Finance Committee on Sept. 20th, 2016

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

Thank you, gentlemen, and Mr. Saunderson, for your optimistic view of Alberta in 2017, my home province. I'm afraid I don't share your optimism, and I'll bet you a steak dinner next year this time when you're back.

I think 2017 is going to be a more difficult year than 2016 was. You didn't really touch on construction. There's still a fair bit of construction happening in Alberta. I think about the major oil sands plant of Suncor still under construction, done in 2017; the North West upgrader, 5,000 people, done in early 2018; seven buildings still going up in downtown Calgary. They will be done in 2017. The arena project in Edmonton is done, with the fact that there's still a building going up next to it, done in 2017.

I think it's going to be a horrible year for construction activity through 2017, 2018, and 2019. There's just nothing on the drawing board. I think it's going to be a tough year. Then we layer on top of that a carbon tax on January 1, as you mentioned, winding down coal, and then an increase of the minimum wage to $15. All of this is predicated on the fact that, even if a pipeline is approved this fall, which we all have high doubts that it will be, construction is not going to start and return any sort of economic return to the province in 2017.

I know a year ago they were predicting oil was going to be $60 by the end of 2016. Here we are fighting like hell to get back to $45. I think 2017 is going to be very, very difficult in Alberta, and the unemployment rate will hit close to double-digit numbers.

We'll see who buys the steak dinner next year, but I appreciate your optimism.

I want to just touch a little bit on the question that Mr. MacKinnon raised around diversification. I'd like your view on diversification, because I think there's a strongly held view out there that diversification should be built on some of your strengths. I think if you look at what's happened in Alberta over the past number of years, you have very strong diversification into agrifood, you have fairly strong diversification out of the energy industry into petrochemicals and some others, obviously a lot of things on which you could have expanded. At the end of the day, when you start to assess where diversification should and could go into the future, how much of that is based on working off your base industries? We're not going to bring auto manufacturing to Alberta, and we don't want to, but give me your view on working off the base industry that's there.

[Jim Saunderson]

Since I neglected a few things in my opening remarks, I'll add, in addition to everything you've said, that I guess we'll tell a year from now. We can meet in the Market for a steak one way or another.

There will be some infrastructure programming kicking in, both on the federal side and the provincial side, which will help at least to some extent on some of these construction projects that are going to be completed over the next year or so. You're right.

As I tried to answer, I think you need a double-barrelled approach. I think we need to look at the strengths we have. We have oil and gas. We need to make it more effective, reduce the environmental footprint, and build off that into value added. We're really good at this, right? We're not the only people in the world with oil. We know how to get it out. We know how to do petroleum engineering. Let's export that expertise around the world.

It's not our only strength. Agriculture has been a strength since the founding of the province a hundred and some years ago. I spoke to that a bit. I think we should be looking at that and at adding value to our high-quality products as well before we export them.

There have been government investments, both federally and provincially, in a number of areas. I've touched on nanotechnology, health, and ICT. They're not going to replace 27% of GDP—I'm not naive—but they exist, they have the potential to build, and they are having some success in exporting around the world.

I think exporting is part of the equation, too, when we look at these other things. It's not the local Canadian market that is going to push us ahead. We need to really be upping our game, both as governments and in the private sector, to take more of our products to American and international markets if we're really going to succeed.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

I wanted to follow up on a question from my colleague Mr. Caron relative to alternative energy initiatives. Is this something that Western Diversification is even considering putting government money into in any way?

[Jim Saunderson]

We have made what we call “clean tech” a priority. In the 2016 budget, we were asked, along with our colleagues from the other regional development agencies, to double our spending on clean technology, but quite frankly, we do not have the large amounts of money that would be required for massive new wind farm or solar farm installations. Our expenditures in that area—for example, in renewable technologies—are going to be invested in the testing of new technologies that could be taken to market by somebody else.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

I'm actually pleased—

[The Chair, Liberal, Wayne Easter]

I'll have to cut it there, Ron. You're well over. You're fast.

I'll turn to Mr. Grewal.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you, Mr. Chair.

Thanks to you, Mr. Saunderson, and to your colleagues, for coming here today.

My connection to Alberta is that I was born there. I moved to Ontario when I was three years old, but I still have a special place in my heart for Alberta.

I have a couple of questions off the top. I just want to confirm: what's your total budget for the year?

[Jim Saunderson]

It's about $150 million. Maybe I'll get Ryan to flip through the pages.

[James Meddings]

It's $157 million.

[Jim Saunderson]

Yes, on a main estimates basis.

[Raj Grewal, Liberal, Brampton East, ON]

How much of that $157 million was committed? Some of the projects go year over year so they get funding every year. How much of it is committed before the 2015 election?

[Jim Saunderson]

About $140 million of that, roughly, is operating costs. It pays for my salary and that kind of thing—although not all of it, just so we're clear with the committee. That's a small portion of it. Also, about $110 million or $112 million of it is the grants and contributions share.

We've actually been very successful with the programs that I was outlining earlier: the western innovation program and the western diversification program. We're already very highly committed going into this coming year and, indeed, into the next fiscal year. The number of projects we receive under a call for proposals under both these programs far exceeds—by multiples—the funds that are available. The good news is that it lets us pick the ones we think are the very best. The bad news is that it means we simply don't have the resources to fund many other good ones.

[Raj Grewal, Liberal, Brampton East, ON]

Of the $157 million, is there any study on the economic growth, the number that it creates in terms of economic growth for the province? For every $1 that your development agency spends or supports in the private sector, how much...? Is it $1.02, $1.03, $1.04, or maybe higher?

[Jim Saunderson]

This is a good question. An area that I think we all struggle with is to determine exactly the impact we're having, and especially on a kind of macro basis, where it gets particularly difficult.

The approach we have on funding each of our projects is that we identify a set of measures that we use for that project. Some of them are common measures, so that we can add them up to bring to committees such as this, and others are specific to particular projects. For example, with the community futures program, we could report on how many jobs and how many loans have been created through that program.

I think my friend Ryan may have a couple of numbers that I could share with you.

By way of example, I talked a little, I think in response to an earlier question, about the importance of increasing international trade and exports by small businesses. We reported, and I guess it would be for this year and the fourth quarter of last year, some $60 million of new trade opportunities that were created by our companies, $72 million of activities by SMEs on international business.

I think there is a body of evidence that our programs are in fact making a difference in a measurable way.

[Raj Grewal, Liberal, Brampton East, ON]

I would highly recommend that there be a lot of emphasis on tracking the data or implementing standardized numbers to ensure there's a return on investment. That encourages the government to keep supporting the development agencies, and, in my humble opinion, makes the business case to ask Parliament for more money so that we can have these regional development agencies.

My next question is on what percentage of the money is spent on large multinational projects as opposed to the small and medium enterprises.

[Jim Saunderson]

For what it's worth, Mr. Chairman, I would like to agree completely with the member on the importance of tracking these measurable outcomes. I recall a conversation recently with the vice-president of one of the post-secondary academic institutions that I was touting in Alberta in which we were absolutely agreeing on that. We attach a great deal of precision to the finances, so if you asked where each dollar went, we can tell you.

Why can't we have the same kind of level of confidence when we're talking about these measurable outcomes?

Now, I forgot the second question in my rant there.

[Raj Grewal, Liberal, Brampton East, ON]

It was on what percentage of the money is spent on large multinationals versus small and medium enterprises.

[Jim Saunderson]

Our western innovation program, which is maybe one-third of our budget, goes entirely to small businesses. Large companies are not eligible for that. In fact, most of the companies that get it have 50 or fewer employees.

With regard to our non-profit sector, of course, most of it goes to the post-secondary institutions and to industry associations. Roughly a third goes to that service network that I was speaking about earlier, which is 100 small, local, non-profit organizations, and all of their work is with small companies.

Now, that's not to mean that we don't try to work with small companies to get them into the supply chains for bigger companies, because we do, in the defence sector and in the oil and gas sector, but our focus is really on small business.

[The Chair, Liberal, Wayne Easter]

Thank you.

I have to cut you there, Raj.

Mr. McColeman, these will be the last questions.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Thank you, Chair.

Thank you for coming today.

I was scanning your notes to see whether I missed it, but in your opening remarks, I believe you mentioned softwood lumber being a major component of the economy.

Did I hear you correctly?

[Jim Saunderson]

I mentioned the forestry specifically. Softwood lumber is obviously a big part of that.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Of course, yes, it is part of that.

For the record, tell me again what percentage of business that represents in Alberta. What are the raw numbers...how many billions of dollars in exports or sales?

[Jim Saunderson]

Agriculture, forestry, and fishing is 1% of Alberta's economy. It's a bright spot, but it's not that big.

[Phil McColeman, Conservative, Brantford—Brant, ON]

When you say it's a bright spot for development and diversification, it has potential perhaps with the products that are being harvested and exported.

That being the case, my question is, how important is a softwood lumber deal with the United States in terms of making sure we maintain that export capability for our forestry industries?

[Jim Saunderson]

I think for the dimensional lumber industry it's very important that we have a stable, consistent, and fair regime to govern our trade with the United States. Alberta and all of western Canada have done, I think, fairly well under the previous agreement, and putting something in place that's, as I say, stable, consistent, and fair would be beneficial to Canadians and I'd even say to American consumers as well.