International Trade Committee on Oct. 18th, 2012

[The Chair, Conservative, Rob Merrifield]

Thank you very much. We would as well. I think the industry would step up if we could settle Europe and America down a little bit.

Mr. Hiebert, go ahead.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Thanks, Mr. Chair. I'll be sharing my time with my colleague, Ms. Brown.

Mr. Stringham, you mentioned that there are no tariffs on LNG right now, and you want certainty in a future EPA or FTA. Are there any non-tariff barriers that would prevent your industry from doing well in Japan?

[Greg Stringham]

Not that I'm aware of directly with Japan, but I know that when it comes to shipping LNG internationally and the flagging of the tankers, there are some issues there that the commercial parties are working on.

It's something we could look into in more detail, but at this point in time, in the development of these projects that have been proposed—again, I say “proposed” because none of them has actually been built yet—there hasn't been anything identified as a major tariff or non-tariff barrier to moving into Japan at this point.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

You believe that you could be competitive, even with the competition, such as Malaysia, China, and Australia, much closer to the market, all with expanded LNG opportunities?

[Greg Stringham]

They've expanded not only their LNG opportunities, but their demand is also increasing. As you saw from the chart of the entire Asian demand, the fact that we're closest to Japan probably gives us the best competitive angle into Japan, but the other growth in that area is really what is causing the whole area to be looking for increased supplies from a number of different countries.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Okay.

Ms. Sharpe, just briefly, what impact are the tariffs having on you right now, and what impact would an EPA have on your companies? Are there any non-tariff barriers as well?

[Dr. Vicky Sharpe]

I don't think there's a structural issue. It would be better if there were removal of the tariff barriers, but because we are shipping in equipment that is heavy-duty equipment, it attracts tariffs. We're at the stage where we haven't gotten that far into the market, so I'm afraid I don't have a lot of examples to give to you to guide you one way or the other.

What we have seen is the declaration of a feed-in tariff program from the Japanese, whereby they're trying to place a significant amount of solar energy into their mix for generation. We think we have technologies that will be able to address that and move in there, so we expect to play; we're just not quite sure how much yet.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Okay.

I'll share the balance of my time.

[The Chair, Conservative, Rob Merrifield]

Okay. Go ahead, Ms. Brown.

[Lois Brown, Conservative, Newmarket—Aurora, ON]

Thank you very much, Mr. Chair.

I'm just a visitor to this committee today, so thank you for affording me the opportunity to speak.

Dr. Sharpe, I wonder if you could make a comment here. One of the things that our government has seen as very important is making considerable investments in university programs for science and technology. We know that there are jobs of the future that are wrapped up in the kinds of projects you're looking at now. Can you comment on that kind of investment and what it looks like for the future of green energies?

I have one other question, and it's regarding your funds. When you have all of these companies that are accessing financing, and we know that financing is a scarce resource and that government is dealing with scarce resources, is there any mechanism whereby the companies themselves would replenish the fund once they've been successful in their capitalization and in moving their product to market? Has there been any discussion about that?

[Dr. Vicky Sharpe]

Thank you.

The big picture is that Canada has areas of real strength and excellence around energy, around the use of its natural resources, and around biomass. It's something that we don't get to discuss so much, but we have a lot of biomass. We have some very advanced technologies for converting that to add significant value to the agriculture and forestry communities, which are very commodity-based. These clean technologies take waste streams and convert them into revenue streams. We have strength in these areas.

We are seeing the creation of IP. I don't know the exact numbers, but we see that flowing into companies. Our universities are structured differently from those in the U.S., so the IP has usually left the university and is inside a company before it's something that we would work with. We are seeing that movement there.

I would refer to the Jenkins report, which says that direct programs provide greater societal benefit. Obviously I'm slightly biased, as SDTC is a direct program as opposed to an indirect taxation program. We are not seeing any letting up of opportunity; if you're asking if it's being choked off and if we don't have enough capacity, we are overwhelmed every time we call for a round of investment. It's flowing well, and I believe to good effect.

In terms of being cost-efficient in the way we use public funds, currently we've leveraged one public dollar to 14 private sector dollars. I don't see a comparison to that anywhere else within the system. However, we've now been around long enough since we began, when there was no clean energy and no definition. There was a need to really push things forward.

We've grown enough capability and recognition for Canada that there are ways of structuring the way we and maybe others would operate so that we could issue grants with warrants. We think a warrant mechanism is a sophisticated approach that the market understands, one that would allow us to take an upside on the companies that are the most successful.

We're also looking at a co-investment model that would enable us to make investments side by side with the investment community, both venture and equity, so that we could take small companies that need to grow fast domestically and become more powerful to reach into the export market. I would call it an acceleration methodology.

I believe there are ways of even further improving that leverage and ensuring that the private sector is appropriately engaged in making the commitment and taking their share of the risk.

[Lois Brown, Conservative, Newmarket—Aurora, ON]

Do you see a very bright future for you and the companies that are within your management?

[Dr. Vicky Sharpe]

Yes, we do. Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We are through the first round.

I'll ask one question, because as a committee we are going to be visiting Japan in another week or so.

Mr. Stringham, could you tell us your timeline and your impediment? Is it trying to get LNG to service the market in Japan? On the timeline you say that you have the right-of-way but not necessarily a pipeline, so you'd have to build a pipeline. Do you have a timeline on that? Is it restrictive because of demand, or is the demand there if you get LNG to market? Can you tell us what your crystal ball would look like in terms of timing?

[Greg Stringham]

Absolutely.

Thanks for the question.

In the critical path of what's going on, the permitting process for natural gas for the liquefied natural gas process has been very efficient. We congratulate the government on doing that. At this point it's a matter of the construction schedule and the commercial terms between the sellers of liquefied natural gas and the purchasers in Japan. They are under negotiation with several projects that I've identified there. That's really what's in motion right now.

In one of those projects they have already begun first nations partnerships and are turning the ground for that first project. It is moving ahead. The critical path will be the construction of the liquefied natural gas facility and the construction or expansion of the pipeline. It gives it about a three-year window before the actual delivery would begin. That's the timeframe.

Is that what you're looking for, Mr. Chairman?

[The Chair, Conservative, Rob Merrifield]

That's what I was looking for, because I think that's a question that the committee is going to be asked. Thank you very much.

Mr. Davies is next.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you, Mr. Chairman.

Ms. Sharpe, I want to first of all congratulate you for the work you've done. The official opposition, the New Democrats, believe very strongly, I think, in a large capital fund that will help stimulate investment and the creation of a sustainable development industry in this country.

However, I want to try to understand the financing here. If I understand correctly, the SD technology fund was funded by a $550 million grant from the Government of Canada that will allow you to disburse funds until the end of this year, December 31, 2012. Is that correct?

[Dr. Vicky Sharpe]

It has actually been modified. We have signed a new funding agreement with the addition of that $40 million in the prior 2011 budget. We are now able to allocate that, and we will fully allocate it by the end of the year. We may disburse funds from now to mid-2017, because we have a very large cohort, if you like, of graduating companies over the next number of years, and they need to be put through the same process that we currently use to ensure we engage private capital.

[Don Davies, NDP, Vancouver Kingsway, BC]

Is that original $550 million, plus the $40 million, the capital that you have to disburse?

[Dr. Vicky Sharpe]

We've also taken some money, some interest income that.... People look at our financials and it's very easy to misunderstand. The money that's in there is committed, so we obviously place it in very advisable, non-risk investments, and some of that money has been made—

[Don Davies, NDP, Vancouver Kingsway, BC]

I'm not interested right now to look at your investment. I'm trying to find out the capital contribution from the government. That's what I'm zeroing in on.

[Dr. Vicky Sharpe]

It's $590 million.

[Don Davies, NDP, Vancouver Kingsway, BC]

That's what you have now.

In the prebudget consultations for this year—I'm reading from your submission—the recommendation from your group was for a Canadian cleantech accelerator fund. You proposed a “...$550-million Cleantech Accelerator Fund to support clean technology development, demonstration and early commercialization”. Then you went on, “The CCAF, at a $110M annually for 5 years, has been designed to maintain SDTC's current level of annual investment in cleantech.”

What you were proposing, if I understand it, was a recapitalization of a further $550 million to take us forward. Do I have that correct?

[Dr. Vicky Sharpe]

That was last year's budget submission, and that is correct in that detail. However, we are actually proposing that we utilize less money but deliver the same results. We haven't made a submission yet for this year.

[Don Davies, NDP, Vancouver Kingsway, BC]

I have this from the pre-budget consultations for the 2012 budget. Is that right?