Natural Resources Committee on Feb. 15th, 2011

[The Chair, Conservative, Leon Benoit]

I call the meeting to order.

Good afternoon, everyone.

Welcome to another meeting on energy security in Canada. Today we are dealing with the topic of regional economic impacts and we have three groups of witnesses here today.

First of all we have Gary Flett, vice-president and chief operating officer with the Athabasca Chipewyan First Nation Business Group. Welcome.

We also have Douglas Bloom, president of Spectra Energy Transmission West. Welcome.

Is there no translation? We'll suspend for about two minutes until we get this fixed.

[Technical Difficulty--Editor]

[The Chair, Conservative, Leon Benoit]

Can you hear me now? Is the mike working?

[Some hon. members]

Yes.

[The Chair, Conservative, Leon Benoit]

We will start the meeting. The technical people can try to straighten things out.

We'll just get directly to the witnesses. I started to name the witnesses we have here today. We have Gary Flett, vice-president and chief operating officer with the Athabasca Chipewyan First Nation Business Group. We also have Douglas Bloom, president of Spectra Energy Transmission West. Welcome, gentlemen, here in the room.

By video conference from Cenovus Energy Inc., we have Jim Campbell, vice-president of government affairs and corporate responsibility; Alan Reid, vice-president for regulatory, local community, and military areas; and Jon Mitchell, team lead for environment policy and strategy.

We will start the presentations, for up to seven minutes, in the order listed on the agenda.

We'll start with Gary Flett from the Athabasca Chipewyan First Nation Business Group.

Go ahead please, sir, for up to seven minutes.

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

Mr. Chair, I have a quick question. I was wondering when the video conference would be coming on.

[The Chair, Conservative, Leon Benoit]

Cenovus will probably be coming on. They tested it earlier and it was working. We'll do what we can.

Mr. Flett, please go ahead.

[Garry Flett, Vice-President and Chief Operating Officer, Athabasca Chipewyan First Nation Business Group]

First of all, thanks for having me. It's a pleasure to be here.

During a committee question period on December 7, 2010, Mr. David Anderson asked questions of Lionel Lepine relative to the ACFN Business Group on employment statistics of the Athabasca Chipewyan First Nation membership.

I wish to submit some of the statistics on the ACFN Business Group as well as some supporting documentation and comments.

The Athabasca Chipewyan First Nation Business Group consists of five companies that are 100% owned by the Athabasca Chipewyan First Nation, and another seven joint ventures and partnerships. The ACFN Business Group employs a moving number of employees, depending on industrial demand. At peak industrial requirement of resources during industrial maintenance turnarounds and/or shutdowns, we employ approximately 1,400 people. During the non-industrial maintenance turnarounds, the business group maintains employment numbers of approximately 1,200 employees.

Employment opportunities for ACFN band members are also a moving number depending on industrial demand. During these turnarounds, industry may ask the business group to provide additional labour resources of 300 to 400 personnel. Out of these numbers, we attempt to provide temporary employment for band members living on-reserve. These employees are then transported from Fort Chipewyan to other communities, directly to the plant site, and are provided with accommodation for the period required by the industrial companies.

For questions pertaining to permanent employee levels, I will provide you with some of the demographics of band membership employed with the business group.

The reasons for ACFN band members being at a suggested low level are listed as follows: in the regional municipality of Wood Buffalo, based on the 2010 census, the population of Fort Chipewyan was 1,261 people. ACFN's total membership population out of that is 920. The number of Athabasca Chipewyan First Nation members living in Fort Chipewyan is 236. This equates to 19% of the total population in Fort Chipewyan which are ACFN members in all ages.

Of the ACFN membership, 26% reside in Fort Chipewyan. The ACFN working-age population, between 18 and 55, as of May 2010, is as follows: in Fort Chipewyan there are 135, in Fort McMurray there are 99, and in Edmonton there are 57.

With regard to the Athabasca Chipewyan First Nation Business Group joint ventures employees, based on January 2011 stats, the ACFN Business Group consists of five companies that are 100% owned by the Athabasca Chipewyan First Nation. These include Chip Manufacturing, manufacturers of Kevlar wristolets and safety products; Denesoline Environment, our waste division; Denesoline Janitorial, our janitorial division; Denesoline Maintenance, for highway mechanical repairs; and Tech Sonic Services, an ultrasonic cleaning company.

Our seven joint ventures and partnerships consist of ACFN Allnorth Consulting, our civil engineering firm; AC&T, our heavy equipment earth moving company; ACE Industrial, where we do all the welding and machining; Cutting Edge, where we shred all sizes of tires, on highway and off highway; Dene West Catering; Lemax Machining and Welding; and Poplar Point, another camp catering service.

Our current combined workforce is 1,250 employees with ACFN business and joint ventures. On our website, we stated we had over 1,400 valued employees. Although that was accurate at the time, we must also take into account the attrition and recession in our business group and joint ventures during 2010.

ACFN Business Group employees, in our 100%-owned companies, total 585.

In the ACFN Business Group, 9% of our total employees are of aboriginal descent, at 54 out of 585 employees. Of our total employees, 4% of them are ACFN members. Thirty-nine per cent of our aboriginal employees are ACFN members, at 21 out of 54. The number of working-age ACFN members living in Fort McMurray and Fort Chipewyan combined is 234, with ACFN employees at almost 9% of that population. You will need to consider other employees who work directly for the industrial energy groups such as Syncrude, Shell, and Suncor.

Of the ACFN members who are employees--21 of them--there are 11 in Fort Chipewyan who hold managerial positions and positions as factory workers. In Fort McMurray, we have 10. These employees are in executive management and senior management, are accountant personnel, and are in administrative support, trades, and janitorial positions.

Our joint venture employees total 665. Seven per cent of the total employees of the joint ventures are of aboriginal descent, at 47 out of 665. Two per cent of the total employees of the joint ventures are ACFN members, at 11 out of 665. Twenty per cent of the joint venture aboriginal employees are ACFN members. The types of positions held by ACFN employees in our joint ventures and partnerships include supervisory positions, heavy equipment operators, camp attendants, accounting and administrative support people, and labourers.

The ACFN Business Group supports continuing education and development. We currently have four ACFN members who are employees as well as students. One is on educational leave, pursuing her studies in native studies; one is working part time towards her accounting degree; one is full time, completing an associate certificate, and has her Bachelor of Management degree and a certified human resources professional designation; and one is a heavy equipment apprentice.

On ACFN students in general--as a whole nation, not the ACFN Business Group--during the last few years, we've had many graduates. They have certificates, diplomas, degrees, master's degrees, and doctorates. They are in range of disciplines, such as environment, management, law, numerous trades, nursing, education, and sciences, to name just a few. Within the last few years, ACFN has a very good number of students registered with our education department for post-secondary studies.

Now I will go on to some barriers to employment opportunities. Employment opportunities for ACFN band members are also a moving number, depending on industrial demand. The business group caters to industry in services such as our janitorial division, waste management, and recycling, and also to very specific sectors.

We do have a large number of graduates, but their field of expertise is not in the sectors that we work in. For example, there are ACFN members who are nurses, but we do not hire nurses. We have no positions for them.

Although we have had success in some areas, there are some areas that need special attention. There are other factors that contribute to barriers, such as, for example, a lack of education among band members. A study done in 2006 said that 74% left high school in grade 10 or earlier.

Also, some band members cannot achieve employment because they do not have a driver's licence.

There is also a lack of employability skills and training.

Transportation is a very critical area. People living in Fort Chipewyan want to work for industry, but they reside in Fort Chip, and when they move to Fort McMurray, they must seek accommodation on their own.

Also, like the total population of the municipality, we have alcohol and drug testing, which is mandatory with us, and some people cannot pass it.

There are 78 houses in Fort Chipewyan, 53 of which are band owned, and 25 are mortgaged. Currently there are ten families, four singles, and two elders on the waiting list for housing.

The average wait for a home is three years. There are homes with more than one family living in them because of the housing shortage.

Housing in Fort McMurray is at an extremely high cost. If an ACFN member decides to leave Fort Chip and move to Fort McMurray, the following is what he or she can expect to pay: a bachelor suite in Fort McMurray is $1,492 per month, a one-bedroom apartment is $1,524, a two-bedroom is $1,879, and a three-bedroom apartment is $2,093. The average single detached home costs $704,000; a multi-family home--a condominium, and that sort of thing--is $429,000; a duplex is about $508,000; and a mobile home on its own property sells for about $410,000. On top of this, there are child care costs. At the YMCA in Fort McMurray, daycare is $1,225 a month per child and after-school care is $450. For a family of four, with two adults and two children, the cost of living in Fort McMurray is $3,000 a month with housing and child care.

I hope I have provided you with some answers to the questions that were asked of me.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you.

We are going to suspend while the system is rebooted, and then we'll go to Mr. Bloom.

[The Chair, Conservative, Leon Benoit]

We will resume the meeting with a presentation from Mr. Bloom, President of Spectra Energy Transmission West.

Go ahead, please.

[Douglas P. Bloom, President, Spectra Energy Transmission West]

Thank you, Mr. Chairman, and thank you for allowing me the opportunity to appear before the committee.

If there's anything you need for the committee's work that I'm unable to provide today, we'd be happy to follow up afterwards and make sure we get you the information you need.

I hope my remarks are of assistance as you study various aspects of energy security.

[The Chair, Conservative, Leon Benoit]

Hang on for a second, please, Mr. Bloom. Apparently there are problems with the translation now. They're not getting the feed.

Mr. Bloom, could you try it again? I hope we won't have to interrupt you again, but we might.

Go ahead, please.

[Douglas P. Bloom]

Do you want me to start with testing?

[Chair]

Sure.

[Douglas P. Bloom]

Are you able to hear me now?

Thank you for the opportunity to appear before the committee....

[The Chair, Conservative, Leon Benoit]

This is the responsibility of the parliamentary secretary. Everybody knows that.

Okay, I'm doing a test here. I'm just seeing if this works. I'll just keep talking until it's working.

Okay, I think we have it fixed.

Mr. Bloom, could you go ahead and start your presentation from the top? Thank you.

[Douglas P. Bloom]

Thank you, Mr. Chairman, and thank you for allowing me the opportunity to appear before the committee. Let me just say from the outset that if there's anything that you need for the committee's work that I'm unable to provide today, we'd be happy to follow up separately and make sure you have the information you need.

I hope my remarks are of assistance as you study various aspects of energy security. Spectra Energy is one of the largest natural gas gathering, processing, transportation, and delivery systems in North America. We operate in seven Canadian provincial jurisdictions, with a significant presence in British Columbia, Ontario, and Atlantic Canada and 3,400 Canadian employees coast to coast. Our operations have deep roots in Canada, more than 50 years of history in B.C., and this year we celebrate 100 years of operations at Union Gas. My written testimony highlights our Canadian and North American footprint and operations in more detail.

Let me first take a moment to talk about our cultural commitment to safety. Our employees live and work in hundreds of Canadian communities, and we're committed to their safety and the safety of the public. We operate and maintain our facilities using thoroughly tested procedures and standards, while adhering to and surpassing strict regulations. With respect to safety, we have a relentless commitment to a zero work-related injury and illness culture. In support of these efforts we ask provincial and federal governments across Canada to work together to support the creation of a national “Call Before You Dig” program. Third party excavation damage continues to be the leading cause of pipeline incidents in Canada.

Given the scope, scale, and geographic diversity of our businesses, Spectra Energy is well positioned to speak to regional economic impacts of energy development throughout Canada. What I hope you take away from my presentation is that the ripple effect from activities in one particular jurisdiction extends widely across our sector and delivers benefits for Canada as a whole.

Let me start with northeast British Columbia. Spectra Energy's assets in B.C. are significant by any measure. Our pipeline and gas processing assets form the backbone of the natural gas sector in B.C. We connect B.C.'s natural gas exploration and production industry with millions of customers who rely on natural gas as a feedstock for manufacturing, as a boiler fuel for electric generation, or as a means to heat their homes and businesses. We process and transport 60% of the natural gas produced in the province, with growth under way. Our system supplies all of the natural gas needs for B.C. and 50% of the natural gas demand in the states of Washington, Oregon, and Idaho, and it is interconnected with the North American pipeline grid.

I recognize this committee has heard testimony about the emergence of new technology and how it's vastly changed the supply picture in North America. In response to this supply growth in the Horn River and Montney/Doig resource areas, Spectra Energy is investing heavily in B.C.'s future. We're expanding our infrastructure to carry these new shale natural gas supplies to markets in western Canada and beyond. Our expansion program is targeted to invest about $1.5 billion in our B.C. assets between 2009 and 2012. To give you a sense of the importance of western Canada in our company, that $1.5 billion represents almost a half of our company's current capital expansion program.

Our expansion program to respond to the ramp-up in production means boots on the ground in northeast B.C. and resulting direct and indirect benefits across the country, spread much more broadly than just in the northern communities, B.C., and western Canada. In total, our regional expansion activities now under way include an estimated incremental 1,350 direct construction and inspection jobs over the next three years and close to two million person-hours of work, with additional jobs related to the many engineering, design, procurement, trucking, and logistics services that are required during an expansion of this scale.

The multiplier effect of these incremental jobs, in addition to the $1.5 billion in capital investment, extends right across Canada and ultimately North America. For example, we're also sourcing equipment from across the continent—pumps from Ontario, process control systems and valves from Alberta, and structural steel from Quebec. All this equipment comes together in collaboration with resources from northeast B.C., along with state-of-the-art engineering, transportation logistics, and millions of dollars in road and bridge upgrades along the way--and this is just Spectra Energy's contribution.

British Columbia’s natural gas industry royalty revenues totalled $406 million in 2010, and the property taxes that Spectra Energy paid, $60 million, made a significant contribution to the provincial economy. Our industry also invests in local communities across B.C. in the form of money and time. In 2010 our employees donated more than 700 hours to volunteer projects in B.C., and annual charitable contributions in the west were nearly a million dollars.

We believe that robust natural gas supplies will provide energy security for Canada and our U.S. neighbours, and natural gas will continue to underpin local, provincial, regional, and federal economies well into the future.

That covers two of the three “E”s in our continental energy equation. The third “E”–our environment–is also a natural fit for natural gas. With a carbon profile that is 45% cleaner than that of coal and 30% cleaner than that of oil, natural gas is available right here and right now to fuel our environmental objectives. Our U.S. neighbours are recognizing this. During his State of the Union address to Congress last month, United States President Barack Obama voiced support for the role of natural gas in a forward-looking clean energy policy.

Alternative sources of energy are essential, and an important part of the overall energy mix, but the reality is that natural gas will continue to provide a significant share of energy for generations to come, and will provide backup to renewables when the wind doesn’t blow and the sun doesn’t shine. In Ontario, natural gas is displacing coal-fired electric generation and delivering immediate emission reductions. Spectra Energy is transporting this natural gas through our Union Gas subsidiary, a company serving 1.3 million customers in Ontario’s energy market, and in the maritime provinces, Nova Scotia and New Brunswick are exploring opportunities to further diversify their energy portfolio with increased utilization of clean-burning natural gas and renewables.

Beyond near-term emissions reductions that can be achieved, the economic benefits associated with greater utilization of natural gas are essential to the host communities that are benefiting from today’s natural gas technology and development boom. We must take advantage of the fuel before us today: a clean, domestic, abundant, efficient, and versatile fuel. This important step will set the stage for economic benefits at the local, regional, and national level.

As Spectra Energy undertakes the large natural gas infrastructure investments across Canada to take advantage of today’s cleanest conventional fuel and support our energy security, environmental, and economic objectives, we offer the committee the recommendations that follow.

First, continue to recognize and support the energy industry’s role in providing essential services to Canadians and stimulating economic growth. Amidst a significant worldwide economic downturn, Spectra Energy added jobs. Our contributions to economic growth can be bolstered by continuing to provide a competitive tax environment; support for infrastructure, research, and development as our industry expands; and a harmonized, efficient, and stable national and North American regulatory environment.

Second, build homegrown demand for natural gas and diversify access to our resources through offshore markets. With more than 100 years of domestic natural gas supply, commodity prices are also expected to remain modest for the foreseeable future. If Canada is unable to build domestic demand for natural gas use and develop offshore market outlets, it will impede the growth of exploration and production across Canada, a major source of revenue and economic benefits for regions across the country.

Third, ramp up efforts that support investments under way in Canada’s natural gas infrastructure. Spectra Energy strongly supports the positive direction taken by the National Energy Board to encourage and attract investment in key energy infrastructure in Canada. Initiatives to encourage regulatory efficiency bode well for long-term investment in our sector.

Fourth, continue to recognize the role that Canadian natural gas resources play in North American energy security. A clear national energy strategy would be helpful to support growth in the energy sector and regional advantages.

I'd like to thank you for the opportunity to speak today. I hope these remarks and our brief are helpful to your deliberations and I look forward to your questions.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Bloom.

The witnesses we had hoped to hear from by video conference aren't connected as of right now, so we'll go to questions and comments, and if they become available, we will stop at some point and hear from them and then carry on. As well, Mr. Flett has to leave before five o'clock, so please keep that in mind while you're asking questions.

I will go first to the official opposition. Go ahead, Mr. Tonks, for up to seven minutes.

[Alan Tonks, Liberal, York South—Weston, ON]

Thank you very much, Mr. Chairman.

Mr. Flett, Mr. Bloom, welcome. I appreciate your being here.

My first question is to Mr. Bloom. Mr. Bloom, you've made several references to a projection of regulatory clarity. Also, you finished by saying that the whole opportunity for investment perhaps hinges on that preciseness of regulatory clarity and excellence. Could you expand on what you believe to be that regulatory framework?

You also talked about a clear national energy strategy. Could you expand on that a little bit in terms of the regulatory regime that you would like to see in place and whether there are problems with the existing regime? As well, what do you mean in terms of an energy strategy?

[The Chair, Conservative, Leon Benoit]

Mr. Bloom, go ahead.

[Douglas P. Bloom]

Thank you. Let me start with the regulatory efficiency point that I wanted to make.

The issue here, sir, is that investment decisions really are advantaged when we have greater certainty of the process, so we encourage any steps on the regulatory side that help us provide clarity and certainty of the process. The outcome, of course. is left to the regulators, but what's important to private sector investors is the timeliness and certainty of the process, and those are probably among the more important things that we could ask of any regulator.

[Alan Tonks, Liberal, York South—Weston, ON]

On the national energy strategy, could you expand on that a bit? We've gone down that path before, and I think you can appreciate that we want to be very careful in terms of provincial sensitivities and so on. What do you see a national strategy encompassing?

[Douglas P. Bloom]

In short, we feel that there's a tremendous opportunity in Canada at this point. We're blessed in this country with abundant resources. We've been also very fortunate to sit next to the largest market in the world, but we're also accessible to many other very large and emerging world economies. We feel there's a tremendous opportunity now for Canada to pause and think about what goals we want to establish for the energy sector and the jobs and incomes that it can support. I think now is an opportunity for us to assess how we best can maximize the value of the resources that we have in this country--respecting the provincial jurisdiction over those resources, but nevertheless assessing the goals that we aspire to as a country and the things that we need to do in order to achieve them. That would encompass all levels of government, as well as the private sector participants.

[Alan Tonks, Liberal, York South—Weston, ON]

We might come back to the point you made in terms of investment, where that investment comes from, and the terms and conditions that would be part of that national strategy.

I'd like to go to Mr. Flett. Mr. Flett, thank you very much for the statistics. This is very excellent, and I think the committee would be interested in terms of the accessibility, if you will, to the benefits of the tar sands, the development that's going on into shale gas and so on--sorry, I meant the oil sands. I just wanted to make sure they are awake over on the other side there. There's a sensitive issue there.

Mr. Flett, the success of your own companies that you have nurtured and developed is very admirable, but are you satisfied that you're getting the reinvestment in educational opportunities and in child care?

You mentioned the housing issues. We have been up to Fort McMurray. We've seen the tremendous overcrowding that's happening. Are some of those benefits equitably coming back to the local populations, and in particular to the first nations that you represent?

[Garry Flett]

The answer, I think, is no, but is there long-term relief? Possibly. There needs to be more input, more development done by industry itself, maybe in conjunction with the provincial government, to relieve some of the pressures on the housing issues.

The reason I provided those stats was the question on behalf of the ACFN employment numbers, the membership numbers. A lot of the members live out of the Fort McMurray area but still within the regional municipality of Wood Buffalo. A lot of the members have limited skills to enter the market, so the positions that they can fill are entry-level, low-skilled, or unskilled positions, which of course attract a low salary or income and hinder their ability to access the local housing market in Fort McMurray.

When industry provides accommodations for them—and mostly it's temporary—they can come into or fly into Fort McMurray or into the area, live in the camps, make an income, and provide it back to their families in the remote regions in which they live, but there really is no incentive shown yet by industry or by the government to provide a long-term solution to the housing issue.

[Alan Tonks, Liberal, York South—Weston, ON]

I see.

How is my time?