Natural Resources Committee on May 4th, 2017

[The Chair, Liberal, James Maloney]

Good afternoon, members and guests. Thank you very much for joining us.

In our first hour today Minister Carr has kindly agreed to join us and make some presentations and answer some questions.

Minister Carr, thank you for joining us. Before I turn the floor over to you, I would like to formally welcome our new member to our committee, Mary Ng.

Mary, thank you for joining us.

[Mary Ng, Liberal, Markham—Thornhill, ON]

Thank you very much.

[The Chair, Liberal, James Maloney]

I'd also like to thank Michael McLeod, who has been on the committee since we started in November 2015, for his contribution.

With no further ado, Minister Carr, thank you again for coming. I turn the floor over to you, sir.

[Jim Carr, Liberal, Minister of Natural Resources]

Thank you, Mr. Chair.

Good afternoon everyone.

Also, welcome to the new members of the committee and Parliament. I can only imagine how exciting the day was for you yesterday. We all came in at once, but you came in one at a time, so you have memories to be cherished no doubt.

Colleagues, a lot has happened in the five months since I was last here. We have seen some commodity prices rise, then fall, and then rise again. Some have momentum. Others, unfortunately, only have moments.

This uncertainty in the natural resource sector is a reminder of the times we live in, one marked by unprecedented change and ongoing challenges from new U.S. countervailing duties on our softwood lumber, to consolidation in the oil patch. All of this is taking place amid a global transition to the lower carbon economy that has become inevitable in every part of the world.

Take China, one of the largest greenhouse gas emitters in the world. It's making generational changes to how it uses energy, including a commitment to cut its greenhouse gas emissions by 18% and to cap its coal emissions by 2020. Next year, it's putting a price on carbon.

Consider Saudi Arabia, the quintessential oil-producing country. It's aiming to build enough solar capacity over the next 15 years to supply about 20% of its electricity.

Why are there all these changes? It's not only because environmental responsibility is essential to economic development, or because meaningful indigenous engagement is the constitutional obligation, or because public confidence is critical to resource development in the 21st century, although those are all very good reasons and top of mind for our government, but there is an even more fundamental reason. Ensuring Canada is a global leader in the clean economy is our surest path to sustainable growth, good middle-class jobs, and shared prosperity for generations to come.

This is the lens through which the main estimates were viewed and drafted. I have Deputy Minister Christyne Tremblay, and our chief financial officer Cheri Crosby, with me to help us navigate our way through the numbers, but I would like to start with a brief overview of how these main estimates fit within our government's priorities.

The first key point to make is that the main estimates are a snapshot in time, in this case from February, but departmental budgets are not static. They evolve, which is why we have supplementary estimates throughout each fiscal year.

Second, our main estimates often feature wide variations from year to year, reflecting everything from volatile commodity prices to new priorities and sunsetting programs—and this year's main estimates, Mr. Chair, are no different. For example, the biggest decrease is a forecast $335 million drop under the statutory Canada–Newfoundland and Labrador Atlantic Accord Implementation Act due to lower resource prices and production levels anticipated on the east coast. It's a steep drop to be sure, but the annual fluctuation has little direct bearing on Natural Resources Canada's funding. We are merely the conduit through which these payments flow to the offshore boards and the provinces.

Likewise, there's a $46.2 million decrease showing for Sustainable Development Technology Canada, but it doesn't mean we've cut its funding. It merely reflects our decision to transfer this important program for clean-tech companies to a different department. So SDTC disappears from our radar and reappears at Innovation, Science and Economic Development Canada.

I highlight these two items because when they are removed from the mix of net increases and decreases, a very different picture of NRCan emerges. Suddenly, a $250 million funding decrease from last year's main estimates gives way to an $82 million overall increase in our programming and operating budget. That means more money to help ensure that Canada's natural resources sector is globally competitive, more money to promote environmental stewardship, more money to encourage consumers to make smarter and more environmentally sound purchases, and more money to better manage our lands and resources and to provide Canadians with greater protections.

That's the snapshot before you today, a storyline built on our first budget, budget 2016, which featured a significant down payment on the clean economy.

You can see it with the first instalments to modernize the department's research facilities, advance clean-energy technologies, enhance environmental performance in the oil and gas industry, and create a national network of recharging and refuelling stations for tomorrow's clean vehicles.

Budget 2017 takes those investments and runs with them. For example, it provides an additional $200 million over four years to support clean technology research and innovation in Canada's natural resource sectors, including energy, forestry, and mining.

Budget 2017 also recognizes the vital role of forestry in addressing climate change, and invests close to $40 million to increase the use of new low-carbon wood technologies in infrastructure projects.

We're also providing another $43 million this year to help the forest sector develop innovative wood products and to expand into new markets. That's particularly timely in the wake of the new countervailing duties the United States announced last week on Canadian softwood lumber. I am sure members will have questions when they have a chance to ask them. I will just add here that our government plans to use every tool at its disposal to fight these punitive duties and to defend the interests of Canada's softwood lumber industry, its workers, and their local communities.

Budget 2017 also extends the 15% mineral exploration tax credit for an additional year to ensure that the mining sector continues to make its vital contribution to the Canadian economy. This tax credit helps junior mineral exploration companies raise capital to finance early exploration that can lead to new discoveries, future mines, and more jobs. Its extension recognizes that recent commodity market improvements are still tenuous and that financing remains challenging.

Budget 2017 also proposes a one-time payment of $30 million to support Alberta's efforts to stimulate economic activity and employment in its resource sector, and there's another $17.4 million over the next three years to support the National Energy Board's efforts to enhance pipeline safety.

All of these investments, Mr. Chairman, will drive innovation and help us fulfill our commitments in the pan-Canadian framework to reduce greenhouse gas emissions, spur innovation, adapt to climate change, and create good jobs across the country.

Budget 2017 also includes $220 million to reduce reliance on diesel fuel in rural and remote communities; $100 million for next-generation smart grid, storage, and clean electricity technology; $120 million for electric vehicles, hydrogen vehicles, and those powered by natural gas; $182 million for new building codes to retrofit existing buildings and construct new net-zero energy buildings across Canada; and $87 million for indigenous advisory and monitoring committees for the Trans Mountain expansion and Line 3 replacement pipelines.

Finally, more broadly and perhaps most importantly, budget 2017 identifies six key innovative industries in which Canada can lead globally and create good jobs for Canadians. Two of them fall within Natural Resources Canada's purview: clean technology and clean resources.

Our main estimates are an important piece in all of this. They are part of our government's plan to strengthen the heart of Canada's economy, the middle class, by making strategic investments that will produce sustainable growth, a cleaner environment, and thriving communities.

I'm hoping you will support our efforts today by approving the main estimates, and I would welcome any questions you may have.

Thank you, Mr. Chair.

[The Chair, Liberal, James Maloney]

Minister, thank you very much. I'm going to turn the floor over for questions. I should also have acknowledged and thanked Mr. McKay and Mr. Doherty for being here today.

Mr. Harvey, you are first up.

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

First of all, I want to thank the minister for being here with us today. I know he has a busy schedule. We appreciate your time.

Coming from an area in New Brunswick that's highly dependent on softwood lumber, and having grown up in a community where we survived the last softwood lumber crisis and seen the closure of two large sawmills in my area, which the community has never really recovered from, I will centre most of my questions on softwood lumber.

There's been the establishment of the softwood lumber task force, and I wonder if you could elaborate a little on the makeup and scope of the task force, as well as some of the deliverable objectives that you could see that task force accomplishing.

[Jim Carr, Liberal, Winnipeg South Centre, MB]

There is the political task force, which is made up of ministers responsible for forestry from all of the provinces, chaired by Canada's Minister of Natural Resources, supported by a committee of deputy ministers and assistant deputy ministers who have been working for months, anticipating the countervailing duties that were announced 11 days ago.

We are looking to establish a pan-Canadian response. We all know there are regional differences in the softwood lumber sector across the country, but we also believe there is much in common. We have met face to face as recently as a few weeks ago. We'll meet again face to face within the next number of weeks, now that we have some idea of the quantum of the countervail—but not all, I should remind members. The antidumping duties will not be known to us until June. The final determination of the U.S. Department of Commerce won't be known to us until the end of the year.

Meanwhile, we are working collaboratively, which is a very important thing for us to be able to say at this juncture of the file, with our provincial counterparts, looking at long-term sustainability within the sector. That means market diversification. It means, within the industry itself, taking advantage of, for example, forest waste and converting it into clean fuel. It has to do with looking at tall building construction. I know my colleague cares about that, because I believe the technology was developed in Penticton, his home community. I hope he has a question about that, because I can be proud along with him, for cutting the ribbon on an 18-storey building at the University of British Columbia. This is the future.

Meanwhile, there will be job losses. We know that this is lumber five—and this is lumber five only since 1982. I'm not going to take up your time, but the first major lumber dispute was in 1839 when Maine and New Brunswick had a go at it. They were able to stop short of fisticuffs and they were able to settle it peacefully through negotiation, which I am sure we will be able to do. That is the only way we can, in the long term, come to terms with this repeating irritant that is a result of the United States repeatedly imposing punitive and, we believe, unfair tariffs against the Canadian industry.

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

I am very proud of the working relationship that New Brunswick has with the State of Maine; maybe it goes all the way to back to then. We're very close in proximity and in the size and scale of our industry. I think it's reflective of our working relationship, back and forth.

Within NRCan specifically, how do you see NRCan's role in helping softwood lumber producers and workers in the coming weeks and months as this softwood lumber issue really starts to hit home and come to roost, so to speak, within the small rural communities across the country?

[Jim Carr, Liberal, Winnipeg South Centre, MB]

We have a variety of instruments available to us. In the immediate term, the most important value is to protect the workers who will be affected by layoffs. We don't know how many there will be. We'll have a better idea after the duties in June are announced. We believe there are adjustments that can be made to federal programs that will cushion the impact on workers. We also know that producers will have very difficult decisions to make. We think there are programs that can be made available and are already available to those producers.

We believe that with the co-operation and collaboration of our provincial counterparts, we will look at ways that we can work together to do as much as we reasonably can under the circumstances to protect those who will lose their jobs, to help companies cope with this very difficult moment for their bottom line, and also, importantly, to help communities that are affected. Those of you who represent rural ridings know how important the forestry sector is, yes, for the workers; yes, for the companies, but also for the communities themselves.

We will be working together with the provinces on each one of those fronts.

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

I know Mr. Doherty and I probably share similar community demographics. On my own part, having grown up within that sector, one of the problems around softwood lumber—and mills in particular—is that they're often in remote rural locations, so there's an adaptability issue that comes with the workforce that's already there. You've got a workforce that's highly skilled, but they're not easily adaptable to another industry. How can we help those workers?

Coming from that community, I know the answer can't always be, “We're going to help you transition into something else.” We need to come up with real and tangible solutions for how we can help those people retain some of the industry they've known, whether it's through market development or increased access to other markets. Do you see that as a viable possibility, that we're going to be able to work with other government departments on market development or creating access?

[Jim Carr, Liberal, Winnipeg South Centre, MB]

Yes, I do. Minister Champagne has just come back from China with a delegation from the industry. I will also be taking a delegation from industry to China in early June. The reports back are that they are keenly interested in the Canadian product. If you look at the growth in the Chinese market over the last decade or so, it's been significant.

At the same time, the Parliamentary Secretary was in Southeast Asia, in Vietnam, and the answer was exactly the same in Southeast Asia as it was in China in terms of their interest in doing more business with Canada.

We will develop this. It will not happen overnight. The trend line is good and encouraging, as we believe it can be also in South America. Ninety-nine percent of Quebec's exports in softwood lumber go to the United States. Ninety-nine percent of Canada's exports in oil and gas go to the United States. It's very important for the future development of our natural resources that we expand these export markets. There's no better example of that than in the forestry sector.

[The Chair, Liberal, James Maloney]

Thank you, Minister. We're going to have to move on.

Mr. Barlow, the floor is yours.

[John Barlow, Conservative, Foothills, AB]

Thank you very much, Mr. Chair. I appreciate it.

Minister, thank you very much for taking the time to be here.

I'm going to go off softwood lumber to a different issue. I want to talk about some of the things you had in your presentation.

You talked about more money to help Canada's natural resource sector become globally competitive. You talked about the uncertainty in the industry. You talked about creating good jobs for the middle class. I would argue that everything you are doing, and especially everything in this budget, is accomplishing exactly the opposite.

It's very timely that you're here today, as yesterday ConocoPhillips announced another 300 people being laid off, the majority of those in Calgary. ConocoPhillips joins Royal Dutch Shell, Marathon Oil, Total, and Statoil, which have all left Alberta. They have all left Canada. That's $80 billion in capital that has already left my home province. The vacancy rate in downtown Calgary is well over 30%, and if you go into the downtown and take a look, it probably is higher than that. More than 125,000 Albertans are out of work in the energy sector.

During the constituency break, I had the opportunity to meet with a group of unemployed engineers, geologists, and geophysicists. They have started a group called the Calgary and Region Unemployed Energy Professionals Association. There are more than 100 members. These are people who have been unemployed not just for months but, for some of them, for close to two years. Two years—and they have no idea where to go.

You talked about the uncertainty in the industry that is causing a lot of these issues. Well, Mr. Minister, a lot of the uncertainty in the industry has been caused by you in making political decisions when it comes to projects such as the northern gateway pipeline and by adding uncertainty to the regulatory process and the approval process. These companies' international investment doesn't leave if there is a good environment for them to be successful. When they don't see a clear pathway to approval or success, they will go where they're will get a return on their investment, where they are welcome, and where business is going to be.

I'm going to finish with a pretty easy question for you. For us in Alberta, what we want to see is whether the federal government wants an energy industry. Do you want an oil and gas industry or not? It's time to let us know. Is this something that you do support or that you don't support? We are getting very mixed messages.

You've put in a carbon tax. It was supposed to give us this elusive social licence so that we would be able to have projects such as the Trans Mountain one and the Line 3 reversal, but you're very possibly going to have an NDP provincial government winning an election in B.C., and they have been quite open about the fact they will block the Trans Mountain pipeline from being built, so I don't see the social licence. It just doesn't exist. This hasn't purchased us any leeway or support from a potential new provincial government in B.C.

What really concerned me in this budget was the elimination of the Canadian exploration expense. When Alberta and our oil and gas sector are hurting, rather than finding a policy that would give that sector some assistance or at least leave it alone, in my opinion—and certainly in the opinion of my constituents in Alberta—you took another opportunity to kick us while we're down. That may seem harsh, Mr. Minister, but that is a fact. That is how people in Alberta feel, especially those in the energy sector.

I took a look at Finance Canada's data this week just to see what the impact of eliminating that exploration expense would be. According to Finance Canada, “from 2007 to 2012, approximately $1.4 billion per year in public equity for the oil and gas, mining and clean energy sectors was raised” through the flow-through share program, including programs such as the Canadian exploration expense, which is available to all companies eligible for expenses. They say that “flow-through shares assist primarily junior exploration companies whose access to other sources of financing may be limited”. This has a huge impact in Alberta.

Tim McMillan, the president and CEO of the Canadian Association of Petroleum Producers, said, “I am disappointed and I think it sends a bad signal and further puts us at a disadvantage in terms of the capital we are trying to attract from global markets, compared to the [United States]...”. You talked about making us globally competitive. This makes us globally uncompetitive. The United States is our biggest competitor for capital.

This government is very concerned about the middle class. Well, our industry hires the middle class.

Mr. Minister, did you do any consultation with industry before you made this decision to remove the Canadian exploration expense from the budget?

[Jim Carr, Liberal, Winnipeg South Centre, MB]

Those are a lot of questions.

[John Barlow, Conservative, Foothills, AB]

No, it's really only the one at the end.

[Jim Carr, Liberal, Winnipeg South Centre, MB]

Well, no. You wanted to ask a simple yes or no question about whether or not this government supports the energy sector.

[John Barlow, Conservative, Foothills, AB]

My question for you is, did you do any consultation with energy or with the businesses involved in the industry before you removed this from the budget?

[Jim Carr, Liberal, Winnipeg South Centre, MB]

If I may, let me answer your questions in some kind of a sequence.

Yes, the Government of Canada supports the energy sector in Alberta and right across the country. The evidence of that support is in the 15,000 jobs that will be created by the expansion of the Trans Mountain pipeline, in the 7,000 jobs that will be created through the Line 3 replacement program, and the many thousands of jobs that will be created in other projects that have been and will be announced.

[John Barlow, Conservative, Foothills, AB]

Are you saying, Minister, you will make sure those projects get built?

[Jim Carr, Liberal, Winnipeg South Centre, MB]

Well, I know that the Government of Canada has approved these projects. These projects—

[John Barlow, Conservative, Foothills, AB]

That's not the question. Will you back them?

[Jim Carr, Liberal, Winnipeg South Centre, MB]

These projects have the support of the Government of Alberta and the Government of British Columbia, so there are three governments in the country that have approved these projects. I would have every expectation that because of that they will be built.

[John Barlow, Conservative, Foothills, AB]

If you have a provincial government in B.C. that opposes it, will you stand to make sure it gets built?

[Jim Carr, Liberal, Winnipeg South Centre, MB]

Well, you know, you're a politician. You've been around a lot longer than I have. Would you answer a hypothetical question about an election that hasn't been decided yet by the people of a province? I don't think so.

[John Barlow, Conservative, Foothills, AB]

So you won't answer the question.