:
Good morning, everyone.
We're here today, pursuant to Standing Order 81(5), to deal with the supplementary estimates (B) for 2012-13. We're dealing with votes lb, 5b, l0b, 15b, 20b, 25b, and 30b under Natural Resources, referred to the committee on Thursday, November 8, 2012.
We have two one-hour sessions today. In the first hour we have witnesses from the Department of Natural Resources, and in the second hour we have the Minister of Natural Resources.
Starting the first hour, we have from the Department of Natural Resources, Serge Dupont, the deputy minister; Anil Arora, acting assistant deputy minister, corporate management and services sector; and Thérèse Roy, director general, financial management branch, corporate management and services sector.
I welcome all three to the meeting.
Monsieur Dupont, I understand you have a presentation to make first and then we'll get to our usual question and comment session. Please go ahead with your presentation.
:
Chairman, members of the committee, I welcome your invitation to present Supplementary Estimates (B) for 2012-13 for Natural Resources Canada. I will keep my remarks brief and would be pleased to respond to any questions that you may have.
[English]
As members are aware, Natural Resources Canada outlined 2012-13 expenditures of just over $2.85 billion in the main estimates presented earlier this year. The main estimates still reflect the department's budgetary needs, with the exception of a supplementary request for additional net funding in supplementary estimates (B) of $1.2 million. A number of transfers are also proposed under these estimates.
The supplementary estimates presented today include the following items, most of which were announced in budget 2012: $54.2 million in funding to support the Canadian forest sector by expanding market opportunities and promoting innovation; $7.7 million to revitalize NRCan's three satellite receiving stations; $6.9 million to advance the development of alternatives to existing medical isotope production technologies; $4 million for a Government of Canada advertising campaign explaining the contribution to Canada of our natural resource industries; and $2.5 million to assist Natural Resources Canada with the restructuring of our corporate support groups. As a result of these amounts, NRCan will have an increase in its voted appropriation of $75.2 million. I'll set aside, in the interests of time, some of the smaller amount transfers.
[Translation]
Mr. Chair, these amounts are largely offset by the re-profiling of $40.3 million of previously authorized monies under the clean energy fund and from $34.9 million in savings identified as part of budget 2012 savings measures. The net increase in the department's spending authority is therefore $1.2 million, as I mentioned.
[English]
I will mention briefly the proposed funding for the Natural Resources portfolio agencies. The supplementary estimates (B) requests for them are as follows: $77 million for Atomic Energy of Canada Limited; $8.6 million for the Canadian Nuclear Safety Commission; and $5.9 million for the National Energy Board.
The AECL request will allow the agency to meet operational requirements for its nuclear laboratories for the remainder of the year. These operational expenditures are consistent with AECL's overall budgetary plans for 2012-13, so they are not a function of any cost overrun.
Finally, let me elaborate briefly on NRCan's savings measures as announced in budget 2012. As reflected in the economic action plan 2012, NRCan's contribution to the government's deficit reduction objectives is $112 million annually by 2014-15, or 10% of the department's review base.
It is worth putting this budget 2012 reduction into the broader context under which NRCan is now operating. After increases to its budget over the last few years, largely in response to the economic downturn of 2008, NRCan is returning to a smaller budget. Our budget doubled between 2008-09 and 2010-11, as we were called upon to deliver on government priorities, including a suite of one-time economic action plan investments.
Change and transformation have been constant themes in NRCan's history, encompassing what we do and how we do it, and we stand ready to support future government initiatives.
[Translation]
Mr. Chair, members of the committee, I would conclude by assuring you that NRCan manages its funds prudently with the goal of contributing to the prosperity of Canada.
Thank you.
You may recall in budget 2010 the government provided an investment of $35 million over two years to try to develop non-reactor-based sources of medical isotopes for Canadians. That funding supported four projects: two cyclotron and two linear accelerator projects. They're two different technologies, cyclotron and accelerator, both in the nuclear technology world, but none are reactor based, and indeed both technologies would not create the kind of high-level radioactive waste that there is with the existing sorts of medical isotope supply.
Those projects advanced the science, advanced the technologies, and budget 2012 then announced a further investment, $17 million over two years, to be awarded on a competitive basis, to try to bring these technologies to the point of commercialization. As you know, the government has been clear about its goal to phase out production of medical isotopes at the Chalk River site by 2016. That is not an economic proposition for Canada, and it's not a good use of facilities over time. New technologies that can provide the services and the medical isotopes for Canadians may come from some of these technologies that can be distributed across Canada on a smaller scale, closer to the patients, closer to the needs.
We're very encouraged by the response we had to the request for proposal that we issued in June 2012, and quite encouraged by the prospect of having some solid proposals to bring these technologies, if not to market, very close to market, within the timeframe.
I want to start off by welcoming Mr. Eyking to the committee today. I'm just going to warn him that I'll be talking about the oil and gas sector as it pertains to pipelines, and I don't want anybody to get their feathers ruffled too much and go down the wrong road here.
My question pertains to the supplementary estimates. We see with respect to the National Energy Board an adjustment of roughly $5.9 million. That brings the total from roughly $55.8 million to $61.7 million insofar as dollars go. I just want to find out what that funding is for.
Also, I'd like to know if you could remind the committee about the total length, capacity, and distance of pipelines that the National Energy Board is a responsible regulator for.
As well, if we can talk a little bit, I'd like to find out the volume that those lines will take into account on an annual basis.
Could you tell me what this funding is for? This is about a 10% increase. I'm not aware of any massive increase. Obviously, new pipelines are being built and pipelines are being decommissioned, but I just wonder why we have this 10% adjustment in the budget.
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One very important part of the grants and contributions money is funding for forest product innovation, which is the largest and I think most successful partnership for forest research and development in the world between governments and the private sector.
Under this $54 million, the program generally is going to be composed of two parts. One part will go to expanding market opportunities. We've already been very successful in opening up new markets, working with partners in China and in other Asian economies. For example, exports to China have increased from $166 million to $1.45 billion in the span of only four years. Exports to South Korea have doubled.
Under this program we will continue to work with partners to grow these offshore markets and also to look at growing exports and domestic use of wood in non-traditional areas, for example, non-residential construction, schools, hospitals, and so forth. That means in some cases working with various partners to try to ensure that the building codes recognize how wood can be used safely in those kinds of construction.
The second part of the effort is around innovation. It is supporting the emergence of breakthrough technologies, the kind of work that we've been doing in the past through FPInnovations, for example, encouraging the development of a technology called nanocrystalline cellulose. We're told of considerable promise with a mill now in Windsor, Quebec, serving as a demonstration plant. These are various efforts.
We think the future of the industry means both innovating in terms of its products and processes and having new markets geographically and sectorally in order to grow. The industry does have to change, but we think it has started to turn the corner and it has a much better outlook now than it did three or four years ago.
Thank you for this opportunity to meet with the committee.
Mr. Chair, members of the committee, since the government's economic action plan was first introduced in 2008 to respond to the global recession, our top priorities have been to support jobs for Canadians and to sustain Canada's economic growth. Today, I'm proud to say that Canada is making progress on both of those important objectives.
[English]
Since 2009 employment has increased by over 820,000, more than 390,000 above its pre-recession peak, and the strongest job growth among G-7 countries. More than 90% of all jobs created in Canada since 2009 have been in full-time positions and about 75% of these jobs are in the private sector and nearly 70% are in high-wage industries.
This strong record of job creation sets Canada apart from many nations, and could be clearly seen in our economy with the best growth in GDP in the G-7 since the recession. Certainly, Mr. Chair, our nation's natural resource industries have played and will continue to play a key role in Canada's ongoing economic resilience. Nearly 20% of our economy is dependent on natural resources and more than 50% on our exports.
In 2011 the forest, energy, and mining sectors employed nearly 800,000 people. With indirect employment that total increases to 1.6 million jobs with even greater contributions in the future.
Over the next 10 years, there is potential for more than $650 billion to be invested in over 600 major resource projects in Canada. That means the creation of hundreds of thousands of new jobs.
The funding requested from supplementary estimates (B) will continue to help bolster our resource sector and create jobs and economic growth.
[Translation]
With our Supplementary Estimates (B), Natural Resources Canada's 2012-2013 funding will show total budgetary authorities of $2.85 billion. NRCan's supplementary request calls for additional net funding of $1.2 million. This net funding request of $1.2 million is the result of various proposed funding increases and transfers.
For example, we are increasing funding in a number of priority areas including $54.2 million to expand market opportunities and promote innovation in the forestry sector; $7.7 million to revitalize our satellite receiving facilities, in addition to transferring some internal funds of $3.9 million for this purpose; and $6.9 million to advance medical isotope production technologies.
[English]
Our government is committed to ensuring the safety of pipelines throughout the country. Pipelines are the safest form of transportation of oil and gas, and we are taking steps to further improve that safety record.
Supplementary estimates (B) provide $5.9 million in funding to the NEB, which will be used to hire additional security staff. This will increase the number of pipeline inspections by 50%, as well as double the number of comprehensive pipeline audits. It's important to note that this funding will be fully cost recovered from industry.
The government is also seeking supplementary funding for other parts of the natural resources portfolio, about $77 million for Atomic Energy of Canada Limited, AECL, and $8.6 million for the Canadian Nuclear Safety Commission.
The AECL request for $77 million will allow the crown corporation to meet operational requirements for its nuclear laboratories for the remainder of the year. These operational expenditures are consistent with AECL's budgetary plans for 2012-13 and do not reflect cost overruns or unexpected items.
[Translation]
Mr. Chair, members of the committee, our government's sound fiscal management is definitely paying some dividends for Canadians and Canada's economy.
To maintain this positive economic momentum, economic action plan 2012 focuses on the drivers of growth and job creation—innovation, investment, education and skills development—underpinned by our ongoing commitments to keeping taxes low and to returning to balanced budgets over the medium term.
[English]
This comprehensive forward-looking plan will continue to deliver high-quality jobs, economic growth, and sound fiscal management, all of which help Canada to maintain its strong position in the global economy.
A key part of our government's plan for the economy is to expand and diversify Canada's energy markets for both oil and natural gas. The International Energy Agency is now predicting that the United States will become the world's largest oil producer by 2020 and will be close to energy self-sufficiency by 2035. Essentially, this means that Canadian oil exports to the U.S. will be competing for a declining portion of U.S. imported oil. This massive shift in U.S. energy production will have far-reaching implications for Canada, given that we export virtually all of our oil and natural gas to U.S. markets.
This lEA projection underscores the fact that our government is doing the right thing today in helping to diversify Canada's energy markets in the Asia-Pacific and elsewhere, as the U.S. ramps up its own energy production. That's why Canada must also build and expand the infrastructure needed to move our product to coastal regions for export.
The expectations are also very high for Canada's mining sector. With major projects anticipated over the next decade, the need for skilled workers will also expand. According to the Mining Industry Human Resources Council, Canada's mining sector will need to hire more than 100,000 additional workers over the next 10 years.
The mining industry is among the country's largest private employers of aboriginal people, who make up 7.5% of its workforce. Aside from their proximity to major mining and energy projects, aboriginal communities can leverage another important asset, a young workforce. According to the Public Policy Forum, in the next 10 years approximately 400,000 aboriginal Canadians could enter the workforce. That's why our government's economic action plan 2012 provides more than $690 million to make sure aboriginal youth are job ready.
There is a tremendous new global opportunity for Canada to thrive economically, so long as we make the right decisions today to capitalize on our vast resource development potential.
In addition, we need to continue to focus on innovation in the natural resources sector, through such programs as our ecoENERGY innovation initiative, which supports a wide range of investments to promote energy efficiency in buildings, communities, industry, transportation, and advances in clean electricity, renewables, and bioenergy. I look forward to the advice of this committee as part of your study on innovation in the energy sector.
Mr. Chair and members of the committee, I have travelled to current and potential markets over the past year and a half to promote the great economic attributes of Canada's resource industry: energy, mining, and forests. At every opportunity I have witnessed great admiration, and even envy, for Canada's accomplishments and potential. It's clear to me that the world is taking notice of Canada as a reliable and responsible source of energy and resources. Other nations and their business communities see Canada as a place to invest safely and as a source of high-quality products and resources.
The choices Canadians make today will determine our success in the future, so I urge all members of Parliament to work in the spirit of cooperation to ensure that Canada does indeed seize the great potential of increased jobs, growth, and long-term prosperity for generations of Canadians from coast to coast to coast.
Thank you again for this opportunity to speak. I'll be pleased to answer any questions you may have.
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Those investments covered a number of different areas.
I might mention as an example the forestry industry, where the government has invested more than $1.7 billion, and this is creating results with close to a 1,000% increase in Canadian softwood lumber exports to China.
The budget also provided over $100 million to support continuing transformation of the forestry industry in areas of innovation and market diversification. A couple of the examples are the expanding opportunities program to help to diversify Canadian wood and help develop the non-residential school and mid-rise construction markets in North America. Another is the forest innovation program of some $66 million to support the emergence of breakthrough technologies that will extract greater value from the wood we already harvest.
There are other areas such as the clean energy fund, which relates to, among other things, carbon capture and storage projects that we have been supportive of. I think it's understood that Canada is a leader in the field of carbon capture and storage at both the provincial and federal levels, and $2 billion has been invested in that particular innovative technology.
There have been a number of areas where the economic action plan response to the recession has not only enabled the country to emerge more quickly and in better economic shape than other countries, but has also enhanced particular industries in the natural resource area.
:
Thank you, Mr. Chair. Yes, I will be sharing my time with Mr. Nicholls.
I appreciate your being here today, Mr. Oliver. As you know, ministerial responsibility means answering questions, even embarrassing questions. I certainly hope Conservatives will allow the opposition members to ask those important questions today.
I'm struck by the allocation in the supplementary estimates of nearly $77 million going to AECL. As you remember, Mr. Oliver, very controversially last year the government sold off hundreds of millions of dollars in assets from AECL for the amount of $15 million. It was called a fire sale at the time. It was called a sweetheart deal. Even greater was the outrage and concern when it was learned just a few weeks later that AECL had actually negotiated an additional contract for $440 million that was part of this sweetheart package.
I note that in your presentation you mentioned a commitment to fiscal responsibility. Here we have a fire sale of government assets, where hundreds of millions of dollars of assets and a $440 million contract are sold off for $15 million. It would be like my saying I'm going to buy your car for $100, but you give me the car and $10,000 back. I think the public understands that was just a poorly negotiated, sweetheart, fire-sale deal.
My question for you is this. Is the $77 million serving to sweeten the pot for subsequent sales, or is that money that is being transferred to the buyer of AECL assets for $15 million?
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You are asking a lot questions and making a lot of accusations, but I will try to answer you.
[English]
First of all, I'm pleased that you read my letters to the editor. I think you will find a lot of information in them.
As to this oft-repeated and often mischaracterized statement about radicals, what I said was that there are some groups who are opposed to every form of resource development. Since making that statement, which was clear at the time, the facts have become even more abundantly obvious because there hasn't been a single major resource development in this country that has been proposed since I became Minister of Natural Resources that has not been opposed by some group or another. That is regrettable because I think analyzing the projects on their merits, and from a political perspective, waiting for the regulatory organization to make its independent, scientific, objective analysis and come to its conclusions, is what responsible parliamentarians should do.
You talked about advertising, so let me respond to that point, and then go on to some of the others.
[Translation]
Canada's natural resources play a crucial role by creating jobs and fostering economic growth in all regions of the country. Natural resources support close to 1.6 million jobs and place fifth overall in Canada's economic activities.
An additional amount of over $4 million will be used to purchase advertising that will appear on television and on the Internet.
[English]
The point is to provide facts to Canadians about measures taken by the government to protect the environment and provide other information on responsible resource development. All details regarding the advertisements will be published by the government in the annual report on government advertising activities.
Thank you, Minister, for coming.
A month ago, I led a delegation of MPs and senators from Atlantic Canada. We spent a few days in northern Alberta. We visited Syncrude's oil and gas operation. We visited the site where former Prime Minister Chrétien signed a big deal with the oil companies and the provinces, which kind of fostered the big development out there.
We also went to Fort McMurray and met with the chamber of commerce, the airport authority, a college, and MLAs. They see the big expansion.
It's just a note to you, Mr. Oliver, that you should tell your to get up there. They need help with their expansion of the infrastructure, the airport, everything. They're busting at the seams.
You already mentioned in your briefing that you're well aware of the numbers, of the impact to the economy in that region. We're talking 20% of GDP in exports. When you look at the numbers, going from 1.5 million barrels a day to over 5 million barrels a day, the amount of increased production is going to be phenomenal.
I don't know if you have read the article in the latest The Economist. It pretty well states that your government has a great opportunity, if it handles it properly, but if it's not handled properly, we're going to lose that big opportunity and you're going to see the big players cutting back on their venture capital and investing.
We also met with stakeholders in Calgary. They see this as your government’s and the Prime Minister’s having to take the lead on this, just as they took the lead 150 years ago when the railroad was built. They have to take then lead on getting these pipelines in place. They cannot leave it to the private sector because the private sector is not going to be able to do this on its own.
I have a couple more comments. I'm on the foreign affairs committee. Right now, we're studying the future of the Arctic. That opens up not only a whole pile of challenges, but also opportunities, of which, as the minister, you're well aware. Just the other day a witness talked about the potential of piping oil to Churchill and oil tankers coming out of Churchill. It's a big challenge, but it could be an opportunity.
That all being said, and assuming you might be minister of this department for the next three years, you're going to see a ratcheting up of production out west. Of course, you're well aware that the United States is becoming more self-sufficient, and we need these other world markets. You mentioned that it has to come out of a pipeline one way or another.
My first big question is, what is your game plan, not only yours, personally, but with your colleagues as well? This can't be pulled off by your department alone. Therefore, what is your game plan along with your colleagues and your provincial counterparts? With reference to the railroad, in order for the railroad to be built 150 years ago, the Prime Minister had to take a real, vested interest in making that happen. I'm concerned about leaving it to the private sector.
If you're going to have this job for the next three years, what is your game plan to do this right, along with your colleagues and your provincial counterparts? If it's not done right, the capital would stop coming into the region, all those jobs out there would be lost, and we would lose this great opportunity for the economy.
:
Thank you for your question. I'm pleased you see the enormous economic potential for the Canadian economy, and for individual Canadians right across this country.
You say that the private sector can't do it on its own, and certainly government has its role too. I hope you're not suggesting, however, that the federal government support the resource companies because that's not where we're heading.
What we need, clearly, is a collaborative effort between the federal government and the provincial governments, and between the provincial governments themselves, because we are talking here about resources and responsibilities that the Constitution has divided between the two levels of government. Some are within federal jurisdiction, some are within provincial jurisdiction, and some are shared, and so we all have a critically important role in that regard.
I should also mention the role of the regulatory bodies. We have been very clear, as a government, that no project will go ahead unless it's safe for Canadians and safe for the environment. We take environmental protection and safety of Canadians very seriously. That is why, in our responsible resource development legislation, we put significant amounts of money into maritime safety and into pipeline safety. We will continue to move forward to make sure that the safety is utterly world-class. This means it's a never-ending task because as technology and science improve, we're going to require industry to move with them.
Our vision is long-term prosperity and security for Canadians, based upon the responsible development of our immense natural resources from coast to coast. Everything we're doing is geared to achieving that overarching objective.
:
Thank you very much, Mr. Chair.
Thank you, Minister, for being here today.
I want to pick up on a couple of Mr. Eyking's comments. I'm glad that the Atlantic caucus from the Liberals went up to the oil sands to see the potential benefit of that. There's a tremendous benefit. I'm glad he is supporting us in developing that and looking for all the opportunities to get our resources out to market.
One of the things, Minister, that we have heard about a lot in the news lately is the reversal of Line 9 and the potential pipeline coming east as an opportunity to open up more markets for oil sands product, which I think is tremendous. I'm sure that my colleague, Mr. Calkins, would be very happy that we're exploring all these markets as well.
In the estimates, where you talk about the funding of $5.9 million to strengthen the capacity to inspect oil and gas pipelines, are those dollars going to be something that will improve our record on pipeline safety? In your view, does that prepare us for when we start to expand our pipelines and potentially look at a pipeline east?
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In response to an earlier question, I talked a bit about the expanding markets opportunity program and the forest innovation program. We see enormous continuing demand in China, India, and Japan. The markets are different. The Japanese market is looking for high-quality wood.
I was in the Sendai district, which had been hit by the tsunami, and I was very moved to see a ship carrying B.C. lumber that had come in. That lumber is being used for reconstruction efforts in that country and is greatly appreciated. Canadian wood is very well respected there.
In China, I was in an area where the very first four-storey wood-frame building in the entire country had been constructed. There's a cultural issue there. We need to propagate the advantages of wood. Wood lasts a long time—the Forbidden City is made of wood—and the Chinese know that, even though they don't have many homes that are built from wood. It's more resistant to earthquakes, and, depending on the quality, it can be very attractive for price-sensitive buyers, which the Chinese market has.
There is enormous potential. Given the huge increase in the middle class in China and India and the demand for second homes, which can often be wood-frame homes, we see tremendous opportunity.
Frankly, if it weren't for the Chinese market, I don't know where the Canadian lumber industry would be today. I've heard that expressed on numerous occasions. Frankly, that market plus the $1.7 billion that our government has invested actually saved the industry.