Thank you, Mr. Calkins.
Evidence of meeting #78 for Natural Resources in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was norway.
A recording is available from Parliament.
Evidence of meeting #78 for Natural Resources in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was norway.
A recording is available from Parliament.
5 p.m.
Conservative
Blaine Calkins Conservative Wetaskiwin, AB
I didn't mean to interrupt you. I was just going to ask whether I had more time, but if you'd like to finish your answer, I would appreciate it.
5 p.m.
Director, Natural Resources and Environmental Policy, Canadian Chamber of Commerce
I didn't have anything of substance to add.
5 p.m.
Conservative
April 30th, 2013 / 5 p.m.
NDP
François Choquette NDP Drummond, QC
Thank you, Mr. Chair.
Thank you, everyone.
Mr. Chair, because I will speak in French, I want to know that everybody has put their earphones on and would ask you to stop the time, please, if it's possible.
5 p.m.
NDP
François Choquette NDP Drummond, QC
I am going to speak French.
I want to thank all of you for being here today. I also thank you, Mr. Wiborg, for joining us via videoconference.
This is very interesting. I am not a permanent member of this committee. I sit on the Standing Committee on Environment and Sustainable Development. However, this study is very interesting, even from the environmental point of view.
One thing comes to mind regarding the theme of the study, which is economic diversification. Today, we talked at length about the oil sands, pipelines, and the importance of diversification for job creation. In this regard—still in the area of natural resources—there are other natural resources that are important. Blue Green Canada recently produced a report entitled “More Bang for Our Buck”. This is a very interesting report, which mentions that the diversification of our natural resources would allow for the creation of 18,000 to 20,000 more jobs.
I liked the way Mr. McGowan clearly explained the importance of job creation. Indeed, we can create many more jobs. It is important also that we not limit ourselves to a single resource.
In Norway, they knew that they had a single resource, but they created an impressive fund for future generations.
Perhaps Mr. Wiborg, and then Mr. McGowan, could talk about the importance of creating jobs through diversification, and of having a fund to allow us to re-target the economy, which will need to be redirected for future generations.
5 p.m.
Engineer, As an Individual
I'll try to address that. I'll go back to the 10 oil commandments created by the standing committee of the Parliament of Norway in 1971.
It stated very clearly that oil and gas development should benefit all Norwegians. It stated that it should create a region-owned oil and gas industry—also one for the supply and delivery platforms—and we have done so.
Today, we export to the world from this industry. We don't only make money on oil and gas by producing it, but also produce the equipment needed for other nations, other provinces, other states, to make their own production viable in an environmentally friendly way.
The issue of jobs was raised earlier, and I tried to make a comment. My understanding is that Alberta imports labour today. Norway does the same. We have gone from four million to five million people in Norway in a very short time, so as to be able to deliver what we need for the oil and gas industry and also export. It's not so much for producing it, because they do that with less labour: automation has taken over.
The lady who set up the videoconference today is Swedish. She's Swedish first generation, coming from the Middle East—Scandinavia has imported people, like Canada. Norway is now filled with Indians, and Swedes, Polish people, Baltic nations people, Russians.... We need them.
We have Canadians coming in and taking good engineering jobs. You're losing them in Canada; we're getting them. Labour and competence is part of the competition. But we have also shipped some Norwegians to Calgary to develop the tar sands.
5:05 p.m.
NDP
François Choquette NDP Drummond, QC
Thank you, Mr. Wiborg. Would it be possible, in the interest of the committee, to send us the commandments you are talking about? I think all of the committee members would be very happy to get them.
Mr. McGowan, did you want to add something?
In fact, I don't know how much time I have left.
5:05 p.m.
Conservative
The Chair Conservative Leon Benoit
Your time is actually up.
Mr. McGowan, go ahead with a very short answer, please.
5:05 p.m.
President, Alberta Federation of Labour
The question is about adding value. We've heard from several people that we cannot add value because of the concept of comparative advantage. My very quick response, first of all, is that there's not a consensus on that in the economic community. Moreover, I think Paul Krugman, the Nobel Prize winning economist, said it best in noting that if Korea and Japan had focused on this notion of comparative advantage, they'd still be exporting rice.
5:05 p.m.
Conservative
The Chair Conservative Leon Benoit
Thank you, Mr. McGowan.
Mr. Leef, you have up to five minutes. please.
5:05 p.m.
Conservative
Ryan Leef Conservative Yukon, YT
Thank you, Mr. Chairman.
Thank you, everybody.
We've heard a bit of discussion around product diversification versus market diversification. I represent the Yukon and we have some smaller demonstration projects going on with geothermal, wind, and hydroelectric energy. We have LNG projects that are being explored right now. It raises a question that I have, and maybe I'll just run through the panel here and you can give me your thoughts on it.
Are we in a position where we can make the decision? It may not be this simple, but do we diversify the market first and then try to expose the people we create relationships with in diversified markets to the other technologies or products that we have? Or is there a suggestion that we would diversify our product first and then highlight the wonderful benefits of a broad range of products and then go shopping for a market? The reason I ask that is we've heard a bit of testimony in the past that there is a bit of a race going on in the energy market now, and the first one to complete projects will settle on those long-term contracts and that we run a risk of losing out there. You can probably see what I'm driving at. If we spend a lot of time trying to diversity a whole bunch of things that can be labour-intensive and very costly with infrastructure—and here we've heard a bit about the human capacity challenges involved—are we going to lose that opportunity and lose our markets while we're trying to develop that? Are we better just to solidify the market we now have and then try to grow a relationship of other products? Perhaps you could comment on that and add to it as you see fit.
We'll start with Mr. Willis and work our way down the line.
5:05 p.m.
Director, Natural Resources and Environmental Policy, Canadian Chamber of Commerce
Is the point job creation or is the point security of electricity and energy supply?
5:05 p.m.
Conservative
Ryan Leef Conservative Yukon, YT
I guess that's up to you and me. We're looking at diversifying. So what are the key elements and points of diversifying? From that, which is the right route to go?
5:10 p.m.
Director, Natural Resources and Environmental Policy, Canadian Chamber of Commerce
I'm not sure I know enough about the provincial and territorial circumstances of the Yukon to weigh in knowledgeably about it.
5:10 p.m.
Conservative
Ryan Leef Conservative Yukon, YT
Broaden that across the country; don't narrow it down to the Yukon. I'm just using that as an example to broaden the picture for the discussion of Canada in general.
5:10 p.m.
President, Alberta Federation of Labour
I can only speak to the oil and gas industry, which I have the most experience with. I think that if concerted efforts aren't made by policy-makers at the provincial level primarily, but also at the federal level, we run the very real risk of being stuck at the low end of the value ladder. Once we're there, we may stay there. The infrastructure that's necessary for upgrading and refining is a multi-billion dollar one. Once it's built in the American Gulf Coast or the American Midwest, that's where it's going to be.
What I hear from the Alberta government, from industry, and increasingly from the federal government is talk of essentially a continental energy strategy, which people on one side of the table here just seem to accept as a given. But I would argue that this question about whether we should lock ourselves into a continental energy strategy where we're the subservient partners to the American lead partner, has never been put to Canadians during an election. It's not what Canadians support, and I think if you did put it to Canadians they would reject it.
So I think in response to your question about whether we should focus on diversifying products first, the short answer is yes, because if we don't do that we're going to get stuck in the role of being hewers of wood and drawers of water and diggers of oil sands for the long term, as opposed to taking on the more profitable and desirable role of value-adder.
5:10 p.m.
Director and Palmer Chair in Public Policy, School of Public Policy, University of Calgary, As an Individual
There's one element of diversification you didn't mention. Let me go through it. There are two elements we've been talking about so far. One is what you might call product diversification, which is, in this case, heavy oil versus synthetic oil, which is the one we've been particularly mentioning, although you can also go into other types of manufacturing and other elements that one could talk about.
Then we have geographic market diversification, which is another concept or type of diversification.
But then there's a third one, which is often discussed in Alberta, but frankly, I think it's also an issue for Canada as a whole, and that's thinking about diversification across industries. This really gets to my point. You might try to move up the value-added chain in the case of bitumen going up to synthetic oil.
But the comment made by Mr. Calkins is right on the spot. If you have full employment already, you're not really creating more jobs, but you will push up wages. That could also hurt you in terms of industrial diversification, because what's happening is that you're going to end up drawing resources into that particular activity and away from other things that could be done, whether it's the agricultural industry, the manufacturing industry, or whatever. Actually, as you focus more resources into energy production, and if you do it through government policies that particularly move away from what the market is determining, then what you're actually doing, or could potentially do, which goes back to my point, is to undermine job creation.
Actually, it's not so much job creation we need to worry about in the future. We need to worry about incomes, because we're moving into a world of labour shortages, given demographic changes. That really pushes us more toward thinking about making the best use of the resources that we have available in this country in order to maximize what we want to achieve in terms of income.
We really have to worry about the productivity challenge, and I think trying to create more value-added by upgrading so we have less heavy oil and more synthetic exports goes to the point I was trying to make that you could actually undermine productivity in the economy. You could actually hurt us, because we will undermine industrial diversification that we actually need.
5:10 p.m.
Conservative
The Chair Conservative Leon Benoit
Thank you, Dr. Mintz. Thank you, Mr. Leef.
We go now to Mr. Trost, for up to five minutes, followed by Mr. Julian and Mr. Garneau.
Go ahead please, Mr. Trost.
5:10 p.m.
Conservative
Bradley Trost Conservative Saskatoon—Humboldt, SK
Thank you, Mr. Chair.
Mr. Mintz, I've heard you a few other times. You talked about things like tax neutrality, lack of distortion, etc. You can talk about royalties, though we're going to stay away from that in our report because we understand that's a fully provincial jurisdiction. But I was wondering if there are any policies the federal or provincial governments are now pursuing that cause a distortion, be it to the regulatory policy or to the tax policy, in our natural resources exploitation and exportation.
I'm thinking now back to once upon a time when there were different corporate tax rates depending on natural resources. Are there things like that that we are continuing to do that we have not talked about or gotten involved in today?
5:15 p.m.
Director and Palmer Chair in Public Policy, School of Public Policy, University of Calgary, As an Individual
Well, there have been a number of changes in the past three budgets that I would say are good ones. I'm a great believer in keeping rates low and the bases broad, and trying to have neutrality. I don't think governments are very good at picking winners and losers, and losers are pretty good at picking governments. It is important to have neutrality in the tax system, so I think getting rid of the mining corporate exploration tax credit was the right thing to do. In the recent budget, it was the right thing to reclassify certain expenditures that were getting expensing and now are going to be treated for development, which will get a slower rate of depreciation. I think the elimination of accelerated capital cost allowances for oil sands production that was done a few years ago, the phasing out of them, was exactly appropriate policy.
I would probably go a few things further. I would like to see the elimination of flow-through shares. I don't think they're doing a favour to the oil and gas industry or to the mining industry. I also think that there are probably some other areas that we could consider. But in terms of the work I've done, which is published, on what's called the marginal effective tax rate on capital, one of things that's quite surprising, at least to me when I actually did the analysis, is that the effective tax rate, in other words the impact on incentive to invest, is actually now higher, at least in Alberta, on oil sands compared to other industries. That's actually an interesting thing. In other words, even though people talk about various types of subsidies, there are elements of the tax system that could be changed.