Finance Committee on Oct. 5th, 2016

[The Chair, Liberal, Wayne Easter]

Thank you for your presentations.

Mr. Grewal is first.

Go ahead for five minutes, Raj.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you, Mr. Chair.

Let's talk about pipelines.

Mr. Hopkins, you spoke about the importance of Energy east. Energy east is a $15.7 billion project as you know. What is the financial impact on Saskatchewan from building it?

[John Hopkins]

I don't have those numbers off the top of my head, but that infrastructure project alone would create thousands of jobs across the country and have a huge impact on people.

Let me back up for one second. I would say that Energy east would have a fairly dramatic impact on this community, far more than one would originally think, given the fact that EVRAZ is here. EVRAZ is here making pipe for pipelines. EVRAZ employs about 700-plus people in this community, so it would have a very significant impact.

In addition to that, we would be able to get some Saskatchewan oil to tidewater, which is a huge problem. I wish I remembered the numbers off the top of my head, but right now we are taking a significant discount when we ship and sell our oil, because we can't get it to where it needs to be. We have only one customer, and that is the United States. If we were able to get our product to tidewater, that would greatly enhance our ability to get at least the fair market price for the products that we have here in Saskatchewan, plus the other jobs that would come as a result of Energy east.

We're not just saying Energy east; Trans Mountain is also important. The Line 3 replacement is actually very important.

There is the whole Nimbyism type of thing. I live a half a block away from all the Enbridge pipelines, and I have never had any problem whatsoever, and those pipelines have been in the ground, I believe, since the early sixties.

We think this is a very important infrastructure project for this country.

[Raj Grewal, Liberal, Brampton East, ON]

At what price per barrel of oil is a product profitable?

[John Hopkins]

That's a good question because it will really depend on where it is, what type of oil it is. I've heard everything from $50, at this point, being a price at which people could start to do some things again, and then not that long ago, at least $70 or $80 a barrel.

I think there have been a lot of efficiencies brought into the system because they had to.... So the price at which you could actually make money has decreased quite a bit, but there is still room. I'm not sure where this question is going to come, but I'm sure it's coming somewhere. That's why there is some concern about the carbon pricing. It's all related to this, given the fact that this is a very energy-dependent province, whether it's mining, or oil and gas.

Any time we're adding to the cost of that is a concern for us. I do understand and appreciate that the money will come back to the province and that it will be revenue neutral to the Government of Canada, but we're concerned about it.

But I'll go back to pipelines. Pipelines are absolutely vital in the future, from our perspective, for us to get our products to tidewater.

[Raj Grewal, Liberal, Brampton East, ON]

With regard to pipelines, we can debate this, but it's a financial question. You're not going to invest $15.7 billion from a private sector perspective unless there is a profit margin at the end of it. You can turn the oil prices in the forecast, but in my humble opinion, if this thing is slated and does get approved to be built by 2020.... Correct me if I'm wrong, but I think construction will start in 2018.

Again, it is this forecast of the price of oil. Yes, pipelines are important, but I am surprised that you didn't talk about how to diversify the province's economy and the importance of that, because innovation and diversification of the economy are extremely important to Saskatchewan, and to all the west, and across the country, to be honest.

As you see new disruptive technologies coming up, and manufacturing or old blue-collar jobs falling by the wayside, what are your comments on Saskatchewan's potential to innovate going into the future?

[John Hopkins]

Thanks for that.

I think we have done a fairly good job at diversification over the last number of years. Can we do more? There is no question about that.

I think clean coal is very innovative and we're proud of it here in this province, so that's one area.

Perhaps I can just segue to the area of Regina, where we've diversified, there is the global transportation centre. We've become an inland port. Loblaw has a major presence here in this community and distributes throughout western Canada. That's been very positive.

Instead of just putting raw product on rail cars and shipping it out, AGT Foods has moved up the value-added chain and has done very well and grown pretty much from the garage, at home, into a very large company right now.

Brandt Industries, another major manufacturer here in Regina, have gone, again, essentially from a garage and built themselves all the way up to a major international manufacturer and player here in Saskatchewan.

[Raj Grewal, Liberal, Brampton East, ON]

Lastly, do you have any statistics or knowledge on your ability to retain immigrants in the region?

[John Hopkins]

That's a great question. I don't have the statistics, but I can tell you some of the stories.

One employer that has done a fantastic job at retaining people from around the world is Loblaw. If you go to Loblaw here in Regina—and Erin, I'm sure you've been there—it is unbelievable what you'll see. You'd think you were somewhere else, to tell you the truth. Loblaw has done a fantastic job at that. There are people from around the world who are so happy to be here in Canada with a good job and to bring their families here. Loblaw is a model in Regina that has worked very well. They have continued to work in that area and it has been great for Regina.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, both.

Mr. Liepert.

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

Thank you, Mr. Hopkins. You were very brief, so I want to pursue a few questions with you.

You represent the chamber of commerce, and I'm presuming that you have a fairly good grasp of the general Saskatchewan economy. Certainly, I come from Alberta, and it's grim and the prospects are even grimmer.

What would your assessment be of the Saskatchewan economy and where we're headed over the next couple of years? I want to get into this a little bit further. The reality of it is that most of the things we're advocating for are not going to show real returns for a few years. Even if Trans Mountain were approved tomorrow, the benefit of that is going to be further down the road.

Give me your general sense of where you see the Saskatchewan economy going. Clearly, Saskatchewan and Alberta have had a lot to do with the strong growth of the country over the past few years and I'm nervous about what's going to be happening because of that with the downturn.

[John Hopkins]

Thanks for your question.

First of all, not as much as Alberta, but we've been very challenged because of what has happened with the energy sector, particularly south of this city in Weyburn and Estevan. Hotels were running at 80%; now some of them are at less than 50% and some are even lower than that. There are major challenges in those areas, as well as in Lloydminster and places where the energy sector is very important. There are some significant challenges there.

I've heard different things about OPEC and what's going to happen in terms of price. Hopefully, there's price stability somewhere along the line, which would help a lot of us. It would help the country, actually, if we had some price stability. That's one area that we're concerned about. We're not as reliant on energy as Alberta, but it's still very important to Saskatchewan.

Obviously the next area is the potash industry, which is very important to Saskatchewan. The price is not great right now. Hopefully we'll see prices move, but that will really depend on the global economy. There is some optimism there, though. We have the K+S mine that's being built here just outside Regina, not too far. The Yancoal project that has been talked about quite a bit—50 or 60 kilometres from Regina—is another major project. There has been expansion in a lot of potash mines throughout the province. That has been good and it has helped carry us through some of these challenging times in the economy.

There's one thing, though. Not all that long ago, people looked at agriculture and said, okay, all right, because agriculture didn't do that great. Agriculture has really been, in many ways, saving Saskatchewan, but is that going to last forever? I don't know. It's a good question. Thankfully, we do have agriculture that has been helping. The crops this year seem to be good. The prices seem to be less because the U.S. crops seem to be much better.

In terms of our outlook on the future, it's really difficult to say what's going to happen, because we are very much a commodity-based economy. I think that's a great thing in some ways; there's no question about that. We need to continue to diversity to ensure that we have an economy that's not so boom-bust reliant. We're not the only province in Canada that goes through that. I know in the Maritimes it's the fishing industry, and there are other places where the mining industry is very important.

For us, what's really important as we move ahead is that we have the environment that is conducive to continued growth. My fear, with the utmost respect, is if the western Canadian economy doesn't perform to where it has been, I don't think that's going to be good for the country. That's my concern.

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

Just to put it on the record, you mentioned in your response to Mr. Grewal that you weren't sure of the differential, but it's about $15 that we lose on every barrel of oil that we can't get to the international marketplace. I just want to put that on the record.

One of the other things that isn't mentioned very often is the fact that because we lack pipeline capacity, so much of our oil is going by rail. A lot of the southern Saskatchewan oil is going by rail. There is only so much rail capacity, which means that if they're shipping tankers of oil, they're probably not shipping carloads of grain.

I wonder if you want to make any response to that?

[John Hopkins]

It certainly wasn't all that long ago that it was a massive issue. We had a bumper crop, a great crop, and how do you get the crop to market if there is no capacity? I believe there has been some work done in that area.

If I can just come back to the whole concept of how we move oil, or how we move energy in this country, I've looked at this a little bit and I think it's fair to say that we're going to continue to see oil on rail. That's the way it is, but the more we can get off rail, the better off we're going to be in the long run. That would be our view. That is why we hope that things like the Line 3 replacement program will get approved and that they can get on with that. Energy east, hopefully, will get approved and we can move on with that. Trans Mountain, all of those major projects, we hope will get approval subject to the conditions of whatever the NEB says needs to be done. We have to say, okay, let's make sure that safety is taken care of, that all of the things that need to be taken care of are taken care of.

Some of those projects are so important not just to western Canada but also to the Canadian economy and to our future.

[The Chair, Liberal, Wayne Easter]

Okay, we're nearly at seven minutes.

Mr. Weir, and then Ms. O'Connell.

[Erin Weir, NDP, Regina—Lewvan, SK]

Mr. Harrington, one of the things I've been advocating for in Parliament in cooperation with other opposition MPs has been an exemption for school boards from the goods and services tax. Could you just speak to the assistance that would provide to your school division?

[Tom Harrington]

Yes, we provided our data to the local provincial agency to compile it. For us, it would mean probably $200,000 or $300,000 more dollars in savings that we could then spend on other things. It would be more resources for children, either for nutrition or supplies or whatever. It would get more resources for kids. That is what it would mean to us.

[Erin Weir, NDP, Regina—Lewvan, SK]

Mr. Wells and Mr. Korneychuk, you've made a very compelling case to open the books on the destruction of the Canadian Wheat Board. We've had a different government in office for a year. I wonder if you have any thoughts on why this government has not disclosed the information it possesses, let alone initiated an audit.

[Stewart Wells]

The short answer is that I can't speak for them. I don't know why they haven't acted. I do know that within days of the election approximately a year ago, Mr. Goodale was doing print interviews in which he supported the idea of an audit to find out what had happened, where the taxpayer money went, where the farmer-paid assets went. However, as you say, there really hasn't been anything happen that I'm aware of.

[Kyle Korneychuk]

The only thing I'd like to add as a taxpayer is that there is essentially at least $400 million that's not on the books. I am disappointed and, certainly, I can't speak for them either, but I'm certainly hoping that they do the right thing. I hate to say this, but as a farmer I'm beginning to maybe walk around with Linus in the black cloud. I think if it were in another sector of society, the books would have been opened immediately. I'm sorry to say that, but that's how I feel.

[The Chair, Liberal, Wayne Easter]

I'll just interrupt you for a second here.

When was the last official audit of the Canadian Wheat Board made public? Was that in 2012?

[Stewart Wells]

It was for the crop year 2011-12. The document was published in the spring of 2013.

[The Chair, Liberal, Wayne Easter]

I'm sorry, Erin. Go ahead. I'll give you that time back.

[Erin Weir, NDP, Regina—Lewvan, SK]

That is much appreciated.

Mr. Korneychuk, you made the point that the lack of orderly grain marketing may push more farmers to turn to the AgriStability program. Do you or Mr. Wells have any comment on the changes that the previous government made to that program? Have any suggestions about how it could be improved going forward?

[Kyle Korneychuk]

Thanks, Mr. Weir.

It was basically gutted. I actually got a payment for the 2014 crop. Basically, the program is half of what it used to be, because they just keep taking eligible expenses out and reducing the coverage. The first 15% you lose is just gratis. Let's just call it a premium. Call it whatever you want. The next 30%, I don't know what you'd call that. Basically, you get half of your losses back.

It's not a great program. I guess what it does is allow you to stay in the game. It certainly doesn't get you back to the income level that you were at. People are flocking away from that program because it's not providing the benefits. I see some analysts here; I'm not sure if they're with Ag Canada or not. This year it's going to be even worse, because if the people who do remain have fusarium-infected grain, the value of the grain is going to be reduced. Even though the program is flawed, the dive in the grain price is going to be so rapid that it's still going to trigger payments out.