Natural Resources Committee on Sept. 22nd, 2016

[The Chair, Liberal, James Maloney]

I call the meeting to order.

Good morning, everybody. Thank you for joining us today.

We have three groups of witnesses today. In the first hour we have the Prospectors and Developers Association of Canada, with Mr. Andrew Cheatle and Deanna Pagnan; from Fertilizer Canada we have Garth Whyte; and joining us by pre-dawn video conference is Christopher Zahovskis from Northcliff Resources.

Thank you all very much for coming. I'm going to get right into things.

I was going to suggest, Mr. Cheatle, that you start us off, if that's okay with you.

[Andrew Cheatle, Executive Director, Prospectors and Developers Association of Canada]

Good morning, Mr. Chair, and committee members. Thank you for this opportunity to speak with you today.

My name is Andrew Cheatle and I am the executive director of the Prospectors and Developers Association of Canada, often known as the PDAC. I speak to you on behalf of the 8,000 members of the PDAC, the national voice of Canada’s mineral exploration and development industry. Our membership includes individuals and companies from all stages of the minerals cycle, from junior explorers and prospectors to major mining companies, as well as members who service the industry, including finance and legal professionals, suppliers, consultants, and students.

Most of our policy efforts and initiatives are focused on ensuring that Canada remains the best place in the world to explore, and I’d like to make a few comments today on Canada’s junior mining sector.

Despite being one of the few sectors in which Canada leads the world, our industry, which employs 375,000 Canadians, is not very well known and is somewhat misunderstood. It is also a sector that is in crisis, despite the integral role it plays in sustaining the global minerals and metals industry.

Mineral exploration is akin to looking for a needle in a haystack. Mineral exploration starts with a team of people selecting a particular parcel of land that they think might have a mineral deposit somewhere underneath the surface. To select this parcel of land, the team has to examine all the information that is known in that area, including public geoscience data, exploration records, community, and geographic information. Based on that information, they will register a claim, raise funds, and initiate a mineral exploration program.

Junior explorers—thousands of small, entrepreneurial companies across Canada—often take on this riskiest type of mineral development. It's likely that less that one in a thousand will make a discovery leading to mine development. Just as large technology companies have outsourced much of their innovation to startups, so too have major mining companies outsourced a significant quantity of greenfields mineral exploration to juniors. This is not a coincidence. Juniors are more successful at making discoveries that can be developed into economically viable mines. Data shows that juniors made approximately 70% of all discoveries in Canada between 2005 and 2014 and found almost 30% more value per dollar expended than did major mining companies.

Turning to the focus of your study, the future of Canada’s mining sector, my remarks will cover several areas.

I`ll begin with Canada’s status as global destination for mineral exploration-related investment and the steps the Government of Canada can take to help Canada retake the top spot. This will include sustaining the super flow-through system that helps juniors raise capital for exploration activity in Canada, making investments in resource-related infrastructure in Canada’s northern and remote regions that will create a foundation for growth for the industry and opportunities for Canada’s northerners, and continuing to support federal geoscience.

I'll then describe the industry's efforts to innovate in response to unique challenges faced by companies exploring in Canada.

After that, I'll address our current research efforts in partnership with the Canadian Mining Innovation Council, or CMIC, and Natural Resources Canada to find ways to reduce environmental impacts of exploration projects.

Finally, I'll suggest how industry and government can work together to enhance the participation of aboriginal people in the minerals industry.

The Canadian minerals industry continues to face a downturn in exploration investment that threatens the sector’s continued ability to generate benefits, including the aforementioned 375,000 jobs across Canada and nearly 3.5% of national GDP. Overall financing for the industry has dropped globally by almost 40% between 2007 and 2015, while financing for exploration fell over 90%. In addition, after years on top, Canada no longer attracts the largest share of total global mineral exploration budgets, having conceded first place to Australia in 2015.

As Natural Resources Canada recently noted:

Overall investment for the more vulnerable off-mine-site exploration work phase [in Canada]…declined from a high of $2.8B in 2011 to $823M in 2015, and is expected to decline further in 2016 to $683M. This total is the lowest for such spending in more than a decade, and…[reinforces] concerns about Canada’s capacity to generate new mineral discoveries and projects.

As existing mines close, exploration financing is crucial to replace mineral reserves and to sustain Canada's economy and the benefits the sector brings. This can be achieved through the discovery of traditional metals, and also through innovation and exploration success in the discovery of minerals and metals that lead to a cleaner, greener future. In turn, this could lead Canada to be a global leader in this field.

PDAC is calling on the government to take two important steps to sustain and revitalize capital flows into the mineral exploration and development sector. The first is to maintain flow-through share financing, which is currently under review as part of Finance Canada's tax expenditure review. Flow-through shares play a critical role by creating an incentive for investors to allocate the risk portions of their portfolios into mineral exploration. In fact, flow-through shares accounted for more than two-thirds of all exploration-focused financing in Canadian exchanges over the last decade.

It is imperative that flow-through financing be maintained to support the continued ability of junior explorers to make mineral discoveries that will become the producing mines of tomorrow.

PDAC is also calling on the government to renew the mineral exploration tax credit, the METC, for one year. The METC is a 15% non-refundable tax credit on eligible expenses. All funds raised using flow-through and METC must be spent on mineral exploration in Canada. Indeed, a recent intergovernmental working group report noted that the METC contributed to maintaining investors' interest in exploration, particularly in troubled times.

In a survey of our membership, almost 90% of respondents reported that if the METC were not renewed, it would have a negative to severely negative impact on their ability to attract investors.

Canada continues to be attractive due to its rich geologic endowment and its stable political climate. However, it faces two structural challenges that are raising the cost profile of exploration. These are the increasing depth at which exploration must take place in established mining camps and the increasing costs of remote exploration.

To give you a sense of the costs, projects that are more than 50 kilometres from a supply route have costs that are 227% of the costs of non-remote projects, while projects that are 500 kilometres or more from a supply route have costs that are almost 300% of the cost of non-remote projects.

To attract exploration investment in remote Canada and reduce this cost premium, a key action the government can take is to invest in community and resource-related infrastructure in northern and remote regions of our country. These areas are geologically rich, and the mineral sector is the major driver of private sector economic activity. In the territories alone, the minerals industry accounts for 20% to 25% of GDP.

The PDAC applauds the government's commitment to infrastructure investment and urges it to dedicate funds to resource development-related infrastructure projects in remote and northern Canada.

Turning to the importance of geoscience in the exploration industry, PDAC strongly supports the federal geo-mapping for energy and minerals program—GEM—and the targeted geoscience initiative, TGI. GEM stimulates exploration in data-poor northern regions, while TGI improves exploration efficiency at depth, through innovations in methodologies, technologies, and data processing. PDAC applauds these programs and urges continued investment.

Our industry is one that is continually innovating to respond to the unique challenges faced in Canada. One example is the Footprints project, co-funded by the Government of Canada and industry to improve exploration effectiveness at depth, under the rubric of CMIC.

Another is our research partnership with Natural Resources Canada and CMIC to reduce the environmental impacts of exploration projects. Both PDAC and Natural Resources Canada are reviewing the key concerns raised by stakeholders about exploration projects in order to develop an innovation strategy in response. Our hope is that we can drive change through a clean tech strategy, leading to the development of new technologies that reduce our already small environmental footprint.

PDAC is also very supportive of the government's commitment to renew its relationship with indigenous peoples and promote economic development and job creation. The minerals industry supports the full participation of aboriginal people in the economic opportunities generated by the sector. In addition to providing training, employment, and support for business development, the industry often makes social investments that both improve the quality of life in aboriginal communities and support aboriginal participation in the resource economy. As a result of these efforts, the minerals industry is the largest private sector employer of aboriginal people in Canada.

However, many aboriginal communities face a number of barriers, such as poverty, poor housing conditions, poor education, and gaps in essential skills, that limit their ability to meaningfully participate in the minerals industry.

PDAC recommends that the government support efforts to enhance the participation of aboriginal people in the minerals industry through foundational social investments in housing, water, and education infrastructure, which contribute to improved health and educational outcomes for aboriginal communities, and target funds for skills, training, and entrepreneurship to assist aboriginal people in securing employment and seizing business development opportunities generated by the industry.

I thank you for the opportunity to appear here today and I am happy to take any questions, Mr. Chair.

[The Chair, Liberal, James Maloney]

Thank you very much, Mr. Cheatle.

Mr. Whyte, I'll turn over the mike to you.

[Garth Whyte, President and Chief Executive Officer, Fertilizer Canada]

Thank you very much, Mr. Chair. Good morning, committee members. Thank you for inviting us.

My name is Garth Whyte, and I'm president and CEO for Fertilizer Canada. Fertilizer Canada is an industry association whose members not only sell fertilizer to farmers and homeowners but also manufacture and mine nitrogen, phosphate, potash, and sulphur. You have a handout, our annual report. It is translated and it explains who we are and what we do.

Fertilizer is one of the world's most precious natural resources. It helps soils become more productive, accounting for 50% of food production. To feed a projected world population of over nine billion by 2050, food production must increase by 70%. Canada's fertilizer industry stands ready to meet this challenge.

Andrew talked about finding a needle in a haystack. In our area, we're the haystack, and we have to mine it and pull it out. Saskatchewan is the world's largest supplier of potash, a mined product accounting for 46% of global trade. Alberta holds the largest concentration of nitrogen fertilizer production facilities in Canada, which add value to the province's natural gas resource. Additionally, Canada is home to the world's largest fertilizer company and the world's largest agri-retailer. These and all our members' contributions are vital to increasing crop production sustainably.

As the committee considers measures to enable economic opportunities in Canada's natural resources sector, I want to highlight three recommendations to aid growth, protect the environment, and help farmers feed the world: first, help industries to promote and implement innovative programs that protect Canada's air and water, such as our program, the 4R nutrient stewardship, which is the right source of fertilizer at the right rate, right time, and right place; second, ensure greenhouse gas reduction policies are science-based and recognize industry competitiveness; and third, enable trade through the development of transportation infrastructure.

As mentioned, more crops need to be produced on less land to feed the world's growing population. Climate change makes this challenge all the more significant, as it requires adaptation in farming systems and innovative ways to protect the environment. Our 4R nutrient stewardship is a science-based approach to fertilizer application.

At last year's United Nations conference on climate change, COP21, we shared how the fertilizer industry can help achieve greenhouse gas reductions from agricultural sources by using 4R nutrient stewardship. Research demonstrates that 4R practices can reduce nitrous oxide emissions released during fertilizer application by up to 25%. Annually, that's a one-to-two megatonne reduction of nitrous oxide emissions in western Canada alone.

One of Fertilizer Canada's strategic goals is to have 20 million acres under 4R nutrient stewardship in Canada by 2020. Fertilizer Canada has worked with governments to promote this innovative process to farmers and homeowners through memorandums of understanding with farm groups, environmental stakeholders, and provincial governments. While the federal government has endorsed 4R nutrient stewardship through the agricultural greenhouse gases program and Growing Forward 2, there are additional opportunities for partnerships resulting in tangible reductions in greenhouse gas emissions.

To that end, our industry has also developed the nitrous oxide emissions reduction protocol. We're using our mined product to develop these programs, which are then used, of course, in agribusiness. The nitrous oxide emission reduction protocol, or NERP, develops saleable carbon credits for farmers who reduce on-farm greenhouse gas emissions using 4R nutrient stewardship practices. Currently used in Alberta's system, the NERP could be used to offset large final emitters in any greenhouse gas reduction regime developed by governments.

We recognize and encourage the government to support sustainable phosphorus management, in a similar way to nitrogen management, to preserve another of our country's precious natural resources: water. Fertilizer Canada is committing to work with stakeholders in Canada and the United States to reduce losses to Lake Erie and other vulnerable water bodies. Protection of these water systems is a subject of our 4R nutrient stewardship agreements with the Government of Ontario and the Government of Manitoba, an approach endorsed by the International Joint Commission.

At production, sustainability is a pillar. Nitrogen fertilizer manufacturing processes are highly efficient, nearing the theoretical minimum for combustion emissions, and use natural gas as a primary input. Extensive government and third-party benchmarking shows that Canadian facilities perform in the top quartile for energy efficiency and greenhouse gas emissions. Likewise, potash producers employ the best available technology in their mining practices.

Environmentally or scientifically, unattainable greenhouse gas reduction targets negatively impact our industry's competitiveness. A recent report by the Ecofiscal Commission shows that the nitrogen fertilizer manufacturing sector in Alberta, where the vast majority of this product is manufactured in Canada, is one of the most energy-intensive, trade-exposed industries, and thereby is most vulnerable to costly policies. Any target set by the federal government should be achievable and sector-specific, balancing environmental goals with the economic realities of our industry.

Further, the government should recognize those efforts taken by our sector to produce real emission reductions through 4R nutrient stewardship, which if implemented on farms across Canada would offset the emissions of nitrogen manufacturing facilities.

Finally, the government can aid miners and manufacturers of fertilizer products by enabling trade through the development of transportation infrastructure.

Most fertilizer products in Canada are produced in landlocked provinces, necessitating long hauls. The large volume of shipments and special handling requirements of some fertilizer products make fertilizers the third-largest commodity shipped by Canada's class 1 railways, CN and CP.

Fertilizer produced in Canada is exported to 80 countries around the world. As the government seeks to enable trade, they must ensure that investments are made in transportation infrastructure to ensure that the capacity exists to meet the needs of all shippers. There are opportunities for the federal government and the private sector to facilitate these investments, exemplified by the recent Pacific gateway initiative.

Several recommendations were made by the Canada Transportation Act review panel to incent private and public sector investment in transportation corridors. We encourage the Government of Canada to consider and implement these recommendations quickly to aid trade-focused industries such as fertilizer.

To conclude, Mr. Chairman, I want to thank the members of the committee for this opportunity to present our views.

In summary, our recommendations are to help industries promote and implement innovative programs that protect Canada's air and water, such as 4R nutrient stewardship—the right fertilizer source at the right rate, right time, and right place; to ensure that greenhouse gas reduction policies are science-based and recognize industry competitiveness; and to enable trade through the development of transportation infrastructure.

We welcome the opportunity to continue this dialogue. I am pleased to answer any questions after the presentations.

Thanks very much.

[The Chair, Liberal, James Maloney]

Thank you very much, Mr. Whyte.

Mr. Zahovskis, we'll turn the floor over to you.

[Christopher Zahovskis, President and Chief Executive Officer, Northcliff Resources Ltd.]

Thank you, Mr. Chairman.

Good morning to all. I thank you for the opportunity to speak to the committee today.

My name is Christopher Zahovskis. I'm the president and CEO of Northcliff Resources. Northcliff is a mineral development company that's listed on the Toronto Stock Exchange.

About six years ago, Northcliff acquired the Sisson deposit, which is situated approximately 100 kilometres northwest of Fredericton in the province of New Brunswick. The Sisson deposit is one of the largest undeveloped tungsten-molybdenum deposits in the world, and as Andrew mentioned earlier on, it's one of the junior mining companies or junior exploration companies that helped define that resource. Northcliff is one of those companies that comes along and takes it to the next step, and that's the stage we're in right now. We're trying to advance this project.

As I mentioned, it's a large, untapped deposit, and probably one of the largest in the western world. At the contemplated rate of production, it would be the largest or second-largest tungsten mine in the world.

The total projected capital cost for this project is in the area of $500 million to $600 million, and it would take approximately two years to build. During construction we would employ approximately 500 people, and during the life of the operation, which is projected to be about 27 years, we would employ approximately 300 full-time direct employees.

The tax revenue that's projected to come from this project over the life of the mine is just under $1 billion in combined provincial and federal taxes, so it's obviously not insignificant.

At present, the company has spent approximately $65 million in advancing this project, and approximately 40% of that has been spent in the province of New Brunswick.

The project right now is currently in the EIA review stage. The EIA report was submitted to both provincial and federal governments in July 2013, with advance copies provided to all 15 first nations two weeks prior to our submission to the governments. During that time, we responded to some 1,300 information requests, which were points of clarification or further questions that various parties had. These information requests came from the public, ENGOs, and provincial and federal governments with their various government department agencies, as well as first nations.

In December of 2015, New Brunswick provided a positive EA determination and gave us approval to proceed with this project, along with 40 conditions that we had to meet.

CEAA posted its CSR, its comprehensive study report, for public review in April 2016, thus concluding the 365-day review period. It took about three years to conclude that process.

The important discovery from the CSR is that it concluded there would be no significant adverse environmental effects as a result of executing this project. In other words, we received a clean CSR, but a federal decision is still pending.

I'd like to move over to the area of stakeholder and first nation engagement. I've always said that in developing any project, you can get all the technical pieces right, but if you don't get the social aspect right, it becomes difficult. This is where this company has spent a majority of its time in advancing this project. We've engaged with stakeholders early. We have formed working groups to ensure there is good participation from a variety of stakeholders. We have held open houses in communities, especially during the public comment periods of the various government processes during the EIA, so the public would have access to the company and its consultants and be better informed in providing any comments or questions they might have regarding the project.

We worked closely with community mayors, councils, chambers of commerce, and various business associations. I would say that over the five years we've been in the province, we received positive support from the communities at large.

Northcliff respects first nations and understands that there are cultural sensitivities regarding engagement with first nations. For these reasons, engagement began in late 2010, before we did anything, before we even arrived in the province. An introduction was sent to all the 15 chiefs, and that resulted in an initial meeting with the Assembly of First Nations. Since then, our relationship with the first nations has grown; obviously we have a deeper relationship with some first nations and with certain groups than we have with others.

Northcliff initiated the founding of the first nations environmental assessment working group. The intent behind this is to ensure that all first nations have a clear understanding of what is involved in an environmental impact assessment, what elements are studied within that, and, obviously, that any questions are asked and input provided during that whole process.

Membership of this committee is composed of representatives from all 15 first nations in New Brunswick, both provincial and federal governments, the consultant that was hired by the first nations to assist them with understanding the EIA and, of course, the proponent. Over two and a half years, we held approximately 14 to 15 meetings, an average of about one every two months. In considering the group and how difficult it might be to get all these people together, I think that's quite an achievement.

To date Northcliff has provided capacity funding to first nations. This is in addition to the provincial and federal government funding towards the EIA process. I won't go into the long list of things that we provided funding for, but just to give you an idea, we've provided funding for them to hire consultants to assist them with the EIA, for traditional knowledge studies, for sponsorships and scholarships, for community events, and so on and so forth.

As well, we extended an invitation to speak with the company towards the co-operation agreement, what is commonly known as an impact benefits agreement. We prefer to call it a co-operation agreement because it has a more positive connotation to it. One first nation has taken up our offer, and we have been in deep discussions and negotiations with this first nation now for about three and a half years. We're optimistic that we will be able to conclude an agreement with them very shortly.

Northcliff's record of consultation with first nations since 2011 is extensive and comprises over 300 pages and thousands of entries of events, meetings, and so on and so forth, which has been submitted to both the province and the CEAA through the EIA process.

In summary, Mr. Chairman, I would just like to say that developing a mining project is fraught with risks that are technical, market related, and geopolitical, but thankfully, despite these, the mining industry continues to take on projects in response to the ongoing demand for raw materials.

One of the most significant risks that is difficult to manage is the permitting and EIA approval risk. Sisson, which has already received provincial approval, continues to linger in the EIA approval process that has now been going on for three and a half years. In the meantime, the tungsten market has deteriorated, and when combined with the project uncertainty created by the approval process, it is increasingly challenging to secure project financing. Unfortunately, Sisson is not unique in this matter, and it's this kind of uncertainty that will continue to challenge investment in the mineral sector in Canada.

Thank you, Mr. Chairman.

I would be pleased to answer any questions.

[The Chair, Liberal, James Maloney]

Thank you very much, sir.

Okay. I'll try this again.

Go ahead, Mr. Harvey.

[TJ Harvey, Liberal, Tobique—Mactaquac, NB]

Thank you, Chris.

I guess my first question is going to be directed towards Chris. I appreciate your time and your ability to join us here today.

I have a couple of questions. First, could you elaborate a little bit for us on the EIA process as you've seen it? What has worked and what hasn't worked, and what do you think could be done, while not taking away from the intent of the process, to streamline it and make it more user-friendly for the industry?

[Christopher Zahovskis]

That's a very broad question, obviously.

The EIA process, as far as we are concerned, has been quite well defined provincially and federally. There are no timelines, speaking provincially. Because this project has to undergo both, I'll speak to the province's process first.

There are no timelines, but because this was a harmonized process in the sense that both governments were going to receive the same EIA documents, it was a little bit easier for the proponents in not having to prepare two slightly different EIAs. That was a good thing.

The approval process on the provincial side was a little bit unclear in the sense that there were no timelines, and we had to respond as questions came in. Even though on the federal side there is a 365-day timeline, as I illustrated, those 365 days have taken some three and a half years to conclude, so obviously there are things that can be done, I believe, to ensure that the timeline is not stretched out as long as it has been, and I understand there are some projects that have extended beyond that.

I think the turnaround time for getting feedback after we submit our response is important, and that would certainly help, but I think the most important thing, the critical aspect that has pulled things along—stretched the timeline, if I can use that term—is the consultation that's required with first nations. There's no getting around that, and I'm not suggesting that we do. The proponent can only do what it can with respect to consultation and engagement with first nations; it's the crown's duty to consult, and I think that aspect needs a little refinement.

[The Chair, Liberal, James Maloney]

I'm going to interrupt for a second. Apparently there's a technical problem. We'll stop for a minute to reset the system, so we'll sit tight for a minute.

[The Chair, Liberal, James Maloney]

We're going to continue. We're back. It's like magic.

[TJ Harvey, Liberal, Tobique—Mactaquac, NB]

How much time did I have left? Can I start over again?

[The Clerk of the Committee, Mr. Michel Marcotte]

You talked for about two minutes. I remember well. Sorry.

[The Chair, Liberal, James Maloney]

You have five minutes.

[TJ Harvey, Liberal, Tobique—Mactaquac, NB]

Perfect.

Chris, basically you led into the second question I had for you with the answer to the first question.

Can you elaborate more on the first nations accommodation aspect? As the proponent, what has your company done to engage with first nations on this project since 2010? I think you said you've spent $65 million on total exploration at this point. Can you elaborate on the aboriginal accommodation piece and the co-operation agreement that you've been working on with the one first nation that has engaged you on that, and how your working relationship with those first nations has evolved?

[Christopher Zahovskis]

To start off with, we have a very constructive relationship with the first nations. As I said earlier, we recognize the need to engage with them and to try to engage with them in a meaningful way.

The EIA working group, we believe, provided a tremendous forum. It was more than talking about what the EIA requirements are. Once you start explaining to everyone that the EIA is about studying the impacts on the environment, then obviously it becomes very easy to then talk with the first nations about what's important to them, what's sensitive to them, and what they know about the area that we should know about earlier on in the piece so that we take those aspects into consideration.

I think that provided a forum for those discussions, and as a result of that, where we could come up with accommodation or mitigation, we did. In the case of our project, we moved the tailings footprint a little bit to avoid one area that potentially had a higher potential for fish habitat. We shifted the footprint of it. This was earlier in the project design.

As well, we were able to understand what the needs are from the various first nations. For example, we know that they have very little capacity, and so we were able to provide jobs where we could. You have to understand that at this stage of the project development, the exploration had already been done, so there was not a tremendous amount of activity on site, and as a project that's going through an EIA process, we are not building anything, so again, there's not a lot of activity on site.

However, to the extent that we had employment, we gave obviously all the first nations a heads up on what our needs were, and the timing, and worked with their folks to try to fill those needs. We responded to requests for a variety of levels of funding, and needless to say, the company understands that we have to pick up all the expenses associated with the EIA working groups—the travel, the per diems—and we do, without any problems.

We offered to fund traditional knowledge studies. Although this is not a requirement in the EIA, we understood this to be a very important aspect for first nations, so we extended the invitation to fund the traditional knowledge studies. That invitation was taken up by three Maliseet first nations. We provided the funding. They hired the consultants and they managed the process.

As well, as the EIA went along, it became clear that they needed technical capacity to help them with understanding all the science that was in the EIA, and again a request was made, in addition to the provincial and federal funding that was provided. We provided funding, and that was signed off by all 15 first nations chiefs.

As to our discussions with Woodstock First Nation—this was earlier on in our development—the one first nation that has agreed to engage with us on a co-operation agreement, we continue to do that. I have had numerous conversations with the chief from time to time, and as I said in my brief, I believe we are very close to concluding a co-operation agreement with them. Woodstock is the community closest to the project site some 60 kilometres away, and over the last five years we've developed some very strong relationships with the previous chief and with the current chief and council. I'm very optimistic that through that engagement and relationship, they will be able to understand better what a mining operation is and what it will involve, and I think that will arm them better for development.

[The Chair, Liberal, James Maloney]

Thank you very much, sir. We're going to have to move on; that's all the time we have.

Mr. Barlow, I believe you're next.

[John Barlow, Conservative, Foothills, AB]

Thank you very much, Mr. Chair.

Thanks to the witnesses for being here today, and especially in the early morning.

Garth, I'm going to start with you. It's great to see you again. Thanks very much for coming.

I'd like to talk to you about PotashCorp and Agrium, but we'll move on with what the deal is today.

[Garth Whyte]

Move on.

[John Barlow, Conservative, Foothills, AB]

Yes, I appreciate that. Okay, that's sensitive. I may ask you about that then, for sure.

You talked in your presentation on your website about the importance of maintaining favourable economic conditions. I found it interesting that you said in your presentation today the “economically and scientifically unattainable” greenhouse gas reduction targets will negatively impact the industry. You're encouraging the government that any targets that we set should be “achievable and sector specific, balancing environmental goals with economic realities of our industry”.

I'm curious. From your perspective, what impact would a federal carbon tax have on the fertilizer industry and maybe the mining industry overall?

[Garth Whyte]

Carbon pricing is different from a carbon tax. A carbon tax is a tax. For our industry, science....

In nitrogen, for example, you have to heat the air to pull the nitrogen out of the air. You use primarily natural gas; then out goes the carbon that comes with that. We're the best in class already.

I'll use an analogy. I visited a farm about a month ago, and this farmer is doing everything right. He has zero tillage and he reuses and refurbishes his equipment. He has a really low footprint. He's best in class in environmental use, but he will have to pay more money because he started his best-in-class environmental application in the 1990s, but the benchmark is at 2013. If the benchmark's there and he's already really low, he can't get lower.

Well, our industry is that way. We're the best in class. We've driven it down. It wasn't through just the goodness of our heart; it was because natural gas prices were really high, and they had to get down to the best possible application. That's one of the concerns. That's why we want to see an industry....

By and large some provinces are doing that, but look at our industry. Don't just do a blanket. We're not the oil and gas industry. We're a value-added product that the world needs. All plants need fertilizer. That's one of the other things.

There's another point I want to say. The Government of Saskatchewan says the industry is currently planning to invest approximately $12 billion by 2020.

I was at the International Fertilizer Association Conference in Moscow, and all the CEOs were there. This is a major industry that is going to invest about $190 billion over 10 years. They're looking at where they're going to invest for expansion or growth and they're trying to find places where there's certainty, so whatever we do, we have to have some sort of policy and regulatory certainty. I think that's what the previous speaker was talking about as well.

Uncertainty causes problems. We may look at a policy this year and move forward on it, and then four years later there's another review. These people are looking for 10 to 20 years. There's new a mine being developed by K+S, and they're very public about it in Saskatchewan. They've got a 20-, 30-, 40-year horizon when they're putting in a major mine, and I'd say it's a $6-billion investment.

Therefore, part of the themes coming out of your report would be how to put things in place so that there's certainty when people go around the country asking where to invest. How do we put it in place?

[John Barlow, Conservative, Foothills, AB]

A part of that, too, is global competitiveness. I know you mentioned that, Garth, as well.

I feel that we as Canadians, as a federal government, are putting extraordinary pressures on our industries that are over and above what any other jurisdiction is doing. In Alberta, for example, we have a provincial carbon tax already. A perfect example is what happened yesterday. Western Feedlots, in my riding, is one of Alberta's largest feedlot operators, with 100,000 head of cattle. They have decided to close their doors because of the uncertainty of the economic future with a provincial carbon tax and now the potential of a federal carbon tax.

The president, Dave Plett, said he just couldn't operate not knowing where he was going to be down the road. Is that also a concern with Fertilizer Canada, the fact that Alberta has a carbon tax? Now there's a discussion about a federal carbon tax on top of that, which would make us essentially uncompetitive globally.

[Garth Whyte]

We have an excellent working relationship with the Government of Alberta because we're so important. They have conflicting goals. They have the environmental goal and they also have a value-added industry goal. We're the value-added industry.

Yes, uncertainty is a big deal. One of the things we talk about is—we may get it in Alberta only—a greenhouse target. We may have a Canada-only greenhouse target, and we'll meet that, but we'll fail the world greenhouse gas target because, if our industry is displaced, it will move on to China, which is a coal-fed, very bottom-quartile industry, and they'll pick up the market. We have to look at world targets, not just provincial and federal targets. That's one of our messages, but we are working very closely....

The other side—and why I spend so much time on it is I'm hoping that it's becoming embedded in your mind—is the 4R sustainable stewardship program.

It's a killer application. Everyone's talking about the cap side of things; this is the trade part of it. It's recognized worldwide, but we're having a hard time getting recognition sometimes with the federal government. We are working with them. It's recognized, as I said, in some pockets, but we need to work with the Department of the Environment for them to recognize what the agriculture sector does in terms of giving credits to greenhouse gases.

[John Barlow, Conservative, Foothills, AB]

Thanks, Garth.

Andrew, I was just looking through the latest issue of Core magazine. There was an announcement there from our minister, Mr. Carr, about $120 billion over 10 years for Canada's north, but it's for public transit, green infrastructure, and social infrastructure. It doesn't say anything in there about infrastructure in terms of roads to mines and those kinds of things.

Would that be a better opportunity for us? You talk about 500 kilometres away, 10 kilometres away. Would that be a better investment of some of those dollars?

[Andrew Cheatle]

Thank you very much for the question, Mr. Barlow.

That's my money. I certainly think phase two of the infrastructure projects that are coming on has to be done in conjunction with communities. We talk about infrastructure corridors. PDAC has very recently completed a major study of infrastructure and distance of projects from mines, and we look forward to engaging the Government of Canada over the next few months with the results of that study.

Access to those deposits will help build the communities, but I think we have to do it in conjunction with them.