Industry Committee on Oct. 24th, 2016

[The Chair, Liberal, Dan Ruimy]

Thank you. I've got to cut you off here. We've got to move on.

Mr. Lobb, you have four minutes.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Thanks very much.

You touched on a good point, and it's a point some of us have been making in this committee on this study about certainty for investors. Whether to retrofit an existing plant or do greenfield development, it has become very complicated for companies today to look at where to make an investment.

B.C. has carbon tax and different things. Ontario has a different regime. Quebec has a different regime, and just as you mentioned, there's also something coming from Ottawa as well. People looking to make an investment want to make sure they're doing as clean as possible a project and as clean as possible development.

You probably can't share comments or feedback exactly, but what are some of the themes that you're hearing about the complexities of doing business in Canada now versus investing in the U.S. or Mexico or wherever?

[Bob Masterson]

Our main competition is the U.S. for investment, and there's no question that Canada is a more complex place to invest in. Yes, there is uncertainly on energy development. Again, if you were going to build a new chemical facility to last 40 years, you'd better make sure you've got feedstock there for 40 years, and again, if we can't approve infrastructure that will move energy resources to market, we're not going to have the resource to add value to. That's a potential concern in people's minds.

Certainly there was increasing certainty around the outlook for Ontario, Quebec, and Alberta. Now there's uncertainty for the next period while we figure out how the federal signals interact on carbon pricing with those of the provinces.

I don't think it's undoable, but again, it's going to take more coordination, and a clear message has to be sent to folks in the community.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Can I go back to—

[Bob Masterson]

I would just say again what I said earlier. If the choice is to add a cost for something we don't want, we have to be willing to practise the other side of ecological fiscal reform. Price the things we don't want and reduce the prices on the things we do want so that we can have less of the thing we don't want and more of the thing we do want.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Yes, and I know from my years in manufacturing that you quoted your job and the OEM expected you to deliver on the price that you quoted, with actual price reductions built into it. I can remember back in 2007, when the price of fuel spiked and we were getting hit with fuel surcharges every single time. You just ate those. They came out of your profit, on top of the cost reductions.

I can see issues coming down the pipeline. You have these added costs of fuel. Of course, in your sector you're talking about feedstock—methanol, propane, etc. Some of it is by rail, but for the last mile it's always by truck. It's going to be more expensive for the manufacturer.

One other thing I did is that I brought a couple of electricity bills from a couple of places that I own. Electricity has to be a concern for Ontario manufacturers. Here I have a bill. I used $10 worth of electricity, but my delivery charge was $99. I've reduced.... I didn't use very much on this property, but yet I have this huge electricity bill.

What are some of your manufacturers saying about the cost of electricity in Ontario? Maybe you can't say....

[Bob Masterson]

No, it's far too high, and the most—

[The Chair, Liberal, Dan Ruimy]

You have about 30 seconds.

[Bob Masterson]

The most discouraging piece is that we export excess power into neighbouring U.S. jurisdictions, and they use that to lure manufacturing out of Ontario into those jurisdictions.

[Ben Lobb, Conservative, Huron—Bruce, ON]

I noticed a document—

[Bob Masterson]

It's very discouraging.

[Ben Lobb, Conservative, Huron—Bruce, ON]

—on your website that your member companies have reduced absolute GHG emissions by 69% from 1992 levels. You are trying to do—

[Bob Masterson]

We have done it.

[Ben Lobb, Conservative, Huron—Bruce, ON]

You have. You're trying to do the right things.

Thank you.

[The Chair, Liberal, Dan Ruimy]

Excellent.

We're going to move to Monsieur Sheehan. You have four minutes.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Thank you very much.

Thank you to our presenters. I appreciated your presentations.

I was reviewing your website earlier. I noticed you had 50 members and partners, and some of them were in the major cities like Calgary, Montreal, Toronto, but you also have some membership in what I'll call small urban areas, rural areas—

[Bob Masterson]

Absolutely.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

—like Prince George, Port Colborne, etc.

My question is, what strategies can Canada employ to help the industry in rural Canada grow what it has and perhaps look at new opportunities?

[Bob Masterson]

To be honest, I haven't thought of rural Canada separately from the broader set of recommendations that we have for the industry. We think that what we've recommended will make sense anywhere.

Take Prince George, for example; why do we have three facilities there? They largely serve the wood products and forest products industry. I'm sure most people in this room would say wood products and forest products are also a strategic sector. If that sector is healthy and we can make the chemistry sector healthy, that will be very good for the community in Prince George.

In southern Ontario, many of our companies are there to serve markets both in Canada and the U.S. Certainly electricity prices, which were mentioned, have made life quite difficult for those smaller players in those regions. It's tougher for them to hang on.

I think the message in northern Quebec and in Alberta is around making the primary sectors healthy, and we'll be there also to serve those industries.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Interesting.

Just following up on that, on alternative energy, I was reading through some of your information. It was very interesting. There's a lot of alternative energy in rural Canada.

What's the chemical association's involvement in alternative energy in its manufacturing?

[Bob Masterson]

First of all, if you have a co-product that you can use to generate your own electricity or meet your own energy requirements, that's great.

In the chlorine/chlor-alkali chemistry business, a by-product is hydrogen, and for many years that was vented to the atmosphere. It causes no environmental harm and it's a very abundant element in the earth's atmosphere, but with the push on for energy efficiency and other related activities, that hydrogen is all captured now and consumed on the sites to give them their own heat and power.

Otherwise, people are very active in combined heat and power. They are very efficient plants, compared to delivering electricity off the grid or combusting their own fuels in an old-fashioned type of boiler.

In terms of other alternative fuels, that would be more the Renewable Fuels Association and what they do in ethanol plants. We get a lot of questions about the ethanol industry and the biodiesel community, but we don't represent them. They're not in our areas of chemistry, let's say.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

I was in Japan as the chair of that particular committee, and they are really looking at hydrogen. The government has become involved, stating that they are going to have x number of hydrogen vehicles by a certain year, and y number by another. They are really pushing that.

You mentioned the hydrogen facilities. One of the things they pointed out in our discussions, and we discussed back with them, is that we don't quite have the infrastructure to do that. We have it in certain areas.

[Bob Masterson]

Well, we don't. Not only that, but our industry consumes a lot of hydrogen. Those who produce hydrogen can give it to somebody else who is going to use it as feedstock, and that's great. There are other facilities—hydrogen peroxide facilities, for instance—that use a large quantity of hydrogen, and it has to be purpose-made. It takes a lot of energy, a lot of natural gas through a steam-methane reformer, to produce hydrogen. It's not a free lunch. It might look good when it's coming out of the tailpipe, but with current technologies, there is a lot of energy that goes in there.

Why do I bring that up? That's an example of the concerns if we don't get carbon pricing done properly. I might operate a steam-methane reformer as part of my process to make my chemical, and I put that inside my plant. I am trade-exposed, and I'm trying to manage my costs. Suddenly, if my energy bill goes up significantly to make that hydrogen, which is a clean fuel, how do I compete in the global market?

[The Chair, Liberal, Dan Ruimy]

Thank you.

We're going to move back to Mr. Lobb.

You have four minutes.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Thanks very much.

We are all concerned about the environment, but when we are the only ones putting a price on the emissions, and the United States—who, as you mentioned, is our major competition in investment—isn't, I can see how we are making this a really easy choice for executives. It is extremely unfortunate that we can't look at a different way.

I noticed that you had comments in your paperwork about wind turbines, as well as solar panel cells. That's great. With a lot of these, as well as cellphone components and many others, there is the waste component. I wonder whether you can tell us what you are doing to make sure they don't end up in the landfill. How can they be reused, so one good idea doesn't become a bad idea, like the mercury lights we have now?