Transport Committee on Dec. 6th, 2010

[The Chair, Conservative, Merv Tweed]

Thank you, and good afternoon, everyone. Welcome to the Standing Committee on Transport, Infrastructure and Communities, meeting number 40.

Our orders of the day, pursuant to Standing Order 81(5), are supplementary estimates (B), 2010-11, votes on vote 1b, vote 5b, vote 10b, vote 25b, vote 40b, vote 55b, vote 60b, vote 70b, vote 75b, and vote 80b under Transport, referred to the committee on Thursday, November 4, 2010.

Joining us today we have the Hon. Chuck Strahl, Minister of Transport, Infrastructure and Communities, and the Hon. Rob Merrifield, Minister of State for Transport.

I have introduced your guests before, but I'm sure that is in your opening comments, Mr. Minister, so I will ask you to take the floor, and then we'll proceed with questions.

[Chuck Strahl, Conservative, Minister of Transport]

Thank you very much, Mr. Chairman.

It's a pleasure to be back, and thank you for inviting me to appear today. I'm pleased to be here to provide you with an update on the transportation, infrastructure and communities portfolio.

I'll be sharing my time with Minister Merrifield, who has some very specific comments about the areas under his responsibility.

With me today are Yaprak Baltacioglu, the deputy minister of transport, infrastructure and communities, and John Forster, associate deputy minister of infrastructure. We have other officials in the room as necessary.

Committee members, the last time we were here was in October. I presented you with an overview of the portfolio.

Committee members, the last time we were here, in October, we presented you with an overview of the portfolio.

I gave you my thoughts on the transportation sector's role in the Canadian economy and the effects infrastructure investments have had on communities across Canada, as well as our partnerships with the provinces, territories, and municipalities. I also raised the issue of ongoing security threats and spoke about the importance we place on relationships with international trading partners.

Today I'd like to provide you with an update on these issues from both the transportation and infrastructure perspectives, as well as to speak to what the future may hold, and then to entertain your questions, of course.

On infrastructure progress, in my last appearance I talked about the funds that Infrastructure Canada manages under the economic action plan. There is the $4 billion in the infrastructure stimulus fund, the $1 billion in the green infrastructure fund, the $500 million top-up to the communities component of the Building Canada fund, and the $25 million for the National Trails Coalition. We also accelerated and streamlined existing funds under the $33 Building Canada fund, our flagship program, so that partners could take advantage of these investments sooner than originally scheduled. Since the introduction of the economic action plan, about $10.7 billion has been committed through Infrastructure Canada's programs toward approximately 6,200 projects. Along with the contributions from our partners, such as provinces, territories, and municipalities, this represents a total investment of over $30 billion.

As you know, last Thursday the Prime Minister announced a seven-month extension, to October 31, 2011, to deadlines for projects funded under four infrastructure programs, including the infrastructure stimulus fund and the communities component top-up. This gives an additional seven months to project proponents across the country that may need extra time to see their projects through to completion.

As you know, last Thursday the Prime Minister announced an extension, to October 31, 2011, to the deadlines for projects funded under four infrastructure programs, including the Infrastructure Stimulus Fund and the remainder of the Communities Component Top-Up. This gives an additional seven months to project proponents across the country who need the extra time.

The vast majority of projects are on target to be built by March 31, 2011. The extension is a fair and reasonable approach that will allow the remaining projects to cross the finish line successfully, and while Canada has emerged from the recession as the strongest G-7 country, the global recovery is so fragile, and this extension is a responsible way to help continue to stimulate the economy without resulting in extra costs for taxpayers. This is certainly good for the country and it is good for the economy, and it ensures that Canada will return to balanced budgets while still completing worthwhile projects.

While Canada has emerged from the recession as the strongest G7 country, the global recovery is still fragile. This extension is a responsible way to help continue to stimulate the economy, without resulting in extra costs for taxpayers. This is certainly good for the country and good for the economy. It ensures that Canada will return to balanced budgets, while still completing worthwhile projects.

Mr. Chair, you see from the supplementary estimates (B) for Infrastructure Canada that we are looking to reprofile funds from 2009-10 to 2010-11 under a number of our programs. This is done to accommodate the funding needs of our partners.

This is an important point that we may get into during the question and answer period. Under the past programs that pre-date our government, and the current contribution agreements that we've signed, funding flows to our partners once they submit claims for work that's been completed. For many projects, work may be well under way or even completed before we receive even the first claim for money and before we can pay any bills. The reprofiling of funds ensures that the necessary resources are available to reimburse costs for projects the government had already committed to support when the claims were submitted. In other words, the economic activity starts, people are hired, the contracts are let, all sorts of action happens out in the field, but we can't pay the bills until they're submitted to us. This continues, and that's the reason for this reprofiling. It goes on virtually every year in Infrastructure Canada, and it will continue this year.

As we move forward in delivering the short-term funds under the economic action plan, we continue to deliver long-term funding under the $33 billion Building Canada plan, which includes the gas tax fund. This fund doubled to $2 billion per year in 2009. That's $2 billion per year going to municipalities, big and small, right across the country for their infrastructure projects. Through Budget 2008, we announced that the gas tax will become permanent after 2014. This is funding that municipalities can rely on and use when they need it—they can use it immediately, or they can bank it and use it further down the road.

Let me turn to Transport Canada. We continue building a safe, secure, sustainable, and efficient transportation system in Canada. While time doesn't permit a detailed discussion of all initiatives, let me highlight just a few. First, there is the action our government is taking to protect our civil aviation system. We know civil aviation remains a target for terrorists and recent attempts on international airlines stress the need to remain vigilant. Our government continues to make significant changes to Canada's aviation security system, including the introduction of full-body scanners at Canadian airports, the development of a passenger behaviour observation program, and the development of aviation security plans at Canada's major airports to assist their security readiness and make changes where needed.

We've also taken action with respect to air cargo security, investing $95.7 million over five years in the air cargo security program. This program will strengthen air cargo screening and the security of the supply chain. We'll continue this focus on the security of all of our airlines. We invest in safety and security because it's our first priority. At the same time, we continue to invest in transportation infrastructure that will create jobs and boost the economy, particularly at this time of economic challenge.

Turning to Canada's ports, I can tell you they are a cornerstone of our gateway and corridor initiatives. I think this is where some of our best successes are and where we can point to some of our most productive partnerships in our gateway and corridor initiatives. As part of Canada's economic action plan, our government has announced close to $104 million under the infrastructure stimulus fund for 30 projects at ports managed by Canadian port authorities.

As part of Canada's Economic Action Plan, our government has announced close to $104 million under the Infrastructure Stimulus Fund for 30 projects at ports managed by Canadian Port Authorities.

Examples include $20.6 million for Port Metro Vancouver to make upgrades to the port's infrastructure and $15.3 million for work at the Port Authority of Montreal. These investments and others are making Canada more competitive at home and abroad and are helping to advance our government's gateway and corridor initiative.

As trade volumes exceed their pre-recession levels, Canada's ports and other supply chain partners have positioned us to capture the economic benefits to be had from international commerce.

These investments are making Canada more competitive at home and abroad, and helping to advance our Gateways and Corridors Strategy.

As trade volumes increase past their pre-recession levels, Canada's ports and other supply chain partners have positioned us ahead of our competitors to capture the economic benefits from international commerce.

In particular, we've made great strides with our Asia-Pacific gateway and corridor initiative, having announced over $3.5 billion worth of projects since our launch in 2006, leveraged from federal contributions of some $1.4 billion. So that's been a tremendous success.

However, we can't be complacent in our success, and we must address the efficiency, reliability, and security of the supply chain if we are to remain competitive globally.

We'll also examine the lessons we learned from the Pacific gateway and apply them to initiatives such as the Atlantic gateway and our Ontario-Quebec continental gateway.

A key element in our gateways and corridors strategy is the Detroit River international crossing. It's the most important bridge project in North America's history, given that cross-border traffic at Windsor and Detroit represents 30% of all Canada-United States trade. We are determined to get that bridge built, and we remain committed to the project. As such, we pledged a maximum of $550 million for project components in Michigan. That being said, our financial participation is subject to the Michigan legislature's adopting all of the authorizing legislation for the bridge project.

Now, unfortunately, the Michigan Senate adjourned without bringing the DRIC authorizing legislation to a vote during their recent lame-duck session. I have spoken with Governor-elect Rick Snyder and have secured his commitment to make this a priority and to work together to obtain the necessary legislative approvals in Michigan.

In the upcoming year, we will continue working closely with the State of Michigan and the U.S. federal government to get that bridge built. It remains, obviously, arguably, the most important infrastructure project on the books for Canada. That bridge is a necessity for increased commercial traffic over the next number of years. We're determined to work with our partners in the United States, both federally and at the state level, to make that happen.

Minister Merrifield has some concluding remarks.

[Rob Merrifield, Conservative, Minister of State (Transport)]

I have a tremendous amount of respect for the committee. I want to thank you for the work you've done on the Railway Safety Act. Just to let you know, we certainly want to accelerate this and get it to you as soon as possible after it passes second reading. I'm told that it is a good possibility before Christmas.

I want to update you very quickly on Marine Atlantic, which is a constitutional obligation we have for the ferry system between North Sydney and Newfoundland. That's North Sydney, Nova Scotia.

The ferry connection is very important for the transportation of the people who travel there and for goods. It was in a terrible situation, a terrible state, when we first came into office. We brought on the Atlantic Vision. Actually, it was on life support.

Just to give you an idea of how comprehensive a refit we are actually making, it is significant. Not only are we plugging forward with two new vessels that will increase capacity for Marine Atlantic by 40%, compared to each of the vessels they're replacing--the total is actually a 50% increase in total belly carrying capacity--but there is also almost $90 million for onshore facilities--it's actually just a little over $90 million--at North Sydney, Argentia, and Port aux Basques.

These two vessels, just to give you a quick update, will be replacing the aging Caribou and the Smallwood. The vessels are named. The first vessel will come into being. They're the MV Blue Puttees and the MV Highlanders. These two vessels are on track. The first one is actually expected to be here in December and to be operational in March or before. The second one will be arriving in February and will be put into service long before the spring rush.

Because of the increased capacity for the movement of people and goods as we move into the spring, Marine Atlantic will have a tremendous amount of opportunity to deal with the pressure it has received. The rollout of the onshore facilities are taking place at the present time and will take place over the next three years.

CO₂ emissions, improvement of waste water handling, and increased fuel efficiency all will be realized as we bring these two vessels into operation. We're very excited about them. They are state-of-the-art vessels. They are chartered for a five-year period. Those who have seen them are ecstatic about what they're seeing. Marine Atlantic is well overdue for a major, major overhaul, and it is getting that.

This was not only a little over half a billion dollars--$521 million over a five-year period--in Budget 2010, but together with what we've done since we came into office, it is almost $1 billion in real money for Marine Atlantic so that it can deal with its pressures.

Thank you.

[The Chair, Conservative, Merv Tweed]

Thank you.

Before I go to Mr. McCallum, protocol suggests that I have to call vote 1.

Mr. McCallum.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you, Mr. Chair.

Thank you, Ministers, for joining us.

I'm saying this because I don't want you to think I'm boycotting you, but I'm going to have to leave before the end of the meeting to speak in the House. I certainly agree with you about the Windsor bridge. I think it's pretty shocking that it's taken us so many years to get this thing done. But I'm not going to agree with you on everything.

I remember Jim Flaherty in his budget saying that to be effective, infrastructure had to be out the door within 100 days. If we look back at last year, for which we now have data, last year was the peak of the recession, the peak of the unemployment and the financial crisis, when money was needed most, yet the figures indicate that only 25% of the money allocated for the infrastructure stimulus fund was actually spent, and a pathetic 3% of the green infrastructure fund. This was in the year that was the peak of the crisis, when the money was needed most. So why was this?

[Chuck Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

Again, all I can come back to is two things. One, the Auditor General looked at the program and how it was rolled out, and you have to balance, of course, the proper kind of oversight and risk management. When you're talking about these kinds of dollars, it's important that we have the right kind of programming and oversight in place to make sure it's done properly. The Auditor General gave officials, I think we all have to admit, a really glowing report, indicating that not only did they get the money out in record time, but they did so without sacrificing what taxpayers expect on the oversight, and they made sure it was done properly.

On the other hand, for many of these projects, again, before the money is spent, the economic activity is already happening. It truly is a case in which somebody will take on an agreement, we sign the contribution agreement, and they construct and incur expenses and economic activity the moment we sign that agreement. So the money starts having an impact even before we pay the bills. I tell people that it's a little like the infrastructure project in your home. If you're going to renovate a bathroom, you call in the people; the plumbers go to work, the carpenters are there, the suppliers are busy supplying, and jobs are being created, but you don't pay the bill until it's done and it's been inspected. The same sort of thing happens here. Not all the money goes out, but it's been that way, as you know, Mr. McCallum, since Liberal days. It was exactly the same. You can't pay the bills before they're submitted.

[John McCallum, Liberal, Markham—Unionville, ON]

That's true, except that's known when you make the commitment. Nevertheless, with that knowledge in people's minds, they committed $2 billion to be spent for that year, and only a quarter of that was spent, and only 3% of the green infrastructure fund. So I still think that is a failure to get the money out the door the way the government committed to do it. If we look at the two years--last year and this year--together, and if we include all the authorities Infrastructure Canada has asked for, you still are only asking for $2 billion out of $4 billion over the two years. So in the budget, you claimed $4 billion over two years. What you're now asking for is half of that, $2 billion. For example, if you claim there are x jobs created, that's based on $4 billion. The most jobs you could have would be half of x if you only get out $2 billion. I just don't understand why you got out such a small fraction of the money that you promised you would.

I want to come now to the question of the announcement of the seven-month extension. We had been asking for six months, so I can hardly disagree with the substance of your announcement, but I do take exception to the timing, because we have been pushing for this for many months, and the consequences of delaying it as long as you did are important for municipalities in at least two respects.

First of all, many millions of extra dollars were spent on overtime trying to meet this arbitrary goal that everybody was shooting for. The former mayor of one town alone, Brantford, said his town alone spent millions of extra dollars in overtime because of this deadline, which was then extended.

The second thing is you talked earlier about rescoping projects in order to meet the deadline. I assume rescoping is a euphemism for downsizing, making them smaller. Now that the deadline has been extended, are you going back to those towns that rescoped or downsized their projects and telling them they can go ahead with the projects as they originally were, now that they have an extra seven months to get the job done?

[Chuck Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

First of all, thank you for the congratulations on the extension.

As I've said in the House, we couldn't make a decision on that until we got the data from the provinces. We had anecdotal stories, but we needed data from the provinces, which are in charge of actually making the projects happen. We supply the money; they do the project management, if you will.

It really wasn't until about three weeks ago that we got all the data in on the specific projects across the country. Once we got all of that, it became quickly apparent, as we went through the data, that there were a number of projects, about 90% of them, probably give or take 90%, that would get completed. There was a significant portion, maybe 10%, that would have trouble or would incur ridiculous costs--paving in the wintertime, for example.

Obviously, we've been sending the signal for quite some time. As you know, in the House, in response to your questions and others, we wanted to be fair and reasonable. I've been meeting with provincial ministers. While the proposal for a six-month extension was fair, to be fair and reasonable it had to be seven months. Of course, that would make it both fair and reasonable.

In the end, we're confident that 90% of these projects are going to get done. It is important that people understand that there are conditions that go with this. Again, there are no blank cheques here. There are certain obligations that proponents have to show us. They have to show us that the project is under way. In other words, it's not just on the back burner; it has to have started. The proponents have to have incurred expenses to date. They have to give us, again, the status report as to.... We don't want to get into this again. They're the ones who promised us that they could do the job, after all. It's only fair to promise us that they can do it, with an engineer's assessment, and that it can be done in this extension period.

We are not taking further applications. This is not a new program or an extension to start new ideas or to come up with new ideas. These are for existing projects that are already in the system.

[The Chair, Conservative, Merv Tweed]

Monsieur Guimond.

[Michel Guimond, Bloc, Montmorency—Charlevoix—Haute-Côte-Nord, QC]

Thank you, Mr. Chair. My question is addressed to Mr. Merrifield.

You mentioned the MV Caribou and the MV Joseph and Clara Smallwood, if I remember correctly. The latter was built at the MIL-Davie shipyards at Lévis.

Where were these two new ships built?

[Rob Merrifield, Conservative, Yellowhead, AB]

These are being retrofitted in Germany right now. The two new ones are Swedish vessels. They're chartered for a five-year period. The work that had to be done on them is fairly extensive. They had to be moved into a size that would fit particularly Port aux Basques, so they're shortened vessels. They are two and three years old, respectively. They're state-of-the-art vessels, as close to a custom-fit vessel as you could make for this application between North Sydney and Port aux Basques.

[Michel Guimond, Bloc, Montmorency—Charlevoix—Haute-Côte-Nord, QC]

If I am not mistaken, these are Swedish ships that were rented for a period of five years, are they not?

[Rob Merrifield, Conservative, Yellowhead, AB]

That's right.

[Michel Guimond, Bloc, Montmorency—Charlevoix—Haute-Côte-Nord, QC]

The transformation, the upgrading, the modernization, the adjustments needed to resolve certain problems, such as the problem at Port aux Basques that you mentioned, all this work was done in Germany. Could this work not have been done in Quebec or in Canada?

[Rob Merrifield, Conservative, Yellowhead, AB]

No, we wouldn't have the capability to do it over here, particularly with the timelines. These are actually the Stena Line vessels. As part of the charter, they come to us retrofitted and ready for service. That's all part of the contract. Stena Line is a $7-billion-plus operation company and has the capacity to do this kind of work in the timelines that were necessary to have it done.

What we didn't want to do is to get into an extension where we go into another summer season without the ability to have a state-of-the-art fleet with the extra capacity. There are two fundamental problems at Marine Atlantic. There is an old, deteriorating fleet of ships that are not reliable. Smallwood went out a number of times this summer, causing major havoc in the middle of the tourist season and over the summer months, where capacity was stretched to the absolute max.

We have to have the capacity and we have to have new vessels.

[Michel Guimond, Bloc, Montmorency—Charlevoix—Haute-Côte-Nord, QC]

You are bringing up many reasons.

To be clear, the tenant is Marine Atlantic S.C.C., and the landlord is a Swedish company. We have shipyards in Quebec and in Canada. For instance, the MIL-Davie shipyard in Lévis employs about 200 people. That is where the MV Joseph and Clara Smallwood was built. This means that we would certainly have the needed expertise to renovate and to upgrade both the ships that you are renting from the Swedes. You could have imposed conditions to Marine Atlantic S.C.C. to make sure that our economy got something out of it.

Instead, you will contribute to the economic prosperity of Germany with the money collected from taxpayers in Quebec and in Canada.

[Rob Merrifield, Conservative, Yellowhead, AB]

No, that's not true at all. They would not have had the capability of being able to do this.

This is not just a minor retrofit of these vessels. These vessels had to be shrunk in size. They actually had a section that was taken out of them and put back together, so this is a major retrofit. It was as custom built as you could possibly make it, plus there was a significant amount of extra seating. Now, they might have been able to do some of the extra seating, but when we do a contract—this is a fibre contract for these vessels—for Marine Atlantic there are options to go further. It wouldn't have been in Canada's best interest or Marine Atlantic's best interest to have brought them over here and then do the retrofit here. It certainly was not something that could have been done in the time period that we had or the capability of doing these with this large a vessel.

[Michel Guimond, Bloc, Montmorency—Charlevoix—Haute-Côte-Nord, QC]

My question is addressed to Minister Strahl.

The supplementary estimates will allocate $587.1 million more to the Infrastructure Stimulus Fund. Is this new allocation due to the fact that you have received more requests for reimbursements from project proponents than were initially anticipated? Why do you want to have this additional $587 million?

[Chuck Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

Perhaps John would want to address that. On the specifics of the five hundred and—because I'm not sure exactly what that number represents. Basically, what we end up doing each year is allotting a certain amount of money for infrastructure, in this case the infrastructure stimulus fund. We're never sure because we never know for sure—for example, right now we have 1,300 projects out there that are completed that no one has given us any bills for yet. Until we get those bills, we don't know what they are. Each year you end up having to re-profile money to look after when that bill has actually come in. The allocation is set out in the budget. That is the amount that will be spent, but we just don't know when the bills will come in. There's an obligation on the proponents to get them in to us. But as I say, right now, there are 1,300 projects with no bills, so they end up having to re-profile this money.

John, do you have something specifically on the $570 million?

[John Forster, Associate Deputy Minister, Infrastructure Canada]

Yes.

Part of the money re-profiled is from the statutory authorities given in the Budget Implementation Act from last year, so it's not part of your loaded supplementary estimates today. It has already been re-profiled and is there for information. Any money under the EAP funds that was not spent last year is being made available this year for proponents: the full $4 billion under the stimulus fund, the full $500 million under the top-up to the communities component.

[The Chair, Conservative, Merv Tweed]

Merci, monsieur Guimond.

Ms. Ashton.

[Niki Ashton, NDP, Churchill, MB]

Thank you, Mr. Chair.

My first question to the minister is this. Transportation Canada is conducting a review of aviation security. We were told that it was to be done by the fall of 2010. My question is, there obviously has been a delay, so why has that delay taken place and when will we see the report?

[Chuck Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

I think Minister Merrifield has some comments, particularly on CATSA, I would think.

There are three things that are happening at the same time. There's a review of the aviation security system that needs to take place. There's the Air India inquiry and the recommendations that have come through that. Then there's the review of CATSA, our flagship security program. All those things are happening kind of simultaneously, and they're all coming together basically at the same time this fall. But it's almost impossible to deal with one without dealing with them all because of the linkages between all three of them.

Rob, do you want to add something to that?

[Rob Merrifield, Conservative, Yellowhead, AB]

Yes, on the CATSA review, which we're doing, it's very close to completion. For the first time, CATSA had received, as a crown corporation, $1.5 billion in Budget 2010. With that was also a commitment to do a review of the spending so that we're getting value for money and efficiency. So that's our goal. As I say, this report is due very soon, and we'll be moving forward on some changes, with the goal of making sure we have the proper security and the efficiencies within that security, so that security is not compromised but flowthrough and efficiency are accelerated. And we believe, from what I've seen in a preliminary way, that we will accomplish some significant changes and improvements to the airports.

[Niki Ashton, NDP, Churchill, MB]

My next question relates to an issue that I raised in the House, that certainly officials from Manitoba have been raising for some time, and that's with respect to the current need for federal involvement in the building of an all-weather road on the east side of Lake Winnipeg. You may have heard of the fatal cases of the flu that hit first nations on the east side. They have been linked to the third world conditions that exist in their communities, regarding which the chiefs most recently expressed an urgent need to invest in all-weather road access for a set of communities of 10,000 people, who are increasingly unable to access essential goods and services that obviously relate to their health, among other things.

When I raised my question in the House, there was some reference to commitments made to first nations in the current stimulus plan. Given that this is a real priority for Manitoba, as well for first nations, I'd like to hear from the federal government side on what the plans are for continued support for infrastructure when it comes to first nations. I realize INAC is part of it, but as I mentioned, you as minister were the one who responded to my question in the House three weeks ago. So I would like to hear from you as well.