Natural Resources Committee on June 8th, 2006

[The Chair, Conservative, Lee Richardson]

Ladies and gentlemen, I think we're ready to proceed.

As you are aware, we have the pleasure of the Minister appearing this morning, the Honourable Gary Lunn, the Minister of Natural Resources, along with his deputy, Richard Fadden, and Howard Brown, and Margaret McCuaig-Johnston. It's nice to see you again, and thank you for coming.

The order of proceeding will be opening remarks, at your leisure. We usually go half an hour, but I think the indication is that you may want to shorten the time of the opening and leave more time for questions. I don't think there'll be any shortage of questions from this group, from what I've gathered, so we'll leave it to you.

When you've completed your remarks, we'll start with Mr. Cullen in questioning. I'd like to try to keep the questions and the answers a little shorter in the first round, so we'll have more rounds, if that's all right with you. Good. We're ready to proceed.

Mr. Lunn.

[Gary Lunn, Conservative, Minister of Natural Resources]

Thank you very much, Mr. Chairman.

I have to tell you that it is a great pleasure to be before the committee. This is actually my first appearance before a committee of the House of Commons since becoming a minister. I have to admit I'm used to sitting in Mr. Cullen's seat, and not used to this end of the table, but I'm sure he'll be equally friendly to me as we were to him not that long ago.

But it is great to be here, and I'd like to start off by saying that since becoming the Minister of Natural Resources, I've had the opportunity to meet some of the 4,500 employees who are conducting some very innovative and groundbreaking research at Natural Resources—officials and dedicated employees working to ensure that effective programs are efficiently delivered to all Canadians.

Mr. Chairman, before inviting the committee's questions, I would like to say a few words about our overall approach to natural resources policy. Our approach is to step back and allow market forces to build the prosperity of the natural resources sector as much as possible. However, for this government, a key goal is to ensure that the regulatory framework will create a climate of certainty. Industry can manage risk under a stable regulatory environment; an unstable regulatory environment adds to that risk. We need clear rules and clear regulations, and we will enforce them consistently and fairly. These rules will help the industry get the clear answers they need to make the investment decisions they have to.

Through this mix of market forces and a stable regulatory environment, we need to balance three objectives: economic prosperity; resource-based employment; and most importantly, environmental protection. When handled in the right way, these objectives enhance the successes of one another.

This committee is well aware of the importance of the natural resources sector to economic prosperity. Every single region of this country benefits. The economy of my own province is driven by mining and forestry. At the other end of the country, Newfoundland's offshore resources are now in production and are bringing great prosperity to that province. The Northwest Territories is entering a new era of prosperity, with the development of the diamond mines; and of course, Alberta has it oil sands; Quebec has its hydro resources; and Ontario is rich in many resources, both in the mining and forestry sectors. In fact, across the country, over 900,000 Canadians work directly in the natural resource industries, and many more Canadians work indirectly in the sectors that support natural resources.

Mr. Chairman, the natural resources sector accounted for a $93.4 billion trade surplus last year alone—a record. If you took our energy exports alone, they would account for Canada's entire trade surplus in 2005 and 37% of Canada's business investment. Look at the financial pages of the newspapers and you can see ample evidence that Canada certainly has the first three objectives firmly established. We have built economic prosperity.

The government is confident that the development of natural resources or economic prosperity can co-exist with the other two objectives—support for the development of skilled workers and protection of the environment.

Resource-based employment includes the viability of hundreds of communities across the country, especially in northern regions that rely on the natural resources sector as their sole economic base. Consider the challenges faced by many communities during the softwood lumber crisis. Not only did the Canadian economy as a whole suffer, but there also was a cost to communities, as mills closed and people were laid off. The settlement of the softwood lumber dispute, under the leadership of the Prime Minister and the Minister of International Trade, will help restore certainty to the industry here at home for the first time in many, many years.

Another aspect of resource-based employment involves the challenges that this workforce faces. In Canada right now, we have a shortage of skilled workers. This is a topic that comes up in many of my discussions with my provincial colleagues. All sectors face skills shortages. For some, like oil and gas, it's a case of not being able to find enough skilled people to keep up with the burgeoning demand. For other sectors, it's a case of many of the best people leaving to seek higher-paying jobs in the oil and gas sector.

There are as many as 20,000 skilled trade positions that cannot be filled today, and that number is expected to rise to 50,000 by 2010. Despite this, only 17,000 people complete apprenticeships each year. As a result, our employment gap is going to grow. I'll be working with my colleague the Minister of Human Resources and Social Development to find ways to promote skills development for the resource sectors, and I'm proud that the new government is already moving to encourage growth and development of the skilled trades.

As most of you know, in the 2006 federal budget, the federal government included a number of key measures that encouraged employees to hire apprentices and help apprentices starting out with the much-needed tax incentives. Mr. Chairman, the federal budget also met the challenge of accommodating older workers whose skill levels have been overtaken by the demands of new technologies. Budget 2006 invested $60 million in a worker adjustment program for the forestry sector and the creation of a sector council to address the development of workplace skills and longer-term human resource issues.

In the same way as this government is committed to looking after workers and their families, we are committed to developing our energy and resource sectors in ways that are more environmentally sustainable and energy efficient. Mr. Chairman, the committee is well aware that the government has made a commitment to pursue a clean air, clean water, clean land, and clean energy policy. Such a policy takes into account environmental, economic, and social realities. We will replace vague policy goals with concrete action for clean energy to reduce emissions and pollution.

I am very encouraged that the Minister of Finance allocated $2 billion to the environment and energy efficiency fund in the recent budget. All initiatives are being re-examined to ensure they achieve real results for Canadians.

Mr. Chairman, there is one challenge that links each of these objectives—the economic prosperity, support for skilled and non-skilled workforce, environmental protection—and that challenge is the need to promote innovation, science, and technology throughout all natural resource sectors—innovation that helps produce resources more competitively and with less impact on the environment, innovation that raises the demand for continuous upgrading of skills in every community in Canada that relies upon the resource industry.

Over the past months, I've also had the opportunity to meet with my provincial colleagues. Let me say at the outset that this government respects the provincial jurisdiction over natural resources. These resources drive the economy in every single region. We will take an active part in areas of federal jurisdiction, such as nuclear energy, international trade, and environmental impacts that cross provincial and national boundaries.

I've had a very busy and productive time since the new government was sworn in. Last month, for example, I had the opportunity to meet in Washington with my colleagues the U.S. Secretary of Energy, Samuel Bodman, and the Mexican Secretary of Energy, Fernando Canales. As you know, the North American Energy Working Group continues to look at ways to encourage cooperation on energy issues, including electricity, oil sands, natural gas, science and technology, nuclear energy and efficiency, regulatory cooperation, and hydrocarbons.

Our competitiveness in the global economy will depend not just on the availability of the resource but on how smart we are in the stewardship of the resource, how efficient we are in the use of that resource, and how forward-thinking we are at identifying future market opportunities. The government will continue to invest in research and development and innovation. Canada remains at the forefront of research and development in mining, metallurgy innovation, and energy technology.

Across the country, we can point to examples where Canada is at the forefront of innovation. Canada is recognized as a world leader in the technology of enhancing oil and gas production by injecting carbon dioxide below the ground in order to help recover additional oil and gas. The Department of Natural Resources has been a key partner in this project, which involves other international partners.

As an example, in Weyburn, Saskatchewan, we are in the forefront of storage technology to capture carbon dioxide gas and put it permanently back in the ground. Working in a partnership with Sterling Homes and the town of Okotoks, Alberta, and other partners, Natural Resources Canada is supporting the installation of North America's first large-scale seasonal storage project. Solar energy will provide over 90% of space-heating requirements for 52 homes. Part of this unique system stores heat underground.

I know members of the committee will be interested to learn the Canadian GeoExchange Coalition, established with the help of Natural Resources Canada, has noted a substantial increase in inquiries with respect to the installation of ground-source heat pumps. A training program sponsored by the Canadian GeoExchange Coalition will provide the needed infrastructure for quality installations. The provincial governments of British Columbia, Manitoba, and Quebec have recently started activities supporting the deployment of this technology.

We will continue to support renewable energy in future, including solar and wind. Again, we are working as partners with leading-edge companies to create innovate solutions to meet our energy needs and environmental and social goals.

Innovation comes in many ways. Sometimes it involves making sure the technologies that have provided our competitive edge for generations remain at the cutting edge. This year, Natural Resources Canada is proud to celebrate the 100th anniversary of the Atlas of Canada. Today, the atlas is easily accessible to anyone with a computer and Internet connection. Every month it gets some 700,000 hits.

Mr. Chairman, when I look to the future of Canada's resource economy, I am very optimistic. In today's global economy, Canada's resource sectors compete fiercely with producers from around the world. We need to ensure our regulatory framework is competitive in that environment and still capable of ensuring we protect the environment.

Mr. Chairman, Canada is on the cusp of becoming an energy superpower, and we must make sure we do it correctly. I'm very optimistic because I believe strongly in Canada's ability to promote innovation, science, and technology. Canada became rich on the strength of our resource economy. We will continue to lead the world in finding better ways to use these resources to drive our economy, create jobs, and protect the environment.

With that, Mr. Chairman, I look forward to the committee's questions. Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Minister. That was an excellent opening. Thank you for that.

We are now going to go into it. Just for the information of those gathered, we have a format here for questioning where we have divided up the rounds to give equal access to questioning to all members of the committee. We begin with a five-minute round from each of the parties represented here.

[Roy Cullen, Liberal, Etobicoke North, ON]

Five minutes?

[The Chair, Conservative, Lee Richardson]

Five minutes. That's the format we have agreed to, leaving some latitude. I think we will again today. But let's try to not go too far beyond that. Otherwise, we simply don't get everybody in, and that's not fair to all the members of the committee.

So we're going to start with Mr. Cullen, followed by M. Bigras and Mr. Bevington.

I'll begin with Mr. Cullen.

[Roy Cullen, Liberal, Etobicoke North, ON]

Thank you, Mr. Chair.

Thank you, Minister and Mr. Fadden and other officials.

I'm sure we can co-exist. I used to live in your riding. I'm not sure my voting patterns would have met with your approval. But nonetheless I'm sure--

[Gary Lunn, Conservative, Saanich—Gulf Islands, BC]

I'm working on them.

[Roy Cullen, Liberal, Etobicoke North, ON]

I had a bunch of questions, but I guess we're not going to get to them. I'll be very succinct, and I hope you can reply in a succinct way.

An energy framework or energy strategy for Canada: I'm looking for some timelines, the comprehensiveness, I hope, of what you're going to have. I presume something is in the works. I know under our watch there was something in the works. When do you think you'll have something? I know people are waiting--provinces, stakeholders, critics. When do you think you'll have something?

[Gary Lunn, Conservative, Saanich—Gulf Islands, BC]

Thank you very much.

I'm always reluctant to give out timelines, for a whole host of reasons, but I will this time. I will admit that, as you're aware, this has been in the works for some time, and we're redrafting, reworking this energy strategy as the vision of a new Conservative Government of Canada, where we can merge.... It's important that you look at all the aspects of this: the social dimension, the affordability of energy, the security of energy, the prosperity of energy. There are so many dimensions to the energy strategy, and I think it's important, as we move forward.

This is something I've been working on with Howard. Howard is the ADM on the energy side. I would hope the House will be rising in a few weeks, but I think sometime late in the fall or toward the end of the year we would have something concrete. But for something as important as this, we want to make sure we get it right. Clearly we're working on this to ensure that it reflects the vision of the new Conservative government.

So that's where we are with that.

[Roy Cullen, Liberal, Etobicoke North, ON]

Thank you.

On the softwood lumber draft agreement, I'm wondering what is your role? While it is a trade issue, it clearly affects the forestry communities across Canada.

I'm particularly concerned about the anti-circumvention clause. I know it's getting some attention, but if it's not crafted correctly, in my judgment it could take some forest policy sovereignty away not only from the federal government but also from the provinces. If the federal government wanted to act in a certain way—it could be to deal with training, value-added, or technology, and so on—the U.S. producers could argue that this would circumvent the softwood lumber deal.

So how do you get involved, and how can you guarantee that the anti-circumvention clause finally will not have that kind of impact?

[Gary Lunn, Conservative, Saanich—Gulf Islands, BC]

Thank you very much. I'm pleased you raised this, because it's something I've lived through, as a member of Parliament. I've seen the dramatic impacts of what's happened with this dispute in my home province of British Columbia and the negative impacts it's had on that sector.

Resolving this dispute has been an enormous priority for this government, starting with the Prime Minister and right through our entire government. I have been involved in direct conversations with the Prime Minister. As you are very much aware, Mr. Cullen, this is the Minister of International Trade's file, but I will say this. As you are aware, there is a framework agreement, and final negotiations are concluding this. The anti-circumvention clause is a necessary part of any agreement. That clause protects our Canadian sovereignty and our forest policies. It's a two-way clause; in other words, the United States can't change their policies, and we can't be forced to change, nor can we change, ours.

The issue here is with the stumpage within British Columbia. As you know, this is an issue that's been looked at by the British Columbia government. It's an issue they've been working on for a number of years now and are getting very close to bringing into play. I'm confident they will be able to bring these policy changes with respect to stumpage in the interior. These changes were brought in to strengthen our position with respect to the entire reason why some of the countervail duties were put in place in the beginning. I can say this is only strengthening it. With respect to some of the specific issues surrounding that—specifically the stumpage in British Columbia—I genuinely believe that we will get around this.

This is good for Canada; this is good for the industry. As you know, when the price of lumber is above $355 per thousand, we get unrestricted access to U.S. markets in every single province. This is the kind of certainty that the industry needs and has been looking for for a long time. There's flexibility within this agreement, where they can go to a quota-based system or an export tax when the price of lumber falls. Again, regarding the export tax, it's important to note that the money is staying in Canada. There are exemptions for the Atlantic provinces; there are exemptions for the mills in Quebec.

Finally, because you raised the issue of the $5 billion, which has often been criticized, I want you to note that the Canadian industry will get $4 billion. Eighty percent of that $5 billion goes directly back to the industry. What did the United States get? They got $500,000—only 10%—as a legal fund for the U.S. industry to recover its legal costs. The other $500,000, or 10%, is a joint fund to cover humanitarian projects or promote the industry on both sides of the border.

This is a great deal for Canada, and something we're very proud of.

[Roy Cullen, Liberal, Etobicoke North, ON]

Thank you. I guess this is your first chance to put your position forward at this committee.

But I think the anti-circumvention clause goes beyond current stumpage considerations in British Columbia. In fact, if they're going to more of an auction system, that's what the U.S. wanted. If they're going to increase stumpage, that shouldn't cause any problems for the Americans. If they're going to decrease stumpage, that could be a problem in terms of anti-circumvention.

I was also dealing with it on a much broader basis, in that any actions the federal government took in its relations with the forest industry, or any province, could be misconstrued deliberately by the U.S. producers as circumventing the softwood lumber agreement.

Anyway, I want to move on to the mining. We know we have some declining reserves. I was glad to see you extended the super flow-throughs. But there's an issue regarding geomapping. If we're going to get people investing in development, they need to have a little more certainty than they have today. My understanding from your department is that they're looking for $25 million over five years, or something similar. Those priorities have to come from you, sir. Are you saying this is going to be a priority moving forward, or not? Because I imagine the funds have to be reallocated from within, and I know you have a lot of competing demands.

[Gary Lunn, Conservative, Saanich—Gulf Islands, BC]

I can answer that question. First of all, you are correct that there is the geomapping issue. I think it's $500 million, which are matching funds from our provincial partners and the federal government. This has come up with the Council of Energy Ministers, with whom I will be meeting in the Yukon in late August. I'm looking forward to that meeting. This is something I am very committed to, and that I—as well as the officials in the department—have spoken very strongly in favour of. I think this is very important.

In this current fiscal framework, there were a number of overlapping commitments of the previous and the current administrations, so it's not in this fiscal framework. It's something I will push hard for in the coming budgets. Personally I believe in it, and I will support it very strongly.

But under no circumstances is this government prepared to go into a deficit situation, so it did not fit into this year's fiscal framework. But it's something that I can assure this committee I'm personally very supportive of, as are the people in my department.

[Roy Cullen, Liberal, Etobicoke North, ON]

Thank you. We'll be looking forward to that.

On the question of greenhouse gases, this is a huge topic, so I want to throw something out for you to consider: the greenhouse gas reduction targets and energy development project. With respect to the recycling of water in the oil sands, I've heard everything from 10%, to 65%, to 90% being recycled. The other day, CAPP said that 90% of the water is being recycled. I have a big problem buying that.

We have also carbon sequestration and capture as being an important part, but we know that this going to take technology. Is there a way that your department can put some muscle behind getting these technologies developed and in play, so that we can develop those projects responsibly and deal with greenhouse gases?

[Gary Lunn, Conservative, Saanich—Gulf Islands, BC]

Absolutely, and this is something that this new government is very committed to. This is something about which we have had very detailed discussions within the department.

You mentioned carbon dioxide capture and storage. This is something in which we are investing in a project in Weyburn, Saskatchewan. This is something that I believe you will see happen very shortly. We have the ability, the technology, to capture 100% of the carbon dioxide gases and emissions from some of these large final emitters and pump back down into the ground.

We want to put in the resources required to do the science in order to see this move forward. We're also pushing the industry very hard so that they come to the table and put in their share as well. They can do a lot more, and they're very open to it. We're saying it's time for you to put in your share in. I will say that in all my meetings they have been very positive and receptive.

This technology is there now. So we're looking for the low-lying fruit. Where can we make significant gains on this file and clean up the air at the same time? These are very important priorities for this government, and we'll continue to support these projects. And my own opinion is that in years, not decades, we'll start seeing the recovery of carbon dioxide gases here in Canada on a commercial basis, such that we can put these carbon dioxide emissions back into the ground and prevent them from going up into the atmosphere. That's something that we're very committed to.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Cullen.

Thank you, Mr. Minister.

We did get a little longer than 5 minutes this time, and I am going to ask the committee for a some latitude today, because we don't get the minister on a regular basis. But I think we will have to keep it to 10, then I'll come down with the gavel if we go any longer.

Mr. Bigras, you have more than 5 minutes, so carry on.

[Bernard Bigras, Bloc, Rosemont—La Petite-Patrie, QC]

Thank you very much Mr. Chairman.

Firstly, I would like to welcome you to this committee, Minister.

You said that you've been busy since you were appointed. When I look at the list of cuts that you've done to supposedly fight climate change since you were elected, I suppose amongst all of your colleagues you're seen as the champion of program cutting.

Secondly, you said that the conservative approach meant taking your time and doing things well. Nonetheless, that's all we see in terms of the fight against climate change. You scrapped over 18 programs including EnerGuide. We don't know what your strategy is to fight climate change no more do we know the content of your made in Canada option. And yet you're still announcing cuts to programs within your department.

Can you assure us that these cuts are now over? The cuts were done in accordance with a Treasury Board report conducted last fall that stated that some programs were inefficient. To not put an end to program cuts present your plan and tell us what your direction is?

Can you guarantee that there will no longer be any program cuts. I'm thinking about programs that encourage wind energy. Can you give us those assurances today?

[Gary Lunn, Conservative, Saanich—Gulf Islands, BC]

Thank you very much, Mr. Bigras. I do really appreciate your question and the work you've done on this. I know you want to see meaningful change. To answer in reverse--because you asked me specifically on wind--wind is something that I believe is very important to Canada's energy mix and I'm very supportive of moving forward on it. Announcements will come in due course. But I do believe wind is an important part of our energy mix. That's what I'm saying.

As far as the program cuts are concerned, there was an independent review done. It was initiated by the previous government, and there were various ratings on the programs, from good, to not so good, to failing grades. The programs weren't working, and there were over 100 programs. If some of these programs, from an independent review, were shown not to be getting the results they were intended to, we have to make a decision: should we continue with those programs? No, we didn't believe we should. Some of the programs had reached the end of what they were intended to do. They were actually completed; they weren't cut.

So it shouldn't surprise you that things are going to be done differently. You and I both know the record of the previous government. I want to give you straight answers, but even in their own government, probably some of the members had frustrations in their 13 years in office.

There were a number of programs. Of those 100 programs, there are still over 85 programs left in place. Will some of those change in the months and years ahead? I can't tell you which ones, but it won't surprise me, and I look forward to your input on which ones. Where can we redeploy money? Where can we get greater value for the taxpayer? When we're reviewing all of these programs, will we get it perfect the first time around? No. Will we be prepared to look at areas and take pieces of things that were working very well and say, this part of a program was working and maybe we can implement it in another program?

These are all the things that we're developing. We want to work with you to hear your ideas. I've said before in speeches that the largest source of untapped energy in Canada we have today, that we have not tapped into in any significant way, is the energy we waste. There's an enormous source of energy there, the energy waste. We want to do what we can as the government to invest the resources.

On energy efficiency, absolutely, we're looking at various programs. Will they be different from the previous government's? Without question. Will some of them remain the same? By all means, if they're working. But overall, yes, there will be changes. We are in a transition. I want to emphasize, talking about these program cuts, that 10% of the programs were either ended or cut, and they were not working. So we are looking forward to your input, and we're going to develop programs that we think are in the taxpayers' interest.

[Bernard Bigras, Bloc, Rosemont—La Petite-Patrie, QC]

How can you say you believe in eco-efficiency and energy efficiency when you cut a program like EnerGuide? That's completely unacceptable.

My second question deals with the agreement signed with the automobile industry by your predecessor. This agreement was based on a voluntary approach for industrial sectors. It had goals for the years 2007, 2008 and 2009. A first report on projections was to be conducted in 2005. Do the 2006 reports you've received indicate that the automobile sector is about to reach the targets set out in the signed agreement with regard to the reduction of greenhouse gases?

[Gary Lunn, Conservative, Saanich—Gulf Islands, BC]

I don't have those exact numbers, but I believe Margaret might be able to help us with them.

[Margaret McCuaig-Johnston, Assistant Deputy Minister, Energy Technology and Programs Sector, Department of Natural Resources]

The first report of the monitoring committee is not yet out and public; they're still gathering data. But we're optimistic that we will meet the ultimate target in 2010, and there are interim goals in 2007, 2008, and 2009. There isn't one for 2006.

[Bernard Bigras, Bloc, Rosemont—La Petite-Patrie, QC]

I understand, but article 9 of that agreement says:

Starting in 2005, the Canadian automobile industry will report its projections for GHG emissions of the next model year on November 30th, at the latest.

You have that report. Are you telling me that the automobile sector has not yet given you a report on its projection?

[Gary Lunn, Conservative, Saanich—Gulf Islands, BC]

Mr. Bigras, we don't have that specific answer. I'm being straight with you, I don't have that answer, but I'm more than happy to get back to you with an answer by the end of today and give you the specifics.

[Bernard Bigras, Bloc, Rosemont—La Petite-Patrie, QC]

I'm sorry Mr. Minister, but this is important data, because in the green plan the reduction goals were set out at 5.3 megatons. Therefore, it's an important sector and that's why before the end of this meeting, I would like to see some figures--figures that should theoretically already be public.

Secondly, in your future made-in-Canada plan, what will be the reduction targets for large industrial emitters? We hope the plan's targets will be measurable. Can you tell us today that the plan's objectives will be measurable and to the large industrial emitters will continue to aim for the 33 Mt target?

[Gary Lunn, Conservative, Saanich—Gulf Islands, BC]

I will be happy to try to get an answer to your previous question, but it is on a company-by-company basis. That data is being collected, and as soon as we have that data we'd be more than happy to get it to you. We will look into that.

As for the large final emitters, yes, there is a role for them to play to reduce greenhouse gases. As you know, we're working on this file, and we're moving forward. When we have announcements ready to make you'll hear about them, but you won't hear the numbers today.

Thank you.