Public Safety Committee on June 19th, 2007

[David MacKay]

That was the attempt of the ammonia code of practice, for industry to get out in front of the government to standardize and harmonize the various standards from across the provinces so that we don't get driven nuts trying to stay compliant. It's ambitious, but the problem is it's also very costly.

[Roy Cullen, Liberal, Etobicoke North, ON]

Not disputing the fact that we need to protect these pesticides, herbicides, insecticides, and fertilizers, has there been much experience in Canada of these sites being robbed or burgled and these products being taken away and used illicitly? Has there been any experience in Canada?

[Jeff Kisiloski]

Yes, there is some. The issue of crystal meth production has definitely come up over the last few years. Again, industry jumped on it right away and did a lot of awareness and safeguard strategies to ensure that either farmers or agri-retailers or even suppliers are directly protecting these products or making it extremely difficult to access these products.

But I think one of the big dangers we've come across the last couple of years and the reason we're here today is that our products are essential to modern agricultural production. But over the years, anhydrous ammonia for crystal meth, ammonium nitrate for other illicit uses, and pest control products have been coming under increased scrutiny. As that happens, industry and government are passing regulations down to ensure safety.

Again, we wholeheartedly agree with it, but I guess what we're saying is that as these regulatory requirements keep piling up on our members and our sector, the cost of regulation is becoming far too cumbersome, and we're looking now for a little bit of assistance to meet these new requirements.

[David MacKay]

And Mr. Cullen, when we sit around the table with our various members, we do get anecdotal reports of theft. The problem with crystal meth is that you can come into a facility and just bleed off the tank. There is no damage done and there's really no evidence you've even been there, other than maybe the seal on the tap being broken in bleeding off the tank. And of course those chemicals then go to meth labs, often in forested areas where they're hidden.

[The Chair, Conservative, Garry Breitkreuz]

Yes, that was a good question.

I just would like to clarify one thing that Mr. Cullen raised. The regulations appear to be all intended for the illegal acquisition of these materials, such as ammonia or ammonium nitrate. It does very little to prevent the legal possession or acquisition of these things. I don't imagine you've done any studies as to—

[David MacKay]

You mean fraudulent?

[The Chair, Conservative, Garry Breitkreuz]

No, legally. You could acquire these legally. These regulations would very little effect on that.

[David MacKay]

Correct. We do have an “On Guard for Canada” program, which trains our members to alert themselves to applying appropriate paperwork and vigilance and due diligence. It's rather strenuous in terms of not letting go of the product without that proper due diligence. Of course, the gut intuition is often the best, where we can alert authorities to what we think might be suspicious behaviour by apparent buyers. If I'm not mistaken, the three tonnes of ammonium nitrate actually had been acquired in southern Ontario, so maybe they posed as buyers.

So, yes, there is an issue there too, but we're also trying to train our members to be aware of that as well.

[Jeff Kisiloski]

I think one of the big benefits that our members in our industry offer is that a lot of these businesses are in rural locations, and in that case you know your customer. Your customers are within a 50-kilometre radius. If you have a customer list of 200 customers and someone shows up you don't know, you're going to ask questions. You're going to ask, “Why do you want this product for this? What about this product?”

I worked at a retail outlet, and I remember there were a couple of times when people came in just to get a couple of bags of fertilizer for their gardens. You know what? They got, “Where are you from? Why aren't you going to the location near Winnipeg? Why are you coming out to the Beausejour area?” There is a lot of scrutiny of customers you don't know.

[The Chair, Conservative, Garry Breitkreuz]

You've raised an issue here that I think is key. If you had $120 million, maybe you'd put a little more into intelligence rather than....

Pardon?

[Dave MacKenzie, Conservative, Oxford, ON]

It is there, Mr. Chairman. It is there. There are lots of regulations on the illegal acquisition of a legal product. Their industry is up to speed on that.

[The Chair, Conservative, Garry Breitkreuz]

That's good to know.

[David MacKay]

We don't want to give the impression that because these are industry-set regulations government is not involved at a federal level. The manufacturers in our organization work with levels of the department all the time. They're fully behind these regulations and are quite satisfied with them. If anything, they're probably pushing them quite a bit.

[The Chair, Conservative, Garry Breitkreuz]

Good. Yes. We're examining this issue and appreciate every side being looked at.

Monsieur Ménard, no more questions?

We'll go to the government side, please. Mr. Hawn.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Thank you, Mr. Chair.

Thanks, gentlemen, for being here.

I want to clarify or follow up with something that Mr. Cullen was talking about there. The heads-up on the new regulations and increased costs and so on were gazetted in 2003.

[David MacKay]

From the environment standpoint.

[A voice]

It was strictly Environment Canada.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Yes, I understand, but that's what he was dwelling on. Your response to government happened right away, and the response back that you considered less than satisfactory from your point of view happened fairly quickly after that. So this all happened in 2003-04.

[Jeff Kisiloski]

Right, for Environment Canada.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Okay. I want to be clear on that.

I want to get my head around cost and what it actually means. You talked about the average cost being $124,000 per site. Maybe you know the answer to this, maybe not: What's the average size of the retail business, in terms of average revenue, average profit? I'm just trying to get something in relation to the average cost of $124,000.

[Jeff Kisiloski]

Right. Again, there's a tremendous variation in retail size here. You can have tiny little operations that are basically a farmstead with an anhydrous ammonia storage bullet attached to it. There are also large commercial facilities. I come from a very small town, just northwest of Winnipeg. The site they have there is approximately half an acre. It's tremendously small. But there are other locations that are ten acres big, and they have large anhydrous ammonia storage bullets, liquid fertilizer tanks, large dry fertilizer storage tanks, pesticide warehouses, fuel storage, custom applicators, all at the site.

In terms of gross revenues, it's somewhere between, yes, I would say $1 million to about $5 million gross revenues annually. As part of our member category, one of the questions we do ask is average gross revenue, and I think the highest category goes up to between $5 million and $6 million.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Okay, and these are all companies that are filing and paying taxes and so on. The costs of doing business are, as with any other business, deducted from....

[David MacKay]

Correct.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

They would get tax-deductible expenses. Even if they did incur the average $124,000, it has to be an average of $124,000 tax-deductible expense.

[David MacKay]

That is correct.