Finance Committee on Oct. 19th, 2016

[Ron MacDonald, President, Remote Communities and Mines, NRStor Inc.]

Yes, it was 1988, a lifetime ago.

[The Chair, Liberal, Wayne Easter]

A lifetime ago, and then he left federal politics, and now he's having a wonderful time.

[Ron MacDonald]

I'm having a great time.

Thank you, Mr. Chair.

It's really good to see you again and to have been invited to this committee. I'm used to being on the other side of the table, so I do this with some trepidation.

First of all, my name is Ron MacDonald and I am president of the remote communities and mines division of NRStor Canada. NRStor Canada is Canada's leading energy storage and microgrid development company. We've been in operation for about four and a half years.

The president of the main company is Annette Verschuren, who most of you probably know. She's an esteemed Canadian business leader and former president of Home Depot Canada and Home Depot Asia. She took this job on about four and a half years ago because she believes that it's important for business people to take a stand on sustainability issues.

My presentation today—I'll try to be very brief—is going to talk about indigenous communities in particular, and some remote mine sites. I want to start off by doing a couple of quotes. It's always good to put it into perspective.

The first quote is from the Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development:

The Government of Canada is proud to support Indigenous peoples to become full economic partners in the development of our abundant energy resources.

The second quote would be from the Honourable Carolyn Bennett:

Genuine partnerships with Indigenous communities in the clean energy and natural resource sectors [will] increase Indigenous participation in economic opportunities, as well as strengthen local economies.

I want to put into some context the issue of indigenous communities and their lack of power resources and the cost both to the community in terms of economic development and on the environmental side of it, as well as the Government of Canada, which has set a number of broad goals and objectives in dealing with Canada's indigenous communities.

To put it into some perspective, across Canada there are roughly 300 communities that rely entirely on diesel-generated power for their power in their communities. Of these, between 170 and 180 communities are indigenous.

To put it into some perspective, I'll talk about one community, one that is not the exception to the rule but is closer to the rule. I'm not going to name it. It's a community that currently gets a direct subsidy for their power, a direct payment from INAC that amounts to between $4 million and $5 million a year. It's a direct subsidy coming from the federal treasury.

This community suffers greatly from a lack of power stability. Their diesel generators go down a lot in the wintertime, and they're subject to appeals to the federal government for emergency dollars for repairs. This community is growing at between 3% and 5% a year. In 15 years, its power needs actually doubled. In the current situation in this community, they need to find a solution so that they can take control of their power situation. They are leaning towards renewables. They no longer want dirty diesel in their community. They don't want the diesel spills to become the norm. Because it's a coastal community, they don't want their fisheries to be impacted by diesel spills.

I'll talk about another series of 27 communities up in Nunavut that are 100% on diesel. They range from maybe 100 people to the capital of Iqaluit, which is around 4,000 people. We have a significant problem up there. These diesel generators are all about the same age; it's about 30 years since they were installed. The government, as we hear it from Nunavut, is looking at an infusion of between $250 million and $500 million to update these diesel generators.

As we all know, dealings with indigenous communities have changed a great deal in Canada over the last number of years. The federal government said that they want to be respectful in their relationships with indigenous communities and deal on a government-to-government basis. That will take a very long time for that process to find its right level.

One thing is absolutely certain in the communities we're dealing with: they want to reduce the use of diesel in their communities as much as possible. The issue is, how do you find the money to do this?

What we're looking at, in our estimation, over a 20-year period if nothing changes, with growth rates of between 3% and 6% in indigenous communities, and government not allowing these citizens and these indigenous communities to freeze in the dark, is a continuous drain on the federal treasury to burn dirty diesel through those smoke stacks in order to supply these communities.

The problem gets more complex. Some of these communities are directly funded by the federal government, but most are funded, or their power rates are subsidized, by provincial and territorial utilities.

To go back to Nunavut, keep in mind as a federal panel that 93% of the budget for Nunavut comes from a federal transfer, so you can figure out that QEC, which is the utility that's responsible for providing power in these communities, gets a direct subsidy from the federal government to continue to use dirty diesel, so we have a problem and we have an opportunity.

There are 250 to 300 communities, including 170 indigenous communities, with direct and indirect subsidies on an annual basis. That amounts to anywhere between—we can't figure out the true number, because it comes from a whole bunch of different sources—$8 billion and $12 billion over a 20-year period that is going to go into subsidizing these communities. That will not address their desire to reduce greenhouse gas emissions and it will not address the requirement that they have stable power to create jobs in their communities.

Keep in mind that a lot of times subsidized power going into indigenous communities is for the household, and if a business comes in and needs to access power, which they all do, it doesn't mean that they get it at the subsidized rate. When you're dealing with these provincial utilities, the way that the rates are structured in the community is a disincentive for economic development in the community.

My company is NRStor. What do we do? We go in and build real and respectful partnerships with the community. We figure out what their power needs are and where they want to go. Do they want to go renewable, or what do they want to do? Do they want wind? Do they want solar? Is there a hydro resource that's close? Does it run a river? Is it biogen?

Then we work with them to develop an economic model so that they can take over responsibility and control of their power situation. We're not there to sell them anything. We're agnostic. We don't care if it's a wind turbine, or if it's a solar panel, or if it's biogen. We work on the economics of the case, and in every situation we will not sell anything to the community. It has to be a genuine partnership. When we engage in that partnership, we will put money in. We're an investment company.

I can tell you that we run a lot of models every day. In nearly every one of these communities, if the federal government reprofiles some of the monies they are spending on subsidy, then nearly every one of these communities could find a penetration level for renewable energy in their communities that makes economic sense and that would attract investment.

What am I talking about in all of this? I'm talking about going into these communities, building the model, working maybe with or against the utilities—it's a very difficult thing—and trying to coordinate with the federal government, which is spending a lot of money on a situation that gets worse by the day. We want those monies reprofiled. If it's $10 billion, federal and provincial, that's being spent, then you don't have to reprofile again. I will tell you that it will attract $2 billion to $4 billion in private sector investment. In the communities we're working in today, we're putting up at least 50% of the cost. When the federal government looks at all of these requirements—infrastructure development, greenhouse gas emission reduction targets, and development in indigenous communities—you're not alone. The private sector is there. The economics make sense today because of a lowering cost of storage, which is making renewables more economic.

We will finance, and we're not the only ones. We'll take15-year to 20-year financing on it. It's no longer seven years, which it used to be five years ago when it was coming from the financial community to support green projects.

My value proposition to the committee today is that as a priority the government, working with the provinces and territories, identify all direct or indirect subsidies that support diesel power generation in indigenous communities and immediately create the policies to reprofile some of these monies to support the development of community-based renewable energy and energy storage projects, which will attract private sector investment.

The monies are there. The government has a choice. It can continue to do it in subsidy over a long period of time, which does nothing for economic development in the community and does nothing for the environmental imperatives to reduce greenhouse gas, or it can take a different path and free these monies up as equity participation in real partnerships in indigenous communities that will attract private sector investment.

Thank you, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

Thank you, Ron.

I was going to say that we always worry when a politician or a former politician says he's going to be brief.

Go ahead, Mr. Grewal, for seven minutes.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you, Mr. Chair.

Thank you to all the witnesses for coming today to testify at the committee.

I want to start off with Andrea from eBay on the de minimis amount. Currently it's $20, and there's been a lot of advocacy to raise it. The United States has just raised it to $800.

You had an interesting point that it cost the government $170 million to collect $40 million worth of taxes. It doesn't take a finance degree to know that doesn't make much sense. What rate are you advocating that we should raise it to?

[Andrea Stairs]

What we're advocating is for an increase such that the cost to collect is more than offset by the duties and taxes collected. The government is the source of that data, but I think it probably is going to be something in the $80 to $100 range. When you look at the C.D. Howe report, you'll see they listed three thresholds—$80, $100, and $200—and I think that range is probably where you get a break-even in terms of the cost to collect being less than the revenues generated.

[Raj Grewal, Liberal, Brampton East, ON]

What is the economic impact on the economy of raising it to $80?

[Andrea Stairs]

Raising to $80 means that the huge delta in the cost to collect can be repurposed by the federal government. C.D. Howe estimated that small business would be ahead by $100 million, and consumers would be significantly ahead as well. The $100 million to small business is mostly driven through reductions in paperwork and in brokerage fees that get paid but don't advance anything.

Then the C.D. Howe authors also did a qualitative assessment on impact to the overall economy, and they found that, directionally, that would be positive as well. Not only would those three stakeholders—government, small business, and consumers—be ahead, but the overall economy would be ahead as well.

[Raj Grewal, Liberal, Brampton East, ON]

Okay. Now is there a figure for dollar for dollar? For every $5 to $10 of business increase, what is the economic benefit to small businesses? At $80 we're seeing $100 million. Let's say the government decided to raise it to $200. There's a petition in the House of Commons right now that asks to raise it to $200.

[Andrea Stairs]

That math is done by the C.D. Howe Institute. I don't have it with me, but I certainly can forward that to the clerk so everyone's got that report.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you.

On the opposition side, is there any argument to not raise the de minimis level?

[Andrea Stairs]

I think you may have heard from the Retail Council of Canada, which has taken a position against increasing the threshold. I think it's important to note that eBay is a member of the Retail Council of Canada, and that organization is not speaking on behalf of all retailers. In fact, eBay is here speaking on behalf of the small and medium-sized businesses that do business on eBay.

There really is very broad support across the Canadian economy for an increase. We're seeing support from Canadian Manufacturers & Exporters, Canadian companies like Shopify, and the Canadian Chamber of Commerce, and it was even positively mentioned in the recent task force report on Canada Post as a potential source for incremental revenues for Canada Post. I think what you see is very broad-based support for an increase.

[Raj Grewal, Liberal, Brampton East, ON]

I asked that question knowing that the Canada Retail Council was advocating against it, so I appreciate your honesty.

The Retail Council pointed to a study showing that it would have a negative impact on retail operations in the country, so in terms of overall economic impact, this would kind of offset it. What's your opinion on that? Basically, what it's advocating is that more Canadians would shop online if we raised the de minimis level and that fewer people would shop in stores, so the net impact on the Canadian economy would be even.

[Andrea Stairs]

I really think that's a bit of a red herring argument.

I think it's important to understand the role that e-commerce plays. In Canada, 94% of retail happens in-store, and even in an economy like the U.S., where you have a very robust e-commerce sector, 90%-plus of retail is happening in-store, so first of all we need to have the level set on how big this is.

The second point is that Canadians prefer to buy domestically every time. It stands to reason that you want to buy from stores where you know that even if you're buying online, you're able to walk down the street and return the item easily should something go wrong. You're able to have after-sale service, warranties, and that kind of thing. Your time of delivery is much shorter.

What we're really talking about is allowing Canadians the same kind of access that their peers around the world have to fill the gaps. Canadians who are living in remote communities or Canadians who aren't going across the border every day are often not well served by traditional retail, and in that case e-commerce fills the gap, and some portion of that e-commerce may be international e-commerce.

We saw that the sky didn't fall in 2012 when the in-person personal exemptions were increased by the previous government.

[Raj Grewal, Liberal, Brampton East, ON]

That might also have to do with the dollar not being that great.

[Andrea Stairs]

Well, it was done in 2012, when the dollar was much stronger, right? I think this has to be put in its appropriate context.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you so much for your commentaries.

I'll move right along to Mary. Thank you for your testimony.

We've been travelling through the Atlantic provinces, and when you read about immigration in Canada and labour shortages and the temporary foreign workers that have been used in this part of our country, do you have any colour to provide?

We heard on the last panel that we're having difficulty retaining immigrants in this part of the country. I was born in Brampton. I love my city and I would never leave it. I worked with many lawyers on Bay Street who were from the east coast, but all left the east coast to come work in downtown Toronto. How can we make sure that our talent stays and that we're building a robust economy here?

[Mary Shortall]

That's been a huge question for the provincial government as well, particularly now in times of fiscal restraint, when we've been arguing that you need to increase immigration levels and you need to allow the people who come here to stay here—not the temporary foreign worker model, but opening the doors to allow more immigrants and to have strong provincial growth strategies as well, working hand in hand with the federal government.

To encourage people to stay, there needs to be support: strong public services, fair labour rules and fair wages, and language supports. The labour market agreements can assist with that.

For example, the more vulnerable in society are the new Syrian refugees. Some of those agreements could be expanded to allow support for the more vulnerable in society to be able to have language training or to stay on EI for the duration of their training or to assist workers in Newfoundland and Labrador. This is not immigration, but another part of population growth. Ten thousand workers are leaving Alberta to come back to Newfoundland because they've lost their jobs there. They're trained to do jobs that don't exist in Newfoundland and Labrador anymore, so how do we transition them and how do we provide all their training through the labour market agreements that exist?

It has been a huge subject for us in discussions with the provincial government, as well as how you work federally. In our opinion, the temporary foreign worker program as it exists doesn't work. People who come to work in our province or across Canada should be able to live there. We need them desperately as well, particularly in areas like Newfoundland and Labrador, where we have an aging population and a declining birth rate. We need to make it open and welcoming and supportive for immigrants to stay.

[The Chair, Liberal, Wayne Easter]

Thank you, Raj. We'll have to cut it there.

That's a good argument for you to make with the whip's office and those in charge of the money. We never did get to Atlantic Canada; we only got to maritime Canada, and that's because they wouldn't give us enough money to see Atlantic Canada, which is over in Newfoundland.

Mr. Albas is next.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you, Mr. Chair.

Thank you again to all our witnesses today.

Ms. Stairs from eBay, many of us here get emails from constituents who have raised concerns that a change to the de minimis level to $80, $100, or $200 would have a negative impact on their business. Obviously this committee is looking for ideas on how to grow the economy. When you say it's a red herring, to me that is somewhat insulting to people who have legitimate concerns. Part of the issue we have with trade right now is that many people are becoming skeptical about trade because we're only acknowledging the positive aspects and not talking about the negative ones and then having a factual discussion based on both sides of the argument.

I'm going to give you a second chance to respond to Mr. Grewal's question. Have you looked into what negatives may come because of this change?

[Andrea Stairs]

We have looked at three major constituencies—the government, small business, and consumers—and found across the board that an increase would be positive for all three constituencies, all three stakeholder groups.

I take exception to the argument around trade. What we see when we look at it—and Kimberley in the gallery is a good example—is that small Canadian businesses are leveraging the Internet to tap into demand around the world, and they grow as a result.

For example, we have a seller in Gatineau who has just won our Entrepreneur of the Year award. This morning we announced our winners. All three are millennial Canadians under 35; they all have million-dollar businesses, built on eBay. These small and medium-sized businesses are tapping into the demand around the world, and doing it very much under their own steam.

For example, we had a round table with Minister Chagger. All she heard about from these entrepreneurs were two issues: one was shipping costs being a massive impediment to their ability to compete internationally, and the other was border issues. These small and medium businesses are the kind of businesses we all want to see prosper in Canada and hire people—

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Okay, but getting back to it, I don't think having a round table chosen by a particular person is broadly representative, while one of the things I like about email is anyone can just grab my email address and send me a message.

You've continued to argue just one side of the coin: the benefits to the people who would have the changes that benefit your company. I'm going to leave it here, but if we're going to have an honest discussion about growing the economy, there has to be an acceptance that there are trade-offs in government. I hope the government listens to more than the voices of those who are for a proposal and also gives equal weight to those who are against.

I'm going to move on.

[The Chair, Liberal, Wayne Easter]

At the end we're going to hear from the Retail Council next week. They're being invited.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you. I appreciate that.

Moving to the Fisheries and Marine Institute, by far the largest of its kind in Canada, what will the building and the improved access to the ocean do for future students as well as industry partners?

[Glenn Blackwood, Vice-President, Fisheries and Marine Institute, Memorial University of Newfoundland]

Thank you. That's a great question.

We've been building. Back in 2007 we created this School of Ocean Technology. At that point in time, companies would advertise in Canada in three newspaper ads for a certain period of time for remote-operated vehicle operators.

We brought in Bob Ballard, of Titanic fame. We partnered with Woods Hole Oceanographic Institution and we created the first ROV, and now we have a degree in underwater systems in Canada.

The students, our students, who historically were rural Newfoundlanders like myself, were mainly from Newfoundland and mainly working in Newfoundland. We've created a School of Ocean Technology on the ocean mapping side. Right now I have students from every province in Canada and all three territories. We're under contract to the Nunavut government, and in partnership with the Nunavut Arctic College, to do fisheries and marine training in the Arctic. We have instructors spread across those 27 communities, probably burning diesel, but it is truly a cachet to become Canada's marine institute.

We also have five maritime schools in Canada at the certification level, but not the degree or the master's. We built that in partnership with those five colleges so they can come in as well.

We simulate the ocean on 24 ship simulators with the world's largest flume tank. It simulates towing the bottom, or offshore structures, but we don't have access to the ocean, so Holyrood for us was to take the outside facilities for safety and marine training and to put it on the water in a sheltered bay in -1° water for a portion of the year. It's very cold water that Charles Randell can tell you about.

Our students now are from across Canada. We've had 120 graduates to date in the underwater vehicles degree program. They're working in Angola, they're working in the North Sea, and they're working intensively in the Gulf of Mexico. They make six figures and they live in Canada.

It's the positioning of Canada piece that we've been doing. This facility—I'll come to your question—will put the subsea infrastructure in place. We have millions of dollars worth of ROVs donated by Oceaneering, the Canadian office of the international company. We have a large number of donations of life-saving equipment to the school of ocean safety by Husky Energy and Hibernia Management & Development Company Ltd. We've had industry support to get to the $15 million to $20 million we've spent to date, and huge support from ACOA on proof of concept and getting the nucleus going. Now we're at the stage of major building.