Finance Committee on Feb. 19th, 2016

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

It was about 500. Let's cut that in half and say 250. What would the price of oil, U.S. crude, have to reach, in your estimation, for there to be 250 rigs out in the field?

[Mark Scholz]

That's a difficult question to answer. I would say that at the current market price, there are very few fields in western Canada that are competitive at $30. If we do not see a significant turnaround in terms of overall commodity pricing, this is just not a sustainable business in today's market.

Generally speaking, we are projecting, at least from a forecast perspective, 20% overall utilization for 2016. When you look at that from the perspective of its impact on jobs, generally one working rig generates 135 direct and indirect jobs. If you use that calculation, we're looking at approximately 30,000 employees in the service business, my members' business, who have been impacted significantly since the end of 2014.

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

In your general assessment of the situation, were those all Albertans?

[Mark Scholz]

No. In fact, when you look at just the drilling industry, you see that our operations range right across western Canada, from southern Manitoba across Saskatchewan and Alberta and into northeast British Columbia. Then, of course, we also represent the offshore drilling rig industry in Atlantic Canada, which has been heavily impacted by this downturn as well.

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

As you mentioned in your remarks, Alberta—or the industry, more so, because it certainly is impacting British Columbia, Saskatchewan, and Newfoundland and Labrador—is not looking for handouts or bailouts, but are there things that the federal budget could do that would soften the blow, let's say? I had a fellow say to me last week when I was on my constituency break that he got this big severance payout, but unfortunately he has to pay all his income tax this year with that payout.

Are there other examples that maybe the Minister of Finance could look at, with an eye to spreading those kinds of severance payouts out over three years?

[Mark Scholz]

We have come out publicly in support of an initiative that Premier Wall has presented. It's what I think is a very targeted program that would inject activity into the specific industry and the very small businesses that are in desperate need right now. I think programs like this one that put some of the oilfield workers who are patiently sitting by the phone waiting for the rig manager to pick up the phone and say that they're ready to get back to work—

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

To be clear, that's the cleanup of abandoned wells?

[Mark Scholz]

Yes. I want to also mention that nobody is taking responsibility in the producing community to clean up abandoned wells, but given the unprecedented times we're in, I think this is an important targeted program to think about.

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

I think it's also important to have it on the record that the NDP government in Alberta has rejected that as an idea. Let's just leave that at that.

I have a quick question for my friend from WestJet, Mr. Gibbons.

To the best of your knowledge, in the 20 years that WestJet has been such a success, has WestJet, as a company involved in the aircraft industry, ever applied for or received a federal government loan, grant, or financial bailout?

[Andy Gibbons]

We have not. No.

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

Are you unionized at all?

[Andy Gibbons]

We are not. No.

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

Thank you.

[Voices]

Oh, oh!

[Jerry Dias]

Do you have an intelligent question for my friend to my left?

[The Chair, Liberal, Wayne Easter]

Thank you—

[Andy Gibbons]

If you were late on our flight, I apologize.

[The Chair, Liberal, Wayne Easter]

Order.

Mr. Scholz, there's something you might want to look at that happens in the agriculture sector when there's a drought or a disaster and people have to sell off their livestock, which makes for a big income. In that sector, there is a deferred payment program, which means that you can stretch out your income tax over a number of years. It might be something that you would want to look at for your industry as well.

Mr. Caron is next.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Mr. Chair.

I will begin with Mr. Scholz. I speak to him with the utmost respect, because before my election, I was working for a union section which is now under the Dias's responsibility. Some of its members worked at Suncor, in Fort McMurray. And so I understand the reality and the current situation. These are extremely trying times for the industry.

You are very passionate about what you do. I understand your message. I particularly understand the necessity of focusing our thoughts on the current situation, because there are a lot of myths and accusations being bandied about. I agree with you entirely. I would however like to point out that this is a two-way street.

When the NDP was the official opposition, I was my party's critic on natural resources. The Energy East pipeline, which you talked a lot about, was front page news. I took on the responsibility of providing information sessions on the nature of the Energy East project and what it means, in Quebec in particular. I did this not in order to take a position and tell people what to think, consult them and find out what people thought, but in order to gather information from both sides, both from those who support the project and those who oppose it. I wanted to give people as much information as possible so that they could make up their minds and take an informed position.

I did so not only in my riding. I did that all over Quebec, wherever I was invited, particularly in those places where the issue is most sensitive, for instance in Saint-Augustin-de-Desmaures, close to Quebec, where, according to the current project, the pipeline would cross the St. Lawrence River. In short, I think I did my share, and I will continue to work so that we have an informed debate on this issue.

I am not blaming you. I want to emphasize that my questions are really sincere. Before asking them, I also want to point out that there are myths on both sides. It frustrates me enormously when Conservatives try to tell us that the oil in eastern Canada comes from Saudi Arabia, Venezuela, Nigeria and the Middle East, which would not be ethical.

Do you know how many barrels of oil were imported from Saudi Arabia into Quebec and Ontario in 2015? Not one. Do you know how many barrels were imported from the Middle East in 2015? None. In fact, 60% of the oil that is imported comes from the United States and the rest comes from Nigeria or Norway. We need an informed debate, but I think there has to be proper information on both sides.

I see a problem in the way the debate is unfolding currently when people say that the government must be partisan and promote a position. I'm not saying that the government should put up barriers and create difficulties. As a rational individual, this is how I think things should be done. When a project is put forward, it must be studied attentively by a regulatory organization, in this case the National Energy Board, and the environmental consequences must be assessed, because there are impacts not only on greenhouse gases; there are also possible repercussions in the communities the pipeline would traverse. These questions must be studied.

In my opinion, the fact of supporting or rejecting a project without proper study is causing the process to be biased. What purpose does the National Energy Board serve if the government has already taken a position?

I'm going to ask you a very, very sincere question. Are you in favour of abolishing the National Energy Board, or of abolishing the regulatory process by which pipelines are approved, and recommendations submitted to the government?

[Mark Scholz]

Thank you for the question and for being a truth seeker. We need to have an intelligent conversation, a fact-based conversation that appreciates, I think, both sides, but, quite to the contrary, the NEB and, quite frankly, the provincial regulators across the country that regulate the energy industry are considered to be the world standard.

We speak quite regularly with regulators in the province of Alberta. They have often told me that our model, the way we develop and regulate our industry, is something the international community wants to learn from. In fact, we see time and time again how our regulators are sharing around the globe the good-news story of how we develop our industry, and it's something we can be incredibly proud of and confident in. I think what we need is the federal government to acknowledge and show confidence in our regulatory processes, because they are the best in the world, and they are seen as an example for so many other oil- and gas-producing regions globally.

I hope that answers your question.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

In part. However, you have to recognize that the change—

I hope I have enough time left, Mr. Chair?

[The Chair, Liberal, Wayne Easter]

Yes. You have one minute.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you.

Nevertheless, there are concerns. When we talk about social licence, these are easy words to say, but for a project like that one, you have to earn it.

For having attended information sessions on this topic and having taken part in discussions on it, I can say that many people are concerned, because they are afraid that the National Energy Board will not be able to do adequate work in 15 months on such a complex project. They also do not believe that the board has the capacity to carry out the environmental assessments that used to fall under the purview of the federal and provincial environment departments.

How can you earn social licence with a regulatory organization and a process the population does not trust, especially the eastern part of the country, which has never seen major projects like the ones being proposed?

[Mark Scholz]

Thank you for the question.

I think it's up to our political leaders to talk about what goes into these regulatory reviews. There is more environmental study, engineering studies, transparency, and evaluation now than at any point in our history. The outcomes of these systems on energy, including pipelines, will allow us to move our energy to markets in a seamless way with an extraordinary safety record.

When we talk about social licence, I would argue that the social licence arguments have already been made. We just need to start talking about them, more loudly and clearly, at all levels of government.

Let's talk about $80 billion in 2015 from the largest private sector investor that went into hiring families and workers and employing family businesses across western Canada, and $17 billion in taxes across the country that goes into hiring nurses and teachers. It's 500,000 people, directly and indirectly.

There have been studies showing that over the course of 10 years, the oil and gas industry will contribute $7.6 trillion to the Canadian GDP. When we look at how this impacts provinces across the country, we see that 8% of all oil sands jobs are in the province of Ontario. The oil sands employs some 300 aboriginal companies in 54 communities, and over the past 14 years has contributed $10 billion to aboriginal companies.

When we look at other suppliers and companies, we see there are 2,300 companies outside of the province of Alberta that supply services and manufacturing to the oil and gas industry. There are 1,100 in the province of Ontario and 200 in the province of Quebec. This is an incredibly spread-out industry that impacts many families and businesses that should be supported across the country.

[The Chair, Liberal, Wayne Easter]

Okay, we're well over our time, but I thought it was fair to provide the information.

Go ahead, Mr. MacKinnon.