Finance Committee on Oct. 4th, 2016

[Steven MacKinnon, Liberal, Gatineau, QC]

Thank you.

Mayor Holmes, you mentioned how we are probably looking at things from a higher level. I can assure you as well that we're very interested in getting results and money out the door. My question is for you and Mr. Vander Ploeg, if you would care to comment on infrastructure funding.

We are keen on getting this money out the door, putting people to work, and renewing infrastructure. I think—I hope—you will say that we've demonstrated flexibility in so doing. I know that we have committed as well to significant investment in rural infrastructure. I'd be interested in your first-hand observations of how that's going, how easy the process is, and what additional measures, if you think there are any, are required for the federal government to make sure that infrastructure has the desired impact right now.

[Lisa Holmes]

Thank you for the question.

I want to say that we are very supportive, obviously, of the platform projects that you guys have put through with increasing infrastructure funding. The current federal Minister of Infrastructure is a former vice-president of AUMA, so obviously we have a great relationship. We've talked a lot about some of the challenges that we face.

The biggest one, I believe, is the fact that it took quite a while to get coordination with the province with regard to getting an agreement signed so that we're able to get the money out this year. Our biggest concern was the timing. We want to make sure that the projects are funded as quickly as possible so that we don't miss construction season.

Also the process is very open. We really do believe that the application-based process is flawed, that it causes a lot more money to be spent on administrative purposes and a lot more time wasted when you should be getting to these projects quickly. We would like to see a movement to a process more like the federal gas tax program model, where the money flows directly to municipalities, rather than through the province, so that we're able to make decisions at the local level. That being said, we're looking forward to phase two.

Our biggest concern is that the water projects were funded at 40% provincial allocations, but will that happen as well with the affordable housing and the social infrastructure funds? Those are of great need in the province. We are finding a lot of municipalities have put forward their water projects in further years at the cost of affordable housing, recreation, and those types of projects. Those are where the issues are now. We would like to see both levels of government really start to respect the fact that local decision-making needs to happen and that different municipalities have different needs.

We're very pleased with what's happening. The openness has been a great change.

[The Chair, Liberal, Wayne Easter]

Thank you both.

How slow was the construction season? I was at the Federation of Canadian Municipalities meeting in Winnipeg. There were huge complaints there that especially the smaller cities and towns couldn't afford to backstop the money until it eventually came through from the feds, so April, May, and June of the construction season were seen to be missed. That's also what happened in my province. Construction didn't get started until well into August. What happened here? They are lessons to be learned for another year, I think.

[Lisa Holmes]

Absolutely. The agreement was only signed a couple of weeks ago, so the complete construction season, in my opinion, has been missed for Alberta for 2016. We are also still awaiting word on the previous infrastructure funding. The construction season for phase one of this new infrastructure fund is one thing, but we're still awaiting the previous building Canada funding that was announced by the previous government. That has not been allocated out to our municipalities yet, so those projects are still on hold. We won't really see anything moving until next year, which is a concern when you have a $26-billion deficit of municipal infrastructure in Alberta.

[The Chair, Liberal, Wayne Easter]

And we could use the jobs.

Mr. Liepert.

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

Thanks, Chair. I have a couple of comments.

Agnes, I don't have any questions regarding your presentation. I just want to let you know that I have it on my calendar to attend your event in Ottawa, so I'm really looking forward to that. I just don't have any questions.

Lisa, I know that this committee would be pleased to attend your event over the next three days, but unfortunately, tomorrow we're in Regina and the following day in Winnipeg. Just for the record, the Oilers' organization has been kind enough to have us tour the new arena this afternoon. It will give members of the committee a good opportunity to see the revitalization of downtown Edmonton. I think that's going to be an important event. Good luck in your conference.

Casey, I just want to talk a bit about the beef situation, because the concern and the seriousness of it has really been below the radar. It was a pretty good joke on the community, a week and a half or 10 days ago, when the major feedlot said they were shutting down operations. I can't remember the name of it. Is it Western Feedlots?

[Casey Vander Ploeg]

Yes, Western Feedlots.

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

I don't want to get political here, so I'm not blaming anyone, but I'm going to repeat what some of the rationale was. It was the head tax by the municipal government. It was the commodity price. It was also things like the concern about the carbon tax coming on. It was the concern about the regulations around workers, Bill 6. One thing that's important for this committee to understand is the piling-on effect that can happen with business. It doesn't matter whether it's the feedlot business or the energy business or small business. It's the piling-on by three levels of government in some cases. At the end of the day, it's the same taxpayer that's getting piled on.

I'd just like you to maybe make a comment on that message, which was sent by Western, about what impact you see that having across the industry.

[Casey Vander Ploeg]

I didn't bring up Western in my comments because I had a sneaking suspicion someone else would, and that indeed is the case.

Western Feedlots, just a little background, is one of Canada's oldest cattle feeding operations, established in 1958. The whole business of feeding cattle in western Canada is a relatively new industry, about 40 to 50 years in operation. Western, of course, is one of western Canada's largest operations, with 100,000 head standing capacity.

The recent announcement that they are winding down their operations was a significant event for the industry. It's not the only operation that we've seen closed. In the county of Lethbridge, producers there have told me that they know of five cattle feeding operations that have recently closed.

The issue of piling-on is definitely of concern to agriculture and to cattle feeders. Just as some background on that, the 2016 Alberta budget increased the fuel tax by 4¢ a litre. They did not increase the farm exemption with that, so all farmers in the province are now paying 4¢ provincial tax on fuel. For cattle feeders, just for the transportation of cattle,—forget about feed grains, forget about ploughing the fields and harvesting—just moving cattle around will cost the beef industry $3.25 per head. We have the prospect of a carbon tax coming in 2017, so you're right Ron, and the cost implications for Bill 6 as well. All of this is coming at a time when the cattle markets are very volatile and prices for fed cattle are very poor.

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

I'm going to cut you off there, because I want to ask a couple of other questions. I think you've answered my question in as much depth as I think I need.

Bob, I'm not going to get you to go into any more detail on your proposal, but I must say, I have trouble understanding it. It makes sense on the surface. We have some analysts here who'll take what you said and put it into a way that we can understand, so hopefully what you said is going to resonate and we can get your message through in our report.

Dan, I was at the launch when you guys launched COSIA. It seems to me that there is an awful lot of good work that you folks are doing, but, gee, nobody knows about it. If we had more evidence in the public of the kinds of things you are doing, I think it would balance all of this negative stuff around pipelines. Why can't you do a better job of getting yourselves known?

[Dan Wicklum]

That's a very valid point. One of the challenges we find, when we get 13 companies working together in a way that is forging new ground about how large companies interact.... We found that this is about technology and innovation, but it's also about culture. The companies have quite different cultures when it comes to communications. Some companies—

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

Terrible culture....

[Dan Wicklum]

While all the organizations agree that we are about innovation, technology, cutting costs, and driving environmental performance improvement, they have very different opinions on what role COSIA would play in the communicating itself, compared to what role COSIA would play in developing facts and proof points, and having other organizations communicate.

Having said that, four years ago this was really about potential and promise. What we've done now, since our launch.... I think there is resounding evidence that this is not just a theory; that this actually works. Collaboration works. The benefits of a healthy oil sands sector would accrue right across Canada, coast to coast, economically.

The companies have asked us to go away and develop more concerted communications plans, so we will be stepping out into the first order of COSIA itself as an organization playing a more concerted role in communications.

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

You have to do a better job on that. You're just fighting from behind, and there is so much good news there.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, both.

Mr. Cannings, you have seven minutes, please.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you, all, for coming here today. It's good to hear these stories.

I wanted to start with Ms. Holmes and Ms. Bohaichuk. Talking about infrastructure, especially in small rural municipalities, I think my riding has 41 communities in it, and 15 are big enough to have a mayor and a council. When we were talking about the infrastructure program of the government, I got in touch with every one of them and talked to them, plus all the rural regional district representatives. I said, “What are your needs?” Their resounding message was, “Don't forget rural Canada.” They feel that they have trouble competing against big cities for this funding. They don't have the capacity to fill out all the forms and do all the grant applications, and they just want it to work better for rural municipalities. I think you touched on some of these things.

I just wanted to know if you could expand a bit on the gas tax model. I didn't really catch.... I don't come from a municipal background. What I've been hearing from some of my mayors is that they know their asset management needs. They know how much money they are going to have to spend every year from now until the end of the century. Why can't we have longer-term grants from higher levels of government so that they don't have to fill out the forms every year? I wonder if you can expand on any of that and help me out. Thanks.

[Lisa Holmes]

Absolutely. I appreciate that, and I will start off by just saying that it's interesting, because although we are the Alberta Urban Municipalities Association, the majority of our members are rural. One of the gaps is the definition of what “rural” means. According to the Federation of Canadian Municipalities, it's anything under a population of 100,000, so it's hard to say what it means. I'm just telling you, from my perspective as a small-town mayor, I feel I am rural so I can speak about small towns.

The federal gas tax model is important because it is indexed and it's sustainable. As you were saying, we are required to do capital plans, and our new municipal government act coming out from the province requires you to do five-year capital plans. We know exactly what our capital projects and needs for infrastructure are, but provincially we do not have sustainable planning. It would be great if we could see more models come from the federal government that were more predictable and sustainable. The federal gas tax money is indexed. It flows directly to municipalities without application, and although there are parameters of what it can be used for, the decision of exactly where it goes is made at the local level.

I think that is very important for your smaller municipalities, as I was saying, that know whether it is a water project that is their number one, or whether they've been investing heavily in water and their project is a bridge or a road, or a recreation centre. It would be great to see other models coming out in the same model, just because it's sustainable.

[Casey Vander Ploeg]

I'll speak to that question and to the one that Mr. MacKinnon asked earlier about how things are working.

We simply use the county of Lethbridge, and I'll use that example simply because I'm quite aware of their financial situation. I've done a lot of research on their financial statements, and it is an area of the province that has a lot of cattle feeding in it. There are over a half a million head in that county alone.

The county receives from the federal gas tax fund about half a million dollars annually. In the view of the farmer and the cattle feeder, when you look at that $500,000 and stack that up to what the farmers are actually paying in federal and provincial fuel tax, you see it is essentially a pittance. We have a situation now where, for example—this is Alberta, not federal—the Alberta government put in a new 4¢ fuel tax. The farmers are now paying that and they're saying, “We're paying it, but what of that is going to come back to the county?” It will be little to nothing, I would submit.

The fuel tax sharing agreement is a good agreement. It works well for municipalities. I think it can work better. It can work better for rural municipalities. Right now those funds are shared on a per capita basis. If sharing were done on a fuel consumption basis, counties like Lethbridge would receive a greater share of those dollars. Given that there is no public transit in the county, fuel is used for farming and harvesting and all sorts of production. That would probably be a better system as far as rural municipalities are concerned.

I would just end with this last comment. Federally, the county of Lethbridge receives a half a million dollars per year, roughly, as its share of the national gas tax fund. Aside from that, there are no other projects in that county that are being funded with federal infrastructure dollars that we know of—none. That's an interesting finding because that county is one of the nation's most productive agricultural areas. They trade internationally around the globe. Billions upon billions of dollars of agricultural product is coming out of that region. We contend it's a national economic priority. We contend that those local roads and bridges, although they are under the purview of the municipality, serve a national interest in terms of agriculture's contribution to the economy.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thanks.

I'd just like to turn to Mr. Wicklum. The story is, obviously, a huge success. It's a great, good-news story. I just have a couple of questions.

You talked about the 819 technologies that have been developed. In practical terms, all of the companies know about those technologies. I just want to know about implementation. How many of those new ideas have been implemented in all the projects in the oil sands that are working right now?

[Dan Wicklum]

I mentioned in response to an earlier question that we're scientists. We're engineers and Ph.D. scientists, every one of us. We affectionately call ourselves “the geek squad“. As we go about our daily business inside of COSIA, we often retreat back into scientific principles and that often means measurement. One of the mantras we use is, “If you don't measure it, you don't manage it.”

One of the things that we take great pains in is developing key performance indicators. How do you measure not only effort but also outcome? How many projects you're developing, how much money you spend, and how much technology is being shared, those are efforts. We measure outcome in two ways. One is the number of implementation decisions. Inside of COSIA the companies develop things and they share. They give away free use rights, but it's up to the companies to implement them. We don't measure exactly how and when the companies implement, but we do measure the formal decision the companies have made to implement a technology. That's when COSIA's responsibility stops. We can tell you, to date, that companies have made 347 implementation decisions based on the shared technologies.

Some of those technologies have been implemented; they're working right now in the plants. For some of them, because of the lead times, the actual implementation won't happen until some time into the future. These companies are very formal in their decision-making, and they make very clear decisions. They made 347 implementation decisions. We have not calculated our 2015 decisions yet, but we're doing that now.

The other outcome is determining what the actual environmental performance improvement is. The best statistics that we have early in our life history are that in situ producers have decreased their fresh water use by 36%, and miners have reduced it by 30%. We measure both effort and outcome, including an implementation metric.

[The Chair, Liberal, Wayne Easter]

I have to cut you there.

Ms. O'Connell, go ahead.

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

Thank you, Mr. Chair.

My first question is to Mayor Holmes. In terms of rural broadband, something I care a lot about as well, I'm just wondering if you or your association has an opinion on backhaul versus last mile. As you may know, our government has committed $500 million in budget 2016 for broadband, and there is now the question of which part of that investment is funded.

Do you have an opinion on that? Does your association have an opinion on that investment?

If not, that's okay. I'm just curious.

[Sue Bohaichuk, Chief Executive Officer, Alberta Urban Municipalities Association]

We just did a survey of our members fairly recently. What we heard was that depending on where they're located, there are varying issues. In some cases the problem is with the actual ISP, the Internet service provider, where the cost is so high and the service is so poor that it's not an infrastructure issue; it's a service provider issue. In other cases there simply is no infrastructure in place, and that's probably the hardest challenge that there is. We've looked at satellite. We've looked at fibre. Probably what we need is a combination of a multitude of solutions.

One of the biggest barriers is that until the CRTC declares broadband as a basic service, it doesn't have the same priority as others.

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

When you're talking about the issues with the service provider, for example, my riding is a rural-urban mix. I'm literally right next door to Toronto, but even within urban parts of my riding, we don't have service because for the service providers it's just not worth it. They have such a market in the municipality right next door.

In the rural area, we have infrastructure issues, but it's also part of that broadband service that is mixed with Toronto. Again, it's a matter of them just not wanting to provide it. Is that the same kind of idea, in terms of the clusters?

[Sue Bohaichuk]

Yes, that's exactly what we're seeing. The dollars just aren't there for the ISP. The latest decision that existing infrastructure has to be shared by an ISP with other ISPs will hopefully be a bit of a catalyst for change. It may be that—pure and simple—we need some sort of a subsidization so that there is a guaranteed level of profit as an incentive to provide to those areas.