Industry Committee on April 1st, 2008

[The Chair, Conservative, James Rajotte]

Members, we have two panels with us today. They are here pursuant to Standing Order 108(2), a study of the proposed sale of part of MacDonald Dettwiler and Associates Ltd. to Alliant Techsystems.

Our first panel is three guests from the Canadian Space Agency, the president, Mr. Guy Bujold; the director of earth observation projects, Mr. Luc Brûlé; and thirdly, we have the director of legal services, Mr. Robert Lefebvre.

Mr. Bujold, I believe you'll be making an opening statement on behalf of the CSA, and then we'll go to questions from members.

[Guy Bujold, President, Canadian Space Agency]

Mr. Chairman, firstly I would like to thank you and the members of the Committee for the opportunity to address you today.

As you said, I am joined here this morning by Luc Brûlé, Director of Earth Observation projects at the Canadian Space Agency, who is also the Program Manager for RADARSAT-2, and by Mr. Robert Lefebvre, Director, Legal Services, at the Canadian Space Agency.

As you may be aware, the mandate of the Canadian Space Agency is to promote the peaceful use and development of space for the social and economic benefit of Canadians.

My remarks today will focus on the Canadian space program, the current context of Canada's space industry, and the Canadian Space Agency's relationship with MDA.

With the launch of Alouette in 1962, Canada became the third nation in space, after the former Soviet Union and the United States.

Canada's achievements in Satellite Communications, Earth Observation and Space Exploration are the result of visionary, targeted and sustained efforts.

For example, thanks to the previous investments in space, our communications satellites now link far-flung communities.

With the launch of Hermès in 1976, Canada was the first country to have its own direct broadcast satellite.

Satellite data helps ships to navigate our waters, helps us to track oil spills and monitor natural resources, and assists disaster response in Canada and the world over. Canadian-developed space-borne instruments provide critical information on changes occurring due to global warming and in the protective ozone layer.

Despite its relatively modest size, the Canadian space program has flourished because of ingenuity, strong cooperation with industry and the research community, and targeted investments, as I have mentioned.

NASA and the European Space Agency recognize the Canadian Space Agency as a valued and trusted partner. Simply put, in terms of the return on our investments in space and our place in space activities, Canada punches well above its weight.

At the outset of the space program, the Government of Canada identified key areas in which Canadian science and technology could develop and excel. The role of the Canadian Space Agency has been to help set the strategic direction for the Canadian space program, a program delivered in close collaboration with Canada's national space industry.

Mr. Chairman, the Canadian Space Agency has worked to find the most effective and cost-efficient means to deliver benefits to Canadians. An important way of doing this has been to support a viable and competitive space industry.

The Canadian Space Agency Act states specifically that one of our functions is to “promote the transfer and diffusion of space technology to and throughout Canadian industry”.

Our relationship with industry and academia is key to us. Approximately 65% of the Canadian Space Agency's annual budget is contracted out.

This approach has been mutually advantageous. It has provided us with a means of leveraging the talents of our space industry and science community to generate meaningful benefits for Canadians. It has also produced significant economic benefits for Canadian industry. With 200 firms—mostly SMEs—employing 6,700 highly skilled employees, Canada's space industry generates roughly $2.5 billion in annual revenues, 50% of which are from exports, the highest ratio in the world.

Let me speak briefly about our relationship with MDA.

Members of the committee, the Canadian Space Agency has had a longstanding and productive relationship with MDA. In the past five years, approximately $430 million of the Canadian Space Agency contracts have been awarded to MDA. This represents 50% of the Canadian Space Agency's overall contracts to business in that time period.

Many are familiar with the most visible products of this relationship: the Space Shuttle's Canadarm; Canadarm2 and now Dextre on the International Space Station; RADARSAT-1 and RADARSAT-2.

Questions have arisen regarding the nature of the deal with MDA surrounding RADARSAT-2. Under the Agreement between the Canadian Space Agency and MDA, MDA owns RADARSAT-2, and the foreground intellectual property. MDA Geospatial Services Inc., a subsidiary of MDA, is the licensed operator of the satellite, which, incidentally, is and will continue to be operated from the Canadian Space Agency's own facilities in St-Hubert.

In return for its investment in RADARSAT-2, the Government of Canada will receive $445 million worth of data over the lifetime of the satellite. The Agreement contains provisions to ensure the Government of Canada receives its pre-purchased data over the useful lifetime of the satellite.

At the Canadian Space Agency, we are reviewing the contracts we have with MDA in order to ensure that the government obtains the services and products it has contracted for with MDA, and, as such, to ensure that Canadians fully obtain the benefits from those undertakings.

Thank you for your attention. We're open to questions from the committee, Mr. Chair.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Bujold.

We'll now go to questions from members. We'll start with the first round of six minutes.

Mr. Brison, please.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you, Mr. Chair, and thank you very much for joining us today.

Is there any other Canadian company with the same capacity to build complex earth observation satellites that MDA has?

[Guy Bujold]

The Canadian space sector, as I indicated, includes a number of firms, 200 firms roughly, who do various parts of the business. MDA—and I know you'll have people from MDA testifying after I do—occupies a particular niche inside that constellation of companies, where they have the capacity, and they've demonstrated it in the past, to handle major, large-scale satellites. So this would be the niche—

[Scott Brison, Liberal, Kings—Hants, NS]

So there's no other company in Canada with the same capacity?

[Guy Bujold]

There is no other company in Canada that currently is in that particular area of business.

[Scott Brison, Liberal, Kings—Hants, NS]

With 50% of the Canadian Space Agency's contracts going to MDA currently and with there only being one company, MDA, capable of building complex earth observation satellites, how is it consistent with your stated mandate to promote the space industry that this deal continue? Would it not decimate the Canadian space industry if this deal is concluded?

[Guy Bujold]

Well, I think, first of all, it should be underlined that we are talking about a transaction that has essentially yet to occur and for which we don't know the final results in terms of the location of the activity, etc.

The Canadian Space Agency, and the Canadian government through the Canadian Space Agency, requires a certain capacity in order to be able to deliver on the mandates in space. It is true that the Canadian Space Agency has in the past promoted the development of that capacity so as to be able to respond to those needs. Until and if the deal is consummated, it's impossible to speculate on what the impacts would be as a result of it.

[Scott Brison, Liberal, Kings—Hants, NS]

So you're saying that until the deal is approved, you will not have access to all of the information as to what the impact would be on the future of Canadian sovereignty or the future of Canada's space industry?

[Guy Bujold]

No, I've not commented on sovereignty. What I've said is that the nature of the resulting entity will matter in terms of how we can engage it in terms of meeting the needs of Canada in the future.

[Scott Brison, Liberal, Kings—Hants, NS]

Under the Remote Sensing Space Systems Act, it is the Minister of Foreign Affairs who has the responsibility to determine whether or not a transaction like this is ultimately compromising Canadian sovereignty, or at least control over RADARSAT-2 and its images.

In the House yesterday it was indicated that the minister is no longer responsible for this and that another minister has been designated. Are you aware of whether the government has taken the unusual step of taking this responsibility away from the Minister of Foreign Affairs and providing the responsibility to the Minister of Industry in this case?

[Guy Bujold]

No, I am not, and as you pointed out in the introduction to your question, the RSSSA is the responsibility of the Minister of Foreign Affairs, and I'm afraid that question probably should be addressed to him.

[Scott Brison, Liberal, Kings—Hants, NS]

We were told previously that one reason it's in the commercial interests of MDA to be sold to an American company is that to have access to U.S. space program contracts is critical to any space industry participant, and that through ITAR and other U.S. security laws there's more and more discrimination against Canadian companies.

Are you aware of what the impact of ITAR and other U.S. security laws would be on RADARSAT-2 and the images, in terms of the access for the American government to those images?

[Guy Bujold]

Again, the responsibility of the Canadian Space Agency is to ensure that the terms of the contract we've entered into with MDA would be respected, regardless of what the outcome of these deliberations would be and the decision of the government. So with regard to the effect of ITAR on the Canadian space industry generally or what the effects of RSSSA licensing are, those are questions that are not within the purview of the president.

[Scott Brison, Liberal, Kings—Hants, NS]

Have you seen a negative impact on the Canadian space industry as a result of ITAR and other U.S. security measures?

[Guy Bujold]

We, like you, have read reports to the effect that ITAR does create a complication for Canadian firms to enter into the U.S. market, but this is not a space-specific comment. As we know, it affects a number of other segments of the Canadian industry.

[Scott Brison, Liberal, Kings—Hants, NS]

Other countries, like the U.K. and Australia, have negotiated ITAR exemptions for their defence and space industries to do business with the American defence and space industries. Shouldn't the Canadian government be doing the same to help create a more vigorous space industry here in Canada?

[Guy Bujold]

I think that's an interesting policy question that you might want to address to the government or to a representative of the minister, but the president of the Canadian Space Agency, unfortunately, is not in a position to answer that.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Bujold.

Thank you, Mr. Brison.

We'll go to Madame Brunelle.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Good morning, gentlemen. Good morning, Mr. Bujold.

Mr. Bujold, you told us that the Canadian Space Agency has awarded a number of contracts to MDA. Indeed, MDA owns RADARSAT-2. The sale of MDA to a US company is obviously what concerns us the most. As we are not privy to the details of the contract between MDA and the Canadian Space Agency, we have no means of knowing whether the Government of Canada would retain the right to interrupt service were RADARSAT-2 sold to a foreign company. I would like to know whether the Canadian government will retain control over the images for reasons of national security and whether it will retain priority access in the event of an emergency, in the event of flooding, for example.

Are you able to confirm that the Government of Canada will be retaining these two rights, rights which we believe to be absolutely essential in terms of our security?

[Guy Bujold]

I can confirm that an agreement has been signed between the Canadian Space Agency and MDA that governs all phases of the RADARSAT-2 project, including construction and orbit insertion. This means that once the satellite is operational, in other words, once the requisite technical standards, amongst others, have been attained, the provisions of our contract with MDA will ensure that the Government of Canada gets what it is due under the terms of the agreement.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Can we really be certain that the Government of Canada will always be able to access RADARSAT, its images and its data once MDA passes into U.S. ownership? What would happen if the Americans refused on grounds of national security?

[Guy Bujold]

As I said in answer to Mr. Brison's question, the deal has not yet been finalized. In order for both the deal and the licence transfer to comply with the Remote Sensing Space Systems Act, they still have to be approved by a number of people, including the Minister of Industry. As the President of the Canadian Space Agency, I have to ensure that the undertakings given to the Canadian government in the contract between the Canadian Space Agency and MDA are met.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

RADARSAT was developed largely thanks to Canadian public funds. You have to understand that we want to ensure that we get our money's worth, as opposed to losing everything to foreign interests. Obviously, the contract has not yet been finalized—that is why we are asking questions today. We want to know whether we should oppose the sale; we want to know what the minister should do. We need to be fully informed.

Mr. Hugh Thompson, an engineer at MDA appeared before this committee on March 5, 2008. I do not know whether you had the opportunity to read his testimony. He said that, due to the U.S. program, Canada could lose access to all the new radar technology developed by MDA. And I would remind you that this is technology that was developed using Canadian taxpayers' money. Mr. Thompson said, and I quote:

Secondly, when ATK buys the systems division of MDA, they will be buying our intellectual property. When ATK bids new technology developed in Canada for U.S. classified projects, it seems highly likely that this technology will also become classified. Canada will lose access to technology that has been developed by Canadians in Canada for the benefit of Canada.

What are your thoughts on that assertion? What ramifications could this have for Canada?