Fisheries Committee on Nov. 24th, 2011

[Voices]

Oh, oh!

[Maria Aubrey]

We believe there's always a need. One of the things that SDTC does a lot is to push the applicants to demonstrate why they need federal funding. We try to leverage other opportunities, such as partnering with Tides Canada, encouraging investors communally, and so on. There's definitely a continued need for that.

We believe that it's not necessarily about more programs; rather, it's about defining which ones of those are working and providing results. We will continue to fund those, making sure that the results and their performance are accurately measured.

[The Chair, Conservative, Rodney Weston]

Thank you very much.

Thank you, Mr. Tremblay.

Ms. Davidson.

[Patricia Davidson, Conservative, Sarnia—Lambton, ON]

Thanks very much, Mr. Chair.

Thanks to our presenters. It's certainly an interesting subject. I think we're hearing a few things that are different from we've heard previously, so that's good too.

I was interested, as was my colleague Mr. Tremblay, in the difference in the two projects. I think this is something we haven't heard a lot about before. You were talking about the one project being on land, which is what we've been hearing quite a bit about, and then the other one being a floating one. Is it a true closed containment system? Is it called a closed containment system?

What happens to the waste? You said that it's a vortex. Is it dispersed into the ocean floor the same as in open-pen? What happens there?

What are the differences between the open-pen system and this? Are there any chances of escape? That was one of the things that we heard was a detriment to the open-pen system: the fact that there could be escapes that could hamper the wild salmon. Could you talk a little bit about that?

[Keith Watson]

Sure. The floating closed containment system is completely enclosed except, obviously, for the opening at the top. It's like a bathtub, but when it draws the material out of the bottom, it takes it into a separate area where the water is separated from the solids. The water is then returned to the ocean, but only after the solids have been removed. Of course, the solids include mortalities and things like that.

There's no way for the fish to actually get out of the solid wall. In fact, they have fences around the top and a netting over the top so the fish can't even jump out, if they were inclined to do so. So it will keep the salmon that are in the closed containment system separated from the wild salmon.

[Patricia Davidson, Conservative, Sarnia—Lambton, ON]

The solids, then, that you're talking about, the waste, they are treated the same as a closed containment system...?

[Keith Watson]

Right: they go to composting.

[Patricia Davidson, Conservative, Sarnia—Lambton, ON]

They're disposed of? Okay.

Maria, how do you protect the public funds? I know you go through a rigorous process, but how do you make sure the public funds are protected when you're doing this? When does your funding come into play? You talked about some partnerships and you talked about industry. Could you elaborate on that, please?

[Maria Aubrey]

Absolutely: thank you.

SDTC goes through a gated process of approval. One of the things we're very conscious of is of course the sensitivity to how much money small companies have. Over 93% of our applicants are small and medium-sized enterprises, with the emphasis on the “s”; therefore, we take them through a process where they can demonstrate their ability and provide information. Not asking them more or less than to take them to that next step is very important.

We often get referred to as a rigorous process. Companies do complain about it. The question always comes down to this: you are getting taxpayers' money and we're accountable for that. We need to make sure that the money is needed, that you are getting it, and that there are deliverables for it and so on.

Once we are satisfied that the project is needed, the components are always there, and the approval is done, we then have a second phase of due diligence, which is actually to sign a contract. At that time, we need to make sure the management is in place, the rest of the funding is in place, and all of the pieces in the project plan and the milestones have been defined.

At that time, a contribution agreement is signed, and SDTC, subject to the need for cashflow, can advance the first installment. If the company is in a good cashflow position, and they have demonstrated why they still need the SDTC money, then we may not advance them the money; we'll do it on a repayment. But as I said, 93% of the applicants are small companies, and therefore cashflow is king.

We advance them the first step. Once they've delivered that first milestone and they've demonstrated they've done what they needed to do, they've delivered.... Now obviously there's risk in a technology, so sometimes performance does not happen, needs to be restated, or taken in a slightly different direction. That's not necessarily a failure; it's just that we need the reporting and we need to make sure the expenses are there. At that time, we will advance them the second one.

Our team evaluates those expenditures. We do spot checks, but we also do audits. We have just finished our third compliance audit in five years. That doesn't include the Auditor General's audit or two interim evaluations. I'm extremely pleased to say that SDTC has received a recognition for all processes being in place, meeting the contribution agreement requirements, and determining that our process is rigorous but appropriate for the use of public funds.

[Patricia Davidson, Conservative, Sarnia—Lambton, ON]

Is there any difference between the SMEs that you referred to, which you said were 93%—and I guess you would call those commercial enterprises, if they're SMEs—and a first nation group? Is that the other 7%?

[Maria Aubrey]

The other 7% is actually large corporations. That's a challenging one: why does a large corporation that has a lot of money need to be funded by government funds? We sometimes get accused of putting them through a little more rigour, if you like, but the reality is they need to explain why they cannot fund those projects. Sometimes there's a return-on-investment target that their boards will not allow them to go ahead with. Sometimes there are other drivers.

[Patricia Davidson, Conservative, Sarnia—Lambton, ON]

One project that you're funding is a first nation group. It's treated the same as an SME, isn't it?

[Maria Aubrey]

Yes.

[Patricia Davidson, Conservative, Sarnia—Lambton, ON]

Thank you.

[The Chair, Conservative, Rodney Weston]

Thank you very much.

Please go ahead, Mr. MacAulay.

[Lawrence MacAulay, Liberal, Cardigan, PE]

Thank you very much, Mr. Chair.

Welcome to the committee.

What you're using is venture capital. You've been in business since 2001. You must have had some failures too?

[Maria Aubrey]

Of course.

[Lawrence MacAulay, Liberal, Cardigan, PE]

Yes, because if everything is successful in venture capital, it's not much of a venture capital.

[Maria Aubrey]

Absolutely.

[Lawrence MacAulay, Liberal, Cardigan, PE]

Also, Ms. Emrick, the $4.8 million currently, that's your total funding up to now, right? Was there more funding in the past?

[Catherine Emrick]

For the industry?

[Lawrence MacAulay, Liberal, Cardigan, PE]

In other projects, and this type of thing, for closed containment.

[Catherine Emrick]

Not through the salmon aquaculture innovation fund: the projects that I've discussed with you here today are the projects that have been funded.

Actually, I should clarify that. We have given small amounts on early design and planning feasibility funding. We did fund one other first nations project that they ended up deciding not to go ahead with. It was a small amount for feasibility funding.

[Lawrence MacAulay, Liberal, Cardigan, PE]

I'd like you to elaborate on whether you think there should be more regulations both on closed containment and on the open net. There are a lot of different opinions around this table, but we have seen examples of what lice have done. Perhaps it's right...but we've seen the fish. I'd like you to elaborate on what you think needs to be done in this area.

Also, I'd like an answer on something. My understanding was that it was more feasible to have the closed containment on land than on the water. Am I wrong? Also, when the solids are taken out, the water is released back into the sea, and they are distributed on land or whatever for fertilizer, correct?

[A voice]

Composting.