Natural Resources Committee on June 5th, 2012

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

I'm getting a head nod, so I would see agreement there, too.

Mr. Mackey, as we've seen here in committee, various industry groups come in and talk about different ways of generating electricity with new technologies, etc. As your company looks forward, do you see any realistic possibilities of replacing your diesel-based system with something more economical? Or is diesel the only real possibility in the foreseeable future for producing electricity for the mines and communities of Nunavut?

[Peter Mackey]

I don't look at diesel as being the most economical method. A better alternative, from our perspective, is hydro. We've had discussions with several mining groups that are looking at mine development. We've identified the areas with hydro potential within the vicinity of the mine that potentially give us the ability, if we're able to go through the regulatory process and approval process concurrently with them—

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

If hydro is the way to go, what's holding that back for you?

[Peter Mackey]

Do you mean as Qulliq Energy, in terms of our being able to develop hydro?

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Yes.

[Peter Mackey]

As I referenced in my presentation, our ability to borrow for a capital project, a hydro project, is limited by the debt cap of the Government of Nunavut, which is $400 million. And they're utilizing their whole budget just for the infrastructure needs of the communities within Nunavut, which are short. I've had discussions with different banks, including various energy banks, that look at these large-scale projects. They'd be quite happy to sit down and loan us the money to go ahead with the Iqaluit hydro project, but we can't borrow that money because we fall under the same debt cap.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

I'm asking this fairly deliberately. Would it be useful to you if this committee recommended either making some sort of exception or change in the debt limit, raising it with some sort of proviso about capital projects, energy projects, backed projects, whatever you'd want to call them?

[Peter Mackey]

I would strongly recommend and support moving energy infrastructure projects in the north outside of the debt cap of the Government of Nunavut, which is looking at the needs of Nunavut from the perspective of the hospitals and schools. Those will always take a higher priority over building a hydro project to feed a mine and two communities. When they're looking at building a hospital to get some health things done, it's going to win every single time.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

I'm not asking you to go too far out of your zone here. If I asked that question of the political leadership of Nunavut, would they give a fairly similar answer? I know you're hesitant to speak for the political leadership, but would your best guess be that they wouldn't disagree with you?

[Peter Mackey]

Certainly, they're the loan shareholder for Qulliq Energy Corporation. If go to them and say that we have an excellent opportunity for a hydro project with a mine and ask them if we can do it, their response is, “It's not within our debt cap. Let's go to the federal government to see if we can do something with it.” There have been discussions about moving large-scale infrastructure related energy projects outside of the debt cap within the GN. I'm not sure if the GN itself has gone to their federal counterparts with that recommendation or request.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Trost.

We go now to Ms. Liu for up to five minutes. Go ahead, please.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

I would like to thank all the witnesses for being here.

I would like to begin by asking Mr. Bradley a question about labour. When talking about electrical projects in remote regions, would you agree that access to labour is a major challenge? Have you any comments about that?

[Francis Bradley]

Yes, absolutely. In fact, we've been addressing human resource challenges for the electricity industry for a number of years through the association. Jointly with Human Resources Development Canada, we launched a HR sector council a number of years ago. We've been attempting to address a significant shortage of both skilled and unskilled labour over the coming decade. As with a lot of other sectors, we're seeing significant numbers of people in our sector moving towards retirement, and so we're actively seeking ways to ensure that we have the human resources that we're going to need. This is not an issue specific to the north; it's an issue that we're seeing right across the industry. But clearly, it is further exacerbated not just the north but in any remote community. The human resource challenges are only increasing; they're not getting any easier.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Thank you.

You mentioned that an aging workforce was a major issue. It was with great interest that I read a report published in 2008 entitled “Powering Up the Future”. I only have the English version of the report with me, so I will read you the following passage:

An aging workforce, impending retirements of 28.8% of the workforce between 2007 and 2012, competition from other industries and utilities, and a growing economy, coupled with aging infrastructure and the need to build new facilities, threatens the reliable generation, transmission and distribution of electricity to Canadians across the country.

I would like us to focus on one of the points made in that quote, that is competition with other sectors. Which other sectors are competing with you to hire skilled labour?

[Francis Bradley]

That's an excellent question.

We see parallels, not just in terms of people but also in terms of equipment and supplies. Any industry that uses the same sorts of skill sets that we have would also include, for example, any other resource development, any other energy development, and so on. So we're looking at the same kinds of pools, on the one hand.

On the other hand, as the industry increasingly moves toward more automation, we're facing a future that will be characterized by smart grids and electric vehicles, and so on. There's a part of the business that's also increasingly becoming high-tech. Not only are we competing, for example, with other construction projects on our hard assets, but we're also competing with Google and Intel for some of the smartest people we're going to need to be able to develop that smart grid for the future.

The challenges are really across the board. It isn't just the people who are pouring the cement but it's the people who are going to be developing the apps that are going to really manage our energy use in the future.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

That is an interesting point of view.

Would it be reasonable to say that the oil exploration and extraction sector is competing with your sector?

[Francis Bradley]

Oh, yes, absolutely. As I say, every industry does, to one degree or another, both in terms of people and equipment. There's only so much rebar in the country at any given time. There's only so much cement that can be poured in any given time. It is an issue of both the people who are going to be doing some of that work and the equipment that is required.

But, yes, clearly, these are not the only sectors that are chasing after the same sort of people, but they're certainly among them. But it really would be every sector in the economy, right down to IT and high-tech.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Do you believe that could cause an increase in wages?

[Francis Bradley]

To a certain extent, in some of these sectors you would see salaries being pushed up, but it's just natural supply and demand. By the same token, if you look back to 1998 and 1999, if you were an IT specialist and you knew something about the Y2K phenomenon and were able to work in that domain, you were able to demand a pretty significant premium for a short period of time just because it was a matter of supply and demand. If that was your particular skill set on January 2, 2000, that skill set was no longer much in demand.

But, yes, that's the natural ebb and flow of demand, so that, as there are increasing demands in some of those specific areas, there's upward pressure on price.

By the way, it isn't just between different industries here in Canada. It's also more of a North American phenomenon as well. We'll train power line technicians here in Canada. We also have to compete, for example, with companies in Florida that are facing shortages.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Is there a brain drain or—

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Liu. Your time is up.

We go now to Mr. Allen, for up to five minutes.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you very much, Mr. Chair, and good morning to our witnesses. Thank you for being here.

Mr. Mackey, I'd like to ask you a couple of questions.

When you were talking about your attempt to install wind power, you installed it and then it was too close to a graveyard, and so you had to move it to an area which didn't have as good a wind regime.

Let's take that to your next level with your hydroelectric development. What is the potential for hydroelectric megawatt development in your area?

[Peter Mackey]

We carried out a study near Iqaluit specifically, given that it's our best chance of displacing the largest amount of CO2 in fossil fuel use. We looked at 14 different sites around that area. We've identified, on a cost basis, the best location for us in terms of the infrastructure. We're looking at being 60 to 70 kilometres away.

We've since been in discussions with a mine that is looking at development near Iqaluit and we're looking at an alternative hydro site, in large part because the capital infrastructure is paid for over the life the mine if we have a power purchase agreement with the mine, even if the infrastructure is initially more costly to develop. So it varies.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

How big a project would that be in megawatts?

[Peter Mackey]

We would build the hydro project to match the requirements of the mine plus the city. For Iqaluit we're looking at 30 megawatts.