Finance Committee on Sept. 22nd, 2016

[Ken Martin]

Absolutely, and you're right. I've heard that analogy used a number of times, that we do have two economies: the St. John's census metropolitan area, and the rest of the province. Yes, many of the interventions we undertake are quite different. Many of the challenges that both regions face are quite different.

In urban areas.... The St. John's CMA is largely the business, government, and retail hub of the province. Memorial University of Newfoundland's largest campus is located there. St. John's accounts for about 50% of the province's GDP. Most of the offshore supply and service companies are located there, as are the operators. So it's a different reality and a different environment from what many of the rural areas face, and the challenges that they have to deal with.

Rural Newfoundland on the other hand is pretty deeply rooted in industry, such as what I talked about previously, the fishing and mining sectors, and of course, tourism. Many of our larger industrial development projects happen in rural areas of the province. Voisey's Bay and Muskrat Falls are offshore fabrication projects as well. The fishery is clearly a sector that is primarily focused in rural areas of the province. Aquaculture is the same. Our interventions, our role, will differ when we deal with the realities and the challenges and opportunities that rural areas face versus areas like St. John's.

To answer your question, yes, we will adjust or we will tailor our interventions and our roles and responses specifically to the economic challenges and opportunities that are unique to rural areas of the province versus the St. John's area.

[Steven MacKinnon, Liberal, Gatineau, QC]

We talk a lot about inequality and inequalities in this country. We don't always talk about inequality of opportunity related to geographic areas. Unless you're sitting on top of a nickel mine, which is an accident of geological history, the fact is there are very real differences in economic opportunity between cities and rural areas. That's true in your province, and it's true in my province, Quebec.

From your perspective, where do you see the bright spots, other than nickel mines, for example, and where can we be doing things that will help make those bright spots even brighter? Our challenge—I know I'm being repetitive, as is our chairman—is that we have to find some growth in this economy, and we have to find it in regions that lack the same opportunities that we have in urban areas. Where in Newfoundland and Labrador are you seeing the bright spots?

[Ken Martin]

I talked a bit about it earlier. Our aquaculture sector shows significant promise, especially salmon aquaculture on the south coast. We have two major operators in that region right now that are salmon producers. We have a third—

[Steven MacKinnon, Liberal, Gatineau, QC]

Simply out of curiosity, are they multinationals or are they local?

[Ken Martin]

They're Canadian-based, but both operate internationally.

[Steven MacKinnon, Liberal, Gatineau, QC]

Okay.

[Ken Martin]

We have a third company that has shown quite a bit of interest, a Norwegian-based company that both the province and the Government of Canada have been talking with around the possibility that we'll see significant investment. This is obviously a work in progress but I think it underlines the strength of the aquaculture sector.

Tourism is certainly a sector that is growing for Newfoundland and Labrador, as I mentioned. Mr. Caron mentioned that he was in Newfoundland and Labrador recently. What Newfoundland has to offer, I think, is the experiential cultural coastal vista offering that appeals to a kind of savvy tourism clientele. That's an important sector for us now and one, as I mentioned, that we've already seen quite a bit of growth in over the last five to six years. I think that sector offers significant promise.

I talked a bit about the ocean technology sector in my opening remarks. Ocean technology offers significant promise, not only in terms of supporting oil and gas development as we move further offshore into deeper water and into fields that are located very much further offshore, but also in some of the challenges that they present. Many of the skills and many of the technologies that are developed to service operating in a harsh marine environment are equally applicable to undertaking and exploring economic development opportunities in the north, such as operating in ice, instrumentation, marine sensing, oceanographic monitoring. All of those things are areas that are actively being worked on by many of our ocean tech companies. As I say, I think they have equal application to assisting Canadian companies as we explore opportunities to further develop the north.

[The Chair, Liberal, Wayne Easter]

We'll have to cut you off there. You're substantially over time.

Mr. McColeman, then it'll be Mr. Grewal, and we'll have a wrap up.

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

Thank you, Chair.

Thank you for being here. You mentioned in your presentation a company called Statoil. I want to get a bit more detail about that. I believe it's a Norwegian company. They had significant investment in western Canada, over which they threw up their hands and said they couldn't do business here because of the regulations they were facing, and they abandoned that. You say they have an investment in offshore fields. Can you describe that more for us?

[Ken Martin]

What I was alluding to was a potential development in the Flemish Pass. It's a deepwater development. It's at the very early stages. It has potential, we understand, for 300 million to 700 million barrels of oil, but at this stage it's still a prospect and a project under development. It still has to go through the full environmental assessment and environmental review process, so it's still very much in the early stages.

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

Is it Statoil that's funding the feasibility of this?

[Ken Martin]

They're the operator, the owner.

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

Good. I remember meeting them in Ottawa a couple of years ago, working through some of the difficulties you were having on the environmental front at that time, and they weren't able to work it out in terms of their business plan being able to make sense. It was also the drop in the price that was a big determination of that.

On the oil business front, and not to belabour the fact that we're probably stuck with a much lower price, how is oil transported from the offshore rigs?

[Ken Martin]

Again I'm a little out of my element here, but I know the gravity-based structures and the FPSO, fixed production storage and offloading, facilities have storage on board, and then the oil is transported to Whiffen Head, which is near Come By Chance in eastern Newfoundland. It is then available for transport or transshipment to whoever the customer would be.

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

From that terminal it would go either by rail—

[Ken Martin]

No, it goes by tanker, by ocean vessel.

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

Okay.

That pretty much answers my questions, Chair.

[The Chair, Liberal, Wayne Easter]

We'll go to Mr. Grewal.

We need to get Ms. Skinner on the record here somehow, too. It's her first time before a parliamentary committee, so she needs to at least say hi.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you, Madam Skinner and Mr. Martin, for coming today.

I'm on the ACOA website and I see a company here called Verafin Inc. It seems like the quintessential example of what ACOA's all about, helping a small start-up to get access to bigger markets. I'm very happy to see that.

This company is involved in financial analytics and in helping banks to combat financial fraud. My concern here is that as companies expand, are they still maintaining presence in the province? I'm assuming that because of the nature of the industry they're in, they're going to end up in Toronto, New York and London. What percentage of your companies are staying local, increasing employment locally, and contributing to the local economy while still using the province as a hub to continue their business?

[Ken Martin]

We have quite a number of companies that are homegrown, and Verafin is a perfect example of that. Just to give you a thumbnail sketch of what they've done, Verafin was actually started by three engineering students, graduates from Memorial's faculty of engineering. The company grew. It was incubated at Memorial University's Genesis Centre. It became one of the agency's clients through their growth and formation, and they've since secured significant private investment.

Verafin is a quintessential example of a company that's grown all the way through the full continuum here right in Newfoundland and Labrador. We have quite a number of companies and quite a number of entrepreneurs that have followed a similar trek.

I think the propensity or the power of Newfoundlanders and Labradorians to want to stay home and to want to do things at home to make things happen in their community is probably what serves us best. I think Jamie King and his colleagues are perfect examples of that. We've had very good success in companies that have grown to international calibre and have decided to stay in Newfoundland, pursue their development, and manage their growth right at home.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you, Mr. Chair. I'll pass my remaining time on to Ms. O'Connell.

[The Chair, Liberal, Wayne Easter]

Ms. O'Connell.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Thank you so much, and thank you for allowing me the time.

My family is from Newfoundland. My mom was born there. Every year my grandfather goes home. It's kind of the interesting story of coming to Ontario to find work. This is how we ended up in Ontario.

My question is around tourism. Again, it's more to have the background. This is just a personal experience, so I want to know if it's actually the reality on the ground. For example, when my grandfather goes back, he stays with family, but he can't rent a car, because everything is sold out. We're from Upper Island Cove, a smaller community. At first I didn't believe that he couldn't get a car. I thought he was being a little dramatic, so I went online, and you cannot rent a car in the summer months.

In terms of the opportunity for tourism, certainly, I could see it just from my personal experience. The question is really around the seasonality of it. From what I understand from my colleagues and from the province, it's hard for tourism companies and businesses to really invest in things like, for example, rental cars. I use this as an example only because of my experience that it's not worth it to them or profitable enough to have that type of investment all year long when, really, tourism is seasonal.

I would see agencies like yours helping these companies. How can you best position these companies to take that opportunity, to have the infrastructure there when the high tourism season hits?

[Ken Martin]

That's a really good question. I would say it's not unique to rentals. I think some of those same challenges often apply to accommodations. It's like that in many jurisdictions where you have a seasonality element. It's often very difficult to get things at the height of the season, whether it's a rental car or a room, but much easier in other periods.

We're directly involved and we participate in the provincial tourism board. We have a seat on the board. We engage with Hospitality Newfoundland and Labrador, our provincial tourism association. As you say, it's difficult to get rental car companies to increase their fleet when they know that the time period when they will actually put those out on the road is fairly short.

One of the things we've been trying to do, working with our provincial tourism and industry partners, is to extend the season to the shoulder season, the spring and fall. Many of our tourism attractions, like in Trinity, offer quite a number of events and activities now in the shoulder season, either in early spring or late fall. What we've seen as well is packaging of opportunities where the accommodations operator, or the event venue, will actually work in collaboration to provide packages to encourage folks to come during the shoulder season.

The best approach is to try to find those mechanisms to extend outside that period when everyone wants to be there, our three weeks of summer, as we like to say. I think we've been having very good success with that so far.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Great. Thank you.