Industry Committee on May 28th, 2008

[Ron Kehrig]

It's great to have more money in the space. Any time you set up another level of bureaucracy and another pot of money, it adds to the complexity out there among sources of funds. We have a lot of funds already. Working with the existing funds and infrastructures is probably better than setting up a new one.

[The Chair, Conservative, James Rajotte]

Thank you.

We're almost out of time. I think Monsieur Vincent has a brief, 30-second question.

[Robert Vincent, Bloc, Shefford, QC]

Mr. Lidster, you said that you receive submissions for about 25 or 50 projects per year but that you just invest in one. How do you evaluate those projects and how do you choose the one in which you are going to invest? I imagine that everything depends on the investment that you have to make. How do you go about it?

[Perry Lidster]

We call for a formal proposal. We will do our own due diligence on the company, we'll do our investigation, we'll ask for a business plan, we'll support them in developing a business plan, which is critical to their success as well as critical to their getting funding. It's a straight business decision on the potential: the likelihood of return and the timing of the return.

The reason we only do one or two is that we're limited in capital. We would probably do five or six, because they all qualify.

And that's really the issue; we're a little bit a victim of our own circumstances, our own success here. The cluster is throwing up technologies at a much faster rate. The cost of supporting them has increased. We would like to raise our cap from $300,000 to $500,000 or $750,000. It would be very advantageous for the company to do that. It's just that there are more good projects, more good technologies out there, and we need to ramp up our activity.

[The Chair, Conservative, James Rajotte]

Thank you. Merci.

I want to wrap up with a couple of questions.

What we hear, certainly in Ottawa and across the country, is that in terms of basic research over the last 11 years, the actions taken by the federal and provincial governments have, in the view of the research community in Canada, reversed a lot of the brain drain. From a basic research point of view, they say that Canada is doing fairly well, just to be very basic, but that from a commercialization point of view we're not doing well. That's certainly what we heard from the panel yesterday in Manitoba.

As a committee, one of the things we're looking for is examples of success: why did they succeed and how do we emulate that success?

To Mr. Hodgson, I've toured VIDO before. Unfortunately, we didn't have time to tour it today. You talked about commercialization successes; vaccine products have been talked about. Can you highlight for the committee why these successes happened? Were there commonalities you can point to there to say that these are some factors involved, that these are things we should emulate, and that these are some policies we as a committee should consider altering?

Can you talk about your successes and how they were actually achieved?

[Dr. Paul Hodgson]

Certainly.

Again, our institution is about 33 years old. From a very early stage, VIDO recognized the importance of intellectual property and patenting. So I guess from a very early age, if you want to talk of business sustainable, competitive advantage, basically a patent does nothing else but give you the right to sue. So the companies that come in now and work with us feel very comfortable that we've kept the notes, we have the due diligence in place, to actually protect them as they take a product forward.

The seven vaccines I talked about initially were vaccines created some time ago now, over various stages--over the last 20 years, even. VIDO initially started out with a spinoff company called BioStar. BioStar actually marketed and sold those products and actually had a revenue of about $2.6 million a year. They went on to out-licence that and sell that off, primarily to Novartis Animal Health.

So even when I talk about our commercialization success, most of our vaccines are now marketed by international companies, not necessarily Canadian companies. So I think that's still a challenge in Saskatoon. As someone mentioned, we all work together, we all know each other. I think Saskatchewan, and Saskatoon in particular, have done an incredible job of making this cluster work. But I think we're still finding some challenges in bringing larger companies here, and I don't know how we would approach that.

What we can do is really enhance the effectiveness of the start-up companies. The one that's been mentioned a couple of times today is a company called Saponin. They make adjuvants. From a vaccine perspective, there's another company called Prairie Plant Systems that's looking to make vaccines in plants.

I think we can work with those companies to help them succeed, and that's something we try to do. From a success and policy perspective, anything you can do to enhance the success of those companies--whether it's tax breaks for angel investors, whether it's new labour-sponsored funds, or whether it's putting money into that--I think that's going to be incredibly advantageous.

[The Chair, Conservative, James Rajotte]

Just to clarify, you talked about advance market commitment. We had Bioniche before us in Ottawa, and my recollection here is that they were asking for a $15 million program or something whereby the new vaccine, that I think was developed in concert with VIDO...that some money would be allocated to producers. Producers would then buy the product and apply it to their cattle.

Is that different from what you're talking about, in terms of this advance market commitment? It was in response to a question from Mr. Stanton.

[Dr. Paul Hodgson]

When I spoke of advance market commitment, I was speaking more from a human health perspective. I do not know whether the government as a policy wants to do the same sort of thing for animal health vaccine.

That's a very interesting vaccine, because it's a bacteria that causes no disease in cattle, but we can actually--from a human food and safety perspective--vaccinate the cattle to protect humans. So in that sense, yes, I guess it's something that could be done.

[The Chair, Conservative, James Rajotte]

But is that what you mean by advance market commitment?

[Dr. Paul Hodgson]

Basically, yes. That's going to be a government policy issue, though. So West Nile virus--where you would actually vaccinate a human probably--would be something that you could have. Saskatchewan is a very...I won't say susceptible population, but it's a population where the disease is prevalent. Whether the government wants to look at actually subsidizing vaccines to be given to animals--through an advance market commitment to protect humans--is something I can't speak to.

[The Chair, Conservative, James Rajotte]

The clerk has just told me that my time is up. Although I have a few more questions, I will thank you all for your time here. I think it was an excellent discussion with our committee members.

The only point I would have to make is I that disagree with Monsieur Arthur on something. At one point he said he “used” to be a communicator. He still is a great communicator, in our view.

We certainly enjoyed the discussion. We enjoyed your presentations here today. If you have anything further to add to the committee, please submit it to the clerk and we will ensure all members get it.

Thank you for your time today.

Members, we will take about a five-minute break and we will have the next witnesses come forward. Thank you.

[The Chair, Conservative, James Rajotte]

Members, we'll welcome our second full panel of guests.

We have with us four organizations again. First of all, from Innovation Place, we have the vice-president of research park operations, Mr. Ken Loeppky; second, from the Saskatchewan Institute of Applied Science and Technology we have president and CEO, Mr. Robert McCulloch, and also we have the executive director, public affairs, Ms. Patricia Gillies; third, from the University of Saskatchewan we have the vice-president of finance and resources, Mr. Richard Florizone, and the managing director, industry liaison office, Mr. Doug Gill; and fourth, from SaskTel, we have the vice-president, corporate counsel and regulatory affairs, Mr. John Meldrum—John, I think you've been before this committee before—and we have the director, regulatory affairs, Mr. Duncan Kroll. Welcome.

We will go in that order, with each organization having up to five minutes for an opening statement, and then we'll go immediately to questions from members.

Mr. Loeppky, we'll start with you.

[Ken Loeppky, Vice-President, Research Park Operations, Innovation Place]

Thank you, Mr. Chairman.

I'd just like to give thanks for the opportunity to come and speak in front of this group.

I thought I'd start by talking a little bit about the background of Innovation Place. Innovation Place is a crown corporation wholly owned by the Province of Saskatchewan. It was started with a research park in Saskatoon in 1977 when a lease for land was secured with the University of Saskatchewan. The first building was built in 1980. The research park expanded into Regina in 1998, when a similar agreement was signed with the University of Regina. Today we have 22 buildings on the two parks, 17 in Saskatoon and five in Regina, and the total investment to date is about $230 million.

As I mentioned, the first building was built in 1980 and was occupied by five tenants. There are now 185 tenants in the research parks, who employ about 3,500 people. In 2007 the economic impact from the tenants' operations in the parks was just under $600 million of economic activity for the province of Saskatchewan. Indirect employment is estimated at over 7,000 jobs. Overall, 62% of the clients who work in the research park are in business. And in fact in Saskatoon, as a mature park, it's even higher at just over 85% private sector tenancy. Of those tenants, 71% have fewer than 10 employees, so they are small companies. In 2007 we actually saw the establishment of eight start-up companies in our parks.

Some of our observations are that there are many ways to enhance commercialization. Research parks, we believe, are part of the solution. All university-related research parks in Canada struggle to deliver infrastructure, and primarily the issue is the high cost to deliver the infrastructure to support technology sectors. The business model requires a high rent when you have high input costs. That's not necessarily conducive to small and medium-sized businesses, and definitely not conducive to start-up companies.

We believe we're an example of a successful university-related research park. As a matter of fact, I think we're the only one in Canada that has an ownership structure like ours. We attribute that success to the relationship we have with the two universities here and to the financial support from our provincial government. As I mentioned, that government support is not common across Canada.

We encourage the committee to consider the university research park model as part of the solution for enhanced commercialization in Canada and to consider ways to support growth of research parks.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Loeppky.

Dr. McCulloch, you have the floor.

[Dr. Robert McCulloch, President and Chief Executive Officer, Saskatchewan Institute of Applied Science and Technology]

Thank you, Mr. Chair. Like Ken, we very much appreciate the opportunity to speak to the panel today.

I'm speaking on behalf of our organization, SIAST--the acronym more commonly used around here. I'm privileged to serve as the president of a four-campus institution. We have campuses in the beautiful Saskatchewan cities of Prince Albert, Saskatoon, Moose Jaw, and Regina. We serve about 12,000 full-time students, almost 30,000 individual course registrations, and we're very proud that we graduate nearly 4,000 students each year.

I hope our brief builds upon the submission you received from ACCC, the Association of Canadian Community Colleges, back in April, entitled Making it Work. I know you can count on SIAST--in fact, as a board member of ACCC, you can count on all of us in the college and institute sector--to work with you on Canada's science and technology plan. We're very proud of our work. Let me just begin with a few brief points that are built upon in our report, beginning perhaps with links to industry.

At our institute we're very proud that we have over 700 people who serve on our industry advisory committees. That gives us a very strong connection to local and regional industry and also some national connections.

I'm proud that we recently had a meeting with three of the leading potash producers in our province--PCS, Mosiac, and Agrium. They were talking not only about their human resource needs but also about their applied research and technology needs. That's what I want the panel to hear, that you can count on the institute and colleges in our province. So the first is industry links.

I hope the panel might also consider the role that colleges and institutes play in applied science. We really are the organization--our faculty and staff--that can take good bench research to the next level. We do a lot of testing of materials, testing of protocols.

We hope the panel might consider direct support to the colleges and institutes. We're pleased to see some changes, for example, with CFI eligibility that have opened the doors to institutes, but perhaps some targeted funding to us would be very helpful in these applied research projects.

The third point that I'd like to build on is really based upon support for students. The ACCC submission highlighted the need for support for internships and co-op students in many areas. Again, we are very proud, and I've been told by Ken's colleagues that almost 40% of the staff at Innovation Place are graduates of technical institutes--the technologists, the lab assistants. These are the foundational staff that really make applied research and general research work. We hope the panel might consider investment in internships and some unique support for co-op kinds of activities.

Finally, as I noted in the document on science, we're really proud of some of the partnerships we've built. We're pleased with the partnerships we have in our provincial institutions, with Dr. Florizone and his colleagues. We have a number of “two plus two” partnerships. But I submit that we've only scratched the surface on those kinds of activities. What I mean by two plus two is building from a technology program into degree programs so that students can explore all sorts of options.

We're pleased with the relationship in our province, but also proud that a number of institutions from outside of Saskatchewan have looked to SIAST for partnerships. We have a number of agreements with Alberta and British Columbia students.

As a subset of that, if I can just build on partnerships, I want the panel to know how proud we are of the partnerships with aboriginal institutions and organizations in the province of Saskatchewan. While the panel is focused on science and applied research, of course, I think we have to, in western Canada, give due consideration to opportunities and the science needs of aboriginal students.

My final comments are that we are delighted that nearly 20% of our student population--with particular emphasis on our Prince Albert Woodland campus, with almost 40% of our students--are of aboriginal ancestry. But this is another area that I urge the panel to build on.

With that handful of comments, other details are in the submission, and I look forward to questions. Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now go to Mr. Florizone.

[Richard Florizone, Vice-President, Finance and Resources, University of Saskatchewan]

Thanks very much.

First off, on behalf of the University of Saskatchewan, welcome to our beautiful city and province, particularly on this wonderful prairie summer day.

Thank you for the opportunity to appear before you. Here with me today is my colleague Doug Gill, who is the managing director of our industry liaison office.

My objective today is to first give you a brief overview of our innovation and science and technology cluster at the University of Saskatchewan. Then I'd like to share some thoughts, as we started to talk about this morning, on what is for us our single largest issue with regard to science and technology, and that is the funding of operating costs for major scientific facilities.

At the University of Saskatchewan we're proud to be in our 101st year. To give you a sense of the scale of the institution, we have over 20,000 students, 7,000 staff, and 13 different colleges. We've created an innovation cluster that is a global leader that we believe will continue to benefit Saskatoon, Saskatchewan, and Canada.

One of the unique elements of our cluster is that we're one of the only universities in the country that has that unique combination of human, animal, and plant sciences with our colleges of medicine, nursing, pharmacy, nutrition, veterinary medicine, and agriculture and bio-resources. Adding to that are, of course, VIDO and our new International Vaccine Centre, together with the biomedical imaging beam lime at the CLS, creating a very unique cluster and capability in the life sciences.

It's those types of combinations that have helped us to be a leader in innovation. Our overall research revenue at the university is now more than $140 million, more than double what it was 10 years ago. So we are in a growth trajectory and seek to continue to build on our success in research.

One of the early successes that paved the way for this level of achievement, and you've heard about it already from Ken Loeppky, is Innovation Place. It's one of the most successful university-related research parks in North America. Ken shared with you some of the stats. With 150 clients, 2,700 employees, it's a very significant entity and a great success story. Actually, as you travel around the world you realize it's one of the early success stories in science and technology parks, having been there in the early eighties. I spent some time in the U.K., and I can say that a lot of countries are probably 10 years behind where we were in Saskatchewan in establishing these types of facilities.

Of course, the other aspect to our cluster, our major science facilities, as we spoke about this morning, is that across the country there are approximately 10 pieces of major science infrastructure, that is, greater than $100 million. Two of them are here in Saskatoon. One is the Canadian Light Source, and the second is the International Vaccine Centre.

As you heard, the CLS is an international facility. It has researchers and funding partners from across Canada and around the world, capital funding from four provinces, active researchers from eight provinces, and, as I understand, we're working on P.E.I. and Newfoundland to get them on board as well. CLS is a very ambitious industrial science program, targeting 25% of its beam time to industrial partners and cost recovery, and we're on track to working towards those goals.

But as I mentioned, the CLS isn't the only major science endeavour. There's also the International Vaccine Centre, the $140 million facility on track to be constructed in 2010. When it is completed it will be the largest containment level 3 research facility in western Canada. What that means is you'll have the capacity to investigate--I think you heard about it already from our colleagues from VIDO--and conduct research on those level 3 diseases that are at the boundaries of animal-human health, some of the hottest topics in public health these days, such as avian influenza, West Nile virus, and SARS.

As you've heard from VIDO, the predecessor organization of InterVac, this facility will have an impact well beyond Saskatchewan borders. For example, we know from VIDO that their calf scours livestock vaccine saved an estimated $5 billion in economic losses per year across North America. So it's a very significant economic impact that you can have directly or indirectly through these types of facilities.

That gives you a bit of history of where we've come from as an institution and where we are today in terms of contributing to Canada's research excellence. Looking forward, of course, we see a range of opportunities and barriers to our continued success in research, but the single biggest issue for us is funding the operating costs of major scientific facilities, such as CLS and InterVac.

The Government of Canada's vision for science and technology is really to build a sustainable national competitive advantage in science and technology. I think from your tour this morning you've had a sense of how major facilities like CLS and InterVac will bring that vision to life, creating those critical masses that can bring together people and investment from across the country and around the world.

As you know, we don't have a framework or single agency to deal with operating costs for major scientific facilities. The CLS currently receives funding from a variety of provincial and federal partners, including NSERC, CIHR, NRC, and Western Economic Diversification Canada. And while we're grateful for this, we also recognize that other nations, such as the United States, have a single agency.

So our key recommendation to you, to give you a bit more detail, is that the Government of Canada provide a program of sustainable funding for major scientific facilities like CLS and InterVac.

The program, I think, should have a number of key features, which we can talk a little more about. It should, for example, provide funding over a five-year timeframe, to give some stability. The program should likely include the requirement of some modest provincial contributions. We believe science and technology is primarily a federal responsibility, but requiring some provincial matching would ensure that major labs continue to serve the needs of their local communities. As well, obviously the industrial targets are a very important component of this.

I want to be clear that we're happy working with our current funding partners, but we do see benefits to the public of establishing a single agency such as this. It would provide more focused and effective oversight of the facilities, a little more monitoring of their strategic goals, a potentially stronger link between government strategy and their direction, and perhaps enhance capacity to create industrial partnerships.

I've covered a lot of ground. I know we'll talk more about this in questions, but to summarize, I hope I've left you with a clearer picture of what our cluster is here and some of the major issues and how we might work together to resolve this issue of operating costs for major facilities.

[The Chair, Conservative, James Rajotte]

Thank you very much.

We'll go now to Mr. Meldrum, please.

[John Meldrum, Vice-President, Corporate Counsel and Regulatory Affairs, SaskTel]

On behalf of SaskTel, I would like to thank the committee for inviting us to appear.

Just to orient new members of the committee, SaskTel is the incumbent phone company in the province of Saskatchewan and is owned 100% by the provincial government.

On the launch of its study, the standing committee stated that “Science, research and development underpin Canada’s position in the knowledge economy, where strength depends on capacity to innovate and stay ahead of the technological curve.” We couldn't agree more. We believe that improvements in our quality of life and standard of living will depend on our increasing success in bringing scientific and technological innovations to life.

In Saskatchewan, with its widely dispersed population and its natural resource base, we understand the implications of the scientific and technological discoveries and applications, and the benefits they provide. Technology and innovation have been at the core of this province since its inception.

SaskTel has taken a lead role in this regard, delivering the world's finest communications technologies to customers and communities across the province. This year SaskTel will have spent 100 years building a world-leading communications network for Saskatchewan, carrying a wealth of information into the households and businesses of this province every day.

Since 1987 we have invested more than $3.1 billion in our Saskatchewan network. And our work continues in 2008, with ongoing efforts to deliver higher bandwidth, expand our cell coverage, and provide the latest communications and entertainment services to our customers.

Looking ahead, most authorities agree that one area of Canadian science and technology strength and opportunity is information and communications technologies, ICT. In 2007 the federal government report, Mobilizing Science and Technology to Canada's Advantage, identified the ICT sector as an area to focus more of our energy and resources on. Prior to that, the Telecommunications Policy Review Panel observed that in Canada, and throughout the world, ICTs had emerged as significant drivers of economic and social change. The panel concluded that ubiquitous access to affordable and reliable advanced broadband services should be available in all regions of Canada by 2010, and recommended that it be a central goal of a national ICT strategy. The review panel made it clear that in order to maximize Canada's potential, we need to leverage our geographic and demographic diversities and give everyone an opportunity to contribute to building a stronger, more prosperous country, no matter where they live. Broadband access will be the key to this full participation.

Internet access has become an essential communication tool for people in Saskatchewan. Businesses and residences want access to a range of entertainment, learning, communications, and business functions. Broadband access and greater bandwidth are increasingly being demanded as Saskatchewan experiences unprecedented economic prosperity. For the burgeoning oil and gas, mining, and agricultural sectors, most of which are located in rural and remote areas, broadband is essential in order to improve their productivity and competitiveness.

At SaskTel we believe we are leading the way in Canada in bringing digital cellular and high-speed Internet service to rural areas, but there remain many unserved and underserved areas in Saskatchewan—in particular, many farmers, businesses, and first nations communities in the southern part of this province. However, as is generally agreed, market forces alone will not provide ubiquitous broadband access. Despite private sector involvement, government intervention in the form of subsidies will still be required for many high-cost service areas in rural and remote regions of Saskatchewan.

Canada is rightly proud of its achievements in ensuring universal coverage of local telecommunications services in all regions through its national subsidy fund. Yet, in our view, there is an increasing need for advanced telecommunication services that go beyond the traditional telephone service.

Unlike some parties who argue that the national subsidy fund for rural and remote local service should be eliminated or significantly reduced, SaskTel believes consideration should be given to expanding the subsidy program to include other services, such as rural broadband access and, possibly, rural cellular.

SaskTel notes that in the United States, the FCC is currently reviewing its Universal Service Fund. One larger form under consideration is the creation of three separate funds for rural areas to support broadband, wireless service, and providers of last resort—those providing local service.

SaskTel believes the time for ad hoc programs that achieve partial results is over. Broadband access should be expanded to all parts of Canada, urban, rural, and remote, as rapidly as possible.

Again, we thank the committee, and we'd be pleased to answer any questions.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Meldrum, for your presentation.

We will now go to questions from members. The first round will be six minutes each. We will go with Mr. Simard first.

[Raymond Simard, Liberal, Saint Boniface, MB]

Thank you very much, Mr. Chair.

Thank you very much for being here this afternoon.

My first question will be to Mr. Florizone. I've asked this question in Ottawa to some of our granting council representatives a few times, but I'd like to hear it from you. One of the things that seem to be happening is that the granting council seems to be focusing on centres of excellence, so that U of T or UBC is targeted. I've heard from some smaller universities that they feel they may not be getting their fair share. As you continue funding these centres of excellence, like UBC or U of T, the gap continues to grow because you continue funding them on a disproportionate basis.

Is this something that is happening here in Saskatchewan, or are we out to lunch on this?

[Richard Florizone]

I think we are maybe a unique example. The quick answer is no. For our size, this university has probably been the most successful in CFI competitions, based on our size, of any university in Canada. So we've been very successful.

I know one of your other panellists in a previous meeting stated that “excellence has no address”. Certainly you see concentrations of excellence throughout Canada, but we've done very well in holding our own. Part of that has been to focus on key sectors in the life sciences and in the synchrotron science where we had existing strengths.

[Raymond Simard, Liberal, Saint Boniface, MB]

Is there a reason why the synchrotron is on the campus as opposed to in the park? I thought it would automatically go in the park.

[Richard Florizone]

That's an excellent question. Part of it gets to the original rationale for selecting Saskatoon as the site. You might remember that there is an older facility that acts as the injector to the machine. That is a linear accelerator.

So the short answer is that there was an existing facility to act as an injector to the machine, and that provided cost savings because you could use some existing infrastructure.

[Raymond Simard, Liberal, Saint Boniface, MB]

Normally would it have gone in the park, or does it matter?