Natural Resources Committee on April 1st, 2014

[Janet Annesley]

It does increase that funnel. It attracts people into the skilled trades and increases the front end of the funnel. In that regard, we think it's a step in the right direction. We know there's more out there. Our industry, whether it's specific companies or CAPP, has a huge range of other educational supports in the range of scholarships and other opportunities.

The actual best part about an apprenticeship is that people can earn wages while they are learning their trade, which absolutely I did not have the opportunity to do, as a university graduate.

[Chris Charlton, NDP, Hamilton Mountain, ON]

Now one of the things that I think is true in Canada, when you compare us especially to countries like Germany, is that when we encourage people to go into apprenticeships, the average starting apprentice age is 26. In Europe they actually do a much better job, encouraging people at a much younger age to start and therefore complete their apprenticeship, which I think would make a really positive difference in the oil sands.

[Janet Annesley]

Absolutely.

[Chris Charlton, NDP, Hamilton Mountain, ON]

I wonder, Mr. Myers, if you have any thoughts about either the apprenticeship program or labour mobility and Bill C-201 in particular.

[Dr. Jayson Myers]

Labour mobility is a major issue. We talk about the details of the bill and, generally, we need to look at what can facilitate better labour mobility. It's more than simply subsidizing travel. I think it's also.... I meet a lot of people flying from the Maritimes, for example, out to Fort McMurray and back on a regular basis, and one of the reasons is they just simply can't afford to live in Alberta and simply can't afford to sell their house in the Maritimes and move out to the west. So, there are major issues here around labour mobility that we have to focus on.

There's an age component in here, too, in that it's very difficult for someone who's spent all of their life, maybe in an area of skills and trades, to all of a sudden pick up and move somewhere else. Canadians, probably even more so than Americans, are very reluctant to.... Older Canadians, past 25—

[Some hon. members]

Oh, oh!

[Dr. Jayson Myers]

—are reluctant to make that move. So, it's about the training of young people and reducing that apprenticeship age. I think companies have to take a much more active part in training and in apprenticeships, so we need to think about how they can do that here.

To me, a part of that—I hear from all over the place, especially from small companies—is that they're unwilling to take the risk of investing in new apprentices or training young people because they're sure that someone else is going to come and poach them. To me that's one of the benefits of the jobs grant, that it can help to alleviate some of the upfront risk of doing some training and incorporating new hires into the company. But that is clearly an issue, not just for the oil sands and for energy development. It's something that is facing the entire country. We have as many challenges in manufacturing in Quebec, Atlantic Canada, and Ontario as we do in trying to find skilled people in the west.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Myers.

Thank you, Ms. Charlton.

We go now to Mr. Leef, followed by Ms. Crockatt, for five minutes.

[Ryan Leef, Conservative, Yukon, YT]

Thank you, Mr. Chair.

Mr. Myers, I just want to try to summarize something that you talked about and see if I understand this correctly. It was based on the price control discussion that Ms. Allan was talking about. Her presentation talked about development versus exploitation, and it's an interesting cross-comparison around this price control issue. You mentioned that cheaper goods don't necessarily equate to capital retention of profits, and then those in turn right now lead to innovation, improvements on efficiencies like environmental protection from emissions, water consumption, and reclamation projects that Canadian companies are, at times, world leaders in.

It would seem to me, and correct me if I'm wrong here, that straight off the board just cheaper goods without any forethought and planning in this would ultimately lead to immediate greater consumption of a product that then in turn has some detrimental environmental impacts because you're consuming at a much higher rate. Then that doesn't leave the companies with that capital investment to create that innovation unless they're highly subsidized by the government. Would that be a sort of close summation of this issue?

[Dr. Jayson Myers]

To be able to develop the economic diversification we've been talking about and the value-added businesses and jobs around energy development, we need investment, particularly in new products that drive new processes. It's as true in upgrading and refining as it is in the entire supply chain. So the issue is what drives a business to invest and it's basically the return on investment and cashflow.

To give you an example outside the energy sector, in Ontario we've seen small companies like Automatic Coating Limited, or Promation, or Aberfoyle Metal Treaters Ltd. These companies have changed their entire business simply by focusing on new product development for the oil sands.

A lot of these companies right now are facing.... It's a big risk to go from an automotive producer to a producer of products for energy. What we're seeing is that a lot of that is driven by internal cashflow. So if you reduce the price, you reduce the cash and you reduce the investment.

We've been talking about how we incent investments. I'm not so sure the government...that we should be calling on taxpayers to subsidize. I think we should be looking at how we incent companies themselves to spend more money in these areas and very important...taxes are important and other costs, mandatory compliance costs and things like that are important, but so is financing. One of the biggest issues that we're seeing, particularly as companies are going into a recovery stage and a growth stage based on new products is that often they don't have the backing from the finance, the banks, to do that.

So these are some of the issues I think we need to focus on, particularly on the smaller manufacturing side. It's all about cashflow and about return on investment. If you reduce the price, you reduce the cash and the investment.

[Ryan Leef, Conservative, Yukon, YT]

How much time do I have? One minute.

Maybe if you have a chance, you could comment on that question as well, Ms. Annesley.

We did start this discussion in the last round of questioning around some of the other things that are being done in the trade sector. Budget 2014 also introduced the Red Seal student loan program. And I know some of the colleges, at least in our territory, are dealing with that dual credit aspect: high school into....

Do you have any comments on that and maybe the previous discussion?

[Janet Annesley]

I think the north leads the way in some of those dual credit programs whether it's in Fort St. John, British Columbia, where there is some great work through Northern Lights College with local high schools....

And when you meet someone who's in their third year of apprenticeship and they're 19 years old, who is going to be an electrician, that's pretty impressive. Those programs are excellent for local communities, matching people up with contractors, matching apprentices up with business owners or contractors.

And also in the Yukon....

I will comment just briefly on what Jay was speaking about and oftentimes I want to say that the industry is criticized.... The IISD, for example, issued a report on fossil fuel subsidies and oftentimes we hear that the fossil fuel industry is subsidized. I'd like to point out, though, that most of those subsidies labelled in that international report are actually pump price subsidies. The types of price controls, the artificial relief for consumers, that could lead to consumer behaviour...for example, increased consumption of oil and gas. Surprisingly, the oil and gas industry actually believes we should be more efficient, not less efficient, and some of those price controls could have unintended consequences.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Leef.

We go now to Ms. Crockatt and then Ms. Duncan.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Thank you very much, Mr. Chair.

I just wanted to go back, Mr. Myers, to review some of the things you said, because a lot of those numbers went by really fast and I think they were quite profound. I want to make sure I have them here correctly.

So for every one dollar of new investment in oil and gas, I believe you said 62% is spent on manufactured goods. Is that correct?

[Dr. Jayson Myers]

That's correct. That's been a fairly constant trend over the last ten years.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Can you drill down for us how that actually works, how the rubber hits the road? How does that actually translate into benefits for Canadians?

[Dr. Jayson Myers]

You're creating a tremendous amount of demand for manufactured products, so it's creating jobs in a couple of ways that I've seen.

First of all, in some areas like structural steel or steel tubes, pumps, valves, it's just an increase in demand, so of course the more massive production there is, the more jobs there are.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Sorry to cut in, but are there any individual examples that you might be able to cite? One from Ontario, one from Quebec, that kind of thing?

[Dr. Jayson Myers]

I'll give you one example. Promation is a company that was....This is the other part of the opportunity, because it's at a time when we're coming out of a recession. The oil sands provide an opportunity for many companies to transition from auto, for example, that isn't doing as well, to supplying for the energy sector.

Promation was a welding shop in Mississauga, Ontario. As a result of the recession, they were looking at other customers. They started doing a very unique type of welding in pressure vessels, originally for the oil sands. From that, they've developed the world's only automated welding technology for pressure vessels. That's now being used throughout the nuclear sector. That's where their biggest exports are coming from right now. That's an example of how a company, through the opportunity of supplying the oil sands, has really developed a very unique product, a unique technology, and has not only kept itself open but is now growing on the basis of this very specialized technology.

We have a number of examples. I have to say, though, that I see a difference between manufacturing in southern Ontario and manufacturing in northern Ontario and in Quebec. That's something I hear about quite a bit from oil sands companies and engineering companies. The companies that have traditionally supplied the auto sector are used to providing high-volume, small-scale, and precision-made parts. For the oil sands, it's a different type of business. Usually these are big-scale, small-volume, and very specialized types of manufacturing parts or equipment. One thing I hear is that it's more difficult for a company in southern Ontario to make that transition. It's easier for some of the manufacturers in Quebec or in northern Ontario that are more used to the project type of development.

We can't take a look at manufacturing in broad strokes. We have to look at what drives investment decisions and where the relative opportunities are, but I can tell you that companies like Promation—

[Joan Crockatt, Conservative, Calgary Centre, AB]

May I just cut in? I know that my time is going to run out.

Do you have any examples of companies in Quebec or northern Ontario that have made that transition? We hear a lot about this in generalities, and I'm just wondering if you can bring that home for us.

[Dr. Jayson Myers]

Well, I think the bus company in Quebec—

[Joan Crockatt, Conservative, Calgary Centre, AB]

Besides Prevost bus lines. We're all well aware how—

[Dr. Jayson Myers]

Yes, exactly.

[A voice]

Ezeflow?

[Dr. Jayson Myers]

Yes. There's Ezeflow. There's Canam, which is a major manufacturer of structural steel products. We can certainly provide a list of companies—