Natural Resources Committee on Dec. 9th, 2014

[Joan Crockatt, Conservative, Calgary Centre, AB]

Thank you.

[Michel Deslauriers]

It is my pleasure, madam.

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Crockatt.

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

Go ahead, please.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Thank you very much, Mr. Chair.

Thank you for being here and thank you for sitting in on the previous session because one of my questions will eventually be about what I was talking about in the previous session, as you can probably smile and imagine I'm going to ask you.

I take it from the conversation I just heard that rail is the cheapest way to transport propane and about 50% of propane is shipped by rail. You're concerned about increased shipments of grain. Are you also concerned about increased shipments of oil last year and this year? There are lots of fingers in the railway pie here.

[Andrea Labelle]

It hasn't been an issue in the past and we hope it's not going to be an issue in the future.

I'm not meaning to pick on grain, because grain is a customer that uses propane to dry its corn and grain, so I didn't mean for it to sound that way.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Let me put it another way.

If you have to ship by road instead of rail when you would have preferred rail but there are no cars available, what sort of percentage increase in the wholesale cost would that be? Or would the cost be for retailers?

[Guy Marchand]

Probably the trucking industry and the rail industry are both aware of each other's cost factors so I'm sure they're competitive enough. On the short distance it's probably easier to do trucking than rail. On the longer runs, it's probably less expensive to do rail. Whatever it is, it is competitive enough otherwise one wouldn't exist compared to the other.

What Andrea was saying also earlier is that we do not recommend that the government favour or support one industry over the other, but rather that the hands in the pie figure out their own way to slot their product at different times.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Thank you very much.

Correct me if I'm wrong, but we heard last week that about 15% of propane comes from oil directly in terms of that process of refining. I know you don't necessarily want to speculate, but with the falling price of oil others have speculated that the price of oil will in fact continue to fall and will for the whole winter season be quite low. Is that going to affect the price of propane?

[Andrea Labelle]

Absolutely. It's probably the lowest it's ever been right now. The wholesale market price is 17¢ in Sarnia and 10¢ cents in the west.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

So it could in fact go lower.

[Andrea Labelle]

Absolutely. They're aligned and it's going down.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Thank you very much.

That leads me to my next question. You heard me earlier in the first session talking about northwestern Ontario, which is in an unusual situation. Many people who use propane for home heating only have one supplier. There's not a real competitive edge by anyone. We had a very unusual situation in my part of northwestern Ontario and I'll just briefly relate it again. We had one supplier that kept its price the same throughout the heating season and the supply was fine. The other one had real supply issues and the price went almost to 100% more for many of its customers in northwestern Ontario. I was wondering if you had any thoughts.

Perhaps you, Mr. Deslauriers, in particular could respond because you deal more with retailers. Did some retailers just simply make a mistake last year?

[Michel Deslauriers]

Without actually saying that they made mistakes, I think we can say that they miscalculated their forecasts.

It is also a question of stocks. Major distributors can have an abundance of stocks, negotiate prices and maintain their prices, whereas smaller distributors usually have a harder time stockpiling. As a result, they have to fill orders as they come.

However, as I mentioned earlier, we have about 60 gas distributors in Quebec. Our situation is slightly different from the situation in northwestern or northern Ontario, where there are only two distributors. In Quebec, since there are 60 distributors, consumers have a choice and can negotiate prices. They can go from one distributor to another.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Thank you very much. I appreciate that answer.

We have a situation now, at least in northwestern Ontario, where suppliers have....They've let the price fluctuate throughout the heating season and during the year. It has not been a fixed price. They've signed everybody up on fixed contracts, including my supplier. It's about 10% more than it was in the previous year.

My concern is this. If we're going to see the wholesale price go down, how are consumers going to ever realize that price? We've seen fixed prices before in the natural gas market in the past and various things. They're not very workable.

Do you have any influence on retailers at all, to say to them, “Listen, we don't want to get into these fixed price contracts because what it looks like is that you're taking advantage of a crisis”. Certainly, they will this year because the price will continue to go down. I don't mind telling you what I paid on my new contract. I think it's 76¢ a litre.

Years and years ago, I worked in propane at a co-op and know that propane was, at that time, sort of a throwaway thing. It was not really seen as a serious gas product, which it is now.

I'm just curious as to what you think about retailers. I know you don't have any say in what retailers do. Do you find that might hurtful to the industry?

[Andrea Labelle]

Part of the challenge in our industry is that we are made up of private companies for the most part, the retailers for example. I have absolutely no right to tell them how to run their businesses and they'd probably slam the door in my face if I did try.

As an industry association, I'm not really allowed to even get into those discussions about price.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Fair enough, I didn't know if you would feel comfortable answering it or not.

My concern is that we only have one supplier, unlike Quebec. We only have one supplier in many areas. You're always concerned about gouging with no flexibility to have a lower price if the price continues to drop. It's not really a competitive thing as much as it is propane suppliers taking advantage of consumers.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Rafferty, your time is up.

Mr. Regan, you have seven minutes.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you, Mr. Chair.

My thanks also go to the witnesses.

Mr. Deslauriers, we heard that, in Canada, about 1% of people use propane to heat their homes; in Ontario, the number is 2%. Is it true that people who live in remote places, on an island or in a very rural community, for example, use propane to heat their homes because they have no alternative?

[Michel Deslauriers]

I cannot agree with what you are saying because I use propane to heat the home that I have just built. I live next to a distributor.

Using propane furnaces is a wise choice. It is an economical and good quality heating method. In Quebec, the carbon market is developing very quickly. With the exception of electricity, propane generates significantly fewer emissions than oil.

We are increasingly educating consumers on the benefits of using propane. Natural gas is also an option, but it is not offered in some regions whereas propane is available.

[Geoff Regan, Liberal, Halifax West, NS]

You must agree that people don't have an alternative in a number of cases.

[Michel Deslauriers]

I completely agree.

[Geoff Regan, Liberal, Halifax West, NS]

Ms. Labelle, I understand that the increase in the cost of propane this past winter at Sarnia was 109%. What was it at Texas? What was the increase?

[Andrea Labelle]

I think it went up almost 400% at one point.

[Geoff Regan, Liberal, Halifax West, NS]

I guess the question is this. What differences were there in terms of the price changes in the North American price versus local prices in Canada? Are you telling us there were no differences?

[Andrea Labelle]

Oh yes, we had an increase in price.