Public Safety Committee on June 19th, 2007

[David MacKay]

I think it's up for debate and still rather contentious as to whether organic products are more tasteful, more healthy, and necessarily more beneficial for Canadians. From a price standpoint, of our disposable incomes, Canadians only have to pay 10% of their disposable incomes on food. Often a lot of other countries face numbers that are closer to 40% and 50%. It's because of the ability to harvest those types of yields with the same amount of acreage and not have to apply more acreage that we enjoy those benefits. So it's really debatable about whether organic farming would produce a higher-quality, a more nutritious, or most tasty produce. But at the same time, we know that this would add a lot of economic cost to the value chain, and that would only be passed on to growers and of course eventually down to consumers, with higher prices in the supermarkets. The organic industry is alive and well and doing very well, and that's a choice for Canadians to make. But right now, adding extra costs to the value chain is not advantageous.

[Serge Ménard, Bloc, Marc-Aurèle-Fortin, QC]

In any case, perhaps this is neither the time nor the place for a debate on whether different, more environmentally friendly farming practices could be used. Regardless of what happens, you could be out of business.

If I understand correctly, generally speaking, you support the government's proposed safety measures.

[David MacKay]

Absolutely.

[Serge Ménard, Bloc, Marc-Aurèle-Fortin, QC]

I do not quite know how to say it, but I do know that terrorists are targeting agricultural products. You are arguing that it should not necessarily be up to farmers to cover the costs of the measures implemented for the sake of the general public. For example, in large cities, it is the municipality, not the merchants, who pay for police officers to patrol the streets. You feel that the government, not the farmers, should cover this expense. Am I correct?

[David MacKay]

We believe there should be a shared responsibility. I think there is a cost of doing business, there's no question, to secure these products, and that also benefits the employees and the workers in terms of safety. It keeps our costs down and costs of operation for insurance purposes. So we do have a benefit. We do believe there's some moral and social responsibility for our industry to pony up with some co-investment, but we believe it should be a shared approach, a partnership with the government.

Actually, if you really come down to it, we believe that industry, all levels of industry, not just the retailer but the manufacturers, should be playing a role in some investment. If ultimately we were to suggest a final solution, you may want to include industry, the manufacturers of fertilizers, in a proposed sharing agreement, almost 50-50, if you will: 50% government, 25% from manufacturing, and 25% from retailers. If there were the ultimate decision and I thought that would be the most practical approach, that would be my suggestion.

I do believe the government has a role. Our members believe they have a role because it is Canadians who benefit ultimately from the public safety enhancement. But we are prepared to share in the cost of investment.

[Serge Ménard, Bloc, Marc-Aurèle-Fortin, QC]

I would like to have a clearer understanding of the table on page 1. What does the $43 entry refer to? If we look at line one, under “New Placards and Markings for Nurse Tanks”, we see that the cost per unit ranges from $43 to $50. What is a unit?

[Jeff Kisiloski]

“Unit” would be actually either a transport vessel that's used to haul product on the road, or the tank used to pull it in the field that is applying product to the ground. So there are marking requirements for these vessels, because they do travel on the road and they are transporting dangerous goods.

When looking at new marking requirements that will come in for all anhydrous ammonia vessels beginning in 2008, there are requirements to remove the current decals and put the new markings back on that are being required by Transport Canada. So there's physical labour. There's repainting required. It's not just taking a sticker off and putting a new sticker back on. These are well adhered to the tank, for obvious reasons, because they spend 100% of their time outdoors, so there's a lot of weathering required. So scraping, manual labour, and purchasing of decals are all part of the package to meet the new marketing requirements that are being dictated by Transport Canada.

[Serge Ménard, Bloc, Marc-Aurèle-Fortin, QC]

Moving right along, the following line says “Labour Costs to Replace [...]”. That is over and above marking costs, I believe.

[The Chair, Conservative, Garry Breitkreuz]

You'll have to wrap it up, Monsieur Ménard.

[Serge Ménard, Bloc, Marc-Aurèle-Fortin, QC]

I realize that my knowledge of this subject is quite limited, but I really do not understand what this table is all about. Perhaps it would be a good idea to give us additional explanations at some point in time.

Thank you.

[The Chair, Conservative, Garry Breitkreuz]

Do you have any additional comments?

[David MacKay]

I'll just summarize. The piece in front of you that you received from the clerk prior to my verbal presentation outlined a few other areas that we did not directly address in our initial comments. There are additional costs—for example, the anhydrous ammonia nurse tanks requiring pressure testing, the decal programs, the E2 emergency preparedness regulations under CEPA, environmental protection, all of which are added costs. As a matter of fact, we've had to add 23% cost to human resource hiring in our industry as well.

We just want to highlight that we're under a fair amount of duress, but the one that will be the real straw that breaks the camel's back will be the ammonia code of practice. So we don't want to look like we're whining about everything, but we're under a lot of pressure, and this particularly is the one we really cannot afford.

[The Chair, Conservative, Garry Breitkreuz]

Thank you.

Before we go over to the government, have you done any analysis of what other countries are doing? You mentioned somewhere in your presentation that we're in a competitive situation here. Are other countries experiencing the same thing? What are they doing? How is this being handled?

[David MacKay]

The United States is the first country you could draw attention to. Currently, the agri-retail facilities in the U.S. have just completed a phase of risk assessment analysis where they had to submit paperwork that was due June 7 to the Department of Homeland Security. The homeland security department will assess, then, these various retail facilities, as well as the products they're carrying, to ultimately come up with a final risk assessment that will then require regulation and stewardship of the products. There is a bill in the United States Senate currently—I believe it was the senator from Iowa, but I can't quite recall, maybe it was Ohio—where they had introduced a potential for a tax credit system to reimburse the agri-retail facilities for the costs of their upgrades. To the best of my knowledge, that's the most advanced that any country is at in terms of its security assessment.

You can well imagine that the United States is very concerned about the agricultural precursors to bomb-making. The London train bombings were agricultural bombs. The Murrah building was brought down with I think just over one tonne of ammonium nitrate. So agricultural bombs seem to be the product of choice, because they're usually acquired.... I'm not telling you anything you don't already know.

[The Chair, Conservative, Garry Breitkreuz]

I don't like the term “agricultural bombs”. I'd rather use something like “fertilizer bombs”.

Yes, go ahead. I understand that we are ahead of most countries.

[David MacKay]

We are. The United States and Canada are certainly in the lead.

Other countries that compete with us agriculturally—South America, certainly Brazil and Argentina, China, and India—are nowhere near as potentially secure as we are, but that also introduces some degree of competitive disadvantage. If they're not spending the money to invest in the security infrastructure and we are, we're at another competitive disadvantage in terms of export in the global markets.

[The Chair, Conservative, Garry Breitkreuz]

In the U.S., I understand that it's all under the umbrella of homeland security. You made the point earlier that there's not one particular ministry in Canada, but in the U.S. there is.

[David MacKay]

They're taking the lead to do the risk assessment.

[The Chair, Conservative, Garry Breitkreuz]

Thank you.

Mr. Norlock.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Thank you very much for coming.

This is a topic of great interest, because from my recollection I think the Oklahoma bombing was, from a North American perspective, one of the first places for the common knowledge that fertilizer and diesel fuel really can do a pretty good job of damaging buildings and/or killing people. That leads us, of course, to why we're here today and why you're here today.

When you were making your opening statement, you mentioned that there is a lot of regulation that you must comply with when you're dealing with the types of products you deal with. This is everything from provincial standards concerning the transportation of dangerous goods, and then if you're transporting nationally, the federal government plays a small role, but generally it tends to be provincial regulation that governs it. From the standpoint of the transportation of dangerous goods, which provinces contribute to their share or their demands? In other words, do the provinces give you some kind of financial remuneration for the need to transport goods in a certain way?

[Jeff Kisiloski]

No, there is no remuneration. We just comply with the regulations, or else we don't transfer the product.

It's much the same at the federal level too. It's what the federal Transportation of Dangerous Goods Act.... Comply, or else don't handle the product.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Right.

In this particular case, you're saying that because of the added demands and because we're now dealing with everyone from airports to harbours, etc., the federal government or governments have seen fit to assist agencies. Now, to your knowledge, do they assist the private sector or do they assist other government agencies vis-à-vis a contribution towards their security arrangements?

[Jeff Kisiloski]

The contribution program we were looking at here was the federal government assisting port facilities to enhance security at their site. In analyzing the program we saw that many of the eligible upgrades allotted to port facilities were exactly what we needed at our facilities. Again, there are 300 ports, I believe, in Canada. There are 1,500 agri-retail sites handling a whole gamut of different products, located very close to urban centres, to 30 miles from the nearest little hamlet, for example, in rural Manitoba. There's a real variation in location, products, and security infrastructure required because right now, as we said earlier, we meet current industry and government requirements.

The big variation comes at the provincial level. There are different requirements in Saskatchewan as compared to Ontario, for example. If we're a Saskatchewan retail facility and we meet all those requirements required by the Saskatchewan environment or the Ontario Ministry of Labour, then we're compliant. I guess that's where some of the variation comes along that we would like to enhance, to make sure it's a level playing field. I think that's where government is coming from too. In addition, a lot of the industry manufacturers want to standardize safety and security measures across Canada.

[David MacKay]

This is more to your point about ownership. When we analyzed the port facilities, a lot of them were municipal quasi-government. Some were non-profit, not-for-profit organizations and some were private. It was a mixed bag. But the government did not discern for eligibility based on that.

For example, one of our members in Hamilton was able to apply for an infrastructure upgrade under the marine security contribution program because they also qualified as a port facility. They're privately held, so that clearly isn't an issue.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

From my perspective, we know there are cooperatives that actually do store, etc., and these cooperatives tend to be the very people who grow the produce. In other words, they're farmer owned and operated. In other cases, they're an international company that actually has billions of dollars in profits.

From your perspective, you would want to treat everyone equally. Let's say, from a societal challenge that the government must deal with, one must be very careful that they're not actually enhancing an international company to compete, and at the same level as someone who's struggling. I'm referring, quite frankly, to our farming community, and therefore to a cooperative that is struggling to exist. So there's a balance there that has to be struck.

I'm opening it up to you. How as a government do you balance perception and reality?