Natural Resources Committee on April 25th, 2013

[The Chair, Conservative, Leon Benoit]

Go ahead, Mr. Smillie.

[Christopher Smillie]

In terms of competencies required to build those projects, the green energy market, so to speak, is exactly the same as traditional energy markets. You still need carpenters, millwrights, and steamfitters, so it's a nice addition to conventional energy employment.

Obviously, when you're building an LNG facility or an upgrader or a refinery, the number of person hours required to build that facility outstrips putting together a few windmills on a wind farm, but granted, those windmills and those wind farms are growing.

We've had mixed experiences with some installations of green projects. Lots of times the big companies from the U.S. come to install the windmills and they want to use their own crews, so even in B.C. we've had difficulties on wind farms when crews come in from other places and Canadians are standing at the gate asking what's happening. For instance, under the Ontario Green Energy Act, some of the solar farms were installed under NAFTA provisions and some of the electricians in Sarnia were left at the gate.

So I agree with you that green energy is an addition to the current work scope, but the person hours required on a conventional energy project are in the millions more than putting up a wind farm or a solar farm. The manufacture of the solar panels itself often doesn't occur in Canada. It occurs offshore, and sometimes the electricians feel they are reduced to being installers of solar panels.

It's a good start. You talked about renewable. I'll include hydro in that. If we're going to build new dams, absolutely, tons and tons of person hours are involved in building new dams. Lots of jobs are involved, absolutely, in building the transmission lines from those dams to market.

We're still waiting to see on some of the other green jobs. The important part is that we have some sort of coordination so we know when projects are occurring where, so we can send the workforce. If we're going to have a large solar installation, say in Kelowna, we need to make sure the workforce isn't doing one in Sarnia or somewhere in New Brunswick.

I sound like a broken record, but an energy plan has to be linked to a labour plan.

I'm sorry, I might be getting off track.

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

No, that was going to be my next question. The whole issue of apprenticeship training is a big one.

We're facing a lot of abuses in the current temporary foreign workers program, whereby hundreds of thousands of temporary foreign workers are brought in, they are paid less, and they're subject to a whole range of abuses that we know about. I've talked to folks in the building trades who are very concerned about how the government has implemented this program.

You have raised apprenticeship and job training. Is that a concern? Are the current structure and the abuses taking place in the temporary foreign workers program a concern to the national building trades? They certainly are to the building trades in B.C.

[Christopher Smillie]

The national building trades have been focusing on using the program to bring the labour force in from the United States. We have a policy where it's local workers first, then provincial, then national, and then our next step is the United States. We've been working on workers in Michigan with the same skills, the same language, the same health and safety training, getting them to Alberta, to where the work is.

In terms of the trades we represent nationally, I think in 2011—I'm still waiting for StatsCan to give me 2012 numbers—only 5,200 or 5,400 TFWs came in under the trades we represent. The first source country is the U.S.

So to answer your question directly, obviously we represent workers, so we're going to do what's best for workers. There's no difference on our site between a temporary foreign worker and a Canadian. At the end of the day, the treatment they receive is exactly the same under the collective bargaining agreement on our sites—

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

I'm sorry, I want to get Mr. Burt in, because my time is growing long.

Mr. Burt, on the whole issue of green energy, the Conference Board has taken a strong stand on putting in place a cap and trade system. That's certainly where the Canadian public is. It certainly isn't where the government is, but that's another story.

How do you feel the government needs to move ahead? Since Canada is lagging behind the rest of the industrialized world in green energy, both in market diversification and product diversification, what are some of the suggestions you can offer us?

[Michael Burt]

First of all, usually you're talking about electricity-generating capacity when you're talking about green energy. If you look at the expectations for the types of capacity that will be installed in Canada going forward, wind and hydro are the two biggest sources of capacity addition. So I do think we are—at least it appears that we're moving forward on it.

Our position is that if you want to promote green energy, we need to put it on the same playing field as traditional carbon-based energy. That means you need to account for the cost associated with carbon emissions. Right now, it's an externality. It's free to emit. So if you want to use a market-based approach to try to push companies towards reducing their emissions, making more use of green energy, you put a price on the commodity, the greenhouse gases that you don't want them to be emitting. As you pointed out, part of that is that obviously you can't necessarily slap a big tax on businesses. You have to help them with transition strategies to get them from where they are now to where we need them to be. There's a lot money invested already in the existing capital stock, and you don't want to just necessarily throw that away.

If you're talking about developing green energy as an export, rather than just changing our internal mix, then you have to start asking questions about where we are going to sell it. We do have a domestic market. We're already quite hydro-intensive. More than, roughly, two-thirds of our electricity comes from hydro, so there are limits to how much more we can grow that portion of our energy mix domestically. If you want to export it, as Mr. Heaps mentioned, we could potentially displace coal-fired generating capacity in the United States, but there are obviously parties that have a stated position already about that. You're talking about displacing existing market participants, because demand growth is fairly flat going forward.

If we're going to get there, we need to level the playing field, I would say. If you're talking about export markets, well, then we need to get our partners in line with our current policies.

[The Chair, Conservative, Leon Benoit]

Thank you.

Thank you, Mr. Julian.

We'll go now to Mr. Garneau for up to seven minutes. Go ahead, please.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you, Mr. Chair.

And thank you all for being here.

If there's one overarching message that I'm hearing from everybody, it's that if we're going to diversify our energy markets, we need two things: we need more infrastructure, and we need labour in some cases. Related to infrastructure is also getting a green light, because sometimes some of these infrastructure projects carry some very demanding requirements with them.

I only have seven minutes, so I'm going to ask specific questions to specific people. I'll start with Mr. Green.

Obviously, tidewater has been mentioned several times. If we're to get to Asian markets—and I'm focusing on hydrocarbons—then the shortest path is through British Columbia. We're hearing an awful lot about what's going on there. If Northern Gateway does not go forward in the end—and I'm being hypothetical here—in your opinion, is there a route to the west coast that would be acceptable to everybody? I'm asking you for your candid opinion. I'm talking about environmentalists, the province, and aboriginal people. Is there a solution there, or is it something that's going to be problematic forever?

[The Chair, Conservative, Leon Benoit]

Go ahead, Mr. Green.

[Dr. Kenneth Green]

Thank you.

Well, again, here's the pessimistic side of me: I don't believe there's any pathway from western Canada's oil resources to the Pacific coast that will be acceptable to environmentalists at all. We have four to five major environmental groups on record as saying that they believe the exploitation of the oil sands is literally the end of the planet, the end of the climate as we know it, and the only position they will accept is that it stays in the ground.

So for that constituency, no pipeline in any direction will be an acceptable one if it carries the oil sands from Alberta or from western Canada to new markets.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you very much. That was very concise.

To Mr. Burt now, the natural resources minister is in the United States at the moment, doing a number of activities. He spoke a few days ago about the desire to encourage foreign investment in Canada. He was talking about natural resources, not just hydrocarbon developments. He in fact talked about hundreds of billions of dollars that were required in terms of foreign investment in Canada to allow us to go forward with many of the projects that we could potentially go forward with in this country.

Nobody has talked about capital as being one of the issues involved in diversifying our energy markets. How big a factor is access to capital in this country?

[Michael Burt]

There's no doubt that all of these activities we're talking about are highly capital-intensive. You're talking about billions of dollars of investment even for an individual project, so you have to have access to it.

Up until now, there hasn't been a shortage of capital in the sense that we have adequate domestic sources and we've been open to foreign investment. Between those two sources, the money's been there. Basically, if you're able to make a return on a project, then businesses have been able to raise the capital to do it.

If we were to be a little more aggressive with limiting foreign investment, we would still have the domestic capital resources, but I would argue it's not necessarily a good thing. We're talking about diversification of our energy. Well, now all of our capital resources would be devoted to one or a few industries. It's better to diversify what we're investing in just to reduce risk.

This is true for anybody, whether you're an individual investor or pension funds or whatever. You don't want to be focused just on investing in energy. You want to have a plethora of potential investment opportunities open to you.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you.

Mr. Heaps, I was interested in what you had to say. Unless I missed something, it was focused almost entirely on North America and the United States specifically in terms of export market.

Was that deliberate, or do you have views on exporting to Asian markets or other markets?

[Toby Heaps]

It was deliberate in the context of the biggest potential for us on the electricity side, but I have views on diversifying our exports to other markets as well.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Can I hear about it briefly?

[Toby Heaps]

Sure.

I don't think too many would argue that it's a good idea to have your umbilical cord tied to just one customer, and currently the vast majority of our oil exports go to just one customer. That's a limiting factor.

Even if the oil exports that we do through the west coast are likely going to be shipped down to the west coast of the U.S. to be refined, where they've made substantial investments in heavy oil refineries and are counting on that oil coming there to refine, it would still give us the bargaining power to potentially have other buyers.

I just came back from Calgary—I did the oil sands tour a couple of weeks ago—and right now everyone there is talking about the 2015 bottleneck, about how if pipelines don't get approved, there's a major bottleneck for the Cenovuses and the Suncors. There are various ways to get the oil out, such as by train, but it's not as economic. On every barrel of oil they sell today, they're taking a $40 haircut.

So if we're going to proceed with the oil sands, I think we should try to optimize the wealth that we can squeeze out of them in a way that can diversify our energy future, similar to what Newfoundland and Labrador has done. I think they're actually a model for the rest of Canada.

If you look at what they've done, they've taken this sort of economist approach and said, “We have an asset—the offshore oil—that won't be around for more than a couple of decades. We're going to squeeze money out of this right now, and we're going to invest it in an asset that will be around for a few centuries: our hydroelectric potential and our wind.”

So they're taking the billions of dollars they're earning from the offshore oil and investing it in reproducible capital that will earn them billions of dollars, for the next couple of centuries, producing and generating clean electricity.

I think there's a lot to be learned there. To have that money to invest, in increasing the forms of capital to offset the finite capital that we're reducing, I think it's important to have the expanded market access so we're not held hostage by a single customer.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Do I have any time left?

[The Chair, Conservative, Leon Benoit]

No, but you can ask an extremely short question.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Okay.

Mr. Smillie, what are your views on the temporary foreign workers program?

[Christopher Smillie]

In our universe, in construction, there are pretty small numbers in the construction workforce right now. I wouldn't want to speak for the service sector or any of the other sectors, but the program is a band-aid solution for not getting the training right in Canada. We need 3,000 or 4,500 electricians yesterday. It's a scramble. What do we do? We have major projects and we have a scarcity of the right people at the right time at the right job site. So it's a band-aid stopping the flood in demographics that's about to happen.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Garneau.

We go now to Mr. Calkins, followed by Ms. Crockatt, and then Mr. Atamanenko.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Thank you, Mr. Chair.

As an Alberta member of Parliament, I would like to talk a little about the price differential. In my province right now, the opportunities for the hydrocarbons to move beyond Alberta's borders across Canada to the east, the south, and the west coast have been talked about quite a bit. All these options are being looked at. Hypothetical options are being looked at to go north to circumvent, and these hypothetical questions are being posed in light of the political environment, which is really the only environment that can stop some of these things from going forward. These are some of the issues I have.

I want to talk a little about the actual benefits of the diversification of the marketplace and what that will mean for the economics of our country, notwithstanding perhaps combining strategies, as Mr. Heaps said. But what does it mean in government revenues?

Mr. Burt, Mr. Green, I would look specifically to you for that.

Then I'll come back to Mr. Smillie and Mr. Heaps with a question afterwards.

[The Chair, Conservative, Leon Benoit]

Go ahead, please, Mr. Burt.

[Michael Burt]

I can't put a precise figure on it. I don't have an exact number in terms of royalties. Different numbers are bandied about. But in terms of oil, which is the commodity that most people talk about right now, depending on when you're talking about it, it's in the range of a $30 or $40 discount right now per barrel, compared to global benchmarks. When you think about it, we're pumping roughly three million barrels a day, and when you start adding that up, a lot of money in profits is being lost by the industry. You can apply royalty rates to that and you're still talking billions of dollars—billions.

There's also the lost investment activity, as I said in my presentation. Drilling activity in natural gas has petered out right now, because you can't make money. Conventional natural gas is not economic right now in Alberta.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

That's because we have a glut right now, and we can't access other markets other than the North American continental marketplace.