Natural Resources Committee on April 16th, 2013

[The Chair, Conservative, Leon Benoit]

Good afternoon, everyone.

We're here today pursuant to Standing Order 81(4) to study the main estimates for 2013-14, votes 1, 5, 10, 15, 20, 25, and 30 under Natural Resources, referred to committee on Monday, February 25, 2013.

Today, we have as witnesses to discuss these main estimates the Minister of Natural Resources, Minister Oliver, for the first hour, and for the second roughly 45 minutes, until the bells start, we will have from the Department of Natural Resources, Serge Dupont, deputy minister.

I welcome you both at the table now, but the first hour is with the minister.

I want to thank you, Minister, for making yourself available, as you always do. I look forward to your comments, if you'd like to make some comments on the main estimates, and then we'll get right to members' comments and questions.

Minister, the floor is yours.

[Joe Oliver, Conservative, Minister of Natural Resources]

Thank you very much, Mr. Chairman.

Good afternoon, everyone. I appreciate the opportunity to meet with the committee.

Mr. Chair, members of the committee, we all know how important Canada's natural resources have been to our economy over the past century. And you are aware of the unprecedented opportunities for growth in natural resource sectors.

Our government remains squarely focused on the economy and jobs, and we are committed to implementing Canada's economic action plan. We're keeping taxes low, eliminating red tape, reducing the regulatory burden, and promoting free trade and innovation.

Our approach to fiscal and economic management has not gone unnoticed. Canada's credit rating is a solid AAA for the fifth straight year. The World Economic Forum ranked Canadian banks the soundest in the world. Our economic performance also speaks for itself. We are the only G-7 country to have recouped all of the jobs lost during the last recession and added 950,000 net new jobs since July 2009. Real GDP is now significantly higher than pre-recession levels.

Both the Organisation for Economic Co-operation and Development and the International Monetary Fund have named Canada as being among the leaders in economic growth in the industrialized world over the next two years.

Mr. Chair, there is clear evidence that our approach is working. Canada's economic fundamentals are sound and we are keeping our fiscal house in order.

We recognize that in uncertain global economic times, the best contribution a government can make is to help create the right environment for jobs and economic growth. And that's why our new federal budget, Economic Action Plan 2013, builds on the foundation of Action Plan 2012, with a clear focus on jobs, growth and long-term economic prosperity.

For the Natural Resources portfolio, economic action plan 2013 will support responsible resource development and competitive, innovative natural resource sectors. New and renewed commitments include: $92 million over two years to support forestry innovation and market development; $325 million over eight years to Sustainable Development Technology Canada, to continue support for the development and demonstration of new clean technologies that create efficiencies for business and contribute to sustainable economic development; and $141 million over two years to ensure a secure supply of medical isotopes, and maintain safe and reliable operations at AECL's Chalk River labs.

Economic action plan 2013 contains measures to connect Canadians to available jobs, to help manufacturers and businesses succeed in the global economy, to develop new infrastructure, invest in world-class research and innovation, and support families and communities. Economic action plan 2013 is anchored in a commitment to eliminate the deficit and return to balanced budgets by 2015-16.

Indeed, many Canadians know that our government is strongly committed to prudent fiscal management. This commitment to fiscal responsibility is reflected in Natural Resources Canada's budget. Through our main estimates, Natural Resources Canada's 2013-14 funding will show total budgetary authorizations of $2.77 billion. Of this amount, $1.45 billion requires voted approval by Parliament.

You will note that we are increasing funding, as compared to the 2012-13 main estimates, in several priority areas, including $5.6 million to strengthen pipeline safety and awareness, as well as to allow for increasing annual inspections by 50% and doubling the number of annual audits, and $9.9 million to advance medical isotope production technologies.

For decades, Canada's natural resource sectors have played a vital role in our nation's history and in our economy. Natural resources account for about 15% of our gross domestic product and more than 50% of our exports. When you include the supply chain that provides goods and services to the resource sectors, natural resources account for nearly 20% of Canada's GDP—almost a fifth of our economic activity.

In 2011, the forestry, energy and mining sectors employed nearly 800,000 people. With indirect employment, that total increases to 1.6 million jobs—with even greater contributions in the future. There has never been a better time to do business in our natural resources sector and our government is ensuring that the sector is well equipped to benefit from these opportunities.

Over the next 10 years, as many as 600 major resource projects, worth more than $650 billion, are underway or planned. That means the creation of hundreds of thousands of new jobs. Few countries in the world are generating natural resource projects of this scale or at this pace—creating a truly once-in-a-generation opportunity for Canadians.

That's why our government is moving ahead with our plan for responsible resource development, a plan that will allow us to develop our resources, bring them to market, and bolster investment and job creation, all the while protecting Canada's environment.

Our wealth of energy resources, both in oil and natural gas, means our country is poised to reap the benefits of this natural legacy in new and emerging markets. The International Energy Agency now predicts that the United States will become the world's largest oil producer by 2020. It will be close to energy sufficiency by 2035. This means that Canadian oil exports to the United States will be competing for a declining portion of U.S. imported oil.

This trend underscores the fact that our government is doing the right thing today by helping to diversify Canada's energy markets in the Asia-Pacific and other emerging markets. Making the most of these opportunities is key to Canada's long-term economic prosperity.

l have spent a good deal of time travelling to other countries where there are opportunities for increased investments and trade to let the world know that Canada is open for business.

l understand that you are beginning a new study this Thursday and have decided to focus on three areas of diversification: export market diversification, product diversification, and diversification of energy supply sources. l am very interested in this study and I look forward to your final report on this important issue.

Mr. Chair, members of the committee, there is no question that Canada's natural resources will be the catalyst for a new era of jobs, growth and prosperity for Canadians. The potential for growth has never been greater than it is right now. And our government is determined to harness that advantage today to create the long-term prosperity of tomorrow.

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

I am pleased to answer any questions you may have.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Minister, for your comments on the natural resource sector in Canada and the importance of that, for the picture you painted of government spending in the area of natural resources, for giving some reasons behind that spending, and for referring to the main estimates.

We'll start now with the first seven-minute round of questions and comments, starting with Mr. Allen, followed by Mr. Julian, and finally Mr. Hsu.

Go ahead, please, Mr. Allen, for up to seven minutes.

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

Thank you very much, Mr. Chair and Minister.

Mr. Dupont, thank you for being here this afternoon with us to go through some of the estimates.

I'm going to focus mainly on pipelines and probably have a little bit of a discussion on the west-east pipeline as well. I will focus my questions there.

Minister, you have done a fair amount of travelling. I know you have been to Saint John. You've been to the Irving refinery in Saint John. A significant portion of the proposed east-west pipeline that would be built through New Brunswick would actually go through my riding of Tobique—Mactaquac.

With regard to some of the things you've learned on export markets, can you talk about the position on the west-east pipeline, specifically the benefits of not only having more oil in the east refined at the Irving refinery, but maybe more specifically on the ability to get our product to deep water and the benefits of that?

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

Thank you for the question.

As I mentioned in my remarks, we have a big challenge, an overarching challenge. Right now we're selling our oil to one customer, the United States. Ninety per cent of our exports of oil go there and 100% of our gas. We are as an economy losing some $50 million a day because of the reduced price in Cushing, Oklahoma in the U.S. Midwest because of a pipeline bottleneck, and so we're talking roughly $20 billion a year, but that amount varies. That is the first problem.

The second problem is that we are confronting an issue of pipeline capacity that is starting to hit our economy. Before the end of the decade this will become very serious because if we don't move the oil out, it will be stranded. Over the intermediate and longer term, because of the immense amounts of shale gas and shale oil that the United States has discovered, they're going to be relying less and less on Canadian imports, and we absolutely must find new markets. Fortunately, those markets are there in the Asia-Pacific area, and 92% of the economic growth over the next 25 years is going to come from non-OECD countries. Energy demand is going to grow by about 36% by 2035, so the market will be there, and there is tremendous complementarity. We have a need to diversify our markets. The Asia-Pacific areas have an intense need to diversify their services and supply, and so we must build the infrastructure, the pipelines, to get the resources to tidewater.

Moving from west to east is one of the ways of doing it. These are not alternatives; they're not mutually exclusive. We have the resources to move in all directions. The advantage of that particular movement—and it can be through the TransCanada Mainline, which is looking at a conversion from gas to oil or the Enbridge Line 9, which is talking about a reversal from east-west to west-east—would be a lower cost Canadian crude coming to the refineries: the Ultramar refinery in Lévis, Quebec, the Suncor refinery in Montreal, and potentially the Irving refinery in Saint John, which is the largest refinery in Canada. They will then have—

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

Minister, could I ask my next question? We're running out of time.

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

I'm sorry. I got carried away.

I just want to say we're talking about lower cost Canadian crude to replace higher cost foreign crude.

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

What I'd like to do is now ask you specifically on that. When you look at the estimates and the NEB, what provisions are in the main estimates? Obviously for some people, when you talk about building 1,400 kilometres of new pipeline and you talk of these reversals, there's concern on the environmental side. Can you talk to the main estimates from the NEB and what expenditures in there will ensure that the pipelines that are built will adhere to a strict safety regime? Specifically with the reduction in the NEB estimates, they will be doing the project reviews, and how do you see that impacting the NEB?

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

Right. Look, the National Energy Board is a strong, independent regulator that ensures pipeline safety. They subject pipeline development proposals to an extensive scientific review that ensures pipelines are safe and protect the environment and the public.

Between the years 2000 and 2011, federally regulated pipelines had a safety record of 99.9996% of the crude oil and petroleum products that were transported. This is a very impressive record and we must continue to take steps to further improve this record.

As you know, our government has taken action to prevent pipeline accidents and improve our ability to respond to any incidents that do occur. Through our responsive resource development plan, we increased the number of inspections of federally regulated pipelines by 50% and doubled the number of annual audits. There are also new fines for companies that break Canada's rigorous environmental protections. The main estimates for 2013-14 allocate $5.6 million for pipeline safety and awareness.

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

That $5.6 million you're talking about is temporary funding for heightened public awareness of pipeline safety.

When you say “heightened public awareness of pipeline safety”, what is your impression of what that means? Is there any concern of the NEB being able to fulfill their mandate as a regulator on this?

[The Chair, Conservative, Leon Benoit]

Minister, I'll need a very short response. Mr. Allen's time is up.

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

The National Energy Board has adequate funding. They have the number of professional personnel to do the inspections and to carry out their independent, objective, scientific regulatory reviews. It's a highly respected organization that has adequate resources to fulfill its task.

[The Chair, Conservative, Leon Benoit]

Thank you very much.

Thank you, Mr. Allen.

We go now to Mr. Julian for up to seven minutes.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you, Mr. Chair.

Thank you, Minister, for being here today.

I'm looking at the main estimates. The government has increased, by millions of dollars, an advertising campaign coming through Natural Resources, but where have they slashed? Well, the government has slashed $162 million from the clean energy fund. Over $60 million has been slashed from ecoENERGY for biofuels. They've slashed millions of dollars from the ecoENERGY renewable power initiative and have slashed millions of dollars from the ecoENERGY innovation initiative. I could go on and on, Minister Oliver.

When we look at all of the slashes in funding that went to renewable energy in the context of your own remarks, Mr. Minister, where you said that the impacts of climate change are exaggerated and cited some fictional scientists saying it wasn't so urgent, it tells a story to the Canadian public. Now that you've had a few days to reflect, I wonder if you could tell us, do you still feel that the impacts that are dramatic, the 2° rise in global temperatures are exaggerated and that we don't have to worry about it, that Canadians aren't concerned about it? Or do you now understand that a 2° rise has severe repercussions internationally and do you retract your remarks?

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

Well, as I've said many times and as I said during the interview with La Presse, this is an urgent matter. Climate change is a pressing problem that our government has been pursuing with quick, decisive action. I was very clear on that. I was very clear repeatedly on my belief in climate science and—

[Peter Julian, NDP, Burnaby—New Westminster, BC]

All of these cuts show the contrary.

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

Can I finish? I'm sorry, what shows the contrary?

[Peter Julian, NDP, Burnaby—New Westminster, BC]

All of the cuts in the main estimates that I've just spoken to: green energy, renewable energy—

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

We're shifting ground here.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

They show the contrary.

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

Well, not really.... We're proud of the over $10 billion our government has invested in clean energy and a cleaner environment, and Canada's investment in energy research and development per unit of GDP has outpaced that of the United States over the past decade. In fact, the International Energy Agency reports that Canada's investment per unit of GDP was more than double that of the United States, and we continue to support this by expanding the eligibility of—

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Minister Oliver—

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

No, just a second—

[The Chair, Conservative, Leon Benoit]

Mr. Julian, order. Mr. Julian, please let the minister answer. You did ask the question and it was a fairly detailed question. He is responding directly to the question, so would you just allow the minister time to give an answer, please.

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

One of the things I want to say is that we are expanding the eligibility for accelerated capital cost allowance for clean energy generation equipment. We've also committed $325 million to sustainable development technology. The clean energy fund has made important investments that will advance emerging technologies and inform energy policies going forward. We're supporting, as an example—