Finance Committee on Oct. 13th, 2023

[Sharron Callahan]

I think the best example I can give is this. Walk down the aisles of a supermarket. You see an older couple. We have all seen it. I've seen it, anyway, and I would invite anybody who hasn't seen it to do it. At Walmart, it's the same thing. Walk down the aisles with a couple with their grocery cart. They are looking at the shelves, picking up items, looking at the price and then putting them back.

I think that recently there was a statement—I'm not sure if it was from Health Canada, but it was certainly a health-promoted commentary that was offered—that, because of these high prices for food items, people are now being forced to make other choices and purchase cheaper, unhealthier foods. As a long-term effect, that's going to be a cyclical action that's going to impact our health care system.

It's just not getting any better. People are suffering more.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Duncan.

Now we go to our final questioner for this first panel.

MP Thompson, go ahead, please.

[Joanne Thompson, Liberal, St. John's East, NL]

Thank you. I'll watch my time so that I can leave a question for my colleague as well.

I certainly want to acknowledge the challenges that we're facing. Without a doubt, it affects all of society. The climate crisis is real. It's having a direct impact. Geopolitical realities are having a direct impact. It's incredibly difficult. That having been said, I just want to make a couple of quick points to try to bring in and tie up some of the things I've heard.

Ms. Callahan, we have met before. I just want to briefly touch on the point of ageism. It is very real—I well know. I will tell you that, when I'm meeting with seniors groups and as the Liberal chair of the national seniors caucus, I go in prepared because there isn't a group that comes in more determined in their points and better organized than older persons. I certainly respect what you bring forward.

I want to quickly touch on the point about the role that older persons can play in the labour force as support. This is something that, at a party level, we speak about often. It is one of the priorities that we're bringing forward as well—what we have heard in rural areas of the province and how we're able to continue to support seasonal work or sectors that are absolutely necessary and essential for economic growth.

How important is it that older persons in communities are able to rejoin the workplace to provide that very essential frontline support?

[Sharron Callahan]

Well, I would think that if rural communities are struggling, as we have heard this morning, and there is an outmigration of the younger population to more urbanized centres, then the continuation of the community is dependent upon those older persons. Initiatives that support them financially, and socially as well, can have a huge positive impact, I would think, on sustaining that community's life into the longer term—for sure.

[Joanne Thompson, Liberal, St. John's East, NL]

Thank you.

Dr. Whitaker, I have a quick question for you.

One of the things we've certainly been hearing about as part of the tour, and something that I know from my own work experience, is the silos that we see across all sectors becoming increasingly challenging as the challenges to society become more apparent in terms of having to do tremendous amounts of groundbreaking change in short periods of time.

We heard from the Association of Atlantic Universities at yesterday's meeting. How can your association work with that association to create some of the systemic changes that I think are absolutely necessary? They spoke about housing infrastructure changes and those critical links that also support.... Also, I agree with you on research. It's critical.

How can we break down some of those silos and really come together in shared support?

[Dr. Robin Whitaker]

Do you mean silos between different associations? We would work with the Atlantic association, certainly. I am a member of a faculty association here, and my faculty association is a member of both the Atlantic association and the Canadian Association of University Teachers, so we have....

Or are you talking about universities, as opposed to faculty associations?

[Joanne Thompson, Liberal, St. John's East, NL]

It's more about how we're able to take the combined influence and use that to help lead some of the changes that we know are necessary.

[Dr. Robin Whitaker]

Right.

Well, I think we share priorities. You mentioned housing. Just days before the start of the semester this year, we got a message from our senior administration asking if professors had a room to spare for students.

Going back to the basic messages, I think that working with the federal government and with the provinces to try to find a way ahead to stabilize funding for post-secondary education is a really vital part of that. We lay out in more detail in our written submission how we could move ahead with that, and we would certainly look forward to having future conversations on it. I'm certain that the Atlantic association supports that idea as well.

Yes, I think that from our perspective we're always here and ready to talk and have a conversation. We have been researching and, I suppose, living on the front lines of these issues for many years. We do work, as I said, with the Atlantic association. We see distinctive regional challenges, of course. I know that from living here and being from here. The Atlantic region has its own challenges, but equally, so do other parts of the country.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Thompson.

We have just a quick comment from MP Rogers.

[Churence Rogers, Liberal, Bonavista—Burin—Trinity, NL]

Deatra, as a past president of Municipalities Newfoundland and Labrador, of course, I know what you're talking about when you talk about all these municipal issues.

The community-building fund, of course, the federal program, has been one of the best things the federal government has ever done, because the money flows directly to towns. I suggest that we try to increase that fund—I say it all the time to the finance minister—as it's great money that flows directly to towns.

I just have a comment on the recent provincial government decision not to pursue regional government. What are your thoughts on that?

[Dr. Deatra Walsh]

We've spoken about that publicly. I think what I'll say is that we need some sort of a regional solution. If it isn't going to be a formal governance structure that's supported and legislated through the provincial government, then we definitely need something else, because relying on municipalities, with capacity issues and everything, to informally work together is also not the solution.

I will just leave it there.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Walsh.

Thank you, MP Rogers.

Before we suspend to go to our second panel of witnesses, we want to thank our first panel of witnesses.

You've been tremendous. On behalf of the members and the entire committee—the clerk, the analysts, the interpreters who are here with us and the technicians—thank you. As I started, I said that you're the salt of the earth. We felt it here. Really, you're a tight-knit community, and that's what we've experienced.

Thank you for your testimony on this pre-budget consultation study to inform our 2024 budget.

We're suspended, members.

[The Chair, Liberal, Peter Fonseca]

Members and witnesses, we're going to get started.

Welcome back, everybody. We're delighted to be here in Newfoundland and Labrador in St. John's. We've received wonderful hospitality.

We've heard from our first panel of witnesses. Now we have our second panel of witnesses here with us today, and I'm sure they're going to be just as excellent as the first panel.

I will introduce the witnesses.

Witnesses, you'll have an opportunity to make an opening statement to provide testimony, and then we're going to get into questions from the members.

We have with us, from Econext, the chair, Alex Templeton; from Hospitality Newfoundland and Labrador, the chief executive officer, Craig Foley; from Ocean Choice International, Carey Bonnell, the vice-president of sustainability and engagement; and from World Energy GH2, Sean Leet, who is the managing director and chief executive officer of the organization.

We're going to start with Mr. Templeton, please, for five minutes.

[Alex Templeton, Chair, Econext]

Thank you, Mr. Chair.

Good morning. My name is Alex Templeton. I’m a partner at the Atlantic Canadian law firm McInnes Cooper, where I maintain a litigation and regulatory practice serving clients in a variety of industry sectors, including offshore oil, renewable energy, aquaculture, traditional harvest fisheries and public administration. I’m not here on behalf of any of my clients today. Rather, I’m appearing in my volunteer capacity as the chairperson of the board of directors of Econext.

Econext is a not-for-profit association comprising over 200 member businesses collectively focused on accelerating clean growth in Newfoundland and Labrador, which is to say environmentally sustainable economic development in our province. To give you a sense of the breadth, scope and impact of our activities, I’d like to share some specific examples of the work we’ve been undertaking.

We recently concluded work with six municipalities in the province to help benchmark their environmental performance and develop climate action plans that would see them reach net zero by 2050 through the lens of economic growth and development. In partnership with Energy NL, we’re in the midst of our net-zero project, which is particularly focused on providing an analysis of technologies and policies that will enable the reduction of greenhouse gas emissions from our offshore oil and gas sector.

Through our clean energy initiative, we’re helping to understand the workforce development requirements of our rapidly emerging renewables and clean fuel industries, while hoping to identify and prioritize supportive research, development and innovation. In September, we held a three-day ideathon that saw undergraduate students at Memorial University competing for the top prize by coming up with the best idea to solve the electricity supply and demand challenges that our province faces.

We’ve been doing this type of work in Newfoundland and Labrador for the past 30 years. To that end, we’re appreciative of the opportunity to appear before the House of Commons Standing Committee on Finance and to inform your deliberations on the 2024 federal budget.

First, we want to reiterate the importance of the tax credits that were introduced in the 2023 budget. Specifically, I'm referring to the clean electricity ITC, the clean technology manufacturing TC, the clean hydrogen ITC and the adjustments made to the clean technology ITC. These will be highly impactful for Newfoundland and Labrador.

What’s unfolding in this province at this moment in time is perhaps not well understood across Canada. The fact is that Newfoundland and Labrador is on the cusp of becoming a significant contributor to the energy transition on a global scale. A number of factors are coming together that position the province effectively to provide the world with the clean energy it needs to combat climate change.

Our onshore and offshore wind resources are among the strongest in the world. We have significant Crown land and fresh water available and accessible. We’re the closest point in North America to Europe. We're located on major shipping routes, and we have established, industrial deep-sea ports with available capacity. We have an abundance of hydroelectricity—developed and undeveloped, including the largest undeveloped asset in North America, called Gull Island—with an electricity grid that is currently 92% renewable. The list goes on.

While all of these factors individually are not necessarily unique, the fact that they exist in one geographical area at this time makes Newfoundland and Labrador a compelling location for large-scale clean energy investment. The projects being pursued in this province would be among the largest clean energy and clean fuel projects in the world, and would fundamentally change our province’s economy. The tax credits introduced in 2023 are, therefore, vital supports for these projects, which are in a global race to confirm financing and secure equipment and supply chains. We’re therefore highly supportive of their swift implementation, and would highly encourage budget 2024 to consider how they can be further supported and leveraged.

The second area that we’d like to draw attention to is the electricity sector. Based on our analysis and insights, it’s becoming clear that the evolution of Newfoundland and Labrador’s electricity grid is going to be of paramount importance with respect to both the province’s ability to achieve net-zero GHGs by the year 2050 and its prospects for economic growth and diversification. Decarbonization in our province, whether by the provision of clean energy to heavy industrial operations like those we see in our mining industry or through the electrification of transportation, is all predicated on the expansion of our electricity system. It’s believed that we’ll need twice as much electricity generation as we have available today by the year 2050 in order to achieve net zero. These projections are based on the current state of activity within the province.

As I mentioned earlier, the prospects of significant clean energy expansion in Newfoundland and Labrador are great. Whether it's the production of hydrogen or other renewable fuels, the extraction of the critical minerals that are needed for batteries and other clean technologies, or the manufacturing of new low-carbon products like green steel, industrial activity in our province is primed for growth.

With that comes population growth, more transportation, more buildings that need to be heated and so on. This is why it's so important to our 200 member businesses. The simple fact is that the rising tide lifts all boats, and this also equates to business opportunities. However, these opportunities are not likely to come to fruition without an electricity grid that can handle these increasing demands. Electricity access can either be an investment-attraction asset or a liability that inhibits progress. Therefore, we'd support federal investment in budget 2024 to directly finance the evolution of Newfoundland and Labrador's electricity grid. Both our path to net zero and our economic growth prospects depend on it.

There are a number of areas where climate action and economic growth are highly linked in Newfoundland and Labrador: supporting our emerging clean energy and hydrogen industry; providing clean electricity to our large mining operations; growing our electricity grid; and advancing the application of carbon capture, utilization and storage technologies. In practice, there are a small number of very targeted investments that could be made that would be highly impactful from both environmental and economic perspectives.

Therefore, my final point would be that we encourage that major investments into climate action by the federal government be done by direct engagement with stakeholders in Newfoundland and Labrador. The regional energy and resource tables created by Natural Resources Canada are a good example of the effectiveness of this approach, and—

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Templeton.

[Alex Templeton]

Oh, I'm sorry.

[The Chair, Liberal, Peter Fonseca]

Thank you.

We have gone well over time, but you will have a lot of opportunities during the questions to expand.

[Alex Templeton]

Okay. Thank you very much, Mr. Chair.

[The Chair, Liberal, Peter Fonseca]

We thank you for your opening statement and testimony.

We are going to move now to Hospitality Newfoundland and Labrador.

We have felt a lot of that hospitality in our time here since yesterday.

We have Mr. Craig Foley, please, for five minutes.

[Craig Foley, Chief Executive Officer, Hospitality Newfoundland and Labrador]

It's great to have you here. Thanks very much for coming.

Good morning. My name is Craig Foley and I'm the CEO of Hospitality Newfoundland and Labrador.

I need to begin by saying that the tourism industry in Canada has not yet recovered. In Canada, total tourism spending was reported to be $94 billion at the end of 2022. That's 89% of our prepandemic level in 2019. However, this doesn't take into consideration the higher rate of inflation over the last couple of years, so the reality is probably much worse.

Businesses in the industry that were the first hit and the hardest hit by COVID-19 now face significant cost increases to operate, higher interest rates, crippling debt, labour issues and, in Newfoundland and Labrador, access issues. In Newfoundland and Labrador, there are approximately 2,500 small to medium-sized tourism businesses generating more than $1.1 billion in annual spending and accounting for 9% of all provincial jobs, offering part-time, full-time, seasonal and year-round employment.

In December of 2022, the Department of Tourism, Culture, Arts and Recreation, in partnership with Hospitality Newfoundland and Labrador, released “Transition, Transform, Thrive—A Tourism Vision and Strategy for Newfoundland and Labrador” or “Vision 2026”. Vision 2026 is a five-year strategy to transition the tourism industry through its recovery from the COVID-19 pandemic and transform this into a thriving tourism destination.

Our first priority for tourism in budget 2024 is access. Newfoundland and Labrador, considering we're an island and then there's Labrador, are over 400,000 square kilometres combined. If it were a U.S. state, it would be ranked fourth behind Alaska, Texas and California. When we think about access in Newfoundland and Labrador, we always think about affordable access to, from and around the province. Access isn't just one form of transportation. We depend on a multi-modal system of marine, road and air. Access in the province means more than transportation. It's actually an economic generator for all sectors of the provincial economy. It allows for the import and export of products and people.

Airlines, airports and the complete aviation sector have not recovered from the impacts of the pandemic. Specifically, in Newfoundland and Labrador, we do not have a direct route to Europe or to the eastern U.S., which severely limits our ability to attract visitors from these markets. Inbound non-seat capacity is down 16%, and air visitors are down 20%, year to date, from August 2019. Routes are limited. Plane configurations are changing to wider-body aircraft. Fares and fees are higher. All of these are putting pressures on air access to Newfoundland and Labrador. Investment in route development and infrastructure is required.

Marine Atlantic connects the island of Newfoundland to the rest of Canada. It's a vital link to the province, affecting residents and travellers. As a major piece of national transportation infrastructure, the Marine Atlantic fleet requires an immediate recapitalization and infrastructure. Auto visitors are up 19%, year to date, from 2019. Planning for increased capacity is essential. Furthermore, Marine Atlantic's sole shareholder requires a 65% cost-recovery rate. Hospitality Newfoundland and Labrador feels this cost-recovery rate is too high and that it limits affordable rates.

Our second priority is tourism business debt. For many tourism businesses, government loans provided through CEBA, RRRF and HASCAP were essential lifelines to keeping businesses whole. A recent Nanos survey demonstrated that increased costs, labour shortages, rising interest rates and mounting debt loads have added significant financial pressure to businesses across each of the tourism industries. The alarming results reveal that 45% of Canadian tourism businesses report that they are likely or somewhat likely to close within the next three years without government intervention into their mounting debt.

Furthermore, 55% of tourism sector businesses are somewhat not or not confident that their company will be able to repay debt, including the above-noted loans. Greater flexibility is needed to allow companies to address the massive financial implications of the COVID-19 pandemic.

Priority three is immigration and labour supply. Due to the extent of the labour force impact of the pandemic and tourism's unique workforce needs, tourism employment numbers remain volatile during a crucial time of recovery and regrowth for the sector. While demand may be high, many industries have not returned to full capacity. Significant shortages in key tourism occupations remain and threaten to tarnish Canada’s global reputation as a tourism destination.

Hospitality in Newfoundland and Labrador endorses TIAC's recommendations in their pre-budget submission. Hospitality NL members have reported, additionally, that the adjusted unemployment rate has put many seasonal workers in a position to be either short on qualifying weeks or short on qualifying hours. The fear of many is that this will force those in an already small labour pool to move to another sector or a different geographic location.

In closing, the growth of the tourism industry is vital to the economic well-being of Newfoundland and Labrador. The strength of our industry is based on renewable resources: our land, our culture, our heritage and our people. Managed correctly, tourism can flourish, preserve and sustain our culturally rich urban and rural communities throughout the province.

Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Foley.

Now we'll go to Ocean Choice International with Mr. Bonnell.

[Carey Bonnell, Vice-President, Sustainability and Engagement, Ocean Choice International]

Good morning, Mr. Chair and committee members.

Thank you for the opportunity to appear before the House of Commons Standing Committee on Finance. I'm here today representing Ocean Choice International.

Ocean Choice is a family-owned and -operated Newfoundland and Labrador seafood company that was started over 20 years ago by brothers Martin and Blaine Sullivan. Today, Ocean Choice is a vertically integrated, global seafood company from sea to plate. We operate processing facilities in rural coastal communities, where we process high-quality seafood that we buy from approximately 1,900 independent fishermen. We also own and operate a fleet of offshore vessels that catch and process species harvested through the quotas we have access to.

Headquartered in St. John's, Newfoundland, we have developed a strong global presence by establishing our own international sales network with offices throughout Canada, the United States, Europe, China and Japan. We proudly sell Canada's high-quality seafood to over 30 countries around the world. Through those activities, we employ about 1,700 people from over 300 communities throughout Newfoundland and Labrador.

We are responsible for delivering wild, low-carbon, sustainable protein to the world. It's our responsibility to make sure that it's available for current and future generations. That's why over 90% of the species that we harvest are sustainably sourced through the Marine Stewardship Council's gold standard for certified fisheries or in a robust fishery improvement project.

This leads me to my first point. There is an immediate need for increased funding resources for robust fishery science to support management decision-making. Fishery science is fundamental to the understanding of fish stocks—including their health, their impact on surrounding ecosystems and the disruptions of climate change—while ensuring the sustainable and optimal utilization of Canada's fish stocks.

In recent years, due to a lack of funds, the inability to procure survey vessels and staffing issues resulting from other priorities in the department taking precedence over stock assessments, DFO has unfortunately fallen behind on its core fisheries mandate. When there's a lack of high-quality science available, it leads to overly precautionary decision-making, which undermines the viability of the sector. For the sector and companies such as Ocean Choice, the lack of science also puts third party certifications at risk. These are certifications that provide market access. We need those certifications to access key markets around the world.

As it relates to the availability of research vessels, Ocean Choice strongly believes that a collaborative approach to surveys, where oversight is provided by DFO science but industry platforms are utilized, can be a solution for gathering data. A great example of this is a working, industry-led survey by the Northern Shrimp Research Foundation, which, since 2004, has been operated annually on schedule, without delays or major disruptions, at a cost well below what the government can achieve. We encourage DFO to engage with industry and leverage industry resources promptly to guarantee that assessments can be completed on a timely basis.

The second point I would like to raise is the July 1 implementation of the clean fuel regulations tax and the cost implication on fuel prices for the business community, particularly the fishery. In the case of Ocean Choice, as a direct result of the regulation, we are now burdened with an additional 10¢ to 14¢ per litre being added to the fuel cost for our offshore fishing fleets. That equates to an approximate $1 million in additional fuel costs over a full fishing year within our fleet alone.

The compounding issue we are faced with is that there are currently no alternatives to the use of diesel fuel available for fishing vessels, and with the commercialization of hybrid and/or electrification of fishing vessels being years or potentially decades away, we have no way to limit our exposure to fuel cost hikes due to this tax.

Ocean Choice is committed to reducing its impact on the environment and to making investments in innovation and technology to lower its greenhouse gas emissions. A great example of that is the company's multi-million dollar investment in the MV Calvert. With a green class designation, the Calvert features a broad suite of green harvesting and processing technologies and energy efficiency features. Despite making these types of investments in green technologies, we remain subject to a tax that we have no capacity to control.

In our view, actions need to be taken to rectify the situation so that companies and independent fishermen who operate fishing vessels do not continue to be unjustly penalized by higher fuel costs.

My final point today relates to the need to renew the expiring Atlantic fisheries fund and, for the longer term, to support innovation, infrastructure and science partnerships. Launched in 2017, the AFF has been a critical program to support the modernization of the Atlantic Canadian seafood sector. The continuation of this program is essential to investing in technology and innovation to modernize and transform the industry to be more competitive globally and to address emerging labour challenges.

Given the current high-interest, inflationary environment in which we find ourselves, the continuation of this program is more critical than ever to help share in the business investment risks associated with innovation.

As the committee continues to hear from stakeholders, I ask you to consider the following four brief recommendations: Make the necessary investments in critical fisheries science; immediately address the ongoing issue with research vessel surveys by expanding the use of industry vessels as a more reliable and consistent means of gathering data; implement measures to mitigate the high cost of fuel due to the clean fuel regulations for sectors with no ability to control the cost; and continue to provide funding to the Atlantic fisheries fund to facilitate strategic and transformative investments for the region.

Thank you for the opportunity, and I welcome your questions and comments.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Bonnell.

Now we'll go to World Energy GH2.

Mr. Leet, go ahead, please.

[Sean Leet, Managing Director and Chief Executive Officer, World Energy GH2]

Mr. Chair, [Technical difficulty—Editor] CEO and one of the partners in project Nujio'qonik.

We're developing Project Nujio'qonik—

[The Chair, Liberal, Peter Fonseca]

The interpretation is not working. Wait just a moment, please.

Mr. Leet, we'll start the time from the top.

Go ahead.