Evidence of meeting #177 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was funding.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Pam Bryan  As an Individual
Susan Roberts  As an Individual
Margaret Schoepp  As an Individual
Kim Rudd  Northumberland—Peterborough South, Lib.
Ken Kobly  President and Chief Executive Officer, Alberta Chambers of Commerce
Lynette Tremblay  Manager, Government Relations, Alberta's Industrial Heartland Association
Mark Scholz  President, Canadian Association of Oilwell Drilling Contractors
Michael Holden  Chief Economist, Canadian Manufacturers & Exporters
Janet Lane  Director, Human Capital Centre, Canada West Foundation
Wesley Morningstar  Chair of the Board of Governors, Explorers and Producers Association of Canada
Mark Plamondon  Executive Director, Alberta's Industrial Heartland Association
Richelle Andreas  Chair, Board of Directors, Agricultural Manufacturers of Canada
David Malloy  Vice-President, Research, Alliance of Canadian Comprehensive Research Universities
Chief Marlene Poitras  Regional Chief, Alberta, Assembly of First Nations
Isabelle Des Chênes  Executive Vice-President, Chemistry Industry Association of Canada
Martin Roy  Executive Director, Festivals and Major Events Canada
Lindsay Hugenholtz Sherk  Senior Leader, Sport Matters Group
Marc Kennedy  Olympic Athlete, Sport Matters Group
Neville Wright  Olympic Athlete, Sport Matters Group
Chantell Ghosh  As an Individual
Jim Gibbon  As an Individual
Paul Lucas  As an Individual
Min Hyu Lee  As an Individual
Kyria Wood  As an Individual

9:50 a.m.

NDP

Peter Julian NDP New Westminster—Burnaby, BC

Thank you for that.

Another part of your testimony stunned me. You said that there's only one 24-hour border crossing from Alberta to the United States. There's Highway 2, there's Highway 4, there's Highway 6, and there's Highway 62.

9:50 a.m.

President and Chief Executive Officer, Alberta Chambers of Commerce

9:50 a.m.

NDP

Peter Julian NDP New Westminster—Burnaby, BC

There are four border crossings. You're telling me that only one of them is operated 24-7. Which one of those is it?

9:50 a.m.

President and Chief Executive Officer, Alberta Chambers of Commerce

Ken Kobly

You're actually missing one as well, which is Wild Horse border crossing, south of Medicine Hat, which has the supplemental benefit of being able to bring truck traffic into Canada and up to central and northern Alberta and take it off of Highway 2, which is currently very congested.

There is only one 24-hour border crossing in the province and that's at Coutts, which is on the far west side of the province, south of Lethbridge.

9:50 a.m.

NDP

Peter Julian NDP New Westminster—Burnaby, BC

Wow, that's stunning. That certainly has to be in our report. I had no idea. In British Columbia, of course, we have 24-7 crossings in various parts of the province. I had no idea Alberta was not getting the support for border crossings, so thank you for that.

Madame Tremblay and Monsieur Plamondon, you are very strong advocates for value-added industries, and I commend the work you've done as a non-profit. It's quite amazing. I come out of the oil industry myself. I worked at the Shellburn oil refinery in Burnaby, British Columbia. It's now closed, and we've seen that happen across the country. Value-added firms have been closing for decades now, in the oil industry of course, in the lumber industry, and we're also seeing this with mining.

We're exporting raw logs, raw bitumen and raw minerals, rather than adding value and making sure that the products that come from our country are actually value-added and we get all the jobs that come with that.

What have been the elements of your success? I note that you commend the Alberta government for attracting $3.5 billion in investment. That's important, so obviously the provincial government has been very supportive of value-added.

Obviously, over the last few decades, it has been a major policy problem, so what do we need to do in this country to get back to value-added?

9:55 a.m.

Executive Director, Alberta's Industrial Heartland Association

Mark Plamondon

Fortunately, if I look at Alberta's industrial heartland, we're very well positioned from a feedstock cost advantage, so that gives a structural cost advantage to the projects that would locate in our area.

The opportunity in our area, as you mentioned, is the value-add. To take a specific example like propane, it is one of the components that is naturally forming with the natural gas in the ground. Natural gas comes out of the ground, and a big component of that is methane but there are other components such as ethane, propane and butane.

Upgrading propane to an intermediate product like polypropylene multiplies its value by five. That's the opportunity we're talking about. Taking the raw product to just an intermediate upgraded product enables it to bring five times as much revenue to our region.

There is tremendous opportunity, and there are structural advantages to the industrial heartland with respect to the competitiveness of the feedstock in the region, as well as all the infrastructure and the clustering benefits that have happened in the industrial heartland.

However, a number of things are important to mention with regard to what is happening with the provincial government, and also what the federal government can do.

Ms. Tremblay, do you want to start talking to some of those points?

9:55 a.m.

Manager, Government Relations, Alberta's Industrial Heartland Association

Lynette Tremblay

Sure. Essentially, there is no single silver bullet, which is what makes it difficult. It requires efforts on the regulatory side of things. We need to streamline certain intransparent regulatory processes. Right now, for value-added projects, that lies with the provinces and we think that's where it should stay. There is certainly work to be done on that front.

We need certainty in terms of a competitive tax framework, which includes carbon pricing but also corporate tax and accelerated capital cost allowance. Also, the existence of incentives is a reality in the market these days, and there are ways of doing that. That's one example where governments have stepped up—particularly the Government of Alberta, but also the governments of Ontario and Quebec—and that has made a fairly significant difference in attracting these investments.

There's the necessity for infrastructure. Rail is particularly important, because these products can only be shipped out by rail. There are a lot of capacity issues, which I know will also be discussed later today, because we have a lot of demand on our rail system. In particular, if a pipeline does not get through, that's crude added on to the rail system as well.

Finally, there's a need for a skilled workforce, as many of our colleagues have said here today.

The municipal and provincial governments have aligned their policies and programs around attracting value-add energy investments, like petrochemical manufacturing and partial upgrading of oil. To be completely blunt, though, we need the federal government to quite openly make value-added energy processing a priority in Canada. We should be vocal about that.

9:55 a.m.

Liberal

The Chair Liberal Wayne Easter

Thank you all. Sorry, we're over time, Peter.

Ms. Rudd.

9:55 a.m.

Northumberland—Peterborough South, Lib.

Kim Rudd

Thank you very much, everyone, for coming. There are so many questions and so little time, so my apologies if it seems I'm rushing you through.

There are a number of things that have come out. I'm going to follow up on what Peter is talking about and the value-added. I had the opportunity to tour the heartland a few months ago and have a great meeting with a number of the stakeholders. Just last week or the week before, I met with the chemistry association, and they have done work on the numbers for the accelerated capital cost allowance there. We had a really good, in-depth conversation, so I think the committee will be very interested to hear their presentation a little later.

You talk about the five-fold increase on the value-added product and Inter Pipeline, of course, in Fort Saskatchewan, a $3.5-billion facility. It sounds like Pembina is going to have another facility in terms of the polypropylene.

Those are good steps forward. There is lots more to do, but I think we have to acknowledge that there is work being done, and there are examples out there.

One of the things we've heard about is education, about the skilled labour force. We're hearing that everywhere across the country. There are a couple of things the government is doing. First, there is a pilot project on the east coast around immigration to fill some of that gap. I think there's a second pilot about to start trying to find creative ways to be able to fill this gap.

One of the things I was very impressed with when I was out here a couple of months ago was my conversation with NAIT and some of the very innovative work they are doing around filling specific skill gaps in what we call the new trades of the sector, particularly here in Alberta. I think it is another good thing that's happening, and it's really industry driven. Industry is extremely involved. I think that's the only way we get the workforce we need in these very specialized areas.

When we talk about oil and gas—I know we're in Alberta—we should also briefly mention on the record the $4-billion natural gas, LNG, facility in British Columbia, Peter's great province, that has formally announced it's going ahead and what that means, as it is not just in terms of jobs and economic development, which is very important, but as a signal. I think we have to keep that in mind as well.

In your recommendation you talked about the Government of Canada permanently extending the accelerated capital cost allowance. That's interesting to me, because, in terms of competitiveness, the U.S. is not permanently extending it. There is a sunset clause on that. We've heard, and I've heard meeting with folks, about this seven-year time frame. You have recommended 10. I'm assuming that's because your projects maybe take longer than most.

I want to share this with you, and maybe a couple of people might be interested in commenting. Our biggest trading partner, the U.S., is our biggest challenge in terms of competitiveness, and we're hearing about this. In 2018, the U.S. deficit is $779 billion, an increase of 17% over last year. They are hitting a current debt of $21 trillion, which is almost unheard of, this kind of interest. Next year they expect their deficit to be over a trillion dollars in one year.

It's unheard of to see those numbers in an economy that's booming. What has done it, of course, are the tax cuts. That's not in dispute; that's pretty clear.

We've had 99% of our product going to one customer. We know that's not a good thing, so we're doing a number of things on that front.

I support the accelerated capital cost allowance. As my colleague Mr. Fergus has mentioned, I support the rationale behind it. When it comes to the tax cuts, I would be really worried about the resulting increase in deficit that would impact the country. Would any of you want to comment about doing something that would increase the deficit significantly?

10 a.m.

Manager, Government Relations, Alberta's Industrial Heartland Association

Lynette Tremblay

A point of clarification, I suppose, is that we're not advocating additional tax cuts. The accelerated capital cost allowance is essentially the extent of that measure.

10 a.m.

Northumberland—Peterborough South, Lib.

Kim Rudd

Others were, I think the chamber of commerce and others.

10 a.m.

Manager, Government Relations, Alberta's Industrial Heartland Association

Lynette Tremblay

I know we've made this point, but I'll just reinforce that the accelerated capital cost allowance alone would not be sufficient. It is one of multiple measures that need to be taken, and not just at the federal level. It requires action at all levels of government in an aligned and coordinated way.

I will allow the others to comment on that.

10 a.m.

Northumberland—Peterborough South, Lib.

Kim Rudd

Ken, maybe you could comment on that.

10 a.m.

President and Chief Executive Officer, Alberta Chambers of Commerce

Ken Kobly

Sure. I'd be glad to.

Accelerated capital cost allowance certainly isn't a new idea. It was around for the oil sands back about eight or nine years ago. It was phased out there and introduced in the auto sector in the same budget.

As far as tax decreases go, you're right; the government would have to be very careful as to when they would introduce any tax decreases. It's interesting that we had a corporate tax increase in this country and the deficit actually increased at the same time.

There is some correlation between tax decreases and increasing deficit, and in some cases, there isn't. Somebody above my pay grade would have to determine when it's beneficial to decrease taxes. Our current policy that we have on our books is to decrease taxes, corporate taxes, when we're fiscally able to do so.

10:05 a.m.

Liberal

The Chair Liberal Wayne Easter

Mr. Morningstar, do you want in?

10:05 a.m.

Chair of the Board of Governors, Explorers and Producers Association of Canada

Wesley Morningstar

I don't have anything to offer on the tax side, but Ms. Rudd, I would just correct you. It's a $40-billion investment on the west coast, as opposed to $4 billion.

10:05 a.m.

Northumberland—Peterborough South, Lib.

Kim Rudd

Sorry. I very much appreciate you putting that correction on the record.

Ken, I'm going to come back to you again, if you don't mind. I am a former president of a chamber of commerce and an entrepreneur for 30 years, and I have been through the cycles of business over that time, some more stressful than others.

There are two things you said that I wonder if you can provide some clarity on. You said 1.8% of Canadians do not have pharmacare coverage. I can't find that number anywhere, and it's certainly not the number that we have been given. Can you tell me where you got that, and if you have it, could you provide it?

10:05 a.m.

President and Chief Executive Officer, Alberta Chambers of Commerce

Ken Kobly

The 1.8% number comes from a study that the Canadian Chamber of Commerce performed. I believe their submission is online on their website, so you can get that backup.

10:05 a.m.

Northumberland—Peterborough South, Lib.

Kim Rudd

Is that your own study?

10:05 a.m.

President and Chief Executive Officer, Alberta Chambers of Commerce

Ken Kobly

That's the Canadian Chamber of Commerce's study.

To translate that into actual numbers, it means about 630,000 or 700,000 Canadians are without coverage either through choice or through falling through the gaps. Our point is to fill those gaps, rather than enforcing a new system on the 98% of Canadians who currently have substantial coverage.

10:05 a.m.

Northumberland—Peterborough South, Lib.

Kim Rudd

It's really important to clarify that it is a Canadian study, because I found about 10 numbers and none are that one. We just need to be clear about what the study is.

10:05 a.m.

Liberal

The Chair Liberal Wayne Easter

Thank you.

We're going to Mr. Kelly. These will be five-minute rounds.

10:05 a.m.

Conservative

Pat Kelly Conservative Calgary Rocky Ridge, AB

Mr. Morningstar, you spoke of the confused, unpredictable and ever-changing regulatory environment that presently exists in Canada. You spoke of capital flows drying up. I'd like you to expand on that, if you have anything you want to add to that. We've heard various numbers on the capital flight that has taken place in Canada at a time when other oil- and gas-producing jurisdictions are seeing capital inflow.

I'd like you to comment if you have any more information you can give the committee on the access to finance within our industry.

10:05 a.m.

Chair of the Board of Governors, Explorers and Producers Association of Canada

Wesley Morningstar

Most of what I would have to add would be slightly anecdotal, admittedly. I was in New York at the end of June looking to raise capital and it was clear at that time that there was no capital to be raised for, one, a natural gas producer, or two, a western Canadian oil and gas producer. All our publicly traded oil and gas companies that make regular junkets to eastern banks and institutions are finding the same story. We are feeling as though we're losing that capital to the U.S., particularly Texas and the gulf coast.

As I said, we make a lot of oil and gas in this basin and we just feel as though there is very little incentive to reinvest that capital back into our business. Therefore, we find there's a flight to elsewhere in the world.

10:05 a.m.

Conservative

Pat Kelly Conservative Calgary Rocky Ridge, AB

Jobs are lost locally here in Alberta. Money is fleeing the province, and indeed the country, for other oil- and gas-producing jurisdictions.