Government Operations Committee on Oct. 2nd, 2012

[Denis Blanchette, NDP, Louis-Hébert, QC]

Thank you, Mr. Chair.

I want to thank the witnesses for being here today.

Part of this kind of a challenge is figuring out how to tackle it, and that includes determining how much money will be invested in that area. If we want to be successful in such a major initiative, we have to invest before we can reap the benefits. I think we all agree on that.

My question is for both witnesses, and I would like them to keep their answers brief.

In your budgets, is any money earmarked specifically for the greening of buildings?

[John McBain]

The short answer to your question is that I don't have a specific envelope of funds that are targeted for greening. I have greening as an objective, and it is built into the building management planning process that I referred to in my opening remarks.

Investment in our real estate and our buildings is, I would say, a many-factored initiative. I must take into account the age of the building, the proposed use of the building, and the tenants and their program requirements. Will they be there for five years or will they be there for seven years?

As I look at the overall investment strategy for the building, I need to take all of those factors into account. If we're looking at a tenant who may have a 20-year requirement in the building, then the return on investment is there for me to invest in a greening initiative and to upgrade the building. Those investments will be made. I think you can see that reflected in some of our numbers. We also use the FBI initiative from NRCan, because the private sector in effect fronts the money for those upgrades.

So I don't have a specific envelope that I set aside for—

[Denis Blanchette, NDP, Louis-Hébert, QC]

I understand what you are saying about the park you are leasing. However, your answer leads me to believe that there is no targeted greening strategy as such and that you operate much more based on the opportunities that arise. In such conditions—with no real strategy—we may wonder whether the targets will really be reached. I am talking about the park that belongs to you and not about what you are leasing. I am under the impression that things are not going too well, that the target may or may not be reached and that savings may or may not be achieved. Is that perception wrong?

[John McBain]

To add precision to my response, I guess I understood your original question to be whether I have a specific amount of money set aside for the target. I don't have a specific amount of funds, but I do have a target.

My greenhouse gas reduction target is set for 2020. I know what my reductions must be; I know the projects we are proposing. And subject to getting those projects approved, I could then tell you the total amount. Nonetheless, I do have a very specific target.

To your colleague's earlier question, the pressure to reduce and save is paramount. As the real property owner, we always need money, so the drive to efficiency benefits us in terms of our ability to manage our inventory.

[Geoff Munro]

My addition would essentially be the same. Our full building fleet budget is focused on achieving our targets. We have allocated a small budget to facilitate this low carbon initiative, but it would be unrealistic to propose that the savings are correlated to that small budget.

I mean, we're talking $1.5 million a year, and that is strictly to put some of the energy monitoring and energy strategy work in place, and then the ongoing expenditures we would normally expend to manage our buildings are used to achieve the target.

With that very small addition, my answer would be the same as John's.

[Denis Blanchette, NDP, Louis-Hébert, QC]

Okay.

So you will try to reach objectives, but you have no incentive beyond the desire to reach them. The willingness to do so is there, and that's politically acceptable, but there is no true strategy involved.

Will you reach your objectives if you continue along this path? Do you have a dashboard that helps you determine whether you will get there? Do you know how much it will cost you to reach those objectives and what kind of savings you will achieve in the end? Do you currently have that type of information?

[John McBain]

I know what my targets are for PWGSC. I know what my targeted reduction is to get to 2020. I then must balance my budget and my appropriation in order to realize the projects to achieve those targets.

That is a very firm commitment that, as managers within the department, we are committed to achieving. Some of these projects are large investments and they require approval of government. They are in the pipeline, if you will, seeking approval, but that is part of our plan to achieve the target, and we do track it.

[Geoff Munro]

In our case, if I may respond quickly, we have diverted a copy of each and every energy bill from the buildings we are working on to a central repository, where we track exactly what we're spending on energy costs so we can correlate that against the work we're doing.

We are tracking it, on the basis that you can't manage what you can't measure.

[The Chair, NDP, Pat Martin]

Very good. Thank you, Mr. Blanchette and Mr. Munro.

Next is Bernard Trottier for the Conservatives.

[Bernard Trottier, Conservative, Etobicoke—Lakeshore, ON]

Thank you, Chair.

Thank you, guests, for coming in this morning.

Mr. McBain, I want to follow up on some of your comments around the cumulative savings. I'm interested in the business model behind making these investments in energy savings.

You mentioned savings between 2005 and 2020 of about $17 million. I imagine there were some pretty large capital investments that went along with that.

I don't want to necessarily ask you for information you might not have at your fingertips today in terms of the capital investment associated with the $17 million, but more around the model.

How do you determine what is a good return on investment for taxpayers? What kind of savings horizon would you look at? For example, would you look at a certain payback period where this would make sense, just like a taxpayer would make a certain decision in their home on whether they should get a new clothes dryer or insulation in their attic, or a new furnace or air conditioner?

How do you make decisions on good investments for taxpayers when it comes to upgrading buildings?

[John McBain]

Your model is very much what we do; we look at the return on investment. As I said earlier, how we manage our real property portfolio is key and central to that function.

If I'm going to retain a building for 20 or 30 years, then I look at more significant investments because I know the payback will be there over the life of the asset. If it's leased accommodation, then frankly I'm loath to do it because leased property tends to be less permanent. It gives us greater agility to meet changing needs, but I'm investing in someone else's property. If it's a 20-year lease, it may be in my best interest to make that investment because operating costs that I pay to the landlord will be reduced.

For the most part, when it comes to our crown-owned inventory, we are looking at exactly what you described: the payback period for this investment. Some things are low dollar, so we call those low-hanging fruit—there's a quick return and they are relatively easy to make within our building management cycle. Others, which may be more significant, take on a special initiative and will require a special project approval consideration, for example, by Treasury Board ministers, in terms of the nature of the investment, and that is demonstrated in the payback period.

[Bernard Trottier, Conservative, Etobicoke—Lakeshore, ON]

If these are good projects, if there's a good return for taxpayer dollars, wouldn't these be things you would do anyway? What's the added benefit of having the federal buildings initiative or the sustainable development strategy? What do those things do? How does that impose certain actions on you?

[John McBain]

From the custodial point of view, those who benefit from the FBI—and I won't speak for NRCan. What I really enjoy about FBI is it is a structure that allows the private sector to come in and pre-approved companies and organizations make investments in the buildings; they are then paid back for their investment on the savings. It's an innovative approach for me that gives me access, in effect, to capital that I would not normally have.

Normally I would have to front that through a typical design bid build with a tender and go out and have the money in my hand before the work was undertaken. With the FBI, the private sector can make the investment, realizing they will get the return. It's an innovative approach that helps us both save money over the long term and be more energy efficient.

In terms of the sustainable development strategy, those are objectives the government has set to be a better citizen and to save taxpayer money. They provide the framework under which we undertake our initiatives. But certainly a large part of what you're talking about in my building management process is to reduce costs. I have less and less money every year. I have an accountability as a steward of this property to protect the taxpayer investment.

[Bernard Trottier, Conservative, Etobicoke—Lakeshore, ON]

Again, getting into the economics, we've got a trade-off between upfront capital costs and ongoing energy savings. Are Canadian taxpayers better off? Is more money coming out of their wallets to pay for these investments or are they seeing the tangible benefits?

[John McBain]

Without hesitation, I would say the taxpayer is better off. We are operating our inventory with fewer and fewer dollars every year, and achieving higher sustainability targets.

[Bernard Trottier, Conservative, Etobicoke—Lakeshore, ON]

Both Public Works and Natural Resources Canada are doing a lot. How are we embedding this culture in the other departments? National Defence, you mentioned, is one of the big landowners and leaseholders. How can we make sure they're moving ahead on their priorities when it comes to energy savings?

[Caroline Weber]

This really does come from the Federal Sustainable Development Act again and the federal sustainable development strategy. The major building emissions are captured by that piece of legislation, and DND is one of the departments identified. The targets are set there and every three years the strategy agencies renew these targets. New targets are set and goals are set. We're coming up to a renewal year in 2013, so those major custodial departments are all captured in that piece of legislation.

[Bernard Trottier, Conservative, Etobicoke—Lakeshore, ON]

Thank you very much.

[The Chair, NDP, Pat Martin]

Thank you, Bernard. You're out of time.

For the Liberals, John McCallum.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you, Mr. Chair, and thank you all for being here.

My first question is about the greenhouse gas targets. I heard 17% by 2017; for NRCan I think I heard 2020.

[Geoff Munro]

I may have misspoken. It was by 2020 as well. The 17% reduction by 2020 is our target.

[John McCallum, Liberal, Markham—Unionville, ON]

That says 2017. Anyway, you have the same target.

[Geoff Munro]

We do.

[John McCallum, Liberal, Markham—Unionville, ON]

And is that the same target across the whole government? Every department has that target?

[Caroline Weber]

The departments that are named within the Federal Sustainable Development Act are custodial departments only. There are 14 of them, and they're the ones that are captured by that target. It does account for something like 90% of all our emissions, so it captures most of what's happening in the federal government.