Finance Committee on May 1st, 2020

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thank you very much, Mr. Chair.

I would like to thank all the witnesses for being here today. We hope their families are safe and healthy.

I would like to start with a few questions for Ms. Tassé-Goodman.

Thank you for being with us, Ms. Tassé-Goodman. You are absolutely right about seniors needing more support during this crisis. On Wednesday, the NDP got a motion passed that will make the government provide more support to seniors in the coming days without delay.

You were also right about funding shortages for the health care network and the situation in nursing homes.

To what degree do you think underfunding of the health care network by several billion dollars has exacerbated the current crisis?

[Gisèle Tassé-Goodman]

As the media have reported, we are trying hard to make the point that more must be done for seniors, for those who built our society, for our wise elders. Seniors say that the guaranteed income supplement sure doesn't cover Internet access.

This government promised a 10% increase but hasn't yet followed through. We talked about that when I appeared before this committee in February. Seniors are feeling left behind during the pandemic. As you know, Mr. Julian, there are desperate needs. The Réseau FADOQ would very much like to see measures for seniors. We would like the government to think of them. They are isolated, and this isn't an easy time for them.

We hope you will listen to this appeal on behalf of all seniors because many of them receive the guaranteed income supplement.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thank you very much.

I'd like to direct my next question to Ms. Carter.

Ms. Carter, you've very eloquently put the case of the importance of providing support to our airports across the country. Obviously we have to keep pushing to make sure that the municipal airports that are operated municipally are also part of that equation. You've spoken about the capital investments, the operations and the regulations. One thing that we haven't yet spoken about is the workers.

There are, of course, supports that should be brought to bear for the airport sector, but we want to make sure that the workers who were there prior to this crisis are not going to see a marked deterioration in their quality of life coming out of this crisis.

Can the Canadian Airports Council confirm that in terms of the wage subsidy, it would be 100% of wages and benefits that would be provided to workers? Also, as you mentioned, it's going to be a very long climb back up, so can you confirm that the airports are willing to give 24-month recall rights so that airport workers have the opportunity to come back into their jobs and then contractors at Canadian airports will be considered as successor employers so that new contractors can't use this crisis to lower wages and eliminate benefits?

[Joyce Carter]

Thank you for that. I appreciate your comments very much. Certainly, from a Canadian Airports Council perspective, the emergency wage subsidy is very helpful, as I mentioned. All except 12 airports, as we understand, qualify because of the municipal consideration. Although we're told by CRA that this measure is still under review, it's excellent.

As for how the wage subsidy applies to each airport authority, it is up to those airport authorities to decide whether they will continue with full employment and compensation of those employees. I do know I am not aware of any airport that has gone to a reduced compensation. As you know well, the subsidy provides, I believe, up to something over $850 a week, and this certainly will compensate additional wages for the employees we have here at the airports today.

At the Halifax airport we employ 5,800 workers, which is the size of the town of Kentville, so we are very much an employment generator in everything we do. Like the other airports, we will continue and ensure we have the employment of all of the sectors that support airports, and the wage subsidy is a big part of that. It allows those employees to continue to be paid, as you say, wages and benefits.

I do worry a lot about the end point of that program and what it means as the businesses start to recover, if it only goes until the end of June.

[The Chair, Liberal, Wayne Easter]

We'll have to move on to the five-minute round. There may be time for another question later, Peter.

We will turn to Mr. Cumming and then go on to Mr. Sorbara.

[James Cumming, Conservative, Edmonton Centre, AB]

Thank you, Mr. Chair, and thank you to all the witnesses today.

Before I go through my line of questioning, I have a comment to Mr. Steenstra. Our thoughts are with the people up in Fort McMurray. If there is a city that has taken it on the chin, it certainly has been Fort McMurray, with fires, the reduction in the resource sector and now the flood, so our thoughts are with you.

I want to direct my first questions to Mr. Scholz. I think he's still on the call.

We heard from the Governor of the Bank of Canada about how important the resource sector is to the Canadian economy and how important it will be to the recovery.

From your perspective and your members' perspective, how critical is it that we see some form of a package from the finance minister? I know he promised that it was days, and then weeks, away. It's been a month now. Can you offer any kind of comment as to how your members are feeling about that situation and how big the crisis is for them?

[Mark Scholz]

I would say this: We certainly are very worried about the future of the sector without additional liquidity measures. We've seen some very prudent investments, and we're certainly incredibly thankful to the federal government for including measures like the wage subsidy, but we have been reviewing the BDC liquidity programs, and unfortunately they don't go far enough, I think, to ultimately ensure the survival of the sector.

On the drilling rig side, for example, there's very little incentive or desire to put this equipment to work, given the current commodity prices today. You will recall that in western Canada we were at negative commodity prices, which meant that Canadian producers were literally paying someone to take barrels of oil and their resource away from them to put it somewhere.

In that sort of environment, we cannot see a reason a that a drilling rig would be required until two things happen, and we think we're at least 12 to 18 months out before this materializes. One is that we need to see a significant increase in overall demand. Keep in mind that we've had a 30% reduction in overall crude demand around the world. The world used to consume about 100 million barrels per day; today it consumes about 70, and that 30% reduction in demand certainly impacted pricing. The second thing is that we have had the supply shock as foreign powers, which produce their products in much less environmentally conscious states, flood the North American market, and this has added to the crushing of pricing for our commodity.

That's a long way of saying that we believe the industry is in a very precarious state. Without additional support measures, it is very unclear as to how many participants are going to get to the other side. With that, there will be a blow to critical service infrastructure for the oil and gas industry, and it will not allow us to produce high-quality Canadian oil and gas.

[James Cumming, Conservative, Edmonton Centre, AB]

Mark, what do you say to the naysayers that we hear from time to time, saying that prices are down, so why are we even in this industry? We hear that from time to time from people. Living in Alberta, I know how critical this industry is and I know that this sector will come back. What are your thoughts on that?

[Mark Scholz]

Well, it's very difficult to replace one of the largest portions of a country's GDP. Quite frankly, it has been one of the largest industries, I would say, if not in this kind of market but certainly in years past. It was the largest portion of the publicly traded market, such as the TSX, which trades around 20% within the energy sector. When you look at things like retirement plans, taxation and employment, you see that all of these things are significantly impacted by an industry that isn't running on all cylinders.

The second point I would make is that we are so proud of our people. We're proud of our technology. There is no question that the oil and gas industry in Canada is the best in the world. The world is going to consume energy in the form of fossil fuels for a very long time, and that energy needs to come from Canada. In fact, one of the MPs—I believe it was Elizabeth May—mentioned that we need to ensure that Canadians consume responsible energy from Canada, and we agree with that. In fact, we want to make sure of it, but we need infrastructure to do that. We need to ensure that every Canadian, coast to coast to coast, does not have to rely on the Saudis or Nigeria or the Russians.

It is in our national strategic interest as a country, as Canadians, that our energy resources be produced here in Canada and be distributed in Canada, and that we get full price for our products, full stop. We can get there, but we need to ensure that we have the leadership and the will to get us to that strategic point.

[James Cumming, Conservative, Edmonton Centre, AB]

Thank you.

[The Chair, Liberal, Wayne Easter]

We're substantially over time. We'll get to Elizabeth at the very end.

While we're with you, Mark, I do want to ask you one question related to your proposal. You said that point two was to purchase income tax losses less the government's cost of capital. Point three was to purchase receivables, etc. What process would you see for doing that?

[Mark Scholz]

On the income tax, our industry has been in a position where we have had sizeable tax losses for the last five years, particularly in the oilfield service industry, which has not had positive earnings for the better part of five years. There are sizeable tax losses that will ultimately delay when our industry and sector will be taxable in the future. Therefore, what we're saying is to allow us to monetize those tax losses today, and we certainly would be prepared to give the government the cost of its internal borrowing so there would essentially be no cost to the government. What that would do is actually put instant liquidity into these struggling companies that will then be paying income taxes earlier than if those tax losses had been taken into future years. We believe there's about $460 million in potential liquidity just from the federal government through a program like that.

Secondly, with the receivables, we believe there is in excess of half a billion dollars in potential receivables. One of the things we're very worried about is that if some of the oil and gas companies we work for, the producers, go under, they will take service companies along with them, which will be completely disastrous for the oilfield sector.

[The Chair, Liberal, Wayne Easter]

Thank you, Mark.

I'll go on to Mr. Sorbara, and then back to Annie, who still missed the first round.

Go ahead, Francesco, for five minutes.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Mr. Chair.

Welcome, everyone, and thank you for your testimony.

This pandemic is challenging our societal norms. For these witnesses this afternoon, whether it's the airlines and airports, who need to get people flying again and whose passengers obviously will be be sitting close together again, whether it's the folks from the mushroom association—and my riding has a mushroom processor and a grower—who with all the banquet halls and restaurants shut down, there's obviously no demand for mushrooms, and we can't get them going until we figure out a way to get people in there safely and have them sitting beside each other.... For the dentists, I think every Canadian will be going to see their dentist when their offices open up, when the province allows them to. We know there has to be a time and place and, hopefully, we can get to that sooner than later.

My first question is for the Airports Council. Air Canada has come out, I think I read today, that it expects airline traffic to pick up again by the end of the year for the Christmas travel season. I surely hope so. Does your association have a view on that? I'd like to go out to visit P.E.I. this summer—just to put a plug in for Wayne—with my family. Do you have a view on that?

[Joyce Carter]

Certainly, from a domestic perspective, we expect air travel to start to open up towards the end of this summer. From an international perspective, it's going to be much longer. Certainly to your point, and thank you for summarizing it so well, the social distancing is going to be the biggest challenge. As people fly, as they make their way through airports, they have to feel healthy and safe doing that. We have to provide them with an environment where they feel healthy and safe to do that.

Domestic air travel will definitely pick up first, and I saw Air Canada's post today, which was really great to read. People will start to move within Canada initially, but not between provinces until we're able to start to remove some of the quarantine measures there.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Absolutely, the issue with the airlines is that once they start operating again, their load factors and occupancies aren't going to be very high. There may be a need for liquidity on that front, because when they're shut down it's one thing, but when they start operating again, if I'd like to go visit my parents out in Vancouver, you know, you're used to having a full Air Canada or WestJet plane, and you may not see that, so they'll need some assistance.

To the mushroom sector, the agri-food sector here in Ontario, to a lot of people's surprise, is actually one of the largest industries. It's actually bigger than the auto sector. With regard to the time frame of the support and assistance you need, you said that some of the programs aren't helping. Obviously, you can put your employees on the CEWS, and 86,000 firms in Canada have taken advantage of the CEWS, but at the same time, you can't sell your product right now.

What other forms of assistance would you be looking for or have requested, if you could just sum it up in 30 seconds?

[Ryan Koeslag]

Essentially what we're looking for is a cash infusion into our industry in any way that they can at this point. Our request is for the $6.5 million that we have already experienced as a loss or cost to the industry. If they could provide that to our industry by any means that they can, that's what we need now in order to avoid more layoffs and to avoid shutdowns.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Okay. Thank you.

I just have another sector to go, Chair.

[The Chair, Liberal, Wayne Easter]

Take your time.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

For the energy folks, I was looking at the GDP data for Canada, at the components. To get to the contribution that energy does with mining, you have to add about six or seven sectors to get to that 10% mark and the 500,000 or 600,000 jobs—good-paying jobs—that we have. I've always been a big supporter of the energy sector. In another decade, when energy prices were high, a lot of folks from the east coast of Canada went to Alberta. They moved there, made quite a good living and supported certain regions of Canada during that time. We have to remember that in this period of time.

We know that there has been demand destruction, and we also know that there has been a supply issue, which came to my attention in early March when I was paying attention to the global oil markets. With that, in terms of liquidity, I'd like to ask if there are certain sectors in Alberta that we can refer to—even though it might not be yours—where there is some positive news. I think about the petrochemical and chemical sector, especially in the Alberta industrial heartland, where there are ongoing billion-dollar projects.

I'd love to just get some colour there, because I don't think it's all doom and gloom. We have a vibrant oil sector in Canada. As you know, it may structurally change, but we need it to continue. As you say, 80% of Ontario's energy's needs are satisfied by non-renewable resources, and for the other 20%, 60% is nuclear energy. It's going to be very hard to replace for many years to come, and it's going to be a large component.

Any comments on that front would be great. Thank you.

[Mark Scholz]

On the good news front, one of the areas that we are taking a very particular keen interest in is looking at redeploying our drilling rigs, which have traditionally been used 95% of the time in oil and gas. We are looking at deploying those same assets, along with other oilfield services, in the geothermal industry. This a budding industry. It has huge potential in Canada. The reality is that it will not save the drilling sector, but it certainly is a huge opportunity, I think, for Canada to look at renewable baseload technology and to redeploy drilling assets that would typically have been used in oil and gas.

I would say that we have looked at this, and we have met with different federal officials to get different funding provisions for exploration and to look at the feasibility of geothermal. I would say that is a pocket of good news for the industry in its challenging times right now.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you.

[The Chair, Liberal, Wayne Easter]

Thanks, all of you. If you want to see geothermal, go to Iceland for sure.

We'll go to Ms. Koutrakis now and then to Mr. Poilievre, if your sound is working, Annie.

[Annie Koutrakis, Liberal, Vimy, QC]

Thank you, Mr. Chair.

Can everyone hear me okay?

[The Chair, Liberal, Wayne Easter]

Yes.