Natural Resources Committee on March 26th, 2009

[Greg Rogers]

First of all, I agree again with what Glen just said. Carbon trading is really important.

Energy is one of our key advantages in Canada. It always has been, and it's being squandered in the province of Ontario, that's for sure. They announced a provincial plan to shut down the coal-fired plants in Ontario with no plan to replace that power, so we have no new power to supply the condominiums that are being built downtown in Toronto or the industry we hope will one day return to Ontario. We're getting that energy from U.S. plants without scrubbers on their coal-fired plants.

It is a little bit of wrong-headedness that needs to be closely examined and corrected in terms of our approach to what has been for a long time one of our biggest advantages but is quickly becoming no longer. Distributed energy is something we should be investing in. More of that infrastructure money should go into the creation of new sources of energy and less into roads and bridges.

[The Chair, Conservative, Leon Benoit]

Thank you.

Mr. Nickel.

[Trevor Nickel]

Since I don't have too much to add to that, I will address the feed-in tariff directly.

Feed-in tariffs are fantastic if applied properly. The lesson that I always look at is Germany in the anaerobic digestion market. They put in a feed-in tariff at a very high price, 22 euro-cents to 27 euro-cents per kilowatt-hour. That's ten times what people might be getting in Manitoba or Quebec for the price of power. Subsequently, over a very brief period of time, they now have well over 5,000 anaerobic digesters feeding electricity into their grid at any given time.

Ontario put in a feed-in tariff a couple of years back with some additional barriers that aren't related to the feed-in tariff. It works out to about 12 cents for anaerobic digestion, and they have one or two projects on the ground. Alberta put in a six cent per kilowatt-hour top-up to whatever is available on market, which essentially made a 13 cent or 14 cent feed-in tariff happen in Alberta. One or two projects were built during that time.

To make a feed-in tariff work, it has to be hefty but not overblown. It also has to be very long term so that investors realize that they can accept the lower utility-type returns because they're very low risk.

[The Chair, Conservative, Leon Benoit]

Okay. Thank you all very much.

We go now to the Bloc Québécois. Madame Brunelle, seven minutes.

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

Good morning, gentlemen. Thank you for being here. Your presentations were very interesting and diversified. I have many questions and I hope to be able to ask a few at least.

The Benny Farm project is aimed at renovating social housing and building new housing. It may not be only social housing. Do you receive any provincial or federal subsidies?

[Daniel Pearl]

At the beginning of the Benny Farm project, it was very difficult for us to get funds from the three levels of government. We had money from the federal government but not the provincial government, or from the municipal government but not the federal government. It took us about fifteen years to be able to get the three levels of government to contribute. However, it necessary for us to get funds from the three levels of government but not because renovations cost more since we were able to demonstrate that renovating could ensure better quality at less cost. However, there are many barriers to getting funds from the three levels of government. That has been one of our biggest issues.

Starting a pilot project is rather complicated. However, Mr. Murray did raise an excellent point when he said that density at Benny Farm was not high enough. We have always insisted on keeping all the existing buildings and we wanted to add more. In that way, we would be able to fill more needs than if we stuck to one type of housing only. One should not think of young families only. Three-story buildings without elevator are not for everyone. So our idea was to integrate several different types of housing on the same site and to include other uses, such as a sports arena or a CLSC. That would give us the opportunity to use residual energy by storing it in a central system in order to redistribute it for other uses. However, this is still very problematic. We find that there is still not enough support for connecting clients.

We worked with Alex on the legal issues and tried to see how several different non-profit cooperatives or organizations could share geothermal wells. It is not easy. Even those who support this system fight about it.

Legal issues are one of our barriers. We need grants as much for legal matters as for technical issues.

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

I found one of your statements absolutely amazing. According to you, the situation in Quebec is difficult because the production of power is a monopoly. I understand that our rates are low but, unless I am mistaken, hydropower is clean energy, green energy. Why would that be a problem for you?

[Daniel Pearl]

I may have spoken too fast and the interpreters may have been unable to translate my thoughts. I apologize.

One of our problems in Quebec is that each dollar spent on one kilowatt of power is a lost opportunity to displace that kilowatt in Vermont where they use coal. We believe this to be a problem. Nine grams of carbon per ton is not helping us. This is only from calculations relating to old hydroelectric systems that have been in existence for forty years. Now, with the new projects, we have indications that for the first time there will be serious problems of greenhouse gases because of damages to our forests and to our biodiversity systems. As Alex told you, it is much more effective to install systems in existing buildings than building new hydroelectric systems.

[Alex Hill]

I would like to add something. I will answer in English because I am more comfortable in that language.

Also, the price of electricity in Quebec for end-users is subject to a lot of pressure in the coming years, since Hydro-Québec has been split into three different companies: production, distribution, and retail. Retail now buys all of its additional energy at market prices. All new demand comes at a loss to Hydro-Québec retail.

This year, when oil prices were very high, we were getting calls every day from homeowners who wanted to switch from heating oil to electricity. That's 20% to 30% of the residential market right there switching to electricity, new demand.

Electric cars.... The Prius, which is the most successful hybrid model, is going to go to a plug-in model in its next form next year. We're going to have electric cars. All of this is going to compete with the existing capacity on the grid. And that's not just going to happen in Quebec; it's going to happen all across Canada. If we don't have ways of localized production that reduce the strain on this grid, we're not going to be able to deliver things like electric cars and green energy to people's homes. So it's very important that we consider a fair price for the production of energy inside the city.

I'm currently building a net-zero house, a very similar program, in the same program as the Minto home in Montreal. It's a three-unit condominium. We've run into exactly that problem of if we produce extra energy we don't get a credit for it. We're producing the energy right where it's needed, as opposed to in the north of Quebec and transferring it down. We're reducing the strain on that grid on the hottest says of the summer, and we have very little benefit to show for that.

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

I hope it is not based on manure, however.

[Some hon. members]

Oh, oh!

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

Mr. Murray, you referred to public transit, where our government does not spend very much. You stated that our government funds urban sprawl. Could you be more specific? Is it not Canadians themselves who want to live in suburbia? Our government certainly does not force people to leave downtown and settle in suburbia. Could you explain your thinking?

[Glen Murray]

The intention in what people do and the results are not always the same thing.

I'll give you an example from when I was mayor, because I know that best. In Winnipeg, every time there was a federal infrastructure program.... And they're not bad things. Thank God the federal government got involved in them. And I'm not making any partisan comment, because I think, quite frankly, all of us who have been in politics wear this fairly equally. Everyone gets money. We have the great peanut butter theory in Canada. Everyone gets the same amount of money for the same thing, which has, I think, been a disaster.

So areas that already have roads and bridges and sewers and water get money that goes into repairing broken water, sewer, and that. I won't get into it, but there have been all kinds of processes in Canada in public policy and taxation that have undermined the success of large urban downtowns in larger cities and destroyed the main streets of many small rural communities.

We subsidize. And I don't have time, but if you want us to write a brief on that, I'll submit it--about the tax system and how the way provincial and federal governments together spend money and tax has created a fundamental disadvantage. One of them is the way the assessment system works.

When provincial governments assess property, they assess buildings very heavily and land very lightly. So a Wal-Mart parking lot isn't taxed very much, but a Hudson's Bay, or in Montreal, the old Dupuis Frères store, lot to lot, pay huge taxes on their buildings. High-density residential and commercial pay 150% to 200% more property taxes than low-density cinder-block buildings in peripheral industrial parks that you cannot service with public transit.

I could go on through provincial sales tax, federal income tax, federal corporate tax. I would tell you I haven't been able to find a tax in Canada that doesn't have an anti-urban, anti-rural bias. It subsidizes low-density, auto-dependent.... It also subsidizes different energy choices.

Direct federal spending, when we get into the shovels-in-the-ground mentality--this isn't the first time, and I don't think anyone's clean on this one, because every party of every stripe in almost every government has used that argument in that exact language--skips through planning and skips through regulatory process.

I think when that happens and everyone gets the same thing.... What was happening was that the sewage treatment plant built outside the city of Winnipeg, or the subsidization of natural gas extension, or a large road that no one could reasonably afford to build, or the subsidy of trunk water and sewer to low-density.... It's not picked up on the property taxes or on the utility bills of those homeowners. It's heavily subsidized by the federal and provincial governments, which makes that development now affordable when it wouldn't be. What it does is it now makes the existing service land in the urban area or in the small rural community that already has services lose its competitive advantage. Because now what you've done is you've taken an area that was unserviced, that wasn't economical to service, that the market wouldn't support and isn't a good environmental choice, and you've had the big hand of provincial and federal governments lower the cost of it using federal and provincial spending undermine to make it equally or less expensive to develop on that kind of land. So you're subsidizing sprawl in that sense.

You can look at natural gas pipeline extensions in small communities. You can look at a sewage treatment plant that was built just outside of Winnipeg that gave them the cheapest water and sewer in Manitoba, and they didn't have to pay for it. And everyone else, whether they were in Portage la Prairie or in Winnipeg, had to pay for their own water and sewer and have higher rates. That's what I mean by perverse subsidy.

I will close by simply saying one last sentence, Mr. Chairman. I appreciate your indulgence.

The International Institute on Sustainable Development, set up by the Mulroney government, did a major paper on perverse subsidy in Canada, and it would answer your question across the country in detail, a case-by-case of how that works.

Thank you, sir.

[The Chair, Conservative, Leon Benoit]

Thank you.

Merci, Madame Brunelle.

Now to the NDP, Mr. Cullen, for up to seven minutes.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Thank you, Chair.

This has been very good. I very much appreciate the direct answers. It's probably because you folks are somewhat engaged in the actual doing of things. We often get to sit with the people who don't necessarily do a lot.

Mr. Nickel, I wanted to pick up on a point. You talked about waste.

We hosted a conference in northern B.C.--it must have been 10 or 12 years ago--called Zero Waste Northwest. No one understood what we were talking about. It was an effort to try to change the terminology we use around some of these things. When something is classified as waste, by definition we no longer have value on it; we no longer consider it. Yet we pay for it. Mr. Murray was talking about perverse subsidies when we try to handle waste streams and such.

When you approach the financial markets right now, as you folks have gone through the first initial expansion, is it coming to the point where what you're talking about is seen as a proper energy source, as something that's just as viable as an oil well project in Alberta, or are you still struggling with the culture of things being seen as waste?

[Trevor Nickel]

Well, I wish.

We are still struggling with it very much, and not just with the idea of waste. We've come to the point where we can educate investors and we can educate consumers by saying there's no such thing as waste, really. They're really just resources that either have a negative value or a positive value because there's a market driving them in either direction. The most sophisticated investors generally understand that.

On the other hand, it's very difficult to gain financing for renewable energy projects, in general, because there's this massive and rather unfair risk premium applied to anything that's new. There's a real investor xenophobia out there about that. Even though anaerobic digestion has been done in every gut since the gut evolved, this is still seen as new.

[Daniel Pearl]

We're working on a project in Montreal that's trying to do zero waste by 2020. There's a twofold process. One process is to look at a technology, a pneumatic, centralized waste system, which actually takes the responsibility, to a certain extent, away from the resident. The second one is to actually change our living habits and go about it from a low-technology perspective. We're in the midst of discussing this with the City of Montreal. We don't know which way they're going to go.

One of the examples I have, which is very frustrating, is happening in London, England. Everybody knows about the amazing requirement to have 5% renewables, and yet at the same time they're taking waste wood chips from outside of the city and trucking them in every day. The amount of carbon that's related to the transport to actually truck in the wood chips is actually worse than the actual burning and saving of the waste, and it's turning “waste” into a verb and not a noun.

I agree with Mr. Murray's attitude that we cannot look at one item in isolation. We have to understand the entire life cycle analysis of any of the systems we're talking about.

I know this lack of cyclical, holistic thinking is very exhausting--and I appreciate Andrew Pride's comment on how exhausting this exercise is--but as we simplify in order to pass subsidy strategies, we actually shoot ourselves in the foot. There's a built-in complexity that's healthy and that's related to a certain duplicity that's important.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Thank you.

I have a question for Mr. Rogers.

Is the Minto company sitting in the middle of the spectrum in terms of developers with regard to this question? Are you at the higher end? Where do you sit? Are you the norm, I suppose? I'm trying to understand.

The reason I ask is that we at this committee often hear from the great projects, the success stories, the things that are pulled off, but we don't often get a sense of where the industry as a whole is, and that's actually in some ways more important for us to know.

[Greg Rogers]

Where we position ourselves is in front of the industry. We don't talk about it as much as we just do it. Andrew's team does a lot of work for the company on new innovations such as turbines, and we test them out; we pilot them. We haven't done much in the waste industry, but there's a good business opportunity we're going to talk about after this.

There's a lot we do. As I say, we try to position ourselves out in front. They call it the bleeding edge for a reason. It hurts to be out there sometimes.

I'll be honest. Our motivation is we have gross rents in a rising cost environment to the extent of our 16,000 residential units. Our costs are rising and the rents don't change, so we have a real financial incentive to work hard, and it's tough. Our returns are eroded every year.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

We've struggled with this government and the previous one around the procurement aspect of this. Is government betting on the next energy? Or is it hedging its bets in the past? Firming up government procurement policy into green energy, whether it's buying vehicles or buildings, has been extraordinarily frustrating.

Mr. Murray, you spoke with some passion. Some other witnesses here and others have mentioned about pricing carbon, about that fork in the road, I suppose, where we're at. We're in an economic crisis, and I think because it's easier to explain to Canadians, the government uses bridges and roads to describe how it's going to stimulate the economy on an infrastructure level, whereas some of the things we've talked about today take more than an eight-second soundbite.

How do we move past that and choose the right fork in the road so the cyclical nature of this doesn't come back and we're not sitting here, 20 years from Mr. Harper's government, looking at a report done 40 years ago by Mr. Mulroney's government, saying we should take the correct route? What is the language that needs to be adapted and adopted by this committee when we go forcefully to government and say that it needs to change course?

[Glen Murray]

I think it's asking if they've done their homework before they get the money. Do you know what I mean?

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

But we have speed needs. We have an economy in crisis. We need to get it out the door yesterday.

[Glen Murray]

Then I don't think you should call it an economic stimulus.

A bridge across the Red River in Manitoba, which I can watch one car go across in an hour, was part of a political stimulus package. Mirabel International Airport, which does not get too many flights these days, was part of a political stimulus package. A natural gas system on the prairies was part of a political stimulus package. Everybody wanted to get bureaucracy out of the way.

If you funded Guelph, if you funded Montreal, if you funded Calgary, if you funded the community that these folks are in, they all have community energy plans. They've all assessed what the best choices are. They've all figured it out. The Calgary system right now will avoid about $30 billion in unnecessary public and private sector costs because they've done their homework.

There's no shortcut. You have to do your homework. I can point to a hundred different municipal, federal, and provincial public infrastructure expenditures that drove sprawl that was unsustainable. With an aging population, seniors won't be able to live in those communities. There's all kinds of other non-energy clutter. And they're more expensive to maintain--for instance, the roads and bridges that we will never, in my lifetime...because we didn't put in public transit routes where it was cheaper to put highways. We put in a BRT because it was cheaper.

That's part of it. The other thing is return on investment. When I was Mayor of Winnipeg, I cut property taxes by 2% per year. I reduced the entire debt of the municipality by 50% in just six years. I was the most fiscally conservative mayor they've had. We cut the city's input in the GDP from 6.1% to 4.7%. You can go to Moody’s, you can go to Standard & Poor’s, and you won't find a government.... We spent less money and had 20% less staff at the end. I was CUPE- and labour-endorsed in both elections. I built spending in the city by building the tax burden and lowering people's taxes.

My biggest criticism of government right now--of all of you, but not as individuals, because I think you're all hard-working members of Parliament who are trying to make a difference in the world--is that we have forgotten that when we use the word “investment” in infrastructure, there has to be return on investment. It should generate revenue and increase economic activity at a greater rate than it's increasing debt. It should not leave municipalities with operating costs that they can't sustain.

The people who use the infrastructure should pay for it. If it's an automobile-dependent piece of infrastructure, little elderly senior citizens in their homes shouldn't be subsidizing it on their property taxes. Those of us who drive vehicles should be paying a greater share at the pump. We have to have some rationale between user pay and that. I think that right now we're asking everyone else to pay for it...and that there's a possibility, because there is no return on investment.

I practised this for six years as mayor. You can go to every member who served with me on that city council or to the Chamber of Commerce. The city hasn't had a property tax increase since I left. It's done a better job than many cities at closing its infrastructure deficit.

So when you spend money, if you spend smart in your communities, and you work with municipalities and provinces, and you work with organizations like Benny Farm, you give them a chance to participate in this. You ask them, “For every dollar we're giving you, what is the dollar back?” We averaged about $9 of private sector and non-profit funding. If you look at the housing programs, we grew the tax base, property values came up, people got the value in their homes back, and neighbourhoods became safer.

We as the Urban Institute do this in seven countries around the world right now. With all of the expertise you have, I've never been asked for help by the federal government, nor has the International Centre for Sustainable Cities, nor has IISD--all established by the federal government, by both your party previously, and yours, who were very critical in B.C. in establishing these things.

Why don't you come back and ask us to do these things for you? Why don't you ask us to help you spend smarter? Why don't you engage us in a partnership with you? Invite the non-profit and private sector to work with you to come up with delivery assessment. I'll bet you that you'll get there a lot faster. You'll get more leverage. You'll get more built for fewer dollars, and they'll be more sustainable and greener. You'll create more jobs than if you simply try to do it on your own.

That would be my best advice. Use the community planning model. Try to get community energy plans out there. You'll be there faster and you'll be much more popular. All of you will find it much easier to get re-elected.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Murray.

Thank you, Mr. Cullen.

We'll go to the government side now, to Mr. Anderson. If there is some time left, we'll go to Mr. Shory.

Oh, you're going to start, Mr. Shory? Go ahead.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Yes, thank you, Mr. Chair.

I have only one question, and it's for Mr. Pride.

Mr. Pride, you mentioned a single home system somewhere. Can you elaborate a little on what you mean by “single”? Is there only one system? And is that system practical from a cost perspective?