Indigenous and Northern Affairs Committee on Oct. 31st, 2018

[The Chair, Liberal, MaryAnn Mihychuk]

I call the meeting to order.

Welcome, everybody. We are continuing to work on our study of Arctic infrastructure. Welcome to those joining us by video conference. Pursuant to Standing Order 108(2), we are conducting a study on northern infrastructure projects and strategies.

Before we get into presentations, I'm going to ask all of us to think about Canada's commitment to truth and reconciliation and that we do that whether we're at an event or at a meeting like this. It's important for us to reflect on that to understand the truth and move towards a process of reconciliation.

We're here in Ottawa, the homeland and unceded territory of the Algonquin people. The Arctic, too, is the land of many indigenous bands and tribes. In how we move forward, it's very important to recognize the history there as well.

As for the way this works, you'll have up to 10 minutes to do your presentation. After both presentations, we will have an opportunity for the members of Parliament to ask you questions. From your testimony and your brief, a report will be written, which will be public and provided to all members of Parliament and the Government of Canada. We'll ask the government to reply to our recommendations.

Your participation is extremely important. Welcome.

Our first presenter is in Regina, where I can see on the screen what looks like the Inland offices to me.

You're speaking about AGT Food and Ingredients Inc. and you're the president and CEO. If you want to start, we will set the timer. I'll give you a signal when you're getting close to the end. You have up to 10 minutes.

[Murad Al-Katib, President and Chief Executive Officer, AGT Food and Ingredients Inc.]

That's perfect.

[The Chair, Liberal, MaryAnn Mihychuk]

Please go ahead when you're ready.

[Murad Al-Katib]

Chairperson, members of the committee, ladies and gentleman, my name is Murad Al-Katib. I come to you today with the perspective of an entrepreneur and a business leader in western Canada. In addition to my role as CEO of AGT Foods, I'm the new CEO of the Arctic Gateway Group corporation, based out of Manitoba.

I come to you as a first-generation Canadian born to immigrant parents from Turkey. My father spent 52 years as a rural doctor serving the people of Saskatchewan. My mother was among the first immigrant Muslim women to serve on a rural council in Canada, elected in 1976. I come with a familial background in community economic development, and my career began in government in the area of trade promotion and economic development. I started my company, AGT, from the basement of my house in 2003 and built it into a $2-billion exporter of pulses and grains grown in western Canada.

We've also taken a strong interest in freight and logistics, being one of the largest containerized grain shippers on the globe, and we are now the largest short-line railway operator in Canada, with over 2,000 kilometres of rail track in Saskatchewan, Alberta and Manitoba. In 2017 we began a journey to invest in a generational opportunity we identified in the iconic Canadian port and rail infrastructure with access to tidewater that is located in a truly uniquely positioned Arctic northern gateway—Churchill, Manitoba, and the Hudson Bay Railway.

This area is a strategic link that will allow future access to northern supply, with this location being the closest shipping point from North America's western Canada region to Europe, North Africa, the Mediterranean, and, via the Suez Canal, to the growing market in India and South Asia.

Churchill, we believe, will become a key future stop in the northern passage. Fairfax Financial Holdings and AGT have completed a monumental partnership with a consortium of first nations communities, the Kivalliq communities in Nunavut and the northern Manitoba communities—collectively known as the Missinippi group—to acquire the Hudson Bay Railway, the Port of Churchill and the Churchill Marine Tank Farm Company. The acquisition vehicle is called the Arctic Gateway Group. There are only a handful of deepwater port accesses in North America, and Churchill is one of those.

The reason I think it's a very special vehicle and opportunity is that we were able to partner directly on equity interests with all 29 of the MKO first nation communities, and every community on the Hudson Bay Railway was given the opportunity to have ownership equity in this generational project.

Churchill is the only rail-served arctic port in North America. It provides the quickest access to the Atlantic Ocean—versus any other port—for western Canadian products. The port has been tremendously underutilized by its former ownership.

Just to give you a bit of context, Russia operates 13 arctic ports, with estimates that approximately 20% of Russia's GDP runs through these ports, six of which are rail-served and many of which operate year round with the use of icebreaker technologies. In terms of the ongoing operation of the Arctic Gateway and the assets it owns, the Government of Canada has committed $117 million in acquisition, repair and operational funds over the course of the remainder of 2018 and 2019, with operating funds available until 2027.

This strong partnership with government, the private sector and first nations and communities de-risks the project dramatically. Within the partnership group, Fairfax brings financial wherewithal in managing major infrastructure investments, AGT brings the experience in running short-line railways and as a grain exporter, and the first nations and communities bring the social licence and true inclusiveness and participation in this generational project.

The Arctic Gateway port is being eyed as a potential new transportation route for North America. The over-the-pole route would see the port of Churchill emerge as a trade and economic development zone, linked to Asia, Europe, Russia and Nunavut. It's time for an Arctic gateway initiative in our great country.

Canada has the longest coastline of any country, almost four times the next-longest coastline, and most of it is in the Arctic. For centuries that coastline was rendered inaccessible by thick, hard multi-year ice, but climate change is causing the sea ice to disappear. More than 1.2 million square kilometres were lost between September 2006 and September 2017, leaving the Northwest Passage temporarily ice-free. Soon, all of the Arctic sea ice may melt away during the summer months. Ice will still form during the winter, but it will be soft, single-year ice. This makes icebreaker-assisted year-round shipping commercially feasible. Since the earth is a sphere, Canada's northern coastline is relatively close to both Asia and Europe.

The Northwest Passage offers a 7,000-kilometre shortcut from New Jersey to Shanghai. Churchill, Manitoba, is the only commercial deepwater port in northern Canada. The shipping season is already extended from July to November. Long used for shipping grain to foreign markets, Churchill is beginning to see two-way trade, witnessing Russian vessels arriving with fertilizer from Estonia and leaving with western Canadian wheat for Italian pasta manufacturers.

An Arctic gateway initiative would embrace the north as a transportation opportunity. All-season roads would be pushed through to Tuktoyaktuk, Bathurst Inlet and Baker Lake. Deepwater ports would be built near the mouth of the Mackenzie River and at Bathurst Inlet and Iqaluit. The port of Churchill would be a bustling trade corridor of activity.

The Canadian Coast Guard would be charged with developing safe, commercially attractive all-season shipping. This work would involve maintaining navigation devices and producing detailed charts. It would also, critically, involve breaking ice for commercial vessels, including foreign ones. The Coast Guard already breaks ice for cargo ships in the Gulf of St. Lawrence and Saguenay River during the winter. A new icebreaker in Hudson Bay would add several months to the shipping season at Churchill and would provide sustainable long-term jobs and economic activity for first nations and northern communities.

Arctic hubs for the transportation of goods from North America would relieve pressure on Vancouver, Prince Rupert, Halifax and Montreal. It would create jobs and it would spur economic development, not just locally but across the country. Most significantly, providing icebreaking for foreign vessels in the Northwest Passage would cement Canada's claim to sovereignty there.

Fairfax and AGT, the consortium of first nations, Kivalliq communities, and communities on the Bay Line are committed to working with the Government of Canada, the provinces, and the private sector to build an Arctic gateway to the world. Phase one of the project is under way. We've repaired the rail line from Gillam to Churchill, a critical railway that has been out of service for a number of seasons. We're undertaking safety and rehabilitation upgrades to the port and the railway assets through the partnership funds provided by Canada.

I'm excited to be part of this initiative through a 99-year agreement that Fairfax and AGT signed with Arctic Gateway to operate the railway, the port and the Marine Tank Farm assets. The Arctic gateway, as a natural resources corridor for Canada and the world, is truly a net contributor to Canada's future economic prosperity for all Canadians.

I want to thank you for the time to give my opening comments.

Thank you.

[The Chair, Liberal, MaryAnn Mihychuk]

Thank you so much.

Our second presenter at this time is Matt Belliveau, from the Northwest Territories and Nunavut Construction Association.

Please go ahead when you're ready.

[Matt Belliveau, Executive Director, Northwest Territories and Nunavut Construction Association]

Good afternoon. Thank you for the invitation to address this committee.

My name is Matt Belliveau. I am the executive director for the NWT and Nunavut Construction Association.

The association was established in the Northwest Territories in 1976 and expanded to include Nunavut in 2012. We have about 150 members here, including general contractors, trade contractors, manufacturers and suppliers, road builders and heavy construction contractors, logistics and transportation businesses, allied professionals, and government departments and agencies working in the north.

One of the primary services that we provide to our members is a summary of public sector procurement opportunities. We assemble it, put it out twice a week, and distribute it through our member email list. This summary includes all the construction projects that are put out to tender by municipal, territorial and federal governments, as well as government agencies such as housing and power corporations.

I'm not here to speak in support of a particular infrastructure project. I did want to use this opportunity to just generally stress the importance of infrastructure investment in northern Canada.

There have been a lot of studies published on the infrastructure deficit in the territories, and this impacts core areas, including housing, transport, water, sewage and solid waste management. There is a cycle of underdevelopment in the north. The lack of infrastructure is itself a barrier to building new infrastructure.

The federal government could contribute to breaking this cycle by taking a long view of its investments in northern Canada. In particular, there is an opportunity to increase the number of skilled workers in northern Canada and lower the cost of building and maintaining infrastructure over the long term.

What do I mean by this? There are a lot of companies here in Yellowknife that take on most of the construction projects in smaller communities around the north, and when they go into these communities, they look to hire local people as apprentices. However, the situation that is happening over and over is that even a large project in one of these communities typically is going to wrap up in two years, at most. That's not long enough to complete an apprenticeship, so even though there is clearly infrastructure that needs to be built in these communities, the funding for it is just trickling in.

That means that there are long periods of time in those communities when there are no projects going on that would allow that apprenticeship to continue to completion. Those apprentices have to make a decision to either leave their community or put their apprenticeship on hold. If you put it on hold for more than a year, you have to start all over again. Either way, the result is that there continues to be a lack of skilled labour in these smaller communities, which does raise the cost of building and maintaining the infrastructure that's needed there.

If the federal government is committed to making steady progress on these local infrastructure deficits, it would create more opportunities because there would be projects going on continually over a period of time that is long enough to complete apprenticeships and build up a skilled workforce at the local level, with new journeypersons who can then train more apprentices.

Every dollar you invest in infrastructure in northern Canada does help to reduce the cost of living for residents here and makes the north more accessible for investors, who can generate more tax revenue for all of Canada.

What I'm hoping you will consider is that the federal government could benefit from efficiencies and cost savings over the long term by taking a more aggressive approach to closing northern Canada's infrastructure gap and building capacity here in the north.

Thank you.

[The Chair, Liberal, MaryAnn Mihychuk]

That's fascinating, because our next study is all about capacity. We'll have to have you back. That was quite the introduction.

We're going to start the questioning with MP Robillard.

[Yves Robillard, Marc-Aurèle-Fortin, Lib.]

Thank you, Madam Chair.

I want to thank the witnesses. I'll ask my questions in French.

Mr. Al-Katib, can you specify the type of federal government support that remote communities in Manitoba receive?

[Murad Al-Katib]

We were able to negotiate a contribution agreement with Western Economic Diversification. That contribution agreement is split into really two major buckets. The first bucket was a bucket of support that would be utilized for the repair of 29 washouts that were left from 2016, when the floods in Manitoba happened.

We were able to repair the rail line from Gillam, Manitoba, to Churchill, which is about 200 kilometres in distance. The first bucket of support was the repair of that critical infrastructure, and then a budget that would allow us to rehabilitate the rail link. We have a number of northern communities that are entirely only rail-served, so there are no road links. In the case of the community of War Lake, Manitoba, when we had excess water levels this fall, we had to suspend the VIA Rail passenger service because we were dealing with high water levels near the tracks. In that time, the only link for that community was airlifting in food and airlifting out passengers for medical attention.

The rail link in northern Manitoba is not a convenience factor. It's literally what provides the propane, what provides the fuel, what provides the food and the basic supplies and services for the local businesses and all of that. Roughly about $50 million of support will go into direct infrastructure development. That's for the repair and rebuilding of railbeds, the replacing of rail ties, and upgrading the critical infrastructure into a class II railway standard. In addition to that, there's an ongoing operating support of about $4.3 million a year for 10 years that will allow us to maintain all of those critical supply elements that are in partnership with the communities. It's the supply of essential service.

[Yves Robillard]

What do you think of the Nutrition North Canada program as a temporary measure?

[Murad Al-Katib]

I think that as a temporary measure, it's a necessary measure. Again, we have to re-establish the supply chains to ensure the availability of cost-effective food and basic essentials. Part of the supply chain efficiency is making it more available, and more availability and more players and more competition will provide better access for northern communities.

[Yves Robillard]

Did the federal government show flexibility in the joint efforts to help resolve the Churchill rail line situation?

[Murad Al-Katib]

The federal government showed a lot of desire, but I think it was very important that we found a commercially viable solution with true partnership and inclusiveness of the communities. Bringing 29 first nations communities together with the Kivalliq communities and with every single municipality and city on the line was quite an enormous undertaking. The fact that we were able to achieve it is what will de-risk and guarantee the success of the project.

[Yves Robillard]

My next question is for Matt Belliveau.

When it comes to housing, how is our government's approach to funding different from past approaches? To date, what have been the results of these investments?

[Matt Belliveau]

I don't know enough about the program to speak to that.

I know there continues to be a deficit in infrastructure funding at the community level. The governments of the Northwest Territories did a report in 2014 on the funding they provide to communities for basic infrastructure and they found that the communities in the Northwest Territories are underfunded by $40 million a year, and that goes on every year. Here in Yellowknife, we're short about $11 million in each year on the funding from the GNWT.

There are definitely still funding gaps. I realize that's at a territorial level, but they get a lot of their funding from the federal government. Everybody up the chain is asking for more money.

I couldn't really speak specifically on that program.

[Yves Robillard]

Thank you.

[The Chair, Liberal, MaryAnn Mihychuk]

We're moving on to MP Cathy McLeod. I understand she is sharing time with MP Kevin Waugh.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Thank you, Madam Chair.

I just have a quick intervention before I turn it over to my colleague.

This is a notice of motion.

We all know that a massive budget implementation bill of 802 pages was tabled. There were some significant issues related to our committee. Of course, we're not going to be able to study that, so I think it's important that we consider this motion carefully when we get an opportunity.

The motion reads:

That, considering the government’s omnibus legislation, Bill C-86, A second Act to implement certain provisions of the budget tabled in Parliament on February 27, 2018 and other measures; and considering the statement in the Ministers’ mandate letters from the Prime Minister that Ministers be held accountable by Parliamentary Committees; officials from the Department of Indigenous and Northern Affairs Canada, and the Department of Indigenous Services Canada, appear before the Committee on November 7, 2018 for a briefing on amendments to the First Nations Land Management Act and the First Nations Fiscal Management Act, and a briefing on the Addition of Lands to Reserves and Reserve Creation Act; and that the Committee submit recommendations and amendments to the Standing Committee on Finance to be considered during its clause-by-clause consideration of the Bill.

Obviously, this is a notice of motion.

I certainly intend to bring this forward again because I think it's absolutely important that our committee examine these significant and important issues within this omnibus legislation.

I apologize to the witnesses, but I did need to get this notice of motion on the floor.

I understand my colleague Mr. Waugh would like to take over the questions.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Thank you very much, Ms. McLeod.

Welcome, you two, on video conferencing.

Murad, welcome. I see you on the plane once in a while.

Let's face it: Over the years, the Churchill rail situation has not been the kindest to anybody in this country. Omnitrax had it. They tried to sell it, and of course the port with it. Then it was closed for a long time. It caused a great deal of angst in the western provinces.

You are totally correct in that this port has been underused since day one. What makes it that you, your group at Fairfax, the first nations, and Kivalliq, think that you can survive in Churchill where other groups have died in Churchill?

Can you talk about that, if you don't mind?

[Murad Al-Katib]

I'll tell you what I think.

What we're seeing is that as we continue to have the western Canadian grain crop grow, the peak shipping period of August, September, October and November coincides with the current shipping season in Churchill. We think it's going to be a very strong pressure release valve capacity for western Canadian grain farmers to have another viable port option to be able to ship grain while Vancouver and Prince Rupert are a bit congested. That is going to be one of the key things.

The other thing is that with the involvement of the communities and the ability of those communities to encourage the participation of first nations and other local businesses to scale and grow, a stable rail infrastructure is going to spawn economic development activities. When we've done our business plan.... This is why we went to the government with an infrastructure development plan. Also, an ongoing operating subsidy will be predictable for the people of Canada and will allow us the opportunity to build a viable business case.

Kevin, you know our business. You've watched us grow. We believe strongly that this can be a strong commercial corridor for natural resources, but we need to do more than just shipping out; we need to be looking at inbound product too—anything in dry bulk, whether it be fertilizer or cement. It's those types of things. We need to utilize that ability to move product into and out of the country.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

I couldn't agree with you more.

I think that for grain companies, the insurance costs of bringing ships into Churchill was just so astronomical that they shied away from that, and even maybe your company, because you go to the west port, in Vancouver.

Could you talk about the added expenses in Churchill that we need to know about around this table?

[Murad Al-Katib]

I think we have to balance off the rail costs. From a west central Saskatchewan point to Churchill, the cost is much lower than the rail cost to Vancouver, and certainly much less than the rail cost to Thunder Bay and Montreal. From that perspective, when I look at the pipeline, freight, and additional vessel costs, they're offset by lower rail costs, and I think that the Churchill shipping route can be very competitive on a freight-for-freight basis.

When I look at our ability, I see that we were shipping vessels with lentils into Turkey and Egypt, and we were looking at durum wheat the same way. The shipping route has some economics. Even with that ice-class vessel issue, it's not an insurmountable premium.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

I have to ask Matt a few questions, if you don't mind.

Matt, I see you've done a survey up there with your organization, which is great. You've reached out to your 150 members. Most agree with you that the cost of living and doing business is an important step up there, but I also noticed that for 55% of your membership, attracting and retaining skilled employees is their number one issue, and you've talked about that. How can we help you up there when, first of all, it's not the ideal place, I guess, to settle for most skilled workers? After they get there, they often have a tendency to move south later.

How can we as government look at getting skilled workers to stay up there and be a part of your community?

[Matt Belliveau]

I think people sometimes have that stereotype in mind that people don't want to live here. There are 20,000 people here in Yellowknife. We have a pretty good quality of life.

The issues are in the smaller surrounding communities, where there is that large infrastructure gap. I don't think anything you're going to do will compare to just building out the core infrastructure that's needed. It's really nothing more complicated than that. I know the government wants to spread this spending out over time and not—

[The Chair, Liberal, MaryAnn Mihychuk]

Thank you.