Finance Committee on April 11th, 2024

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. DiFruscia.

I'm glad that our next witnesses were able to accommodate us. They were supposed to start at 5:30, but because we know what's going to happen, we have them in a little earlier.

We have the Canadian Cancer Society with us. It's the senior policy analyst, Rob Cunningham. I believe Kelly Masotti, the vice-president of advocacy, is also joining us.

You now have an opportunity for five minutes, please.

[Rob Cunningham, Senior Policy Analyst, Canadian Cancer Society]

Mr. Chair and members of the committee, thank you for this opportunity.

My name is Rob Cunningham. I'm a lawyer and senior policy analyst for the Canadian Cancer Society.

My testimony will focus on the provisions in Bill C-59 for the cost recovery fee for tobacco and vaping companies in clauses 217 and 218 and the vaping tax administration and enforcement provisions in clauses 145 to 167.

With respect to the cost recovery fee, it would provide enabling authority for regulations to require tobacco companies and vaping companies to reimburse the federal government for the $66 million annual cost of the federal tobacco control strategy. We strongly support this measure and thank, with appreciation, the government for bringing it forward. Indeed, we thank all parties for their unanimous 323-to-zero vote at second reading in support of this measure.

The cost recovery fee has a long history. In 2021, this committee recommended the fee in its pre-budget report. In the 2021 federal election, it was in the Liberal, Conservative and NDP platforms. In the 2019 federal election, it was in the Conservative platform and called for by the NDP. It was in the health minister's 2021 mandate letter. MP Don Davies, now on this committee, has been a long champion, with motions introduced in the current and previous Parliaments.

It shouldn't be all Canadians who are paying for the government's strategy to reduce smoking, a strategy that also now regards vaping. It should be the tobacco industry with the principles of accountability and fiscal responsibility. The tobacco industry has caused the tobacco epidemic and vast health devastation, and it should be responsible for the cost of reducing tobacco use.

Moreover, the vaping industry has benefited significantly financially due to high rates of youth vaping, with many previous teenagers now older, addicted and vaping as adults. They may be addicted to nicotine for life. It should be noted that the tobacco industry is a major player in the vaping industry as well.

In the U.S., a cost recovery fee has been in place since 2009, administered by the FDA. Each year, $712 million U.S., more than $900 million Canadian, is recovered from tobacco companies on the basis of market share to reimburse the FDA's tobacco control budget. If the U.S. can have a cost recovery fee, surely we can in Canada.

Here in Canada, we've had a cost recovery fee on the cannabis industry since 2018. If we can do it for cannabis, we can do it for tobacco and vaping.

The tobacco industry, on average, over a nine-and-a-half year period, has increased their own prices, not including tax, by $30.40 a carton. They increased their own prices by 180% in a period when cumulative inflation was just 28%. As a result, they have incremental revenues of $2 billion a year or more. Can they afford $66 million a year to pay to the federal government? Yes, they can.

For the cost recovery fee, we have three proposed amendments to strengthen the implementation. The amendments are short and simple and would advance the bill's objectives and the government's objectives. Draft legislative text with rationale for these recommended amendments has been provided to the clerk.

First, we urge the legislation to require that companies pay upfront: Unless the company has paid the fee, they can't sell the product. That's the way a tobacco excise tax works. The government shouldn't have to be chasing companies after the fact.

Second, the maximum fine for contravening cost recovery fee provisions should be increased from just $50,000 to $500,000, a maximum already found frequently elsewhere in the act. A fine of only $50,000 would merely be the cost of doing business for a tobacco company.

Third, the legislation should explicitly state that the Service Fees Act does not apply to tobacco and vaping cost recovery fees, just as the Cannabis Act states that the Service Fees Act does not apply to the cannabis cost recovery fee. It is not the case here that there is a service, and thus a fee for that service, such as an approval of a patent or a prescription drug.

With respect to the vaping tax administration and enforcement provisions, they are important to ensure that the vaping product tax works well, including to reduce youth vaping.

Finally, I want to highlight the category of disposable e-cigarettes. They are very popular with youth and have recently taken off in Canada. They are very inexpensive and are undermining the objective of the vaping product tax of reducing youth vaping. Before the Senate finance committee recently, even Imperial Tobacco urged an increase in the tax rate for disposable e-cigarettes.

Thank you. We look forward to your questions.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Cunningham. Thank you for your advocacy here on the Hill for the Canadian Cancer Society.

Now we will hear from Mr. Jeff Pearson from Wolf Midstream.

Please go ahead.

[Jeff Pearson, President, Carbon, Wolf Midstream Inc.]

Thank you very much, Mr. Chair, for giving me the opportunity to speak today.

My name is Jeff Pearson. I'm the president of the carbon division at Wolf Midstream. I have a background in oil and gas engineering, commerce and finance.

By way of background, Wolf Midstream is a private Calgary-based company that was founded in 2015. We focus on energy infrastructure development, and we have spent around $5 billion dollars on energy assets. We are backed by a large Canadian pension fund.

Wolf Midstream has three divisions, including a pipeline division that owns a large oil pipeline system that moves oil from production sites in northeast Alberta to the Edmonton market. We also have a natural gas liquids division, which has recently constructed large-scale infrastructure to remove natural gas liquids, such as ethane and propane, from natural gas before it is burned in the oil sands. These liquids are then transported to Edmonton and separated, through infrastructure we have built, to be turned into plastics. Following the removal of the high-carbon natural gas liquids and the burning of largely pure methane, CO2 emissions are reduced by upwards of 250,000 tonnes per year.

Our third division is the carbon division, which I run. In this group, we have constructed, and we own and operate, CO2 infrastructure called the Alberta Carbon Trunk Line, or ACTL. Wolf spent close to $500 million constructing this infrastructure in 2019 and 2020, and the system became operational in early 2020.

The ACTL is one of the largest-capacity CO2 pipelines in the world, and the largest one focused on man-made, or anthropogenic, CO2. The pipeline has a capacity of close to 15 million tonnes per annum, which is greater than the emissions reductions proposed through the CCUS from the oil sands.

We currently have two sources of CO2—the Nutrien Redwater fertilizer facility and the North West Sturgeon refinery—and CO2 from both sites is a by-product of hydrogen production. These sources total approximately one and a half million tonnes per year. In March, we celebrated our five-millionth tonne of CO2 transported, which would have been emitted into the atmosphere but instead has been permanently stored deep underground.

The ACTL pipeline is currently running at 10% capacity and is underutilized. Over the last five years, Wolf has been focused on capturing more sources of CO2 and utilizing the spare capacity to transport the CO2 to permanent storage. We have been working closely with Air Products, which is constructing the new net-zero hydrogen facility outside of Edmonton. We have also been working with Dow Chemical, which is constructing the Path2Zero petrochemical project through an expansion of their existing site in Fort Saskatchewan. Using ACTL, Wolf will provide both of these companies CO2 transport to permanent geological storage.

Wolf is also developing a deep saline aquifer storage project, also known as sequestration, near the ACTL pipeline, to be able to permanently store CO2 from these and other projects. Partners in this project include five first nations groups and Whitecap Resources, which has significant subsurface technical expertise as a result of their ownership and operation of the Weyburn CO2 project in Saskatchewan. We are targeting completion and start-up of this project for 2025, commensurate with the start of the Air Products facility.

To service these projects, last year Wolf constructed a 38-kilometre fit-for-purpose extension of our CO2 pipeline to the Air Products facility near Edmonton. We commenced construction in August last year, and it was largely completed, other than some final cleanup work, in December 2023. Through this project, Wolf spent close to $100 million on that pipeline. Much of that spend is eligible for the investment tax credits, or ITCs, under the carbon capture, utilization and storage, or CCUS, ITC.

I believe that today Wolf is one of the largest spenders of capital that is ITC-eligible. The ITC is a meaningful and necessary component of our commerce with emitters, with the capital support provided through the ITC going back into our commercial structure to lower the toll for our customers and, hence, the cost of decarbonization. As a result of our spending of funds that are ITC-eligible, we are happily anticipating that the ITC legislation will move to formalization as soon as possible. This will demonstrate real progress in our national goals to support decarbonization and provide additional certainty to emitters that are contemplating CCUS investments.

Thank you. I look forward to questions.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Pearson.

Next we'll hear from Dr. Peter German of the Vancouver Anti-Corruption Institute.

Go ahead, please.

[Dr. Peter German, Chair, Advisory Committee, Vancouver Anti-Corruption Institute]

Thank you for the invitation to appear before this committee.

I wish to address certain amendments related to money laundering that are contained within Bill C-59.

Before doing so, allow me to introduce myself and to apologize for not being there with you.

I've been engaged in the field of anti-money laundering since Canada adopted proceeds of crime legislation in 1989. That work included being director general of financial crime for the RCMP, completing graduate degrees on the topic, teaching at law schools, providing expert opinion evidence, speaking within Canada and internationally, and working as a consultant. I'm the author of a text published by Thomson Reuters, which has been on the market since 1998 and is the only current service dealing with Canada's proceeds of crime legislation.

The Vancouver Anti-Corruption Institute is an entity created in part as a response to two reports written for the then attorney general David Eby: “Dirty Money” and “Dirty Money—Part 2”.

Mr. Jeffrey Simser, who appeared before this committee on April 9 of this year, is a professional colleague of mine and has a distinguished record of service in the province of Ontario, including being the first director of civil forfeiture in Canada. We endorse the comments he made to this committee and will not repeat them.

In British Columbia, there are virtually no prosecutions under way for money laundering. Police officers and prosecutors cite a plethora of reasons why. Most revolve around the wording of the Criminal Code and judicial decisions. As a result, most asset forfeiture in B.C. occurs by way of civil forfeiture. British Columbia has a very successful civil forfeiture regime. This is good; however, it simply removes money and goods from criminal actors, which they should not have in the first place. The individuals are not sanctioned, they are not charged and they do not go to jail. We need a robust Criminal Code regime that deals with money laundering.

For many years, the major complaint of police and prosecutors has been the difficulty in connecting dirty money to its predicate crime, which is a requirement of the offences. Bill C-59 attempts to overcome that obstacle in the case of third party money launderers. These are individuals who do not necessarily commit predicate offences, such as drug trafficking, but specialize in the laundering of money. Internationally, we now use the term “global money-laundering organizations” to identify third party money-laundering entities that contract their services. In many cases, they operate out of major financial hubs.

Canada has witnessed a considerable uptake in money laundering. We are an easy target for laundering organizations for any number of reasons.

I am pleased to see the amendments to the Criminal Code that attempt to deal with third party money laundering. I'm also very pleased that the undertaking requirement that was previously located within the “Special search warrant” and “Restraint order” provisions of the Criminal Code is being removed.

My only disappointment is that it has taken us since 1989 to make these changes. This is symptomatic of a greater problem. We are tweaking our legislation; we are not grabbing it, shaking it and making sure it is effective. Without going into detail, I fully anticipate that there will be further amendments to the very amendments being considered today.

I also wish to support the inclusion of white-label ATMs under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. People, such as I, have been calling for this change for probably 20 years. It is well overdue.

Members of the committee, we can do better. Canadians do not want their country to become a haven for money launderers. This will require political and bureaucratic will and a continuing commitment to rid Canada of this vice.

Thank you. I am most pleased to answer any questions you may have.

[The Chair, Liberal, Peter Fonseca]

Thank you, Dr. German.

We will hear our final witness before we get on to members' questions. It is the Front d'action populaire en réaménagement urbain.

Madame Laflamme, please go ahead.

[Véronique Laflamme, Spokesperson, Front d'action populaire en réaménagement urbain]

Good morning, Mr. Chair and members of the committee.

The Front d'action populaire en réaménagement urbain, FRAPRU, is a group of 141 community organizations active in the various regions of Quebec, including 30 housing committees and tenant associations that are at the heart of these interventions. For 45 years, our association has been working primarily on issues related to the right to housing and promoting social housing. We are the voice of under-housed tenants and social housing applicants in Quebec.

As you know, a housing crisis is raging across Canada and is hitting Quebec hard. This housing crisis is in addition to two other crises: homelessness, which is being fuelled by the consequences of the deteriorating housing situation, and the hundreds of thousands of low- and modest-income tenant households who spend too much of their income on housing. Governments have paid too little attention to them for too long, despite their commitments to progressively implement the right to decent housing.

There are 1.6 million tenant households in Canada, of which more than 373,600 are in Quebec. In the last census, they spent more than the standard 30% of their income on housing. That is huge, and it is far too much in a wealthy country like ours. The median income of Quebec renters in this situation is only $23,800.

This housing crisis is caused by widespread scarcity of rental housing, but also by inaccessibility. The increase in the number of often illegal evictions for profit is fuelling it as well. The stock of affordable housing is rapidly dwindling. Quebec lost 116,000 housing units at less than $750 between the last two censuses.

Residential insecurity is now affecting more and more tenant households. The median income of all tenant households in Quebec is $48,400 compared to $55,000 in Canada as a whole. This median income means that they are less and less able to afford a decent place to live without cutting expenses for other essential needs such as food, travel, children's clothing and school supplies. The social safety net isn't there for tenants who lose their housing, since alternatives to overpriced private housing aren't available because of the lack of social housing in various forms. The consequences are dramatic, particularly for seniors, children and women fleeing domestic violence.

In this context, it is clearly social housing that the federal government must prioritize. Whether in the form of public housing, co‑operatives or non‑profit housing organizations, social housing provides a roof that meets the diverse needs of tenants, and at a price that respects their ability to pay. It's also the solution for thousands of people experiencing homelessness. It's the most comprehensive and permanent form of housing assistance. However, there's a serious lack of social housing. If the federal government hadn't stopped funding its long‑term development, we would have tens of thousands of social housing units, meeting those needs, across Canada today.

To get out of the double crisis that is hard on tenants in Quebec and across Canada, building tens of thousands of housing units, regardless of their price and tenure, won't be enough. It may solve the shortage problem, but along the way, we will have compounded the problem of inaccessibility, which is already untenable in a number of cities in Quebec and Canada.

Newly built private housing doesn't offer rents commensurate with the ability to pay for a significant portion of tenant households. In addition, in Quebec, landlords can raise rents at will in the five years following the construction of the dwelling, further pushing up prices. That's also the case in other provinces. If the supply of housing is to be increased, it's important to ensure that it's done by targeting and supporting, with public funds, those that will sustainably meet the needs of our most disadvantaged fellow citizens. For that reason, social housing must be given priority.

While investments in social housing are insufficient and the national housing strategy allocates a tiny fraction of the billions allocated to it, low‑income and modest‑income renters are the most forgotten. Only the rapid housing initiative, which covered all the costs of carrying out projects, was dedicated to them, but it's not recurring, and the last budget didn't grant new funding to it.

We think it's time to stop using public funds to support private housing development projects that are too expensive. Real estate is a profitable investment sector, and the profits of private developers are pocketed by them alone, especially when buildings are sold. There is no guarantee that public funds going to private developers will support the affordability of new housing being built.

Public funds must be invested in sustainable solutions that address the collective needs of communities, in other words, social housing outside the private market. It could be through co‑operatives, not-for-profit organizations or public agencies that support low-income housing.

That is why we oppose eliminating the goods and services tax, or GST, on all new rental housing. In its November economic update, the government estimated that the measure would cost a whopping $4.6 billion—

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Laflamme.

[Véronique Laflamme]

—when those billions in public funding should go towards helping renters whose needs are most urgent.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Laflamme.

There will be an opportunity during questions from members to expand on that and to go further.

Members, I just want to ensure that we have unanimous consent once the bells start ringing. I'll ask for that, because that will affect how I allocate the time.

[Some hon. members]

Agreed.

[The Chair, Liberal, Peter Fonseca]

What we're going to do is start with our regular round, which is six minutes for each party. However, MP Ste-Marie has asked to go first because one of the witnesses he has brought—I believe it's Madame Laflamme—has to leave early, so he will commence, out of order, and then we'll go back to our order.

We'll go to MP Ste-Marie, please, for the first six minutes.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

Thank you to my fellow committee members for agreeing to let me go first so that I can question Ms. Laflamme, who has to leave the meeting soon because of family obligations.

If you'd like to finish your presentation, Ms. Laflamme, please go ahead.

[Véronique Laflamme]

I was saying that removing the GST from all new rental housing in no way guarantees that the housing that is built will do anything to address the affordability crisis, which is a huge problem.

We do, however, support a targeted GST exemption for co‑operatives, not-for-profit organizations and public agencies that provide housing.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

You are saying, then, that public investment should prioritize social housing and that investments in the private sector would be better spent on social housing initiatives such as co-operatives.

If I got that right, I agree.

[Véronique Laflamme]

That's absolutely right, Mr. Ste‑Marie.

I want to take a moment to thank you for inviting me to speak with the committee.

We believe the public funds that have already been set aside should support non-profit housing. Halfway through the national housing strategy, which covers 10 years, $40 billion has already been allocated to various housing initiatives. If that money had been invested exclusively in social housing, Quebec and Canada would have thousands more social housing units. The outcome would be measurable. We would have already seen progress towards increasing the percentage of social housing in the rental housing stock.

The government has invested in a range of initiatives that prioritize overly expensive private housing, with little to show for it five years into the national housing strategy. That's why we hope that, in the next budget, the government will reallocate the remaining funding for the strategy to the construction of social housing.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you.

[Véronique Laflamme]

I would add that the Standing Committee on Finance is probably familiar with last year's Scotia Bank report and the Royal Bank of Canada's more recent report.

Housing advocacy groups like FRAPRU and a number of other groups across the country are not the only ones calling on Canada to build significantly more social housing as a way to help resolve this crisis.

Now we have banks—including the Royal Bank of Canada just last week and Scotia Bank last year—clearly saying that a massive investment in social housing, through targeted government measures, is necessary if this crisis is to be resolved.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

That's a very important point.

When the Royal Bank of Canada and FRAPRU are saying the same thing, it's a sure sign of how serious the crisis is.

You said in your opening remarks that, between the last two censuses, the number of affordable housing units had dropped by 116,000. That underscores the importance of investing in social housing.

What accounts for that decrease in affordable housing?

[Véronique Laflamme]

The decline in rental housing units still considered affordable is due to changes in the rental price range. When you look at the graph—which I can forward to you, Mr. Ste‑Marie—you see that the number of units renting for less than $750 a month is dropping, while the number of units renting for more than $1,000 a month is growing. Those are Statistics Canada figures. A similar exercise was done for all of Canada, and it's extremely worrisome.

Housing in the biggest cities is now virtually unaffordable. There is no more affordable rental housing for low- and modest-income households. Take the current situation in Quebec, where the lack of rental housing has spread to all municipalities, including regional municipalities that had previously been spared. The affordability crisis was first felt in Montreal, Gatineau and Quebec City but is now affecting Alma, Chicoutimi, Shawinigan, Trois‑Rivières, Drummondville, Granby and other small cities. It's having a devastating impact on renter households, which tend to be poorer than other households.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you.

You can have the rest of my time, if you have any final remarks you want to leave us with.

[Véronique Laflamme]

Housing seems to have garnered a lot of attention in the pre-budget announcements over the past few weeks. Expectations for the next budget are higher.

We encourage parliamentarians to keep in mind Canada's commitment to gradually implement the right to housing and to make targeted public investments so that households most in need have access to government supports. The fact is that the people most in need are currently the most shut out of the measures announced to date. It's important to understand that those initiatives were not meant to help the poorest households first and foremost.

The government needs to move faster and do better.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you very much.

Thank you, Mr. Chair.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste‑Marie.

Now we have MP Lawrence.