Thank you, Mr. Chair.
Good afternoon. I wish to thank the finance committee for inviting me to comment on the federal government's response to COVID-19, particularly around the response to the energy sector.
My name is Peter Kiss. I'm the owner of Morgan Construction, a heavy civil contractor operating throughout western Canada with a focus on the oil sands. I was previously in front of you on February 6 during the pre-budget consultations when I discussed competitive tax rates; differing rules for resources, our resources, which must compete throughout the world; bills C-69 and C-48; indigenous opportunities; and the tech frontier. I spoke of the economic Armageddon that is happening in Alberta. Since then things have gotten worse.
Obviously, our world has changed. My company has laid off 80% of our staff and reduced wages, and our revenues are down 87%, and I consider us fortunate. I have peers and competitors whose revenues are down 100% and the staff is reduced to a skeleton management group. The difference now in the resources sector, and specifically in Alberta, is that COVID started the problem, and a Saudi-Russian coordinated predatory oil price war caused the price to crash, production cuts, and capital spending to cease.
I would like to compliment the federal and provincial governments on their efforts thus far in providing support to families and workers via the CERB and the multitude of other measures put in place. They are certainly helpful in the near term, but when it comes to supporting business and indirectly the workers, we need to re-evaluate.
Businesses need two things only: credit or liquidity and revenue. This should be the focus. This is how people are going to get back to work.
From what we have seen thus far, the Canada emergency benefit, this $2,000 per month grant, while helpful in the beginning, needs to end. Beyond the moral hazard of paying people not to work and creating a society that lives on handouts and subsidies, it is preventing people from going back to work. It is that simple. While the story is anecdotal, workers are choosing to make less and stay at home this summer.
The Canada emergency wage subsidy is a great program. It's putting liquidity into the hands of businesses and is certainly helpful. I don't feel that it's keeping additional people employed, as no business is going to pay employees to sit around and do nothing, even with the subsidy. The greater hazard with this program is that the government artificially reduces input costs, and over the long term in a free market economy, the selling price is reduced. We are seeing this already. Once competitive businesses know how long supports such as the CERB, tax deferral, WCB premium and lease reductions are going to last, the subsidy gets worked into the selling price and creates an artificially low selling price for goods and services. Selling prices are dropping because of subsidies.
While this wage subsidy should continue, it should be extended on a one-month or even less increment, and businesses should not be allowed to plan on receiving it. Therefore, it would get worked out of the price.
EDC and BDC support loans are liquidity measures that have the right intent; however, they are not accessible to those companies that need it. The program needs to be adjusted to increase access and the velocity of capital as the economy opens up. This is when businesses require working capital the most. Companies don't go bankrupt; they run out of cash.
On the large employer emergency financing facility, LEEFF, the entire Canadian energy sector across the prairies and in Newfoundland waited hours, days and then months for sector assistance to be announced. I believe that the LEEFF program is that support and all that is coming.
From what I can tell, industry can't access this capital because of the restrictions surrounding the funds, and it's like it was written by predatory lenders of last resort with the intent of taking over the business. The credit standards are too high. The interest is accelerated over time, which is punitive, and by creating convertible debt, the federal government is looking for a clear path to board seats on E and Ps. This is not what the energy sector or Canada needs.
If we want to recover in this country and pay for all the COVID-related expenses, we need a viable energy sector paying royalties. We need real support now with easily accessible liquidity.
Before the questions, I'll leave you with a couple of thoughts. Stop the handouts. We're over the hump now, and everyone needs to get back to work. Accelerate project approvals. There are enough projects in energy, mining and commercial waiting for federal approval to turn this economy around. Don't start paying sick leave. There are only two groups that are going to pay for this: taxpayers, since there's no such thing as government funding; and businesses. With 10 days of paid sick leave, 10 statutory holidays and two to six weeks of holidays, we are not-so-slowly turning into Europe, but without the historical charm. Layering on more costs for our nation's businesses and taxpayers is not helpful.
Finally, protect Canada's largest industry. Saudi Arabia and Russia started a price crash with predatory pricing and production. If this was steel, aluminum, automobiles, agriculture or aerospace, we would have immediate countervailing duties, but with regard to energy, we are left to twist in the wind. Liquidity problems in the resource sector are a direct result of foreign interference, and now they are buying our assets at a discount. If the federal government wants to help, it can start with protection. Again, we don't want handouts; we need a hand up.
In conclusion, I wish to thank the federal government for inviting me to present today. Please remember this: The social cost of not getting the energy sector and its 850,000 people back to work will be paid with—and I'm not trying to be an alarmist—the destruction of families, alcoholism and drug abuse, social welfare and suicide.
Thank you.