Natural Resources Committee on April 25th, 2013

[Dr. Kenneth Green]

I could speak to the regulatory portion to a certain extent. The Fraser Institute does several annual surveys—one on mining and one on upstream oil and gas production—of executives with companies that engage in that kind of production. One of the things we've learned from the year-to-year surveys is that good regulatory environments, that is, transparent regulatory environments that are non-duplicative and non-burdensome, are a huge factor is making a jurisdiction attractive to investment.

Your capital and regulation parts go hand in hand. With the right regulatory regime you can make a jurisdiction attractive to investment; with the wrong regulatory regime you can discourage companies from investing and they will send their funds elsewhere. You have to get the regulatory part right to attract the capital that will build the projects and hire the labour.

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

Could regulatory or political issues affect the timeliness of projects or determine whether or not they go ahead? Could we lose projects on regulatory or political issues because we would be the second or third compared with some of our competitors?

[Dr. Kenneth Green]

Absolutely. We've already seen very long regulatory delays. Look at Keystone XL. We're missing opportunities every day.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Trost.

We'll now hear from Monsieur Dusseault, followed by Mr. Allen.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you, Mr. Chair.

I would like to thank the witnesses for being here today to meet with us.

My question is quite specific and is for Mr. Heaps and Mr. Burt, if they wish to answer it.

I would like your comments on the problems that may arise with an economy that relies on a single sector or a few sectors in particular. What do you think the risk might be if we encounter problems in that sector or if the markets and demand change?

Let's take oil for example. We know that other markets like the United States produce more. What would be the risk of having an economy that basically relies on a single energy sector or a few sectors?

Mr. Heaps?

[Toby Heaps]

Sure. The first one isn't the most conventional type of risk most people would think of, but it's the risk that it's easier to get pigeonholed, and we as a country have been pigeonholed in the U.S.—I would argue somewhat unfairly—as a dirty energy purveyor, and we could be much more than that.

As Ms. Crockatt commented, we do have some clean oil sands operations, cleaner than conventional, but they're not zero carbon or even close to approaching zero carbon. We could get quite close to zero carbon if we were to take the ATCO Group's plan and use the abundant thousands of megawatts of hydro power in northern Alberta to steam out the oil—use that electricity to steam out the oil. If we did that, it would be pretty hard for U.S. environmentalists and Robert Redford to oppose the import of Canadian oil that was zero carbon.

For the other one, I'd like to use the metaphor of a horse. I think we've taken a bit of a one-trick-pony approach on our energy strategy, and it has been a lot about exporting our oil, particularly our oil sands oil. When the world changes and our biggest customer finds that they have more oil than they thought they had, and we can't build our pipelines because the environmental community is a much more powerful force than we thought they were at preventing those pipelines, we wake up feeling a little like the person in The Godfather when he unfortunately found his favourite horse's head in bed with him. It's not a pretty picture for our economy.

It never pays to put all your eggs in one basket. Not only does it make it harder for us to export our oil, by not having green energy being produced in Alberta that's abundant and economic in the hydro form, but it also makes us quite vulnerable when we put all our eggs in that hydrocarbon basket.

So for both reasons, for the sake of the oil industry and for the sake of economic green energy generation, it makes a lot more sense to diversify into both clean and conventional energy.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Mr. Burt, do you have any comments to make on that?

[Michael Burt]

Obviously diversification is a good thing. You don't want to put all your eggs in one basket, to use your expression.

What we've seen is that although the Canadian economy is not just about energy or about oil sands, a lot of the growth right now is being driven by our natural resources, and energy in particular. How do you deal with that? Obviously our businesses are taking advantage of the opportunity that's available to them.

One of the ways that is commonly used around the world when you have one-sector economies is to establish legacy funds of one sort or another. Rather than spending the royalties and tax revenues we're generating from this finite resource, build a legacy fund that allows us to share the wealth of that resource over time. When you do have a bust cycle, which we all know will occur at some point, you can smooth out those up and down fluctuations in the economy.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you, Mr. Burt.

Mr. Heaps, I would like to continue with the follow-up to my question.

What role do you see the government playing in this diversification? You spoke at length about oil in Alberta and the use of hydro to change the extraction method a little so that it is more ecological.

With respect to this diversification, what role do you think the government should play to ensure that our economy does not rely on just one resource and that it can grow despite the whims of world markets and the economy?

[Toby Heaps]

I would say two things, and they both have a lot to do with accounting—if we're just going to limit it to two things.

One is we don't currently include our commercial natural resource wealth on the balance sheet of our nation. Australia does. They do include their oil and their coal and their natural gas on the balance sheet of their nation. So when it goes down, or when they're making new discoveries, there's a change to the balance sheet and they know their wealth-producing potential is changing. It has an effect on their policy and an effect on giving an incentive to have things like sovereign wealth funds, because you can see you're depleting a form of capital on your balance sheet. You want to increase a form of capital.

But the other thing is—and I'd like to re-emphasize this—it is so important to have the knowledge in this country about what our economic clean electricity potential generation is. We do have over 160,000 megawatts of hydropower potential that is not tapped. That's twice what we have tapped.

We do have millions of megawatts of economic wind that is fast-blowing but far away from power lines. The thing that equalizes the wind, that people don't understand.... Sometimes folks like to criticize green energy, but Canada has a unique geography, especially in the Niagara region, with the 99-metre difference between Lake Erie and Lake Ontario, where we could do large-capacity pump storage. It could be the world's biggest battery that could store wind energy by pumping water uphill when the wind is blowing, and then we could have it come down. We're talking about 1,300 gigawatts. It's a massive amount. It could be part of a backbone of a North American super grid that would allow us to export our energy quite profitably, especially during peak times.

By providing this clarity on a map, the National Energy Board could show all of Canada, with the best energy economists and energy estimates, what our clean energy generation potential is if we had the proper grid in place, just from the engineering perspective. If we had the answer, if we could see the magnitude of the opportunity, it would start to focus a lot of minds, both in the private sector and in the public sector. It's a multi-trillion-dollar opportunity for us this century.

[The Chair, Conservative, Leon Benoit]

Thank you.

Mr. Allen, you have up to five minutes.

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

Thank you, Chair, and thank you to our witnesses for being here.

Mr. Smillie, I want to focus on the labour part of this. And you're right, it is a little of a continuation from the last time you were here.

I have a couple of questions. I want to ask a clarification question first. You talked about inefficiencies in the training systems. In your response to Mr. Trost you said colleges are starting to work together—agreed—you talked about labour mobility, and the other one was getting a recognition so that young folks don't have to come back to their originating province to get trained for six weeks, or whatever it happens to be. I talked to someone last week who was training in New Brunswick for six weeks. Are those some of the inefficiencies you're talking about, or would you like to mention others?

[Christopher Smillie]

There's the inefficiency of training centres not talking to each other. There are inefficiencies in the Red Seal system itself. We have a Red Seal system in construction and in other trades that recognizes credentials from each of the provinces.

We spend a lot of time applying and a lot of time trying to get more trades recognized in the Red Seal. We've been working hard with HRSDC to get more trades recognized, so there would be an efficiency in certification recognition across the provinces. We need to get that right. We need to get the skilled trades promotion thing right. HRSDC and the Red Seal could convene that with the provinces.

We have 13 different training systems across Canada. That's inefficient. If there is training capacity in one province because there's a slowdown or there isn't a lot of economic activity, let's use the available resources in that province.

The key thing with construction workers is that to be in an apprenticeship you need a job. There are inefficiencies in getting young people linked to companies that are offering apprenticeships. Everyone's on their own in the marketplace. We find jobs for our members. But the vast majority of young people don't even know we exist. So there are inefficiencies in information delivery to young people about careers in our trades as well.

I have a new daughter and I want her to be a millwright, so I can retire.

[Voices]

Oh, oh!

[A voice]

Right on.

[A voice]

Good for you.

[Christopher Smillie]

I will not allow her to take something that isn't linked to where our economy is headed. She's going to have her own choices, I'm sure. But I want her to be a millwright. Not a lot of people have that—

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

As long as it's her choice, yes.

[Christopher Smillie]

As long as it's her choice, I'm fine with it. I'm learning how to be a father quickly.

There are inefficiencies in getting young people into the trades, realizing there's value. We've got to get that right. We can do that as a country.

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

You led me into the next question. I recently met with the president of New Brunswick Community College and with one of your members who runs the trades in New Brunswick. One of the things we talked about was the young folks going into this, and that they may be under a false perception that they're going to be able to get this trade and get a job locally. But the construction business does not work like that.

So now here we are. As you said, we're going to be negotiating new labour market development agreements with the provinces next year. What are the key success factors in those negotiations that we should accomplish to achieve some of the objectives you just talked about, so we can fix some of this?

[Christopher Smillie]

LMDA funding—for the other members of the committee who don't know—is the part 2 training money from Employment Insurance. You have to be eligible for employment insurance to be able to access LMDA funding or receive employment insurance. We need to spend less on administering these funds and more on putting money in.

There's no one from the Government of Ontario here, so I'll stick my neck out. Of the LMDA funding the Ontario government receives, close to 50% of that money is spent on administration of the fund. It's not spent on training young people. I like Second Career; I like the Ontario government's idea. They spent a quarter-billion on advertising and administration. That's a lot of money. We need to make sure that when these LMDA deals are being negotiated there's value for money.

At the end of the day, if we want to upscale people who are on employment insurance, we better be training them for jobs that exist. We don't want to be training them to be unemployed. It's pretty simple. We need to train people for what the labour market is demanding in that region.

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

Can you say the same thing for post-secondary transfers and all that? Should we be looking at negotiating those metrics as part of that?

[Christopher Smillie]

There's no one from Algonquin College in the room, so I'll make an example of them.

They have 18,000 students at Algonquin down the road, and 150 of them are in the construction pre-apprentice program.

So what are we focusing on? Ontario will have the Ring of Fire, Ontario will have a new nuclear build, Ontario will have pipelines running through it, and Algonquin College, I think the fourth-largest community college in Ontario, has 150 students involved in the skilled trades. Their number one programs? Police foundations and pre-science.

No offence to cops, no offence to pre-science students, but are we training people in a way that makes sense for the economy that's coming?

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

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Allen.

Monsieur Choquette, you have up to five minutes, followed by Mr. Anderson.