INDY Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, April 21, 1998

• 0833

[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): Pursuant to Standing Order 108(2), a study on information technology, preparedness for year 2000, we are continuing our hearings, and we're very pleased today to have a number of groups coming before us to discuss their preparedness for the year 2000.

We have with us today the Atomic Energy Control Board, Atomic Energy of Canada Ltd., Ontario Hydro, and Ottawa Hydro. I'm going to be asking the different groups to do their presentations in that order, which is slightly different from what's listed on the agenda before you. After the presentations, we'll open it up for questions. You should have in front of you—and if you don't, the clerk will ensure that you do—a copy of each of the briefs for the four groups that are before us.

With that, I will begin with the Atomic Energy Control Board, and I believe Mr. Asmis, the director, is doing the presentation.

Mr. Werner Schmidt (Kelowna, Ref.): On a question of procedure, will we be asking questions after each presentation, or will we have the three presentations and then questions afterwards to all of them?

The Chair: I'm sorry, there are going to be four presentations. We'll have the four presentations, and then we'll have questions that will be directed to all of them.

Mr. Werner Schmidt: Thank you.

The Chair: Sorry, Mr. Asmis. You may begin.

Mr. Kurt Asmis (Director, Atomic Energy Control Board): Thank you, Madam Chair and members of the committee.

I'm representing the Atomic Energy Control Board. I have with me Mr. Namir Anani, the head of the instrumentation control and electrical group; and also Mr. Ha Huynh, a control engineer in the ICE group.

We have prepared a brief for the committee, which I think has been distributed to you, and there are really three points I would like to underline in that brief.

First, the Atomic Energy Control Board regulates nuclear power electrical generating stations. For the year 2000 issues, we are requiring from our licensees assurances that these issues cannot affect the safe operation of the plants.

The primary focus of our activities, however, is in nuclear safety. We are certainly interested in the reliable production of the plants and the reliable distribution of electric power, but only insofar as to minimize the challenges to the safe operation of the nuclear plants themselves. Reliable electrical power production and distribution to the consumers against any year 2000 threats is not our primary focus.

• 0835

The second point I'd like to make is that we at the Atomic Energy Control Board are treating the year 2000 issue seriously, and so are our licensees, Ontario Hydro, Hydro Quebec and New Brunswick Power. As well, I should mention that the designer of CANDU, AECL, Atomic Energy of Canada Limited, have their own year 2000 programs.

A year ago we formally requested the licensees to investigate the year 2000 issues. At that time all the licensees informed us that they had programs already in place, so the awareness and the willingness to treat these issues and correct deficiencies is there.

The third point I'd like to mention is that for the year 2000 issues we have a strategy in place that requires the most important systems to be examined, corrected and tested first. The time line attached to that strategy has three dates and requires the systems most important to safety—what we call the special safety systems—to be ready by October 1 of this year. The special safety systems are the ones that shut the reactor down, provide continual cooling to the fuel, provide containment and continued monitoring and control.

By the end of the year the next level of systems—these are key process systems that could challenge the safety systems, such as the station computers and the fuelling machine computers—will be ready. Then by June 30 of next year we require that all other systems, computerized processes, instruments, engineering tools, databases, that are important for the continued operation of the plants be ready.

I'll stop here. In the brief we've given, there are a number of examples of the types of problems that have already been found within the nuclear power industry and there's a listing of the types of systems we consider important for safety.

My colleagues and I are prepared to answer your questions.

The Chair: Thank you very much, Mr. Asmis.

Perhaps we could turn to the Atomic Energy of Canada Limited. Dr. David Torgerson, please.

Dr. David Torgerson (Vice-President, Research and Product Development, Atomic Energy of Canada Ltd.): Thank you very much, ladies and gentlemen.

First, I'd like to introduce my colleague Basma Shalaby, who is AECL's chief engineer. I am responsible for research and product development at Atomic Energy of Canada Limited. There are only a few points I would like to make, but first I would like to make it clear that AECL's business is to design, develop, market, build and service CANDU nuclear power plants domestically and abroad. It is the CANDU utilities' business to operate the plants. AECL supports the utilities as a service provider and is cooperating with them on the year 2000 issues.

Our year 2000 program is under way with full-time project coordination and the program is built around an inventory of digital products designed, used or procured by AECL. I stress again that the CANDU utilities all have their own year 2000 programs.

AECL is providing information advisories to the utilities and offers detailed year 2000 technical support to them.

AECL has a comprehensive scope of activities to examine all aspects of the year 2000 issue. The activities are divided into three main areas. First, there is our engineering program under which we are examining our analysis codes, our engineering tools, plant systems and our experimental facilities and equipment.

Secondly, we have our project program in which we are working with our subcontractors, clients, services, production facilities and equipment suppliers.

Finally, we have our corporate program looking at our business support systems, information technology infrastructure and facilities equipment.

• 0840

In terms of our major milestones, in November 1997 we had a year 2000 program start-up team; a mandate was confirmed. We had a program plan prepared as of March 1998. We advise operating stations of AECL year 2000 findings, or need for corrective actions to support their Atomic Energy Control Board target dates in 1998 and 1999. Then year 2000 review and corrective actions for business-important in-house tools and facilities will be completed by September 1999.

In conclusion, I will state that we are ensuring that all systems used by AECL are year 2000 compliant. We are ensuring that new products are year 2000 compliant. We are providing information feedback from our in-house program to the operating utilities, and of course we are fulfilling all legal and contractual obligations to our customers.

Thank you very much.

The Chair: Thank you very much, Dr. Torgerson.

We will turn now to Ontario Hydro and Mr. Ted Clark.

Mr. Ted Clark (Vice-President, Year 2000 Project, Ontario Hydro): Good morning. My name is Ted Clark. I'm the vice-president of the year 2000 project for Ontario Hydro, and I thank you for the opportunity to share our year 2000 initiative with you today.

I will spend a few minutes speaking about the program from a high-level perspective and then I'll ask David Kwan, who is heading up the nuclear part of the program, to deal specifically with the nuclear aspect of the year 2000 program at Ontario Hydro.

Briefly, I'll talk about the impact we've seen with year 2000 at Ontario Hydro, the approach we are adopting, the current status of the program and the objectives of the program as we've set them out at this time.

Year 2000, as an information technology problem, impacts all areas of the business at Ontario Hydro. It affects our generation stations, hydroelectric, fossil and nuclear; it impacts our ability to transmit power through the grid; it impacts the distribution and control of the distribution of power. It obviously has an impact in our relationship with our regulators and licensors. It affects interconnections with other utilities who are sharing the grid and supplying power to us. It has an impact on our suppliers and, ultimately, on our customers in terms of their own readiness.

The approach that Ontario Hydro has taken to year 2000 is that we are treating it as a major threat. It is a program that has an estimated budget of $125 million and will involve between 400 and 500 people working through most of 1998. It is the highest priority program in the corporation and we view it as critical to the success of both our nuclear optimization and our preparation for the deregulation that is going on in parallel to the year 2000 program.

It is an overriding performance measure for the executives and the management of the corporation. It is a must-achieve objective in 1998 for all executive compensation in the corporation. I report on a regular basis to the CEO and to the board of directors each month. The program in Ontario Hydro is centrally coordinated and locally executed, so in each of the business units a year 2000 program that is coordinated at a corporate level is in process.

We are also focusing on a business process risk management contingency planning strategy in parallel with our remediation of the IT assets.

Accomplishments to date: We obviously have a high level of awareness and the size of the problem has been determined. The year 2000 program organization is established and operating. We have completed our inventory. Planning and analysis is completed and remediation projects are under way. Business process risk assessment is also in process at this time, as is emergency response preparedness planning specific to year 2000. We also have an active vendor compliance program.

Our program objectives are to achieve operational sustainability by the end of 1998. This means that all critical systems and processes will operate successfully before, during and after transition to the year 2000, or that viable workarounds have been identified, tested and certified. Our objective for the year 2000 is to be year 2000 ready in 1999. This means that we have agreement at the executive level that specific levels of preparedness, critical business processes, our internal and external relationships and emergency response capabilities be in place.

• 0845

I'll now turn it over to David Kwan to summarize on the nuclear aspects.

Mr. David Kwan (Project Manager, Year 2000, Ontario Hydro Nuclear): Thank you. I am the project manager for the year 2000 at Ontario Hydro Nuclear. We represent 50% of the generation capacity at Ontario Hydro and we operate the three nuclear power plants in Ontario at Bruce, Pickering and at Darlington.

We have rigorous processes in place to ensure that all nuclear safety systems are addressed adequately. We have processes and procedures well defined and documented. We have a rigorous inventory process and we have a certification process. I will go into a little more detail of what these processes are.

One of the weakest links of any year 2000 project is to make sure that all the systems that are vulnerable are identified. This is what we call a complete inventory process.

The four elements of ensuring that we have a complete inventory is to make sure that we have sign-off by responsible supervisors and asset owners across the organization. We are having plant walkdowns to confirm the inventory. We will be doing consistency checks against the different sites for each of the systems that we have at the site. This information is in our database that we maintain to help us monitor and track all these systems. These systems also have interface to each other and we'll be doing consistency checks amongst the interfaces for the assets and systems that we have.

All the safety systems or high-impact systems go through a certification process to confirm that there is no Y2K problem to our business. The elements of that process are what we call a platform assessment. This is essentially a review of the operating system, the tools and the hardware on which we run our systems. We do a detailed code review as well. We document the plans for testing. We do the tests and we document the results in test reports. The fixes and replacement projects that we would need to replace the problem systems that we identify will follow existing QA procedures that we have established and are working to.

For the high-impact systems, we have an independent review of the information gathered during this certification process on the work that's been done.

We are closely linked to all industries and vendors. We do not exist by ourselves. Our success depends on the collaboration of our business partners, especially in the CANDU community, and of our vendor systems suppliers.

We need to collaborate and work together with the Atomic Energy Control Board, for example, to establish the requirements that will ensure that our nuclear safety systems will operate safely. We need to work with our suppliers, like Atomic Energy of Canada Limited, to support our staff to identify and fix problems.

We are working with General Electric of Canada, who are the designers of our fuelling machines. Also, we have discussions with Hydro Quebec and New Brunswick Power on what their programs are and what their findings are. As well, we'll be involved with the Electric Power Research Institute to make sure that we learn what other industry utilities are doing as well as to share information with them to make the most effective use of our resources and time.

• 0850

We have put together an ambitious plan for OHN to demonstrate that we can mobilize our organization to face the challenge of the century. We will continue to generate power, and do it safely, through to 2000.

Thank you.

The Chair: Thank you very much, Mr. Kwan and Mr. Clark.

I'll now turn to Ottawa Hydro. Mr. Peter Liu.

Mr. Peter Liu (Director, Information Systems, Ottawa Hydro): Good morning. I'm only going to take four minutes.

Ottawa Hydro is a local utility with a focus on the reliable and safe supply of electricity at competitive rates. Our year 2000 readiness represents that of a typical major utility in the province of Ontario from Sudbury to Windsor and from Toronto to Ottawa.

Before I delve into our year 2000 issue, I want to make five points on electricity in general.

Our electrical system and its infrastructure were established before microchips were invented. Our circuits and breakers may be manually controlled for public safety and reliability reasons. We have current and complete paper back-ups of our infrastructure maps and electrical drawings in case of computer failure. Our line crews and bucket trucks are now equipped with mobile computing devices. Most of our customer meters are chip-free. The majority of the meters that are embedded with microchips have been tested.

The year 2000 issue in our organization has two dimensions. The components of legacy systems form the basis of our customer billing and engineering operations. This is crucial to the financial well-being of our organization. The other dimension consists of systems such as building security, electric load monitoring, telecommunications, and PC and LAN systems.

In the dimension of legacy systems, the year 2000 inventory and estimating phases were started in 1996. This process took three months. No money was spent on consultants or conversion tools because some of the original authors of our systems and programs are still on staff. This also demonstrates the advantage of homemade systems versus purchased software packages, which place you at the mercy of the vendor.

Resources, which are 30% in our case, and project priorities have been rearranged and assigned. Senior management support has always been there.

Actual program changes and testing started in the summer of 1997. We replaced our ten-year old IBM mainframe with a new CMOS CPU, which went into production early this year. Our new operating system and database software are ready for the year 2000 right now.

Our application code conversion changes using sliding windows and expanding fields are targeted for completion in July 1999. This deadline cannot be extended, as you all know.

As I speak, 45% of this entire project has been complete. Most of the completed systems have been tested, and some are already implemented without the users' awareness.

In the areas of the other dimension, our building security and electrical load monitoring systems are scheduled for replacement this year, after 19 years of service. We already started some long-term PC and LAN testing.

We're also in the process of verifying the year 2000 readiness of our suppliers and vendors, including telecommunication equipment and Ontario Hydro.

In conclusion, I'm confident that Ottawa Hydro will successfully meet the targeted deadline for our year 2000 project, as we always have for the previous projects. The only concern I have, other than what we may have forgotten, is the reliability of our legislated electricity supplier, Ontario Hydro. If the regulation of our industry were to proceed at a faster pace, we could tap into the open market and guarantee our customers a reliable supply of electricity and services for January 2000 and beyond.

Thank you.

The Chair: Thank you very much, Mr. Liu.

I'm now going to turn it over to questions. We'll begin with Mr. Schmidt.

• 0855

Mr. Werner Schmidt: Thank you very much, Madam Chair.

Thank you, gentlemen and lady, for appearing before us here this morning. It's a pleasure to hear you all and also to have reflected in every one of your voices total confidence that we will be ready. I'm so happy to see this, because we haven't heard that from anyone else before this. The only other group that suggested they will be absolutely ready and assured were the banks. So you are the other group that is in that same category, according to your own testimony.

My question has to do with the communication links that you have between yourselves and of course the world that you serve, and the way in which your various generating stations, distribution stations and so on are linked to one another. Here you need the telecommunications industry, clearly, as well as probably some others.

I notice that in your presentations, especially Ontario Hydro's, you indicate that your cooperation is necessary in all areas and it's the one that's singularly not there. So what is your connection with the telecommunications industry in particular that really links the communication you have to do when you're in business?

Mr. Ted Clark: Thank you.

Telecommunications is a major supplier and it was in the supplier context that we would be referring to them. We are working very closely with Bell and related companies as far as the compliance of the telecommunications network is concerned, and we have Bell people working on our telecommunications team. In addition, we are looking at alternate telecommunications strategies related to the monitoring of the health of the network.

Obviously telecommunications is a critical device for measuring the health of the network and we have alternate means, through microwave and other types of technology, that we're already experimenting with as alternate strategies in terms of the risk management related to the telecommunications side.

The Chair: Mr. Liu.

Mr. Peter Liu: I would like to answer the question in two parts. One part of the question was on the link between substations. As I mentioned before, the substation was made of mechanical and electrical. Microchips are not in there. Even though we have low-monitoring systems to monitor the switching, we could manually override with that.

In terms of the communications in the telephone area, we also have assurance from Bell Canada, in our case, that their equipment is ready, but we still need to test it. We offered joint testing with Bell Canada but we haven't heard from them yet.

Mr. Werner Schmidt: I think, Madam Chair, that's rather a significant point. If you have not tested it yet.... Ontario Hydro, have you tested it yet?

Mr. Ted Clark: We are testing at this time with Bell Canada, and as you know, the telecommunications network is complex but tests are going on. We have a telecommunications team as part of the year 2000 program, and that's the focus of their attention, primarily dealing first with the security of the monitoring of the transmission and distribution network.

Mr. Werner Schmidt: I'm particularly impressed with the fact that there seems to be an anticipation of a question with regard to embedded chips, but that seems to be answered in your presentation here. I'm wondering, in your inventory or your analysis of your inventory, have you an accurate inventory list of all of the embedded chips that are contained in any of your equipment that is critical to the transmission or the generation of electrical power? This applies not only to the hydro distribution people at Ontario Hydro and Ottawa Hydro but also particularly to the nuclear people.

Mr. Ted Clark: The inventory of the digital assets included a full inventory of the unique systems and the embedded systems that were in the network. Obviously there are, worldwide, something like 3 billion process control devices, embedded systems. The walkdown that David was referring to is really a last check in terms of the nuclear area to try to again ensure that we have identified all of the microprocessor chips that are in the systems.

The Chair: Mr. Asmis.

• 0900

Mr. Kurt Asmis: From the nuclear safety point of view, most of the special safety systems I mentioned, which, independent of any process computer's monitors, oversee the safety of the plants, are hard-wired analog. The only difference is Darlington, where all the special safety systems are digitally controlled. There was a major effort in reviewing those 10 years ago. From my recollection, there are no real-time clocks in the safety computers. Ontario Hydro will be confirming that. These systems, totally independently of any communications system or anything external, will put the plant in a safe state.

Mr. David Kwan: One of the most important processes is to make sure we have identified all the systems that are vulnerable, and that includes what the gentlemen here have referred to as embedded systems. We have a rigorous process to make sure we identify all these systems, and one of the key points is we have identified these systems without any prior judgment of whether they are vulnerable or not. We have used the term “digital access” to include all equipment and software that is built from digital technology. We identified that equipment without any prior judgment of whether that system is vulnerable or not. We are doing the assessments based on that list.

We have already assessed safety critical systems. There are two areas. One is shutdown system one and shutdown system two at Darlington. Those systems do not have any date usage, so they are not vulnerable to the year 2000 problem. The other system is what we call the OH180—controllers we use for the containment system. Those systems also do not have any date capability or usage so they are not vulnerable to the year 2000 problem.

Mr. Werner Schmidt: I'm very encouraged to hear some of these comments and I think there is a reason to feel somewhat assured.

The other question I have is about other electrical distribution or generation systems that may not be as ready as you are. We know there's an interlocking grid system. So if one of those other systems goes down and you are called upon to provide that extra electricity, how ready are you to make those kinds of commitments?

Mr. David Kwan: I think the whole industry is interlinked. Everyone needs to be ready in order for us to deliver power to your doorsteps. We have to continue to work together to make sure we play our role and take responsibility to ensure our business is ready. As part of our year 2000 program, we're also working with all business partners to ensure they are ready as well.

Mr. Werner Schmidt: That's not exactly a question. We know that. The important thing is what steps are actually being taken to provide some assurance that this will work, and what is the contingency if something goes down? We understand the problem, as you do, and the complexity of it, which you've illustrated very well.

The important thing is what happens if something fails? It will probably not be a big thing that will fail. It'll be a little thing that will cause it to break down somewhere. It'll either be in a nuclear generation part or somewhere else. It may be one little switch somewhere. That's where it will happen. It won't happen on the big system, but it'll be a big system that does down. What will happen then?

Mr. Ted Clark: Maybe I could comment on that. The management organization, in terms of control of the distribution for Ontario Hydro, works closely with the other utilities across the northeastern part of the continent. Within that structure, it has the ability to certainly isolate Ontario, for example, from failure of other organizations losing load, unlike what happened in 1965, I believe, when there was a major collapse of the power grid across northeastern North America.

Coming out of that experience, changes were made in the network control side. We have an organization called CMO, which basically monitors the grid in its area of responsibility and has the ability to isolate the power and the supply of power into Ontario through that grid through control mechanisms built into the grid. So they have a more secure situation as a result of the experience in 1965.

• 0905

Mr. Werner Schmidt: So that isolation capability is not time sensitive but demand sensitive?

Mr. Ted Clark: It's sensitive to the performance of the grid they're monitoring. They have the ability to isolate the grid within their control structure.

The Chair: Thank you, Mr. Schmidt.

Mr. Bellemare.

[Translation]

Mr. Eugène Bellemare (Carleton—Gloucester, Lib.): I will direct my questions mainly to the representatives of Ottawa-Hydro and Ontario-Hydro.

[English]

You're giving us some kind of comfort zone here—you know, smile, be happy; we're experts, we have everything under control. As a politician, though, I still have concerns. My concerns would be going back to January 1998, say, during the ice storm. I think many people in my area were very critical of Ontario Hydro. The problem was isolated in eastern Ontario and isolated in southern Quebec. You had people from the United States, even, from different provinces, different areas of the province, coming in to help.

Should the grid system break down, one could even write a nice book for a good movie on what could really happen. My worry at the worst of times is that on January 1, although someone had thought they had fixed everything, it breaks down, and you have a total grid system shutdown, which would affect, for example, the whole telephone system, emergency systems, including police, fire, and ambulance, elevators, traffic lights, consumer power to homes, the banking system, gas stations, and hospitals. You'd be stuck.

Some people are even thinking of buying a generator and taking out at least a $10,000 loan in order to be able to buy things, because on that day, if there is a breakdown, the exploitation is going to be criminal, as it was in many areas in this general area. You're aware of the news reports of how people were gouging other people. If this occurs on January 1 in Canada, especially in this area, it could be 20° below zero.

I am aware that at Atomic Energy of Canada they have safety features. Everything shuts down. The question would be how you start it up, because it's getting goddamned cold, and it's dark. The kids are upset. Mom is very sick, and So-and-so is having a heart attack. We have to take him to the hospital, but the hospital is shut down because it has problems also. As a matter of fact, it's mayhem out there in the streets.

I'm concerned about this. My questions, which I've prepared so that they'd be more concise and succinct, are these.

To the hydro people, do you have a schedule for each of your systems showing milestones for tracking year 2000 compliance at Ottawa Hydro and at Ontario Hydro?

I'm not getting any answers, Madam Chair.

The Chair: They're nodding “yes”.

Mr. Ted Clark: Was that the question?

The Chair: Yes.

Mr. Ted Clark: Then the answer is yes.

Mr. Eugène Bellemare: Thank you. If you believe you have finished—

The Chair: Ottawa Hydro is also here.

Mr. Liu.

Mr. Peter Liu: Ottawa Hydro does have a schedule of milestones. We have a project—I happen to have brought it with me—that outlines the milestones and the time lines. It shows at what date the steps should be finished, tested, and implemented.

Mr. Eugène Bellemare: You'll provide that to us?

Mr. Peter Liu: You can have it, yes. This is as of last week.

Mr. Eugène Bellemare: If you believe you have finished or just about finished your year 2000 compliance program, can you tell us if you have certification internally, with back-up testing?

• 0910

Mr. Ted Clark: I did not say that we have finished our program. I basically outlined the status of our program, but the certification of all assets...whether they're considered compliant or non-compliant, they will be all certified as part of the program.

Mr. Eugène Bellemare: Is it the same thing with Ottawa Hydro?

Mr. Peter Liu: As I said in my opening statement, we have 45% of the whole project completed. We also have a new mainframe installed.

Mr. Eugène Bellemare: But with respect to the certification, will you have or do you have certification?

Mr. Peter Liu: Let me answer this question by quoting an article I read yesterday in Computerworld. This is from April 13, and it says that “none of the three major network operating system vendors—IBM, Microsoft and Novell—will guarantee any of their products against year 2000 failures”.

Mr. Eugène Bellemare: Okay, and where—

Mr. Peter Liu: They can't do it. We'll do the best we can.

Mr. Eugène Bellemare: Ah, we're starting to see the crack in the wall. Do you have, in written form, any certification in-house that things will be in order, notwithstanding what you've just said, that you cannot guarantee what IBM and the rest of the companies can provide you?

Mr. Peter Liu: We have a new mainframe that divides the system into two “L” parts called “partitions”. Today we're running production in one partition and at the same time testing year 2000 in the other partition. So we are pretty confident that the system will operate today because it's operating today, and it will be operating in the year 2000.

Mr. Eugène Bellemare: And certification can be done?

Mr. Peter Liu: We don't have a certification problem.

Mr. Eugène Bellemare: Is it in written form?

Mr. Peter Liu: We don't have one.

Mr. Eugène Bellemare: Why not?

Mr. Peter Liu: Because we put it into practice and we figure it's going to work—

Mr. Eugène Bellemare: Oh?

Mr. Peter Liu: —in our local support. Now remember, during the ice storm—

Mr. Eugène Bellemare: Are you maybe afraid of being sued and you wouldn't have anything on record?

Mr. Peter Liu: That actually comes up through the ice storm—

Mr. Eugène Bellemare: Yes. And if so, if I were in charge at Ottawa Hydro, I'd ask what we had in order to be able to defend ourselves. This is what you would be accused of if there's a breakdown. You didn't have the records. There's nothing to audit.

Mr. Peter Liu: Your point's taken.

Mr. Eugène Bellemare: Thank you. My next question—

The Chair: Last question, Mr. Bellemare.

Mr. Eugène Bellemare: Oh, my good gracious!

Mr. Werner Schmidt: I know how you feel.

Mr. Eugène Bellemare: Thanks.

The Chair: Go ahead.

Mr. Eugène Bellemare: Do your written reports indicate...you don't have written reports. My question would have been, sir—may I, Madam Chair? There's this potential question that I can't have because they haven't done their homework.

The Chair: It's your last question. You have your choice.

Mr. Eugène Bellemare: And I will return and maybe someone else who is still asleep can give me their turn and I can go on.

Do your written reports indicate that your testing methodology will assure everyone that your system will run properly, without a hitch? I'm guessing that word is no.

The Chair: Mr. Clark.

Mr. Ted Clark: The answer would be no.

The Chair: Thank you, Mr. Bellemare.

Mr. Eugène Bellemare: I'd like to ask for another turn.

The Chair: We'll try.

Mr. Eugène Bellemare: Thank you.

[Translation]

The Chairman: Mr. Dubé, please.

Mr. Antoine Dubé (Lévis, BQ): I've pointed out in the past that witnesses were not presenting their documents in French. So I must congratulate those who do and I thank you today for having sent us your documents in French.

This committee is asking you to brief us on what preparations each one of the organizations you represent has made to deal with the year 2000 problem. I'd like to flip the question around and ask you what you think about what the World Millennium Foundation has already suggested which is setting up a national program committee to really coordinate all that.

I'd like to put a subquestion right away because I'm going to be suggesting a little round table for each of the organizations. As there is a national subcommittee to coordinate the problems that will arise in the gas area, would you like to have a national subcommittee in your electrical energy area to coordinate the efforts with a view to settling the year 2000 problem?

I'd like to get an answer from each one of the organizations.

• 0915

[English]

The Chair: Mr. Dubé, I should just let you know that the next session we're holding will be with the gas companies, at 10 a.m. This session is specific to hydro, so we're trying to keep our questions on hydro. Okay? I know part of your question was about gas, so I want to clarify that.

[Translation]

Mr. Antoine Dubé: That's because we have good research people who read the documents ahead of time.

[English]

The Chair: Mr. Asmis, please, or Mr. Anani.

[Translation]

Mr. Namir Anani (Head, Instrumentation Control Electrical Group, Safety Evaluation Division (engineering), Atomic Energy Control Board): I'm Namir Anani and I work for the Atomic Energy Control Board.

We have actually been in discussion with different regulatory organizations in England and in the U.S., in other words at the international level. As Mr. Asmis explained in his presentation earlier, we're looking at this matter very seriously. That's why we asked for the setting up of a transparent process to ensure that the problems that will occur in the year 2000 don't put the plant's safety at risk.

We asked the permit holders, whether Ontario Hydro or the others, to provide us with clear and specific information concerning, for example, any possible failure of data processing systems. We also asked them to do a risk analysis to identify the modes of failure and their impact on the safety of nuclear plants as well as to provide for emergency measures for those plants.

In conclusion, I could say that we're taking this problem very seriously and that there have been discussions with many international regulatory organizations and agencies.

Mr. Antoine Dubé: I guess my question wasn't understood or maybe I didn't word it the way I should have. I can see that you're taking these questions very seriously and I have no doubt at all about that. My question has to do with another aspect. You think you already have the terms of reference to supervise all that aspect on the national level, but it seems to me the problem is greater—everyone agrees that it's a problem that could be greater than what we think—and a special committee or a special program should be set up to deal with it.

Mr. Namir Anani: As for whatever problems may occur in the year 2000, in theory our terms of reference deal only with the nuclear plants and not with other electrical stations. I'll let the representative of Hydro-Ontario or others answer your question on that. The Atomic Energy Control Board's main mandate is to solve whatever impairments may occur in the year 2000 and to look at the whole aspect of safety in nuclear stations or plants.

[English]

The Chair: Dr. Torgerson, would you respond to that?

Dr. David Torgerson: I will only reiterate that at AECL, even as we speak, we are dealing with the stations and making them aware of our findings as we carry out our year 2000 program. I can only agree that, of course, coordination is very important, and that is an integral part of our program.

The Chair: Thank you.

[Translation]

Mr. Dubé, do you have another question?

Mr. Antoine Dubé: This is all just a matter of words. I understood that people were working together and cooperating to some extent, but I believe that there is not one sole organization that has been mandated to cover the entire hydroelectric sector. I believe that there is no organization that has a mandate to cover the entire industry.

If I understood your answer correctly, you are saying that you monitor the safety of nuclear power stations. However, you are also saying that you do not have the mandate to coordinate the whole thing. I was asking you whether you thought it would be useful to create a federal organization that would coordinate this entire aspect.

• 0920

[English]

The Chair: Mr. Clark.

Mr. Ted Clark: I think the point is well made and there are advantages with a more coordinated structure.

Today the various utilities are working together in an informal and cooperative way, and there are consultations that go on between the various groups. But there is nothing of a formal structure or of guidelines for performance that have been established on a national level or even on a North American level, which is the way the power system is actually operating. So I think there is validity in the suggestion.

The Chair: Thank you.

[Translation]

Mr. Antoine Dubé: Could I have the opinion of the other two witnesses?

[English]

The Chair: Mr. Liu, did you have a reply?

Mr. Peter Liu: As a local utility, our objective is to keep your lights on. We have done that during the ice storm, even when it's a natural disaster.

My concern was, as I stated, the supplier. As long as we have insurance with the supplier, then we shall do what we always do every day, and that is keep your lights on.

The Chair: Thank you.

[Translation]

Thank you, Mr. Dubé.

[English]

Our next questioner will be Mr. Lastewka.

Mr. Walt Lastewka (St. Catharines, Lib.): Thank you, Madam Chair.

I want to thank the witnesses for being here this morning. I think we all take this subject very seriously, and we're looking not only for accountability from everybody but also for assistance on how to make sure the country is in the right position come the year 2000.

I want to start off first with the Atomic Energy Control Board, where I heard very clearly that your main concern, your priority, is safety of operation, and you did list a number of sites in your report. When will we find out and be able to tell the Canadian people that from the safety standpoint the work has been done? From your report, I wasn't clear on when your target date is.

Mr. Kurt Asmis: The year 2000 issues are more than just the turn of the century. We have a strategy that does the most important systems first—these are the special safety systems. They'll be done by October 1. They're primarily hard wired, so that is basically a confirmation that somehow some digital component is not in there, which we do not expect.

The next line of defence is the systems that could challenge the special safety systems. They will be done by the end of the year. Then, by June 30, all systems and tool sets necessary for the continued operation of the plants will be in place, will be ready for the year 2000.

So it's a strategy that doesn't wait for one final date. It's a strategy that does the most important systems first, gets them out of the way, and then continues from there.

Mr. Walt Lastewka: Do the most important systems take care of the safety items of those sites?

Mr. Kurt Asmis: Absolutely. What we call the special safety systems assure with independent sensors and independent logic devices, most of them analog, that the reactor will shut down, there will be continued cooling of the fuel, containment will function, and there will be control and monitoring for the safety systems.

Mr. Walt Lastewka: So I understand that the safety of the systems, which you're taking care of, goes back to the supplier. You're getting it from both ends, from the top of the control board and from the local people, aren't you?

My question is going to hitchhike a little bit on Mr. Schmidt's. We both have been worried about the grid system and how the grid is interreacted by so many people, and so forth. We all remember that shutdown, and you've explained that very well.

I guess what was coming out with Mr. Dubé's concern was having this national group to ensure a little bit more, to get us more comfortable. I take it from what you've said that you do have communication with, let's say, Hydro-Québec and other areas, but it's done on an informal basis.

• 0925

Mr. Ted Clark: There are working committees that are functioning that are focusing on that problem, but they're industry generated. They're not outside regulated.

Mr. Walt Lastewka: No, it doesn't have to be, I guess, from my standpoint, as long as we do have a working committee that's across the country.

Mr. Ted Clark: Yes, basically the northeast power grid, which consists of utilities in both the northeastern United States and eastern Canada, fundamentally works together as a group.

Mr. Walt Lastewka: That working group—can you tell me a little bit more how much of their work has been done?

Mr. Ted Clark: They have been meeting over the last six to eight months. It's more or less a comparison of the readiness of the different utilities and a comparison of how they're addressing the program. It's of that nature.

Mr. Walt Lastewka: So you're able to identify where the weak link is, from those working group meetings.

Mr. Ted Clark: Well, it's always hard to determine, as you are doing here, what individuals are saying, and then what's reality—right?

Mr. Walt Lastewka: That was my next question.

You mentioned that you had some vigorous inventory and certification programs going on. I'm not quite clear on...if we ask the question, what percentage of your work has been done and what work has to be done?

Mr. Ted Clark: In terms of the critical systems, we are probably 40% of the way through the program.

Mr. Walt Lastewka: Okay, so we have lots of work to do.

Mr. Ted Clark: We have lots of work to do.

Mr. Walt Lastewka: I missed my other question that I wanted to ask the Atomic Energy Control Board. How do you interact with the U.S.? Do you have similar working groups?

Mr. Kurt Asmis: Yes, we meet. Actually, in the software area we are quite fortunate. We have twice-yearly meetings with the U.S. NRC, the French CSSIN and the British NEA. We actually communicate extremely well with any of their software concerns in nuclear power plants.

I was in Washington last week, and it was a special session just on the year 2000. I had a chance again to meet my colleagues there and to exchange ideas on programs. They are in about the same position as we are. They are perhaps not as.... We have more digital control, particularly at Darlington, but they're in about the same shape as we are.

The Chair: Thank you very much, Mr. Lastewka.

Mr. Jones, did you have any questions?

Mr. Jim Jones (Markham, PC): Yes, I do.

I really just have one question. I hear you're 40% through. What is your estimated completion date?

Mr. Ted Clark: For Ontario Hydro, the estimated completion date of what we call the high-medium business impact system is the end of this year.

Mr. Jim Jones: So everything should be done by the end of this year, or just...?

Mr. Ted Clark: Everything will be certified at the end of this year in those categories.

Mr. Jim Jones: When it's done, is there an independent body that could come in and audit your organization to make sure you're ready? Is there any thought of having, say, the team from Hydro-Québec come in and audit your preparedness, and your going in and auditing Hydro-Québec's preparedness?

Mr. Ted Clark: We have an external consulting firm that has been working with us. They have been doing an assessment at various points in the program, bringing in outside people from their organization to monitor what's going on inside the program and recommend improvements. We will do that toward the end of this year, as well, with them.

In terms of Mr. Dubé's comment about a committee level, that is a function that organization could play as well, to further reinforce, but we haven't anything formalized in that respect.

Mr. Jim Jones: You mentioned the eastern power grid organization and that you're sort of working informally together, but overall you're a system and you really all depend on each other. So why wouldn't there be some type of plan where you sort of audit each other next year?

Mr. Ted Clark: That could be done. Nothing formal has been organized at this stage.

Mr. Jim Jones: Instead of having a national body or something like that, you could make sure that you rigorously test each other's readiness.

Mr. Ted Clark: Right.

• 0930

Mr. David Kwan: We have also discussed with AECB, and with others, inviting them to come, later this year as well as into next year, and review the processes we've done for these safety-related systems. This will ensure that in terms of our processes and the findings we have, they do support and concur with our findings.

Mr. Jim Jones: When you've completed work, have you gone back and found more bugs, or is the work you complete error free?

Mr. Ted Clark: As you know, error free in the area of software is nirvana, but the systems that to date have gone back into production have been smaller systems, obviously, but we have not experienced a lot of problems with having to take them back out and deal with problems with them. But obviously you still have to go through the year 2000 rollover and that's where your risk management, your contingency planning, your emergency response preparedness has to be at an extremely high level specific to the year 2000 threat, and that's also a key part of the program. We're going to do our absolute best to find everything we possibly can and then we are going to be on top from an emergency response preparedness standpoint, because you cannot absolutely guarantee, as you know.

The Chair: Thank you, Mr. Jones. Mr. Shepherd.

Mr. Alex Shepherd (Durham, Lib.): I'll go back to the Atomic Energy Control Board, and the first question is who has ball? Ontario Hydro here talks about certification. Are you going to certify those nuclear reactors as being year 2000 compliant somewhere along the process?

Mr. Kurt Asmis: We will do an independent investigation of their work and we will in effect declare the.... I should say the safety is their responsibility, but we will make sure these systems are as safe as we can possibly make them.

Mr. Alex Shepherd: You're going to give a report?

Mr. Kurt Asmis: We will. Certainly everything we do is transparent. We will go in and investigate their work. Our reports will be totally open to the public and we will ensure that these safety systems are safe.

Mr. Alex Shepherd: You talked about the Darlington nuclear reactor a few times and interjected about how you don't think there are any digital time clocks. You also go on to say later, in conversation, that there's a lot of digital equipment in Darlington.

Mr. Kurt Asmis: Yes.

Mr. Alex Shepherd: You have people on site there. Why don't you know that there are no digital time clocks today? Why don't you know that?

Mr. Kurt Asmis: This is for the shutdown system number one and shutdown system number two. These are digitally controlled, and we went through an enormous review process about 10 years ago, and that is documented. There are no real-time clocks in the chip computers, but what I'm saying is I'm going to make absolutely certain that nothing has snuck in over the last few years. I don't anticipate it. It will be a breach of our regulations if it did, but we will just go that extra step and make absolutely certain that everything that was qualified 10 years ago is still exactly as it was.

Mr. Alex Shepherd: When?

Mr. Kurt Asmis: Before October 1 of this year.

Mr. Alex Shepherd: Ontario Hydro, you're going through all kinds of regulatory changes and so forth. Is the budgetary process that's going on there, the fact that Ontario Hydro has posted losses and so forth, impeding your ability to solve this problem?

Mr. Ted Clark: No, it isn't, and the reason is that this program has enjoyed extremely high support at the board and the CEO level. There has been no question about the availability of resources, either people or funds, to address this problem.

Mr. Alex Shepherd: How long ago did you start working on it?

Mr. Ted Clark: The approach to the resolution of the problem really consists of both the repair of existing systems and replacement projects for a number of systems. The replacement projects would extend back into 1995-96, but the actual year 2000 remediation of the digital assets that were referred to really started in late 1996 with an assessment period and then in 1997 with the planning analysis inventory activities.

• 0935

Mr. Alex Shepherd: Given the amount of hardware you use, is 1996-99 a reasonable timeframe to resolve this problem?

Mr. Ted Clark: I think everyone wishes they had started sooner in this situation. I don't think we're any different.

Mr. Alex Shepherd: But you are going to be complying. You're going to meet AECB's requirement in October, certifying that the Darlington plant will be free of the problems of digital equipment. Is that correct?

Mr. Ted Clark: Yes, sir.

Mr. Alex Shepherd: And all the other energy plants as well?

Mr. Ted Clark: Not in October, but in terms of the generation systems, by the end of the year.

The Chair: Thank you. Thank you, Mr. Shepherd.

Mr. Schmidt or Mr. Pankiw.

Mr. Werner Schmidt: May we divide our time? Yes? Good.

The Chair: Mr. Pankiw.

Mr. Jim Pankiw (Saskatoon—Humboldt, Ref.): My first question is for Mr. Torgerson.

You said you were fulfilling all legal and contractual obligations to your customers. I'm thinking about CANDU reactors in other countries. What obligation do you have and what are you doing to ensure they don't run into problems?

Dr. David Torgerson: We have active projects going on in Korea and in China, and we are ensuring that any of the software products used in those projects are year 2000 compliant.

Mr. Jim Pankiw: My next question is for the gentleman from Ontario Hydro.

There is some outside chance that there would be a sudden, prolonged power failure on January 1, 2000. Are you doing anything to notify customers of your power? I'm thinking of industries. For example, mines should maybe be made aware that they could be facing that kind of problem so that they are prepared. Even Joe Average, the guy who has a house, should be aware that the power might go out.

Mr. Ted Clark: At this point, we have not felt that the risk is of that nature. I believe that if we do come to that point, we will. At this point in time, though, we are operating on the basis that we're going to deal with the issue, and we're putting our best effort forward to do that.

Mr. Jim Pankiw: You mentioned the northeast section of the continent. Do you have any indication about electrical utilities in the west? Are they taking the same degree of seriousness in their approach to this? Do you know?

Mr. Ted Clark: We're not as familiar with what's happening in those other areas. We have had conversations with utilities in Alberta and British Columbia. We know they're working on the problem, but they're not part of the group I was referring to.

Mr. Jim Pankiw: Okay. I'm going to now defer to Mr. Schmidt.

The Chair: Mr. Schmidt.

Mr. Werner Schmidt: Thank you, Madam Chair.

I found it rather interesting. The point that you've made, Mr. Asmis, is that most of the equipment is analog, not digital. If it's going to break down—

Mr. Kurt Asmis: That's for what we call the special safety systems. Most of those are analog, hard-wired, that's correct.

Mr. Werner Schmidt: I appreciate that. But the breakdown doesn't depend upon most. The breakdown will depend upon a failure. That's the issue here, and I think Mr. Clark of Ontario Hydro indicated to us very clearly that we all wish we had started sooner.

I think the point bothering all of us is the lack of assurance. We can talk about certification. We can talk about all these lists of people who have done things and have checked things off. Yet where is that system that you're using to test, that gives you the assurance, the comfort, whether it's directed-wired and analog? I know the difference between those two, and I think that's fair. By the same token, it gives me grave concern when I hear “most” or “we will” or “we are doing”. It's all in process.

I want to know that at the end of the day, on December 31, 1999, I can go to bed and can say that the mine will be operating tomorrow morning, the telephone systems will be operating, I'll be able to get my money out of the bank from an ABM machine, and so on. I want to be able to turn that switch and have the light go on.

• 0940

Mr. Kurt Asmis: If you focus on nuclear safety and it came to shutdown of computers—

Mr. Werner Schmidt: Yes. That's one possibility.

Mr. Kurt Asmis: —I absolutely agree with you. The devil is in the details, and for nuclear safety we go that extra mile. For most of the computers 10 years ago, every single location was identified, and what was written in it and what will be written in it forevermore has been put on paper and is available.

Mr. Werner Schmidt: But that's 10 years—

Mr. Kurt Asmis: I have 20 volumes of analysis of those Darlington computers in my office. We will go over that once more and we will use that same level of rigour and vigilance and these things will work.

Mr. Werner Schmidt: That's 10 years ago. You have a list there that's 10 years old. We are in 1998—

Mr. Kurt Asmis: But every single change has been documented since then and we will just go that extra mile and go over it once more. I do not anticipate that there will be a year 2000 issue with those computers.

Mr. Werner Schmidt: You're telling us that every change and modification that has taken place since the 10 years has been documented.

Mr. Kurt Asmis: Absolutely.

Mr. Werner Schmidt: And that is what gives you the basis for your assurance?

Mr. Kurt Asmis: We will do it once more before the first of October, but the insurance is there. The paper trail is there and those records are in place for the safety of these Darlington computers. The safety of the Darlington reactors will be assured because of that.

Mr. Werner Schmidt: The other question has to go to Mr. Clark, because we have been told on this committee by various witnesses that all of the equipment necessary to make the changes required by the year 2000 isn't going to be available.

You are in the process and I believe you are confident you're going to have all those things, but by the same token, you wish you had started a little earlier. Is there really the assurance in your mind that you will be able to get the equipment, the software adjustments that have to be made, but particularly the equipment? Will you be able to buy that or get it off the shelf or have it manufactured for your particular application so that you will be able to be year 2000 compliant?

Mr. Ted Clark: I can't make you feel 100% confident that everything is going to function on January 1 of the year 2000—neither I nor anyone else.

In terms of the digital assets that we are going to have to replace, our experience to date has indicated that the actual number of process control devices, for example, that have to be replaced in a population of date-sensitive assets is relatively low, in the 5% category. And the number of actual serious types of problems is lower, at 2% or 3% of those assets.

So we are not talking in terms of microprocessor devices that need to be replaced in a population of process control devices. We are not talking about huge numbers of these devices. We are talking about some specific devices for a specific problem. To date we have been able to get either upgrades or enhancements to those devices from our vendors. That's all I can tell you at this point. As you know, we still have some distance to go here.

Mr. Werner Schmidt: Yes, but you are only 40% complete—that's the point—and 60% is left to go. You see, what's happening now is that you are in that situation and a whole lot of other companies are in that situation, and there's going to be this huge wave that bursts on the scene all of a sudden. So while you can comfortably say that to date you've had no problem, multiply that 10 times and all of a sudden you may have a problem.

What is being done to anticipate that kind of a wave in the demand for this equipment?

Mr. Ted Clark: Obviously we have to test those assets to find out which ones we have to replace, and then we move forward to replace them. We are working closely with the major vendors, like AECL and General Electric and these other suppliers. That's all I can say at this point.

The Chair: Thank you. Mr. Bellemare.

Mr. Eugène Bellemare: To Ontario Hydro and Ottawa Hydro, you'll have to excuse me if I worry, because no one can guarantee me anything. I still see January 1, 1998, as a big shutdown. Hospitals—I'll repeat that again—all the traffic lights, the elevators, the gas stations...you can't get your gas, people are arguing with each other, it's 20 degrees below zero, it's a hell of a mess. You cannot guarantee me that this cannot happen. That's the context I'm working from.

• 0945

When did you begin working on this problem of year 2000?

Mr. Ted Clark: As I indicated to the previous question, the work in terms of replacement systems goes back as far as 1995. The specific work in relation to the year 2000 problem began in the latter part of 1996.

Mr. Eugène Bellemare: That's about 36 months ago. You have 40% of the work done. We have 20 months to go. How do you work 60% into 20 months now?

Mr. Ted Clark: You put 500 people on the job, and you have a plan that shows you that you will get there.

Mr. Eugène Bellemare: So you're now observing or concluding that we need an army of people, that we should have done this at the very beginning. Or is it all planned like this, that you only need all this army at the end of the war?

I'd like to continue on the line of questions that I had before. The next question would be, do you have certification from the manufacturers of your embedded system chips that they have been tested to be year 2000 compliant, both Ottawa and Ontario?

Mr. Ted Clark: Part of our process is to go to our vendors for statements of compliance. We have received those in a certain percentage of the cases. The reality is that we have to test those assets anyway. In some cases we have found that the vendors' compliance statements have not proven to be accurate. So we test, even if the vendor tells us that the systems are compliant.

Mr. Eugène Bellemare: You've used the word “statement” as opposed to “certification”. Do you interrelate them, or was that purposeful?

Mr. Ted Clark: No, we ask for statements of compliance. We sometimes get statements back that do not give us the level of satisfaction. If it's a high-medium business impact system, we test it anyway. In some cases, we have found that their statements of compliance have not proven to be accurate.

Mr. Eugène Bellemare: Ottawa Hydro, at the beginning, if I heard you correctly, I think you mentioned that you didn't have many integrated systems in, for example, the vehicles.

Mr. Peter Liu: We do have legacy systems, which is the business side of the system, which we have written ourselves.

Mr. Eugène Bellemare: Yes.

Mr. Peter Liu: Since it's not bought from some vendor, we have the resources to fix them at our priority.

Mr. Eugène Bellemare: Do you have integrated chips in that?

Mr. Peter Liu: It's a business system. It's a computer system. Yes, it is year 2000—-

Mr. Eugène Bellemare: You have integrated chips there.

Mr. Peter Liu: We do have chips in the meters. Probably this is what you're referring to, right?

Most of the consumers don't have chips in their meters, but the commercial meters have chips and those are tested.

Mr. Eugène Bellemare: Are they compliant for the year 2000?

Mr. Peter Liu: They are tested, and yes, they're year 2000 compliant.

Mr. Eugène Bellemare: Okay.

Mr. Peter Liu: Some of the year 2000 problems are in the software, not in those chips, not like PCs.

Mr. Eugène Bellemare: What about your trucks that go out? They have integrated chips. All vehicles have integrated chips. I've heard that some vehicles have maybe 700 integrated chips, and some have chips within chips. Are all your trucks manually operated?

Mr. Peter Liu: Let me answer your question this way. I also learned DND's armoured trucks could not start because the maintenance date was over, right?

For our trucks, I don't think we have a date. We don't have an elaborate maintenance schedule in the trucks. Our trucks are expensive because they're bucket trucks; they're hydraulic. But chips are not in there for starting the truck, not that we know of.

Mr. Eugène Bellemare: But things like whatever—hydraulic, the wheels—there are chips in that, and are they year 2000 compliant?

Mr. Peter Liu: I'm not sure they have chips in the hydraulic buckets. I don't think so. They may be mechanical and electrical.

Mr. Eugène Bellemare: That's interesting. Okay, we'll drop it for now.

The Chair: This is your last question, Mr. Bellemare.

Mr. Eugène Bellemare: Okay, and I would like to come back a third time, Madam Chairman.

The Chair: That's not possible.

Mr. Eugène Bellemare: Ontario Hydro and Ottawa Hydro, have you done any risk management; and if you have completed your risk management, have you taken into consideration that a certain percentage of other exterior systems may not have gone through a risk assessment; and within this risk management—since I only have one question I have to put this all together—have you established a contingency plan?

• 0950

Mr. Ted Clark: We have a risk management program that's under way at this time. The contingency planning, as I mentioned previously, extends to the emergency response and preparedness program that will be specifically tailored to the year 2000 rollover period.

The contingency planning related to the projects, contingency planning related to major business processes that extend outside the bounds of the organization, and the emergency response and preparedness program tailored to the year 2000 rollover period are all parts of the program.

The Chair: Thank you.

Mr. Peter Liu: In the case of Ottawa, contingency plans are our business. Every day when your lights go out we have to fix them the best we can. The year 2000 is not that big an issue with us in that sense.

Mr. Eugène Bellemare: I'm worried by that answer.

The Chair: Thank you, Mr. Bellemare. Mr. Dubé.

[Translation]

Mr. Dubé.

Mr. Antoine Dubé: You may find Mr. Bellemare's insistence with respect to the hydroelectric industry somewhat comical, but I'll give you an example of what can happen: over the weekend, in Quebec City, 100,000 people were without electricity for at least an hour because a squirrel had caused two circuit breakers to come in contact with each other. These are things that can happen.

I will change topics and turn to atomic energy. I would like to be able to reassure people about atomic energy, because one cannot help thinking about certain disasters that have taken place elsewhere. I would therefore ask you what guarantees we have that Canada is monitoring the system properly. Should there be any problems in the year 2000 and should various instruments fail in the nuclear power stations, what steps will be taken so that there is no impact on the public? Do we have any guarantees in this respect?

[English]

Mr. Kurt Asmis: The special safety systems will make sure the reactors are shut down and cooled, and containment, monitoring and control are in place. Each centre aisle has its own power generation, which is sufficient for maintaining the plant in a safe state. We talked earlier of contingency plans. We expect the licensees will have contingency plans to make sure there's sufficient fuel to run their standby generation for as long as it takes.

[Translation]

Mr. Antoine Dubé: That means when?

[English]

Mr. Kurt Asmis: There is no time limit. They could run basically indefinitely. I would anticipate that in terms of the contingency planning, the licensees will make submissions to us as to how they will make sure, in case of a grid failure, they will continue to keep their generators going.

[Translation]

Mr. Antoine Dubé: Part of your answer worries me somewhat. You did in fact say that each organization had its own way of operating. I will therefore go back to the question I raised earlier. How can we be assured that, in Canada, everything is working properly throughout the country since each organization has its way of operating?

[English]

Mr. Kurt Asmis: Each station is an island in itself. It can look after its safety needs by itself in terms of shutdown, control, monitoring and containment. Each station has its own power generation on site, which is run by either diesels or turbines. There are fuel storage facilities on site. We expect the licensees will have contingency plans in place and their own generation will be sufficient to run for however long the prognosis is for a complete grid failure. We don't anticipate a grid failure, but if it does happen they will be ready and they will be safe.

The Chair: Thank you, Mr. Dubé.

Mr. Anani, do you wish to reply to that?

• 0955

Mr. Namir Anani: Yes.

[Translation]

As I explained to you earlier, the process that we implemented to ensure the safety of nuclear power stations is the same everywhere. This must be consistent. I don't know if that answers your question, but we have a similar process everywhere. Is this what you wanted to know?

Mr. Antoine Dubé: Yes.

Mr. Namir Anani: So it's clear. Our strategy is to ensure that all nuclear power stations operate in accordance with the same requirements.

Mr. Antoine Dubé: Thank you.

[English]

The Chair: Thank you. Thank you, Mr. Anani.

I want to thank the witnesses for being here this morning, and I want to ask one quick question. It's my understanding, Mr. Asmis, that your group basically regulates nuclear power, and what happens, and ensures that the safety and responsibility are there.

Dr. Torgerson, you design the reactors, and yet Ontario Hydro has taken theirs and somewhat changed them, so they're not identical to the design, and Ontario Hydro is looking for system problems. Assuming you're looking for system problems, and then Ottawa gets its supply....

Is this the first time you've all sat together to discuss the different...? We look at this as a link, from the regulation to the design to the usage to the supply to Ottawa, and that's why we asked you all to come here together today. Is this the first time you've sat down together?

Mr. Peter Liu: Let me answer from this end. About two months ago, we issued a letter to Ontario Hydro asking them if they are going to be, not in the words of certification, but able to guarantee our supply of electricity. We had a reply recently from Ontario Hydro stating the fact that they will be ready. That would be our communication with Ontario Hydro. We have no reason to communicate with Atomic Energy at this point.

The Chair: Your link is to Ontario Hydro, and Ontario Hydro's link is to Dr. Torgerson and to Mr. Asmis. I'm assuming, then, that the three of you have met before or discussed this.

Mr. David Kwan: Yes, with the AECB as well as.... We had met with the AECB a number of times over the last year to discuss our expectation and what their expectation is from us.

We've also engaged AECL to work with us, to resolve some of the problems that they were the original designers of. As said in my presentation, we have also engaged in discussions with Hydro-Québec and New Brunswick Power concerning what they're doing and what we're doing, to share information.

Mr. Ted Clark: In addition, we have come to Ottawa and met with other municipal electrical utilities in the past, and made presentations to some of the people in Public Works Canada and some of the other organizations as well.

Within Ontario Hydro as well, there's an end-to-end group that's basically looking at the end-to-end flow and any of the risks of year 2000 as it exists between generation, transmission, and distribution. So there are groups working internally as well to address that.

The Chair: Okay. I have just one final question.

Dr. Torgerson, with regards to your supply to other places, New Brunswick Power was unable to be here with us today, but they would give us a different impression than Ontario Hydro in the sense that New Brunswick is relying on you to tell them what's wrong, whereas Ontario seems to be looking within their own. I'm assuming that because they've adapted your systems at Ontario Hydro, whereas New Brunswick is operating them as you delivered them.

Dr. David Torgerson: Well, this is correct. AECL of course is the original designer of the type of reactor that is being operated by New Brunswick Power. We in fact are in touch with New Brunswick Power and Hydro-Québec with respect to the work that we are doing on that reactor.

The Chair: Okay.

Mr. Kurt Asmis: We formally dialogue with our licensees. That's our sort of mechanism of control. We don't dialogue directly with AECL, but we certainly do on an informal basis.

Mr. Eugène Bellemare: Madam Chair, I have two questions to you.

The Chair: Yes, Mr. Bellemare.

Mr. Eugène Bellemare: The first one is a question of a report that I'd asked for at the beginning of the meeting regarding Ottawa Hydro—that they would give us the schedule they have prepared showing the milestones.

The Chair: Right. Mr. Liu said he would.

Mr. Eugène Bellemare: The second question to you is, would it not be pertinent to require that these gentlemen meet to discuss the potential breakdown and what their contingency plans as a group could be?

• 1000

The Chair: Mr. Bellemare, that was my question, as to whether they've had previous meetings. As was explained by Mr. Liu, his responsibility or his direct contact is to Ontario Hydro. Ontario Hydro has been meeting, as Mr. Clark explained, with Mr. Asmis, then with Dr. Torgerson already—

Mr. Eugène Bellemare: I heard that answer, but it's a question of just one-to-one communication, it would appear.

The Chair: I think that would be part of our final recommendation in our report. I don't think it's appropriate at this stage to start to make individual recommendations to different groups. We haven't heard from all of the utilities yet, and that's what this meeting is about today.

Mr. Eugène Bellemare: Thank you.

The Chair: I'd like to thank the witnesses again. We appreciate it, and I just wanted to leave you with a closing comment. Much to Canada's credit, we've been found as the best prepared to meet the year 2000, according to a consultancy group based in Stanford, Connecticut. We're just ahead of second-ranked Australia, and a country mile in front of the United States. But in terms of what truly animates the world economy we all depend on, that's about as comforting as knowing the mouse is in far better shape than the elephant. It's kind of a reference to Mr Dubé's comment about the squirrel.

With that, we're going to suspend the meeting for about five minutes to change witnesses.

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• 1009

The Chair: Let us reconvene the meeting, please.

We are continuing our meeting of this morning. To remind everyone, we are discussing information technology preparedness for the year 2000.

We have before us the National Energy Board, the Canadian Association of Petroleum Producers and the Canadian Gas Association. I will be asking them to each make their presentations, and it will be in that order: the National Energy Board, followed by the Canadian Association of Petroleum Producers, then the Canadian Gas Association. This is slightly different from the order listed. After they've each made their presentations we will begin questioning.

• 1010

We'll now hear from Mr. John McCarthy, business leader of operations, and Mr. Paul Trudel, team leader of operations, from the National Energy Board.

Mr. McCarthy, would you like to begin?

Mr. John McCarthy (Business Leader of Operations, National Energy Board): Yes. Thank you, Madam Chair.

It's a privilege to be invited to speak to the committee today. I'd like first to introduce myself and my colleague. Mr. Paul Trudel is our team leader of pipeline integrity and is involved primarily with pipeline safety and integrity issues.

My role as business leader of operations includes the pipeline integrity aspect as well as the environmental aspect of the National Energy Board's responsibilities. I think that probably indicates that our focus with respect to the year 2000 issue is to ensure public safety and ensure the safety of the pipeline infrastructure, particularly the infrastructure that we regulate.

I won't go over it in great detail, but we have put together a brief—which I assume has been circulated—outlining some of the issues we have identified.

I think it's important to say that we are very much at the beginning of our regulatory response and that we are preparing to question the industry we regulate as far as getting a good handle on their level of preparedness is concerned. We will be doing that in very short order, and depending on the response, we feel our role will be very much to follow up, to monitor, to influence and to try to use moral suasion when we have no regulatory authority, as we do in many cases, to try to ensure that the pipeline infrastructure, particularly, is safe and ready for the year 2000.

The Chair: Thank you.

If there are no comments, we'll proceed to the Canadian Association of Petroleum Producers. Mr. Greg Stringham, vice-president, markets and fiscal policy, please.

Mr. Greg Stringham (Vice-President, Markets and Fiscal Policy, Canadian Association of Petroleum Producers): Thank you, Madam Chair.

I'm distributing here a copy of what I'd like to take you through very briefly as a summary of where we're at on the year 2000 situation. I've just given my colleagues a copy of it as well. Hopefully, you have that in front of you. I'd like to take you through it briefly and then respond to some of your questions.

To explain what the Canadian Association of Petroleum Producers represents, to make sure it's clear in your mind, I will say that we represent about 170 natural gas and crude oil exploration and development companies in Canada, and that represents about 95% of the crude oil and natural gas produced in Canada.

We also have about 110 associate members, which include companies that provide services to the industry, such as consulting, forecasting, accounting, financial, legal, those types of things. Our mission is to try to keep our members, as you can see at the top of the page, to enhance the economic well-being and sustainability of the Canadian upstream petroleum industry in a socially, environmentally and technically responsible manner.

As part of that, this year 2000 issue has been brought forward by our members as one where CAPP can play an interesting role to help bring our membership together in providing two things. It's really a two-pronged approach, one of which is to provide information to all of them and education to our members—and not only to our members, but to their business partners, and I'll get into that briefly. The second is to help them provide the tools that are necessary to develop what would be required in a contingency plan, about which you have heard much in your discussions here.

The work of our association is not to do the work for them, but simply to bring them the information that is available, provide the resources that are available in the market right now and to help them develop contingency plans.

At the Canadian Association of Petroleum Producers a committee was formed to deal with this issue and it was initiated back in November. Its focus was on education, awareness, and information sharing. Really, this committee has grown drastically from just our members to include other associates as well and people we deal with. So we're working with the suppliers and the business partners and governments to try to ensure that all of those interfaces are developed.

One of the key things that came out of this committee that may be useful to your discussions is the development of an information disclosure agreement. I'm sure you've probably heard in your discussions much about the legal liability and litigation that's associated with this issue.

What was necessary for free and open discussion among our members was the development of an agreement that people would sign that would guarantee confidentiality. They would also agree to share this information among themselves, without prejudice, so there could not be legal liability associated with it. That was a key element to the open and free information sharing taking place in this committee.

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The second element we were trying to develop as part of the committee was a communications strategy for our members only—for example, what is it they needed to know in order to get at least these mission-critical issues dealt with and then move on to the other issues beyond that. In the first part of that, we dealt with our members only. These are the oil and gas companies that produce oil and gas in Canada.

The next page deals with the CAPP communications strategy and what we have tried to put together for them, or are in the process of doing.

First, we have developed an information package and checklist, which I have here in draft form. I can certainly leave a copy for members who are interested in it.

What this three-page brochure essentially does is identify the critical nature of the problem before us. Probably the most important thing we've developed here is a checklist of what your company needs to go through to ensure that you are working towards a solution to or resolution of this problem.

The second thing that's included as part of this checklist is a resource and reference card. On the back of it, you can see there are a number of publicly available resources you can turn to for the type of expertise and tools you are looking for in your individual company. Again, many of those are Internet-available, or else consultants or other people can help you in that situation if you don't already have that in-house expertise.

Third, we've distributed a compliance survey. It's gone out to all of our members. Unfortunately, the timing was not appropriate for bringing the results to this committee, because we've asked for a response by April 30. This was something that was already under way. We certainly could make the results of it available.

This has been sent out to all of our members. It asks them the status of where they're at on year 2000 compliance. It then goes through several elements of the checklist we've provided to them, and asks them whether they've started this, whether it's in progress, or whether it's complete. So we should have that back by April 30. It also identifies the name of the individual responsible in that organization for maintaining year 2000 compliance.

Following that survey, as part of the committee—and it's not just the CAPP staff members but also the volunteers from the oil and gas companies—we have committed to making a phone survey to follow up on each and every one of these surveys to ensure that if it doesn't come back, by calling them up and following through on that, we'll still get a response.

The members of this CAPP committee have also volunteered to create a speakers forum, which then says, okay, here are experts in the area, working in their own company, who on a non-prejudicial basis would come into your company, explain the issues you should be focusing on, and try to guide you towards what you should be doing to help you get your contingency plans and your strategy under way.

Finally, we have really just tried to raise public awareness on this. One of the keys, we've found, is that the importance of this issue needs to be brought to the CEO level within our companies. Many of the IT people have been working on it, but getting that recognition and awareness at the CEO level is critical.

We've updated our website to make it compatible to raising the awareness of this issue. We are providing information and articles to industry-related magazines and media so that they can then know of the nature of this issue. We've also sent out a letter to all of our CEOs identifying the critical nature of this issue at their level, saying it's not just an IT issue. So that will help in then moving us on to the compliance survey when we see that the work is being done.

That is what we've done with our members. If you flip over to the next page, it'll show that beyond our members, probably the next most critical issue we have is dealing with what we call “interfaces”, or the relationships between our industries and those industries and governments and agencies that we deal directly with.

That would include the pipelines and utilities; the governments and their regulators, such as the National Energy Board and the Alberta Energy and Utilities Board; the service sector, which would be the drilling companies and other associations that provide services to the oil and gas industry; the financial investment community; the legal community, of course; and then the transportation sector itself.

All of these sectors are represented now on the CAPP working committee and have had presentations made to that committee so that those interfaces can be worked through. They will come in and explain what they are doing and what we should be aware of so that we can be compatible and meet this deadline together. I can go through and identify some of the people involved in that group when we get into the questions and answers, if you prefer.

Finally, the priorities we have in front of us have certainly been making this committee focus on what's most important first. We've developed a priorities list, which starts with safety and health as being the most critical issue that companies should focus on and spend their time and money on right now. That's followed by environment, then essential services, and then, most importantly, the process control systems. These are the systems that will determine the operational delivery of oil and natural gas at this critical point in time.

Following that, we've developed and spent a workshop on contingency plans, where companies can come and figure out how they should be developing their own contingency plans.

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Once we have the operations in place for the health and safety and mission-critical items, last but certainly not least on our list of priorities is moving on to the accounting and financial world. Those interfaces can then continue to operate correctly.

I will just quickly summarize the recommendations for you. We certainly do support the recommendations of the task force 2000 that has been here. Mr. Jim Stanford, one of the CEOs of Petro-Canada, has been involved in that task force on behalf of our industry, and has therefore kept our industry quite abreast of that. He is still playing a very key role in making sure that awareness is felt at a CEO level and is felt as a business issue.

There is an interesting issue on the tax considerations associated with this. I'm sure your committee has heard of them, and you will hear more today about how to deal with expenditures associated with this. Certainly, our recommendation is that we look very closely at writing off those expenditures that can be identified in the year in which they're incurred, as was stated in the federal budget.

We believe the recommendation from this committee should say there is a continual need for information flow and support, particularly to small and medium companies. In our analysis to this point in time, the larger companies do have their plans under way and will be working towards this. It needs to be raised in the smaller oil and gas companies so that they can identify this issue.

Lastly, we must ensure the governments move to compliance in a timely fashion. There are many interfaces I have talked about previously that will rely on the governments having things in place. If that requires changes in government system to which the industry then needs to respond, they need to be done in a timely enough fashion to allow for that response if the industry must change systems or software required in order for this to be operational continuously through that period.

The Chair: Thank you very much, Mr. Stringham.

I'd now like to turn to the Canadian Gas Association. We have Mr. George Barnhart, the director; and Ms. Kathryn Moore, the manager of government relations.

Ms. Kathryn Moore (Manager, Government Relations, Canadian Gas Association): Good morning. I'm Kathryn Moore, manager of government relations at the Canadian Gas Association. With me today is George Barnhart, vice-president of information systems at SaskEnergy. Thank you very much for inviting us to appear before the committee.

I'd like to tell you a little bit about the Canadian Gas Association. We were established in 1907 to respond to electric competition in the street lighting business. CGA is the national trade organization for Canada's multibillion-dollar natural gas industry. We currently represent 270 members spanning a broad spectrum of the industry, including Canada's major natural gas distribution and transmission companies, the country's larger energy service providers, gas brokers and service suppliers, and a significant portion of the manufacturing sector.

Just to give you an idea of the size of the industry, we have annual revenues of over $14 billion and account for approximately 2.5% of Canadian GDP. We exported about $7 billion worth of natural gas to the U.S. in 1996. Oil and gas production account for about 50,000 direct jobs, 9,000 people are employed in natural gas transmission, and 13,000 in local gas distribution. There are also tens of thousands of people employed in the manufacturing of appliances and equipment, service and supply.

Before I turn the presentation over to George, I'd like to point out that many of our members are also members of the Canadian Energy Pipeline Association, and they are encompassed in CGA's year 2000 activities.

Mr. George Barnhart (Director, Canadian Gas Association): Good morning. I'm George Barnhart, vice-president of information systems at SaskEnergy. I'm also the chair of CGA's information technology committee and task force on the year 2000. Thank you very much for the invitation to speak with you today.

Membership of the CGA appreciates the seriousness and consequences of the year 2000 problem on our respective business and in fact the entire industry. Initially it was believed the year 2000 problem was a systems or technology one, and it was addressed primarily as an internal issue. With risk assessment and further discussion among the member companies, the full extent and impact on all our stakeholders in the supply chain became known, and with that came knowledge and appreciation of the fact that the full impact of non-compliance was beyond the control of any one company.

CGA has had a subcommittee on information technology for some time. It's made up of senior IT representatives from our major member companies. Late last year, we formed a task force specifically to prepare the industry for year 2000. The task force objectives are, one, to collaborate on internal compliance issues; two, to collectively address stakeholder and cross-industry issues related to year 2000; and three, to address business continuity. I'll speak about the steps we've taken on these issues to date and our plans for the future, and finally leave you with some recommendations.

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Regarding internal compliance, each member company is addressing the impact of the year 2000 within its own organization. Core business functions are being addressed, and while each company is at varying levels of compliance, there are plans in place to ensure that the impact on business functions is minimized and that internal systems will be compliant.

This is a large undertaking for all our companies and is demanding that considerable resources be deployed. It has been and will continue to be very disruptive, expensive and time-consuming to address the year 2000 issues.

I wish to emphasize, however, that the year 2000 has received top priority across the CGA membership. Our plans are to have these problems substantially remedied by year-end 1998.

In addition to management information systems common to most organizations, the CGA membership is heavily automated throughout our operations. In other technologies such as electronic measurement devices, sensors and process control equipment are critical to the core business effectiveness.

These technologies utilize embedded chips and have many components. Due to complex integration, they are extremely difficult to identify and test. Our companies are at various stages of inventory, discovery and testing. However, it is acknowledged that the embedded chips will pose an increased challenge to ensure compliance and in many cases will require business contingency plans. The safety, reliability and operational integrity of our system is paramount and will not be jeopardized.

Stakeholder impact: The subcommittee has done a risk assessment of the entire business supply chain, a wellhead-to-hospital scenario. It highlighted not only the legal and financial implications of customers, suppliers and vendors, but also the operational impact of critical service providers such as telecommunications.

The committee has created awareness within other functional areas of their organizations and, as necessary, heightened the awareness of all our stakeholders. The subcommittee has had dialogue and communications with stakeholders such as Stentor, Canadian Association of Petroleum Producers, the American Gas Association, vendors, customers and many others to discuss concerns, common remediation initiatives and mutual business continuity plans. We've escalated our efforts in this area and will continue to do so as the need arises.

Business continuity: The primary focus of the subcommittee has been on remediation measures. However, the business risk assessments have also shown that the current business continuity may be inadequate given the extent and pervasiveness of the year 2000 problem. Existing IT disaster recovery plans and even operational contingency plans have been prepared and tested under single scenarios in the past; however, with the possibility of multiple and extended incidents arising simultaneously, these plans need to be reassessed and coordinated across our entire industry. The subcommittee has begun sharing information on an approach to this issues and will accelerate preparations through 1999.

In closing, we ask for your assistance in the following. The year 2000 is without precedents. Large organizations such as ours that are prepared have the highest legal liability exposure. We ask that you implement good samaritan legislation to reduce the risks of our legal liability and to assist us in working with those that are not prepared towards a solution.

Secondly, we ask that all levels of government work in partnership with industry to ensure community preparedness. The foundation of our business continuity planning is that community service and infrastructures are in place and will be functional through the year 2000.

Finally, we encourage the implementation of the 1998 budget initiative, which states “expenditures that are made to ensure functionality in the Year 2000 will be fully deductible in the year incurred”. We support this initiative, not only for our membership but as incentive to small and medium-sized organizations within the natural gas supply chain to invest in their remediation efforts.

Thank you for your time and attention. I'd be happy to answer any questions you might have.

The Chair: Thank you very much, Mr. Barnhart.

We're going to begin now with Mr. Lowther, please.

Mr. Eric Lowther (Calgary Centre, Ref.): Thank you, Madam Chair.

Thank you, presenters. I have a number of questions and I may not go through them all. I may just do a few and come back on the second round.

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Mr. Stringham, maybe I will start with your presentation. I was impressed with CAPP's efforts to get information out—the checklist, the pamphlet, the compliance survey, a speakers bureau, all these initiatives. It's looks like some energy is being spent there. If we went back six months and heard what we heard here today, we would have thought you were overplaying this and surely it's not that big a deal. But now we all take it quite seriously and we realize it is a significant issue here.

I'm wondering how the CAPP membership sees this. On a scale from 1 to 10, do they see this as being really serious, or are you putting out all this energy and they're saying, gee, you know.... Has the penny dropped for these guys, or are they still sort of in the mode of saying “Gee, our association's kind of sending out a lot of stuff on this, but it's not really on the horizon for us. We've got bigger fish to fry right now.”

Mr. Greg Stringham: To be very candid, about a year ago that may have been the case, but the penny has really dropped for them. A lot of companies had undertaken the work themselves and have come forward to try to assist other companies in an environment where they can say, “This is what we've done. Here's what has worked.” They are really trying to work together to resolve this. It really hasn't become a serious issue for them.

I guess the best demonstration of that is how fast this committee has grown, and the presentations that have come in even from outside have really drawn a lot of attention toward that.

Mr. Eric Lowther: At the CEO level, do they understand that some companies will fold because of this? That's what we're being told. I don't know if it's true in the petroleum industry, but I would assume it applies across all industries. Are they aware that's a real potential?

Mr. Greg Stringham: They're aware of the potential of that happening. The larger companies are really the ones responsible for a lot of the operational side of the gas plants and the other smaller companies aren't in that operational business all the time. It's really those larger companies that have focused on it, and it has now trickled down to the medium-sized companies. We're still trying to get the CEO engagement at the smaller company level. Some of them are very engaged, don't let me mislead you, but some of them are so busy with the other day-to-day activities that this awareness program is really starting to pay dividends.

Mr. Eric Lowther: You talked a bit about the interfaces that need to be looked at, and I don't think I heard you say anything about testing. Is there any way to test prior to 2000, or do we just sound the alarm, everybody scurries around, and hope on the morning of the year 2000 everything works? Can we test this infrastructure somehow?

Mr. Greg Stringham: As was referred to by some of my colleagues, testing the entire industry is probably not feasible, but testing parts of it is. So they're trying to focus on, as I mentioned, those mission-critical things to ensure the operation will be in place first and the health, safety and essential services are dealt with. They're doing what they can to ensure the delivery will continue of that natural gas or oil, and ensuring those kinds of things work first.

Following that, they'll step into other aspects. Some companies have gone through that portion already and are moving on to the financial and accounting things, either in a parallel track or in a subsequent track. It's just a matter of getting the entire industry to do that.

Let me give you an example. For example, in Alberta there are approximately 600 gas plants. Many of them are small gas plants that would go up and down perhaps on a cold winter's day and wouldn't have a mission-critical nature associated with them. The more advanced and larger gas plants are the mission-critical ones that need to be tested, and they are going through that process.

Mr. Eric Lowther: Much of this industry is really provincially regulated from the resource side. I'm wondering—not just to you, Mr. Stringham, but any of the presenters here today—what kind of read we're getting from the provincial governments. Are they in step? Do you find one government is alert to this issue and actually championing it, while others are asleep, or is there sort of a unity at the provincial level on this industry and the concerns around providing service?

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Mr. Greg Stringham: Again, let me start, and then I can pass it on to others who may wish to comment.

As for the Alberta government, we had the energy and utilities board, which is the provincial regulator in Alberta, come to our committee to make a presentation on where they're at. They're coming back again in May to ensure that this interface is well understood. We've been talking to the Alberta Department of Energy. Again, this is a region that represents about 80% of the gas production, so we're focusing there first, and then we'll broaden out after we've gone through that process.

Others may have comments.

Mr. John McCarthy: We have fairly good connections and rapport with a number of provincial regulatory agencies, and we are going to be using those channels to ensure awareness, first of all, and then see whether that develops into a more common plan of approach to the issue.

For example, I mentioned in the brief that we were planning to make a presentation to a group of public utility tribunal participants next week. The point of the presentation is the year 2000 and what the provincial regulators are doing about it and how they're approaching the issue.

Mr. Eric Lowther: I would like to come back on the second round.

The Chair: Thank you, Mr. Lowther. Mr. Murray, please.

Mr. Ian Murray (Lanark—Carleton, Lib.): Thanks very much, Madam Chair.

I guess most of my questions would be for Mr. Barnhart.

I want to say, first of all, that I appreciate your frankness. You raised a couple of points that some people might have preferred to shy away from.

There was the question of legal liability. You also mentioned that because of the nature, I believe, of some of the embedded technology, it would be almost impossible to correct some problems, so you need to have contingency plans as a result.

I guess the first question I would like to ask you is about the nature of the transmission business and whether it's necessary to shut down large sections of that in order to test the technology that's there so as to monitor it and do whatever else it does along the way.

Mr. George Barnhart: Our plans do include doing some modular testing. We're certainly not, as Mr. Stringham pointed out, doing the entire industry from end to end, but we certainly can isolate to a compressor station or a particular control system and take that as a representative sample of the type of technology we're dealing with as an actual practical field test.

Let me point out though that this follows an extensive amount of work that we've done on the individual components. Certainly all the remedial efforts have taken place, but we believe that field testing is the only practical way for us to actually test it.

We are also working with service providers. As I mentioned, the telecom industry is critical to our operation, and we will be working with them throughout the summer to try to do integrated testings between our industries to ensure that our components work together, that what we require will be available, and that we can work together.

Having said that, though, we talked about the business continuity plans and we recognize that there are 10 levels of technology involved. It's an extremely complex problem. Just with the sheer number of facilities we have, we're certainly going to make plans to have a plan B, as we refer to it, should anything unforeseen happen.

Mr. Ian Murray: For example, you have one pipeline, essentially. You can't replace that pipeline. Are you talking about having something you can take out, a piece of technology, and then plug something else in to replace it? Is it as simple as that?

Mr. George Barnhart: It may be as simple as going back in some cases to manual operation.

Mr. Ian Murray: I would like to look at this question of the good Samaritan legislation. I think it's an interesting idea. The way you've suggested it was that the legislation should reduce the risk of losses for enterprises that are conscientiously trying to work towards a solution.

I think that's an interesting concept. I think it's important as well that, as we heard from Mr. Stringham, people feel free to talk about this, share their experiences, and let others know where they stand.

I guess the problem I have is in defining what would be conscientious and where government would draw the line when we're assessing how well people have tried to prepare for this.

Mr. George Barnhart: I guess our concern on this is that, again, because there is no precedent, really, for this type of an event, companies that have information or are in a good position to share are being advised by their legal counsel that this certainly increases their legal liability and their risk of lawsuit. It's causing them to restrict the flow of information, I guess, to have second thoughts, or perhaps not be as forthcoming with the information as we'd certainly like them to be.

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A personal case I can cite is that we had a vendor that took three weeks, and forced it to get the information we needed cleared through their legal department before we could get it. Six months or a year ago that information would have been easily forthcoming. There was nothing untoward in the request whatsoever.

But certainly there's a cautiousness coming up, and we're quite concerned that attitude could start to grow and people could stop communicating. As Mr. Stringham points out, that's essential. We also believe the larger companies need to be very actively involved in promoting remediation efforts.

Mr. Ian Murray: I have one final question, about people. Of course I know you are primarily associations talking for member companies, but are you aware of a shortage of skilled people available to your industry to help out with these problems, or are you doing fine with in-house resources?

Mr. Greg Stringham: Let me start. We have noticed a growing shortage of expertise in this area. So people are able to start sharing that expertise, and that's what we're trying to do here. But we have noticed that. I can't say it's at epidemic proportions.

Mr. Ian Murray: Is there a bidding war going on because they're in such demand?

Mr. Greg Stringham: Maybe George, who deals with it directly, could tell better than that, but we have heard that the cost of this is going up as we approach the deadline.

Mr George Barnhart: Yes, absolutely. Across Canada we see it in the smaller market sectors such as Regina and Winnipeg. Certainly the demand for resources there is much greater, and there's an extensive shortage in some. Our member companies at the present time are not greatly impacted, but we're very concerned about the trend in the industry.

We're also concerned with specialized resources who deal with the embedded chip problem—instrument technicians, engineers, those types of people. That's now a growing wave occurring nationally, and there's a concern there.

Most of the vendors indicate to us that they're operating at pretty much full capacity, whether it's on the software side, the embedded chip instrument side—regardless, there are not a lot of spare resources out there.

Our plans are all contingent on maintaining the level of resourcing that we now have, so absolutely, it's a concern to us. There are also escalating costs, in some cases as high as 15% inflation right now in that sector.

Mr. Ian Murray: Thank you very much.

The Chair: Mr. Dubé.

[Translation]

Mr. Antoine Dubé: It's my turn to observe that your briefs are very well presented and deal with some issues that are useful for the committee.

Recommendation 3 is of particular interest to me. It says:

We recommend that all government levels work in partnership with the industry to ensure that the entire community is prepared to deal with the millennium problem.

As my colleague pointed out earlier, when you say "all government levels", that implies the provincial governments since they are responsible for controlling resources and they already have regulations on the matter. If you are making this recommendation, it is probably because you realize that there is currently a problem with respect to this issue.

I can see that you have worked very well together. Your group is perhaps one of the best in the industrial world. I think that you represent what is an ideal situation and should, in my opinion, serve as an example which can be applied in a larger scale. Despite the fact that your group works very well, you still recommend that we provide for, if not a structure per se, at least some cooperation between all government levels.

There's also an association in another field, the Global Millennium Foundation, which advocates the creation of a national committee and a national program with subcommittees representing the various industrial sectors, in other words, something similar to you. However, this association recommends that this be an official institution and that the task of preparing for the year 2000 not be left up to individuals at each level of government. What do you think about that?

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[English]

The Chair: Mr. Barnhart.

Mr. George Barnhart: If I could respond, I guess there are a number of things.

I'd like to address community preparedness in terms of your first comment. And thank you, by the way, for your comments regarding our cooperation. We believe it has been one of the keys to our success to date, and see it continuing to be that way. We've also spent some time with Gaz Métropolitain, reviewing the Quebec ice storm and the incidents and results out of that.

In terms of how our response plans can be improved, I'd like to emphasize that we're working towards the best and full remediation of the problem. But we also feel it's our responsibility to make contingency plans, in some cases for the worst possible scenarios. We believe that's our mandate, and it's been our long history in our industry to maintain safety, reliability, and operational integrity throughout. We don't see that being jeopardized.

As we've pursued that, we have believed there is some risk to us. There is an element of risk that we will require emergency response. We would like to work with the community organizations to ensure that we've at least made whatever preparations are necessary. Hopefully it's not required for the year 2000, but we believe that to be a good exercise for our communities further to an event such as the Montreal and Quebec ice storm, in any event.

With regard to working on a national basis with other organizations, I believe we are starting to do that informally with the telecom and electric industries. We also are working with the American associations, the American Gas Association, because of our export interests. We will certainly support some work on a national basis for that regard.

[Translation]

Mr. Antoine Dubé: In spite of everything, in spite of your preparation and the cooperation that exists, you still have some concerns. In fact, you would like to see Good Samaritan legislation to reduce the risk of legal action.

Is it because you have explored all the options that could be provided by an insurance system? Have you found out that the best insurance could not provide the guarantees you require? Are you advocating this because you think the risks are even greater than the coverage that can be provided by insurance?

[English]

Mr. George Barnhart: Yes, I guess our interest in that is that we believe the Good Samaritan legislation, as we're proposing it and as much as anything else, sends a message to organizations to work together. It's a positive message, I guess.

With regard to insurance, certainly board liabilities, and those types of issues, I know the insurance industry is starting to position itself as well for the year 2000. We don't see that as being an answer to the remediation problems and to actually trying to work together.

[Translation]

Mr. Antoine Dubé: In insurance, we usually hear about what are called "acts of God". However, the computer problem for the year 2000 was not created by God, nor by the computer. Is this not rather the option that should be explored to protect ourselves against this? When everyone could be affected, the insurance companies generally must be very worried. You recommend that legislation be passed, and you see it as simply a message. However, I think that in addition to sending a message, you also want to protect yourselves against possible risks.

[English]

Mr. George Barnhart: Yes, we will, and we're certainly pursuing the insurance options. We don't believe that, as you say, the insurance companies protect themselves against acts of God. As they go towards the probabilities through the year 2000, we believe the insurance premiums that we would pay for this type of liability insurance would be excessive, unreasonable.

The Chair: Mr. Stringham, did you wish to comment on that?

• 1050

Mr. Greg Stringham: Yes, Madam Chair, just briefly.

In looking at that one, I recognize the problem for sure. One of the things we have done to try to ameliorate that is to look at a disclosure agreement that allows for this provision of sharing of information amongst parties, but it's mutually entered into rather than put on through a forced mandate.

It's just an extension of what we already have in place, but we certainly notice more and more litigation as we approach the deadline. Our solution, interim as it may be, is to put this agreement in place, which people can mutually enter into to facilitate information sharing.

What Mr. Barnhart is suggesting, I think, is really just an extension of that to a global perspective.

The Chair: Thank you.

[Translation]

Mr. Antoine Dubé: You were involved in business among yourselves, but also with other industries. You mentioned in fact that you sometimes deal with electrical companies. There may be other groups as well.

The Chairman: Thank you, Mr. Dubé.

[English]

Mr. Shepherd, please.

Mr. Alex Shepherd: Just to pursue that thought process of mitigating your losses, how do you see the federal government doing that? A lot of this is commercial law and would be in the domain of the provinces. What is your general recommendation to us, to this federal committee?

Mr. George Barnhart: I'm not sure I can answer that fully, Mr. Shepherd. Law is not my area of expertise.

Mr. Alex Shepherd: That's okay. It's not my area either.

Mr. George Barnhart: I guess, as Mr. Stringham pointed out, just an extension of trying to mitigate some of the litigation issues that we see coming, whether that happens at the federal level or the provincial level.... It would certainly be a recommendation we would make, in whatever context of the law that would take.

Mr. Alex Shepherd: You talked about ten levels of technology. I don't mean you to go through them all, but what were you alluding to there?

Mr. George Barnhart: For example, at the very root of technologies there are sensors that judge temperature, gas quality and any number of things. That progresses all the way through a number of communication and computer devices, basically, all the way up to a screen that a human can visualize or a graphic display unit of some type. And all through that process, there are chips, there are programs and there are computer pieces involved. So as far as testing goes, any one particular component may be year 2000 compliant, but we really have to look at the entire string of all the components put together.

Mr. Alex Shepherd: Okay.

You seem to have bit of a handle on this and also on your industry. If you were to give us a risk assessment, how many of your members do you think will be non-compliant and possibly fail by the year 2000?

Mr. George Barnhart: Of our membership, we don't believe that any will. We believe that the work being done, the plans that have been set out...and, as we discussed, based on the resource levels we have planned, we see the primary critical business problem certainly being addressed.

We do see our businesses being impacted. The cost of the remediation efforts and perhaps lost opportunities as we're focusing on just maintaining what we have as opposed to moving on to other markets and other new industries will have an an impact on our industry. There's absolutely no question about it. But we don't see that being enough to put us over the edge or—

Mr. Alex Shepherd: So is the impact ultimately one of supply, the supply of gas products—

Mr. George Barnhart: It's the entire chain, it's the impact—

Mr. Alex Shepherd: —the downside, that it doesn't come out at the end of the pipe and people who are heating their homes aren't going to get any of that stuff...? Are all the suppliers members of your association, or not necessarily?

Mr. George Barnhart: All the gas suppliers are really in Mr. Stringham's association. They're with CAP. We have a close liaison between the Canadian Gas Association, which is constituted basically of the pipeline and the LDC companies—the local distribution companies—with the petroleum producers association and the gas suppliers on that end.

• 1055

Mr. Alex Shepherd: In the CAPP presentation, one of your recommendations was to do with tax treatment. I just wonder if you can clarify. We talked about software being fully deductible and so forth. Are you asking for additional tax incentives to solve this problem?

Mr. Greg Stringham: No. At this point in time we're simply asking for the implementation of what was in the budget, which is 100% write-off of the software and hardware costs to deal with this problem. So just an implementation.

Mr. Alex Shepherd: I think it talks about software, not necessarily hardware.

Mr. Greg Stringham: What I would be suggesting here then would be the hardware as well. That's correct.

Mr. Alex Shepherd: You used the word “expenditure” just to mean all expenditures, where we might mean an expense item, not necessarily a capital item?

Mr. Greg Stringham: I was referring to both capital and operating because there will be many of these embedded chip problems and things in the process control that will actually be hardware items that will be replaced for this purpose solely. Those things being accelerated write-off would certainly entice people into doing that quicker than if it's spread out over a longer period of time.

Mr. Alex Shepherd: Some people have made the suggestion that if we're going to allow hardware write-off it should be only allocated to small and medium-sized companies, ones that could possibly claim the small-business deduction. What would be your attitude on that?

Mr. Greg Stringham: That would certainly go part way. I think we'd recommend that it goes all the way, but that would certainly be better than what's in place right now.

Mr. Alex Shepherd: So some of your members would fall into that classification as claiming the small business deduction?

Mr. Greg Stringham: Some of them would fall into that, that's correct. The hardware that's being replaced on many of the gas plants may be with the larger companies, however.

The Chair: Mr. Barnhart.

Mr. George Barnhart: If I could make a comment on that, you talk about how as associations we will represent companies, but when we're talking about the small and medium-sized organizations, what I was referring to was really a lot of our suppliers and our vendors, key, critical components to our operations, exist in the small to medium-sized sector. We're not talking about large organizations. It's those organizations, which we have some influence over but haven't got a direct association with, that we would very much like to see become compliant. It's just in our own interest that they continue to be our suppliers and vendors.

The Chair: Thank you, Mr. Barnhart.

Mr. Lowther.

Mr. Eric Lowther: Thank you, Madam Chair.

We've gone around here once, and I'd like to focus in a little bit more. We're talking of the eve of the year 2000 here in the middle of winter, and we're talking about heat in the middle of winter. Even in the ice storm they still had heat. Right? I'm looking at the National Energy Board's mandate here. It's an independent federal quasi-judicial regulatory tribunal responsible for regulating the Canadian public interest. And I'm thinking heat in the middle of winter. These seem to line up to me, public interest and heat.

I'm surprised here today. It seems the associations are doing more to champion this cause than is our National Energy Board. I could be misreading that, and I'm open to be corrected, but I'm concerned when I hear that we cannot test this system. We can only test isolated pockets, or plants or whatever.

I'm doubly concerned when I hear we're dependent on the telecom industry. We've had them present to us and they gave us no guarantee that data transmission will work. I know that many of the gas transfer mechanisms are dependent on SCADA-type systems that move the gas around.

On top of that, I see right here in the National Energy Board's paragraph it says:

Conceivably all parts of the pipeline transportation system, including compressor and pumps stations, control valves, storage facilities, gas plants and refineries, could be affected by the Year 2000.

With that preamble, I applaud Mr. Barnhart's organization for at least recognizing that there needs to be some energy around not just fixing this, because we're not going to fix it, but a contingency planning. I would have much preferred, though, to see the National Energy Board be the ones championing a contingency plan infrastructure that would champion that cause. Will we see that, or can we see that? Where are you at on that, Mr. McCarthy, if I may ask?

• 1100

Mr. John McCarthy: To be clear, our jurisdiction is with respect to the public interest, but it's a little bit more limited in this area. We regulate federally regulated pipelines, which, as the other witnesses have indicated, form one link in the chain.

I am very pleased to see that Mr. Barnhart talked about the acknowledgement by the CGA that things may not be in place, and that contingency planning will be a priority for that organization and for its members.

As for us, our role, as I mentioned at the outset, is primarily focused on safety and environmental issues. As a secondary role to that, it is not officially our mandate, but we feel it's a responsibility of ours to pursue the idea of security of supply to Canadians. Of course, heat is part of that.

What we would be doing with respect to the regulatory component we have responsibility for is to first of all ensure awareness, and to ensure, secondly, that planning is being done by that critical link in the chain.

Planning as we've considered it is very much in line with the first recommendation of Task Force 2000, which takes a look at everything, from looking at and assessing your own systems and then looking at your partner's to dealing with contingency plans, and that type of thing.

So we're very enthusiastic that the companies.... And we know some of the major companies certainly are well ahead of the game and moving forward, such as the members of Mr. Barnhart's association, but we want to make sure all companies are at least aware of the program and have plans in place. We will be doing an oversight of those plans.

You also have to remember that we're only responsible for the pipelines. We have two very important partners in the regulatory regime in Canada at both the upstream and downstream end. We have to work with them, because a combined regulatory oversight will be the only way, from a regulator's point of view, to be able to ensure that chain is complete.

Mr. Eric Lowther: I appreciate your comments. I guess I would encourage you to start to embrace a little bit more than the strict letter of your mandate as a regulator.

Within your document here you talk about protecting the public, pipeline companies, the environment, and property. The thing that I think is lacking here, and that you could really have a significant leadership role in, is perhaps championing some of these recommendations the associations are putting forward to pave the way to a more speedy solution, or at least less of a problem, on the morning of the year 2000.

I would suggest that one of the ones you might want to jump on in the short term is this contingency planning, and that we see more from the NEB on the contingency part of this. Because in so many of these presentations we've had from industry groups, yes, they're all waving the flag, and yes, they're pouring resources into trying to fix it all, but without exception they're telling us they're not going to get them all fixed, and there are going to be problems. So it seems to me to be a “no-brainer” that we should be building a contingency plan.

I applaud Mr. Barnhart. He is the first person to present to this committee who has really hammered on that. I encourage you to pick up on that and start moving the yardstick on that one.

Thank you, Madam Chair.

The Chair: Thank you, Mr. Lowther.

Mr. Ianno, please.

Mr. Tony Ianno (Trinity—Spadina, Lib.): Thank you, Madam Chair.

Some of the concerns have already been brought forward by some of my colleagues in terms of the year 2000 and winter in January and so on. I heard your answer, but I am wondering about the contingency plans. Do you have a formulation? Is it already put in place? Could you expand on that?

Mr. George Barnhart: Some of the contingency plans we certainly have in place. We have had a long reputation, I guess, for emergency response, for dealing with the various incidents that occur at all times of the year, at 40 degrees below or 40 degrees above.

• 1105

I guess what we see as being different this time is the fact that we've done different scenarios. That may be the loss of a particular pipeline or it may be a loss in a compressor station, or a particular event certainly isolated within one sector of the country. What we would like to address is what happens if we have multiple incidents. For those of us who are operational in nature, we realize that if you have one problem to deal with, it's one thing, but if you have multiple problems, the complexity of the matter becomes beyond the ability of the individuals involved to really cope with the size and magnitude of it. What we would really like to do is prepare our people to deal with any eventualities that come along in that regard.

Mr. Tony Ianno: How are you doing that?

Mr. George Barnhart: Some of that involves consideration of our storage units. Some of it involves coordination of our pipeline and compressor stations. There are multiple scenarios over various combinations of operational issues certainly in terms of resourcing and resource availability throughout not only the year 2000 date, but other key dates that we have that are going to impact our systems or our controls. I believe there are 24 of them in total.

I guess we'll also be looking at communication and escalation procedures, at how we work across the companies to deal with pipeline alternatives, and we have different alternatives there. In that regard, at that level, we're just at the very early stages in terms of what some of those scenarios might be.

Mr. Tony Ianno: Have you come up with a strategy to use if there's a problem in multiple places, in distribution to the export market versus the Canadian market? How does that play? What is the precedent?

Mr. George Barnhart: Which one establishes precedents? No, we haven't. We're actually looking at perhaps some of our legal obligations. Certainly the supplies to the local distribution companies vary across Canada as well in terms of where the supply comes from and how it's handled. But in answer to your question, no, we haven't gotten into—

Mr. Tony Ianno: Will you consider communicating with your members to try to figure that out so that you might be able to report to us what the strategy or the agreement might be among the members?

Mr. George Barnhart: Absolutely.

Mr. Tony Ianno: What percentage of your members do you think are ready in terms of being compliant?

Mr. George Barnhart: If we look at it in terms of compliance, I guess this would be just a rough ballpark guess, but I would say we're 70% there in terms of the critical business applications, the computer systems, the programming types of problems. We're probably at about 50% in terms of the embedded chip issues.

Mr. Tony Ianno: In terms of the embedded chip on the distribution side or the production side, what is the rate of improvement for that number? When do you expect it to be ready?

Mr. George Barnhart: Certainly within the core operational functions, we're targeting that towards the end of 1998. For the balance, we're looking at 1999 to do either secondary remediation issues or to correct any defects that may arise from some of the testing measures that we'll be conducting over the summer.

Mr. Tony Ianno: In terms of rural Canada, how will that play a role, considering the fact that many of our citizens live in rural communities? How are we dealing with that from a contingency perspective?

Mr. George Barnhart: We haven't differentiated at all in terms of our contingencies. In our particular case, most of our customers are rural—or many of them are, at least. We don't differentiate by customer or by customer type in that regard.

The Chair: Mr. Stringham.

Mr. Greg Stringham: Maybe I could just add a little bit to that question as well, because I think it's important to understand the chain that we've been talking about.

The chain is not directly from the well head all the way to the burner tip of one individual element. From the well head, there's storage both in the upstream part of the industry and there's storage elsewhere throughout the pipeline system, such as in Manitoba as it comes across the country. There's also storage at the downstream part of the industry, particularly when we're talking about natural gas.

• 1110

I agree that we have to look at all of these things. It's not one link in that chain that may necessarily pull the whole chain down. There are supply elements located strategically through the country that will help alleviate it if there's a failure in one of the elements.

That's not an excuse. We still need to check them all. I wanted to make sure you understood the nature of the natural gas chain. All the supply doesn't just sit at one end and move through the pipe. There are strategic storage locations that have a sufficient amount of storage to deal with these winter peaks. Or if a gas plant goes down on a regular basis right now, this would just be a continuation—

Mr. Tony Ianno: So are you then taking the logical step in terms of the people or homes that need it most such that the steps backward are all fixed first? So in effect, your supply storage might have time to get restocked and at least the supply that exists can get to the homes.

Mr. Greg Stringham: That's right. I'll defer to the CGA, which represents the downstream, but my understanding is that under any emergency situation, this one or another one, that's the critical nature of the delivery of natural gas.

Mr. Tony Ianno: But are your critical systems set up right now when you're doing your inventory? Are you checking? You said that 50% of the production is up to snuff or compliant. Are you 100% compliant on the final end of the distribution chain?

Mr. Greg Stringham: I'll have to defer to the downstream to answer that.

Mr. George Barnhart: I'm sorry, I'm not sure that—

Mr. Tony Ianno: What I'm trying to do is this. Mr. Stringham basically said that there might be seven points through the chain. Say you're starting off with the source and then by the time you catch the final phase you're not ready by the year 2000. At some point it may have taken longer than anticipated. Then when you get to the final consumer, you may have fixed everything before that but the storage to the consumer may not work. So how do you resolve that?

If you go on the reverse side and fix from the consumer end backward, then at least there's enough storage in the system so that if you go toward the source, you can still fix the problem possibly with intense work on it, and eventually the whole system will still continue to work all the way through. Have you thought from that perspective?

Mr. George Barnhart: Yes, that's how we did our risk assessment. As I say, we call it the wellhead-to-hospital scenario. We address it really from the customer end and work it backward to wherever the weakest links are.

Mr. Tony Ianno: So where are you on the chain?

Mr. George Barnhart: We're addressing the entire chain, if you may.

Mr. Tony Ianno: I've heard that before with many of our witnesses all the way through the system. I guess, from our perspective, we're going from the perspective that there might be a problem.

So how do we build time into the problem so that, in effect, when you get to January 1, 2000, and there's a problem in your system, it's very nice that everyone is at 70% or 90%, but you have 10% all the way through the chain, whereas if you solved the most critical side, then at least you're left with a certain part that you can put everything into to try to fix?

Mr. George Barnhart: Maybe I can clarify that. There's no question in our mind that our priority is the safe, reliable delivery of natural gas as well as the integrity of the operation. Again, that's right through the supply chain, but that's looking at, I guess, risk mitigation for the critical components. A member talked of our SCADA systems, so obviously those are key for controls on the pipeline side.

We're certainly looking at operations through our border stations and whatever remediation efforts need to take place, but that's happening at all points throughout the chain. That's coming down in terms of highest priority down to what I would class as perhaps secondary issues.

Mr. Tony Ianno: So as of yet, there's no 100% completion on any parts of the chain.

Mr. George Barnhart: Certainly in component parts of the chain, I would say there is.

The Chair: Thank you, Mr. Ianno.

[Translation]

Mr. Dubé, please.

Mr. Antoine Dubé: I have just one question. My impression is that you came to this meeting very well prepared, and that you even prepared your answers to our questions. We could think of many other questions we could ask you.

• 1115

However, you are here before a committee of elected representatives, not specialists trained to inspect, control or monitor anything at all. I would like to ask you the opposite question. In your view, has the federal government done everything it should to date to solve this problem, and have the provincial governments also done everything they should?

I have a subquestion that will help us assess this. Do you ask for things from governments, or do governments usually...? When industries have the inspection or supervisory services they require, they generally tell us that they find government officials annoying. Do you think you request things from governments, or are you in the opposite position? Do you understand my question? Do you think the government gets in the way of your business dealings, or do you expect certain things from the government?

[English]

Mr. Greg Stringham: Let me start first on that. I don't think we are looking for an imposition of something from the government. The industry has taken this themselves and recognized the business problem associated with it, with its inherent relationship with the public interest as well, and has said we need to be prepared for this from a number of fronts. An additional mandate would certainly raise the awareness of it, but would it change the activities that are under way? Probably not. People are taking it into their business applications every day already.

It's a balance of how much awareness versus how much control you want to have. If you absolutely said there has to be a 100% guarantee of something, would it change what people are doing right now? I think people have recognized the problem and are working as hard as they can at it. It may accelerate their motivation, but would it actually accelerate the effort? It's difficult to say.

The Chair: Mr. Barnhart.

Mr. George Barnhart: I would like to comment and actually applaud Industry Canada and the Task Force Year 2000 as an example of where government has certainly created an awareness beyond anything we could have done as an association or as an industry. That has helped our efforts immensely. It was very informative, very helpful to us in terms of our work as well. We would certainly like to see those types of efforts continue across the country, and at all levels of government, not just federally, but provincially and municipally as well.

We believe, though, that there are some efforts that are beyond the influence of industry and business to be able to have an impact on, or to get support in, and it's in those areas we would like to see governments start to take a very active role. Some that we mentioned were community services and emergency response types of issues. Those are issues of concern we can participate in, and we will certainly work with you to address those, but that leadership has to come from the government sector, we believe.

[Translation]

Mr. Antoine Dubé: So, there are local, provincial and municipal emergency plans, to avoid being caught short as we were at time of the ice storm.

Thank you.

[English]

The Chair: Thank you, Mr. Dubé.

Mr. Lastewka.

Mr. Walt Lastewka: Thank you, Madam Chair.

Your remarks lead me right into my questions. We've heard on this standing committee a number of times from associations. One of the things that has become very clear to us is that although associations try to get the message out and try to do surveys and so on, the support for associations comes very slowly.

I appreciate the fact that you have all your senior information technology representatives working as a committee and so forth. The question that pops up, though, is do we have enough senior executives, a person reporting to the president, who is helping these IT representatives? Our feedback from ITs, when you talk to them one to one and so forth, is that their executives are not giving them the support they need. In the Task Force 2000 report, it was very clear that senior executives, those reporting to the president.... There needs to be someone in control. Is that happening in the gas industry?

• 1120

Mr. Greg Stringham: Let me start, and then I'll turn it over to George.

That was certainly one of the key issues. It was the very first one that was raised when our committee got together last year, saying so far this has been looked at as an IT problem and it needs to have this senior involvement. That's what we as an association in this committee have been trying to do—accelerate that, or elevate it to ensure that CEO acknowledgement of the issue and assignment of responsibility and accountability have been made. A number of efforts have been undertaken to try to do that, but I agree with your comment that that's what really needs to be taken in order for the action to happen.

How do you do that? Well, we've gone out and sent things directly to them. We've raised it at our board of governors meeting directly with them. We've also been phoning them up afterwards and saying, “Okay, who has been assigned to be responsible and accountable in your individual company?”, so that we know that's been undertaken. That in itself, I think you'll see, is an example of how once that person is in place, the rest of this activity does follow.

Your point is very valid.

Mr. George Barnhart: Just as a clarification, within the Canadian Gas Association, personally I report to the CEO of SaskEnergy, as do many of the colleagues who work on the IT subcommittee. Our committee, though, while we work independently within our own member companies, has had the support of the CEOs from across all the pipeline and the LDC companies across Canada and the boards of directors of the companies that are involved in that case.

In many cases it has been mandated that the problem be addressed in the fashion we're talking about. The Canadian Gas Association's board of directors consists as well of the CEOs of our companies, so in many ways we're dealing with it independently as member organizations.

We haven't seen any evidence that there has been any lack of support. We've had extremely strong support not only at the CEO level but in other functions, for example through legal counsel and through our financial and operational counterparts.

It's being viewed very much as a business problem with the Canadian Gas Association, not just as a technology issue. It was a number of years ago when we started, but I think as we got an understanding of the impacts, we've certainly had the strong support of senior management.

Mr. Walt Lastewka: Okay. I really appreciate your frankness in confirming what many of the other associations have said: having the CEO and at least a top executive assisting the ITs gets things done.

I want to switch over from the larger utilities or larger companies into the medium-sized and the small-sized companies that we talked about. The latest Statistics Canada survey showed very clearly that 43% of the small businesses haven't even started. There are many small businesses that, as you mentioned earlier, Mr. Barnhart, are suppliers to you, that require....

How is your association assisting everybody, including our committee, to get the message to those small businesses that it's not good enough just to be aware, and that there's not a silver platter coming from somewhere, from whoever—that they themselves have to face that situation head on? We've already heard that 8% have said they're going out of business, and those may be some of your suppliers. What additional things are you doing as groups to help those small businesses not just get the message, but start doing things, and not consider going bankrupt, but make sure they're going to fix the problem?

Mr. Greg Stringham: Let me start, and then we can talk CGA.

From the small producer companies within the CAP organization, what we're doing is providing to them, as I mentioned earlier, this checklist that they need to go through. One of the big things they haven't had in their hands to this point is where to start. So what we've provided to them what they need to start. Can you go down and answer yes or no to this checklist? If you can't answer yes to it, then what do you need? You need the help for the tools. Where do you go for the resources? We provided that to them as well.

Now the question is yes, you can provide all that information to them, but how do you ensure that they do it? Well, you can't ensure that they do it, but what you can do is phone them up afterwards and ask who is responsible—the key that you mentioned earlier—and ask them if they've become compliant in these areas, and start quizzing them on those questions. But all you can do is ask them the questions, and that's what we've tried to do. We've tried to ensure they are aware of it, that they have the tools in their hands to be able to complete it and that they're aware of the critical nature of it.

• 1125

Mr. Walt Lastewka: I understand that they have to provide that information, and you're going to, but isn't there somewhere along the line where, if you want to be a supplier to the gas companies and so on and so forth, you have no choice but to be...? Thinking now about going out of business is a silly option as far as I'm concerned.

Mr. Greg Stringham: Right. One of the options there is certainly that the market will be looking to people who are reliable suppliers. I don't know of contracts that put that in right now or where you need to have that right now, but I know that people are considering it as part of their limitations on their liabilities as well as looking to who they contract with in the future.

Mr. Walt Lastewka: Thank you, Madam Chair.

The Chair: Mr. Barnhart, do you wish to add to that?

Mr. George Barnhart: Just to add to that comment, yes, some of the contractual nature of the vendors has certainly changed. There's been a lot more emphasis and focus and discussion with vendors of all sizes, with particular attention being paid to the small and medium-sized vendors. The ability of our CGA committee to deal with the small and medium-sized vendors...really, I think it has been put out to the member companies so they can deal with it on more of a local basis, more from an awareness perspective, and so they can deal with the suppliers that are critical to them.

Also, in some cases there have been local awareness workshops, which have been supported by our memberships to try to get the small to medium-sized businesses at least aware, as Mr. Stringham points out, of these questions. How do I start? What types of things do I start to look for? What types of things do I address?

But we're certainly addressing it contractually and emphasizing with them that they must be compliant in order to do business with us.

The Chair: Mr. Lastewka.

Mr. Walt Lastewka: My last point, Madam Chair, is that the voluntary part, the getting the information out, was okay two years ago. It's not okay now. Now it's fish or cut bait. Either you're going to be a supplier or you're not going to be a supplier. And associations and larger companies must get that message out, because 43% of small businesses haven't even started. They say they're going to get around to it “some day”.

The Chair: Thank you, Mr. Lastewka.

Mr. Lowther had one last question.

Mr. Eric Lowther: Thank you, Madam Chair.

I want to thank the witnesses, as I'm sure Madam Chair will do. We have the easy job: we have to ask the questions. You have the hard job: you have to try to answer them. I applaud all your efforts in trying to champion this issue and I appreciate your coming here today.

There's one question I will probably get asked by the folks back home, so I'm going to extend it to you. I wonder what you personally are going to do and what you'd advise the people we're serving here. Should I stock up with firewood and fill the propane tank for the morning of the year 2000?

I'd like to begin with the National Energy Board.

Mr. John McCarthy: From what I see so far, my perspective is that the industry, the operators of this chain that we've talked about, has realized its responsibility and is organizing. We see our role as trying to ensure that the associated safety issues are at the top of the list of priorities and stay there. I feel comfortable when I say we can ensure that we will do our role. And we will hopefully see that the industry will continue—as it has so far—to accept its responsibility in following through and keeping that eye on the ball and that focus on those priorities.

I hope that answers your question.

Mr. George Barnhart: I'd just like to reiterate that as the Canadian Gas Association we see the safety, reliability, and operational integrity as being just so fundamental that it will happen. It is essential to maintain the gas services. We have every confidence at this time that those measures will be taken, that the gas will flow, that the gas will be provided and that we'll take steps to ensure that does happen.

• 1130

The Chair: Mr. Stringham, do you have a comment?

Mr. Greg Stringham: I would reinforce what Mr. Barnhart has said.

The question you are really asking, Mr. Lowther, is should each individual have a contingency plan themselves anyway. I think the experience of the Quebec ice storm and other things demonstrate that we probably should have a contingency plan, regardless of the situation. The way I could rephrase your question perhaps is has this increased the probability of us having to use that contingency plan? I think I would agree with Mr. Barnhart that no, it will not increase it very significantly, but that doesn't mean you shouldn't have your own contingency plan anyway.

The Chair: Thank you very much.

I have two points of clarification that I want to have made before we end this session.

Mr. McCarthy, you talked in your brief about your regulatory powers and responsibility. I'm curious as to whether the safe operation of the pipeline system requires hydro, or is it self-sufficient on its own?

Mr. John McCarthy: Many of the components would be electrically driven, of course. So yes, in many cases that's the case.

The Chair: Are you working with the hydro associations and hydro suppliers to ensure that to be year 2000 compliant they will meet the safety requirements?

Mr. John McCarthy: Our avenue for that would be to focus on the companies and ensure that the companies develop contingency plans that suit their needs, and that includes checking with their suppliers, be they electrical suppliers or any other suppliers that are critical for their safety and their operational requirements.

We would go that avenue. We try to work with the companies that we regulate in the industry and people that we regulate. It is probably better for us to focus our energy there than to deal with the people they should be dealing with.

The Chair: Mr. Barnhart, are you working with the hydro suppliers to ensure service to consumers through your association?

Mr. George Barnhart: We certainly have been, and the hydro power suppliers are a critical component to our operation as well, as they are for most. We are doing that pretty much on a jurisdiction-by-jurisdiction basis across Canada, each utility, each member company. Our plans are to deal with that on a more national basis.

The Chair: Mr. Stringham, do you have anything to add to that?

Mr. Greg Stringham: No. I'd simply say that we have been working with TransAlta and other individual companies to make sure that interface is correct, but that's the work that is ongoing in the committee.

The Chair: I have one question for you, Mr. Stringham. You said you would make the results of your survey available to the committee, and I would appreciate it if you could do that once it becomes available.

Mr. Greg Stringham: Absolutely.

The Chair: There was some discussion earlier about supply and what's in the supply. Is it an hour's worth of extra supply, or two weeks' worth? How long can we sustain any type of emergency or disaster situation when we talk about what's in the supply chain?

Mr. Greg Stringham: It all depends on where you are located. It's not an easy answer to that question. If you have a location, you can certainly figure out what's the closest proximity of the storage and the emergency response that's associated with those kinds of events, but it's not a simple answer.

There's x amount in supply. There are certainly large billions of cubic feet of gas in supply in Alberta. There are large amounts in storage reservoirs or caverns that are located throughout the different parts of the country, and Ontario as well. So depending on where you ask that question, I could give you a better answer.

The Chair: Would there be some areas that would be only subject to a couple of hours of emergency supply, or would every area have an adequate supply? I think we need to know if all areas have at least a week timeframe or not.

Mr. Greg Stringham: It all depends on how close they are to the storage facilities. Some remote locations may not have that supply for that period of time. Some that are located next to a storage reservoir in high-density residential areas would have a longer-term supply. I can clarify that if you would like to know, but it really is dependent on where you are located.

The Chair: I think in light of Mr. Ianno's questions earlier and Mr. Barnhart's reply about rural areas, we are concerned about remote and rural areas and what the effects would be if perchance something were to happen and all the t's aren't crossed nor the i's dotted.

Mr. Barnhart, you had said earlier that in your case in particular, in Saskatchewan, a lot of it is rural, but some are more remote than others and some will be closer to these supply stations than others. I'm concerned that as we talk about adequate supply, some may have only a couple of hours of emergency supply, whereas others will have weeks, in close proximity. If everything were to shut down in a worst-case scenario, what happens in these remote or rural areas? Those are concerns we have as a committee.

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The one last thing I want to raise is the Good Samaritan proposal, which I don't have problems with per se, but I am concerned that some companies are signing agreements with people who are fixing their IT systems or fixing their embedded chips. Are they restricted in those agreements from passing on information, when you talk about having a law of sharing of information?

Mr. George Barnhart: In some cases, Madam Chairman, there are restrictions, depending again on the type of contract. I think in a lot of cases what we're talking about are perhaps product defects, particular types of equipment, and certainly measures that are taken, even the status of preparation or steps taken. Some of those are considered. It's not necessarily just a particular company that's doing things. In our case, it was product specific.

The Chair: Thank you. I want to thank you all for being here, and for the well thought out presentations and for the discussion we've had. We know you're actively working towards meeting the year 2000 requirements, and we appreciate that, not only as parliamentarians but as consumers. We hope you will definitely meet your goals.

I'm now going to suspend sitting while we exchange witnesses and allow members to grab some lunch, because it is going to be a working meeting for the next session, a working lunch. The meeting is suspended for about five to ten minutes.

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• 1146

The Chair: We're going to reconvene the meeting.

The next groups before us to discuss year 2000 preparedness are the Air Transport Association of Canada and NAV CANADA.

From the Air Transport Association, we have Mr. Clifford Mackay, the president and CEO; Mr. Jean-Paul Bourgeois, the director of enterprise systems for Air Canada; Ms. Janice Robinson, the project director for year 2000 at Air Canada; and Mr. Ric Bentkowski, the manager of the year 2000 project at Canadian Airlines International.

From NAV CANADA, we have Mr. Sid Koslow, the vice-president of engineering; and Mr. David Honkanen, the year 2000 manager.

We're going to begin with the presentations, first by the Air Transport Association, and then by NAV CANADA. We'll then turn it over to questions.

Could I begin with Mr. Clifford Mackay?

Mr. J. Clifford Mackay (President and Chief Executive Officer, Air Transport Association of Canada): Thank you, Madam Chair.

First, let me just briefly describe what the Air Transport Association of Canada is. It is the Canadian association representing the commercial aviation interests in Canada. In addition to the large scheduled carriers, Air Canada and Canadian, our membership roster includes all of the air carriers flying scheduled service, all of the large jet charter operators, and many of the smaller operators of air taxis, helicopters, and flight training schools across the country. In total, our members account for about 96% of the total commercial revenue in the air transport industry in Canada.

I'm here today to provide the committee with a status report on the activities of the air transport industry with respect to the year 2000 problem. Frankly, it's hard to believe we're facing this problem at this point, because less than a generation ago computers, while they were around, were not a big deal in our industry. Today they are absolutely essential. We cannot operate in any of our modes without computer-based systems. Everything from the selling of tickets through to the scheduling of our aircraft and crews, from our maintenance tracking and aircraft operations through to our various customer plans such as frequent flyer programs, are all inextricably bound up with computer-based systems. They are therefore part of the year 2000 issue.

Today's computers are endemic. Let me just to give you a bit of a sense of how they're used in the industry above and beyond the obvious ways I'm sure you would immediately recognize. Today's modern jet aircraft have telemetry systems on board that communicate to the ground the status of various operating systems on the aircraft so that our maintenance management people can better maintain the aircraft in a real-time environment. Also on board modern aircraft are data links from the flight deck to the airlines on the ground so that, again, more efficient operations can be achieved.

All of these systems, along with a wide range of others, such as the environmental control systems on aircraft and the automatic landing systems that modern aircraft have to assist in landing in foul or inclement weather, are linked into computer-based systems in some way or other.

I hope that gives you, in brief, a sense of the scope of the issues we're dealing with in the air transport industry for each airline.

Before I tell you precisely what we're doing, let me just start off by saying that our first priority, our second priority, and our third priority in addressing this problem is safety. Nothing else is more important to us in ensuring that this issue is properly managed, and that on January 1, 2000, the travelling public will be able to fly in a safe and convenient manner.

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Members of the industry have been working on this problem for quite some time already. I don't want to leave you with the impression that this is something we discovered a few months ago. The larger companies have been at it in some cases for well over two years. Very significant resources have been spent already.

There are literally millions of lines of code that need to be checked and fixed, and the costs of these activities are significant. I don't propose today to get into the details of what each individual airline is doing. My colleagues are here just in case members of the committee have questions in that context.

Just to give you a sense of the size of the issue and the amount of effort that's going on, IATA, the International Air Transport Association, which represents all the large carriers around the world, recently estimated that their members would spend well over $2 billion Canadian in addressing the problem. Here in Canada I can say quite confidently that Canadian carriers will be spending anywhere from $50 million to $100 million and perhaps even more. Obviously we don't have hard numbers yet because the job is not complete. So I think I can assure committee members that the industry is taking a very serious and businesslike approach to this.

Let me take a few minutes and talk to what is going on beyond the efforts of our individual members.

Our industry is bound together in one large system. It is not simply necessary for our members to satisfy themselves that all of their internal systems are working appropriately when they are addressing the year 2000 problem. In order to ensure safety, our members must also know that all the other elements of the air transport international system are also Y2K or year 2000 compliant and operating safely. These are things such as the air navigation services around the world—and my colleague Mr. Koslow will be speaking about NAV CANADA's efforts in a minute on that subject—but also what are each of the airports doing around the world that our members use, and what are all of the suppliers to the industry doing to ensure that all of their products, everything from very large and sophisticated products like a Boeing 747 400 down to the people who make sure that your meals arrive on time and are warm, so that you have something to eat when you fly on the airplane and all of the things in between....

That particular problem is gargantuan if each airline individually had to go out and satisfy themselves individually that all of that activity was being undertaken, and that all of those various players were going to be Y2K or year 2000 compliant in the appropriate timeframes.

What the industry has done to try to address that collective problem is that we are putting in place a program in cooperation with IATA internationally and with the American Transportation Association in the U.S. to develop a database that will allow our members to very easily and quickly ascertain the status of the providers of air navigation service, the providers of airport services, and the providers of all other services to the industry through a database that is currently being developed.

The database would review in Canada up to 50 airports, which include of course all of our major airports and many of the smaller airports across the country. It would also work in cooperation with NAV CANADA to ensure that all the users had access to the status of NAV CANADA's program. In addition, it would include up to 5,000 direct suppliers to the industry and then an additional database of smaller suppliers, which are regionally or locally based and would not be in the core database. This information would be available to all participating carriers so that they could make judgments in regard to the safety of their scheduling and operations as the year 2000 approaches.

This, in addition to the numbers I mentioned earlier, is not an unsubstantial undertaking. The Air Transport Association in Canada will be spending as much on this undertaking as our entire annual budget this year, something in the order of $1.3 million to $1.4 million. So it is frankly a significant undertaking for us.

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Let me give you an example of some little things and some not-so-little things that need to be checked, just to give you a sense of what we're dealing with.

When you check into an airport, you'll notice that the attendant there is almost invariably working on a computer to confirm your seats and your flight. These computers are called “common-use terminal equipment”. They are developed so that any airline using that gate can access its own reservation and operating systems so that you can get on and off the airplane efficiently. It is estimated that 13,000 of these terminals will have to be replaced around the world because they are not Y2K compliant. That process is going on at the moment.

Another example of much larger proportions is that Boeing has advised that all of their major jets are now in the process of having to be changed out—some equipment and other things are being changed out—in order to make them Y2K compliant. As you know, Boeing is the largest supplier of commercial jet aircraft in the world.

Another very tiny example, which speaks to the need to always address the detail in this issue—do not make assumptions—is that at a particular airport in the U.S. they believed they had the problem fixed until they went through things in great detail and discovered that they had a very old IBM 286 computer which just happened to operate the landing lights system at this airport. It was, of course, not Y2K compliant. They are obviously moving to fix it. Detail is important.

The other point to be made about this is that cooperation is equally important. Here are two examples. The larger carriers tend to have proprietary reservation systems, things like SABRE. These reservation systems are used by many of the smaller carriers as well, who are related in one way or the other, either by ownership or through some business arrangements with the larger carriers. There is a large and significant flow-down benefit to the smaller carriers from the work that the larger carriers are doing on some of these systems. Those costs, of course, are costs that the smaller carriers no longer need to concern themselves with. So as well, there are some benefits to working cooperatively in this area.

Let me stop there and talk just for a moment, then, about the smaller carriers. The program I described is a program which is obviously focused on the larger carriers. In Canada, probably the top 20 or so carriers will likely directly participate in this program because they have a compelling need and it is a very cost-effective way to address some of these problems. It doesn't address the problem, though, of a lot of very small operators, people who fly charters or fly in the north or fly special kinds of services, helicopter or other services.

In that particular case, the association is putting in place an information system which will build off the expertise we are developing on some of these other activities so that our smaller members can, with great ease, find out what questions they need to ask and where they can go for some help in this area.

ATAC has about 100 flight schools as members of the association. Flight schools do not need to address the year 2000 problem with the same the level of intensity as, for example, Air Canada or Canadian, but they still have issues they must address. So we will be making available, starting in about four weeks' time, an information package and a help process whereby our smaller members can gain access to expertise on an as-required basis so they can address the problem.

For quite some time now we have been exhorting our members to take this problem seriously. I think I can report that many of them are now beginning to do so, so we are optimistic that over the next three to six months significant progress among our smaller members will be made.

Let me just conclude my remarks by re-emphasizing one absolutely critical point that I hope I have communicated very well. The air transport industry in Canada is absolutely committed to addressing this problem. And as I say, again, the number one priority for us is safety. Our members have been very clear: they will not fly to a destination they do not believe to be safe.

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Having said that, we are very confident with the work going on in the companies of our individual member and with the work that is being done collectively here in Canada and in cooperation both with our American and our international colleagues that we will be in very good shape to satisfy the travelling public that they will be just as safe and find it just as convenient getting on an airplane on January 1 as on December 31.

Thank you very much, Madam Chair.

The Chair: Thank you very much, Mr. Mackay. I would like now to turn to Mr. Sid Koslow, who's from NAV CANADA.

Mr. Sid Koslow (Vice-President of Engineering, NAV CANADA): Thank you, Madam Chair. It's our pleasure to appear before you and your colleagues today.

Let me start with the bottom line: all of our systems will be Y2K compliant by April 1999. I'd like to explain briefly how we are progressing toward that goal.

Our experience to date indicates that with a good knowledge base of the systems in question—I think that's a key point—the challenge in ensuring Y2K compliance lies in identifying potential problems. Once the problems are identified, they are relatively easy to fix.

NAV CANADA is using a total systems approach to ensure that our operational systems, which make up Canadian civil air navigation service, are free of the Y2K problem. That approach is disciplined and thorough, and it's providing management with visibility into progress toward achieving that goal.

NAV CANADA provides one of the safest and most efficient air navigation services in the world. The systems include air traffic control, flight information, weather briefings, airport advisory services, and electronic aids to navigation.

Safety is priority one at NAV CANADA. Safety is the cornerstone of our corporate culture, and it will not be compromised. All changes, including those required to resolve the Y2K issue are analysed and risk-managed from a safety perspective.

A plan to address the Y2K problem has been developed. This plan states that a due-diligence approach will be used. This plan is quite comprehensive and covers all of our systems.

As VP of engineering, I've been involved from the beginning and have a clear view of what needs to be done. The objective of the program office is to put NAV CANADA in the position of providing service as usual through the risk period.

NAV CANADA has been working on this issue since late 1996. The problem was identified by our predecessor, Transport Canada, after the transfer of the air navigation system to NAV CANADA.

On November 1, 1996, the corporation began to deal with this problem. From the very beginning, our focus has been in identifying the risks. This includes determining the size of the problem, setting objectives, and then designing ways of solving the problem.

We are well along in this process. The solution really has as much to do with management as with technology.

In early 1997, NAV CANADA hired an outside consultant team that specialized in this problem. We told them to develop a plan of action for assessing affected air navigation systems and complying with the Y2K standards. In September 1997, we began to create an inventory of all of our ANS systems. This effort has been completed.

In the fall of last year, we set aside a week at our technical systems centre to move all of the system clocks forward to just before midnight on the last day of the millennium. We then moved forward into the first day. The results were encouraging. The systems did not crash. But a number of problems, some of which would be serious if not fixed, were revealed.

The experts we had engaged also recommended that we use a sample system that we knew was likely to have problems so we could get firsthand experience in dealing with these sorts of problems and then prototype a process for dealing with the remaining systems.

The system chosen was the Gander automated air traffic system, known as GAATS. This system is the oceanic flight planning system located in Gander, Newfoundland. It provides oceanic flight plan information which allows us to coordinate flights with the United Kingdom system in Prestwick. Through this system we manage all of the oceanic traffic west of 30 degrees longitude, and this represents the majority of the North Atlantic flights on a daily basis.

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The next step was to assess all of NAV CANADA's operational systems to find out which ones will be affected and to identify all those that are mission critical.

We have approximately 140 operational systems. These range from large complex systems such as flight plan data-processing systems and communication systems to small PC-based systems, which provide support functions.

As of March 2, 1998, we established a full-time project team with a full-time project manager and with a staff to support the function.

We have completed our assessment and categorized all 140 of our operational systems. Of those 140, 42 were judged to be mission critical; that is, these systems have an immediate impact on information provided to controllers and flight service specialists. Of the 42 that are mission critical, 18 have a major software component and need careful examination. We have completed a full technical review of these 18 software-intensive, mission-critical systems. The result of this review has allowed for detailed planning for required remediation and for the provision of a tracking system that will allow us to have week-by-week visibility into the process.

One of the 18 mission-critical systems was GAATS, which was our sample system, and it turns out that it in fact had a number of critical problems. But since we had started early we can report that repairs are just about complete and that the repaired system will be in operational use before the end of this calendar year.

After remediation, all mission-critical systems will be tested individually. We will then test them in combination and put them in environments which are realistic relative to the operational world.

I should add that we are also using this process to ensure that our business systems are Y2K compliant. We will cover all of our computing assets in the corporation. We intend to not overlook any of the systems on which we depend.

We recognize this as a serious problem, for which considerable work remains. We are in the process of completing our detailed plans and we have plans that will lead us to finding and fixing the problems, with a lot of emphasis on tests. We expect that we will expend perhaps half our effort on testing systems. In addition to what we do ourselves, we need to be assured that our fellow agencies with which we interface—and this includes principally the FAA in the United States and the CAA in the United Kingdom—are equally well prepared. Finally, we will need to be assured that our telecommunications and utility service providers will be ready. As well, airport authorities need to be prepared.

In summary, although there are a number of challenges concerning the millennium problem, the scope relative to NAV CANADA's systems is now well known. We have an activity underway to address these problems, we expect to do it in an orderly manner and we expect the problem to be resolved in time.

Thank you.

The Chair: Thank you very much, Mr. Koslow.

We will now proceed with questions, beginning with Mr. Schmidt.

Mr. Werner Schmidt: Thank you, Madam Chair.

Thank you very much for appearing. I'm sorry that I had to come in a little late, but that's what happens sometimes.

I am intrigued by the second-last word in your report from NAV CANADA, which is the word “in”. Why wouldn't that word be “on”?

Mr. Sid Koslow: I'm sorry, but I'm not quite sure of the reference.

Mr. Werner Schmidt: The point is that you say the problem will be resolved “in time”. In time for what? Sometime in the future, or on time for the year 2000?

Mr. Sid Koslow: I'm sorry—on time. It will be on time for the year 2000. Our plan is to be complete with this process by April 1999. At the end of that process we will be doing very extensive testing and that will leave us enough time to do the process over if we find any unexpected problems.

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So yes, thank you, I would certainly like to change that. It will be on time for the millennium.

Mr. Werner Schmidt: It's only a two-letter word, but it can make a lot of difference.

I think the significant point here is that you have taken as a model a system that proved to be defective in many ways. Your system is so critical that not only does one part have to work very well, but all parts have to work together.

When you talk about the service sites you have—and earlier we talked about the Air Transport Association, which presented a very fine brief as well—it seems to me that not only are you concerned about having your accounting systems in place and your critical systems in place, but another thing has to happen here: there has to be the coordination of all these things happening together. This includes the telecommunications people and the electrical systems. What contingency do you have in the event that something like GAATS proves in the final analysis not to work?

Mr. Sid Koslow: I think you're entirely correct. In the plan we have in place our intention is to deal with each system individually and then put them together in combinations.

We have also been in touch with the CAA in the U.K. and the FAA in the United States. We are very interested in each other's plans. That exchange is taking place.

We are about to put out a formal letter to our telecommunications suppliers and utilities to work with them to assure ourselves that they will be ready.

We will be testing near the end of the time period, April 1999, much of the system in an operational environment—all working together.

Mr. Werner Schmidt: That frightens me. If April 1999 is the day when everything is supposed to be working, you have roughly seven months in which to make your changes, because it will take you a while to analyse what went wrong. Does that give you enough time? Why aren't you testing this by the end of 1998, instead of April 1999?

Mr. Sid Koslow: We are in fact testing systems. We have run tests already. We will be testing individual systems as we repair them. The April 1999 date is the date by which we expect the entire system and all the interfaces to each have been repaired, plus combinations of those systems tested, and by the end of April the entire system tested.

It would be reasonable to expect that while it's possible to discover some problem at that late date, the probability is that we will have caught everything by then. If there is some concern at that time, if we do discover something in April, we will have time to do that process all over again before the end of the year.

Mr. Werner Schmidt: That's all very well, and it sounds really good if yours were the only system. But I think the government has that as its date as well, and there are a number of other organizations that have picked April 1999 as the date on which they're going to test everything. If every one of those who are testing have only one problem, there is a huge set of problems that comes as a result, even though there's only one per organization. There is a real logistical problem as to how are these all going to be remediated.

There are three kinds of problems that I see. First, the experts who are going to fix the problem. Second, the kinds of materials that need to be done—maybe equipment that has to be purchased, switches that have to be replaced or others that have to be repaired. Third is the ability to put this into the coordination now and again. Because you have it coordinated, and now you have to take it apart and you have to bring it back together again. The timeframe is very limited to do that.

I'm wondering, if an inordinate number of groups are picking April 1999 as the big day, what's going to happen? There's this wave of demand that is going to test and probably break what's available to support the system.

Mr. Sid Koslow: We are reasonably confident that we need approximately a year to do a very thorough, orderly engineering process to go through each of our systems and come to a high level of belief that we have found and fixed every problem in the individual systems, put them together as they work in the operation, test them thoroughly in that environment, wring out whatever problems there are, fix them, and put them together with interfaces to the outside world.

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We think with reasonable probability that we can do all that work in one year. In order to make sure we have the resources and do that job thoroughly, we think that is a prudent amount of time to set aside for that process. Given the amount of work we're expecting to do during that year, we think the remaining time beyond April is sufficient to fix any problems we would discover after that very, very thorough process is gone through.

Mr. Werner Schmidt: Will you tell the airlines not to fly if something goes wrong?

Mr. Sid Koslow: Absolutely.

Mr. Werner Schmidt: Thank you, Madam Chair.

The Chair: Thank you very much, Mr. Schmidt.

Mr. Bellemare, please.

Mr. Eugène Bellemare: My questions are to both the airline industry and NAV CANADA. Have you made an assessment of your legal responsibilities?

Mr. Clifford Mackay: Just to start, each individual company, of course, is making those assessments, but the general answer from the air industries association point of view is yes, that matter has been looked into.

Mr. Eugène Bellemare: Have you set some kind of an amount where you could be liable for lawsuits of a certain amount of money?

Mr. Clifford Mackay: No, that has not been done. It has really been looked at more from the point of view of what some of the liability issues and the insurability issues are.

The insurance industry has made it very clear that if policyholders do not exercise prudence and due diligence, then it is unlikely that their insurance coverage would continue if there were a serious incident that resulted in loss of life or damage as a result of a Y2K failure.

Mr. Eugène Bellemare: Would it be far-fetched to say that you could be liable, if proven guilty, to hundreds of millions of dollars?

Mr. Clifford Mackay: I'm not a lawyer, but depending on what jurisdictions you talked about and depending on the nature of the incident, I'm sure the numbers could get very big.

Mr. Eugène Bellemare: Knowing that, NAV CANADA, in March Pearson Airport was shut down. Are you aware of this?

Mr. Sid Koslow: There were flow restrictions for several hours, yes.

Mr. Eugène Bellemare: One evening in March there was a total shutdown at Pearson Airport. No one could fly in or out.

Mr. Sid Koslow: My understanding is there were flow restrictions that were quite severe, and the airlines did cancel a number of flights. My understanding of the March incident was that at no time was the airport actually shut down, but it was a very severe restriction.

Mr. Eugène Bellemare: The airport was possibly not shut down, but was the flow of traffic in and out shut down?

Mr. Sid Koslow: It is my understanding that it was never shut down but it was severely restricted, which led to a number of cancellations.

Mr. Eugène Bellemare: What is the definition of “severely restricted”? If I were flying from Ottawa to Toronto that night, could I have done it?

Mr. Sid Koslow: I mean, the number of aircraft that could land that night—

Mr. Eugène Bellemare: The answer is no, you could not have done it, because my colleagues tried to fly to Toronto and could not and had to stay here. Some people in Toronto, some of my colleagues, could not fly here.

What was the cause of that?

Mr. Sid Koslow: We had several failures in our power conditioning equipment. We never lost power, but because we could not switch without interruption to the back-up, we restricted the flow of traffic.

Mr. Eugène Bellemare: Do you have any guarantees that the power wouldn't go out on January 1, power from let's say Ontario Hydro?

Mr. Sid Koslow: There are few guarantees in this business. We are including—

Mr. Eugène Bellemare: In other words, you are telling me there are no guarantees.

Mr. Sid Koslow: There are no guarantees. We are in contact with Hydro, and in fact our legal folks are helping us frame some inquiries to them to make sure we have every assurance that—

Mr. Eugène Bellemare: Would you be allowed to audit whatever interfacing they have to do with you, so that in an audit, an outside auditor could say yes, they are compliant and they will be able to serve you?

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The Chair: Mr. Bellemare, would you please let the witness finish the answer before you start the next question?

Mr. Eugène Bellemare: Well, I only have ten minutes, and if the—

The Chair: You only have five minutes.

Mr. Eugène Bellemare: Five minutes? It's even worse, and if the—

The Chair: You have to let them finish speaking before you start your—

Mr. Eugène Bellemare: If the witness waffles and “maybes”, and says “I don't know”, and he's not sure....

The Chair: This is not a courtroom setting.

Mr. Eugène Bellemare: I am reminded it is not a court—I am sorry.

The Chair: Mr. Koslow, would you like to reply to the last question?

Mr. Sid Koslow: Sure. I have not considered the possibility of auditing Hydro.

Mr. Eugène Bellemare: Okay. Whether it's Hydro or other groups, will you be requiring compliance certificates?

Mr. Sid Koslow: Yes. We will be requiring that they answer our inquiry and give us assurance that they will not have a problem at the millennium time, yes.

Mr. Eugène Bellemare: I wonder if the airline industry would comment on my question.

Mr. Clifford Mackay: Just briefly, I think words are important here. You used the word “audit”. What we are doing is going around, in cooperation with airports and other service providers, and—I'll put this word in quotes—“auditing” their activity. I don't want that word to be used in a financial sense.

Mr. Eugène Bellemare: No, no.

Mr. Clifford Mackay: This is in the sense of inquiring as to what the status of their Y2K program is, so that our members can get the best information possible.

That information is not intended to be used in a contractual or legal way. It's intended to be used as information to allow our members to make the best judgments possible. Then the individual companies are going to have to make their own decisions as to whether or not that Y2K program for that particular supplier or that particular service provider is good enough to meet our safety standards. That's the critical question that always gets asked.

This of course will be an ongoing process as we move toward the millennium. The information should be completely available and the database complete, although it will always be upgraded, well before the end of this calendar year.

To try to get to your question, will individual airlines be requiring that all of their suppliers provide certificates saying they are, I think each individual airline will probably have slightly different procedures for different suppliers, depending on the criticality.

The purpose of the exercise is to get, collectively, because it's much more efficient, the best information humanly possible on the status of the problem for this huge network of players, so that people can make their judgments when they make up their operating plans.

Mr. Eugène Bellemare: Do you have, in NAV CAN or the airline industry, a continguency plan in case you need some emergency response?

Mr. Sid Koslow: Yes, we will have contingency plans in case—

Mr. Eugène Bellemare: Whoa.

Mr. Sid Koslow: —everything that we do doesn't work as we expect.

Mr. Eugène Bellemare: Excuse me. The key word that made me say “whoa” was the word “will”. You don't have it now?

Mr. Sid Koslow: Yes, we do have contingency plans. We will—

Mr. Eugène Bellemare: There's a contradiction now. You said “will”, and now you have it.

Mr. Sid Koslow: We have a set of contingency plans now, based on the sorts of problems we expect to happen in the ordinary course of business. In the Y2K case, it's possible that multiple systems could fail for the same reason at the same time. We are going to be examining those plans that we have now to make sure they would be applicable in that case.

The Chair: Last question, Mr. Bellemare.

Mr. Eugène Bellemare: Take one case. For example, you have a shutdown. You have hundreds of people at the Ottawa airport. Then these hundreds of people become thousands and thousands of people. What's your contingency plan there? You can't move them; the flights are not moving. What do you do? That's simple—I mean, that's not a safety issue.

Mr. Clifford Mackay: Let me start from the airlines' point of view. Obviously those people wouldn't be there if they didn't have an expectation of getting on an airplane. Therefore they would have a ticket and they would have some arrangement made with one or another carrier. If for—

Mr. Eugène Bellemare: If they're planning to go to Hawaii that day, I mean, they've all come down to the airport. There are thousands of them.

Mr. Clifford Mackay: If, in that particular case, there was some reason Ottawa wasn't operating, obviously the kinds of contingency plans that airlines would have would be to try to move people to a facility that was operating.

• 1225

That's not unusual. We do it when snowstorms or other things arise. I won't call those sorts of activities routine, because they're never routine. I travel a lot myself, and I understand the frustrations of those sorts of things. But those sorts of contingency plans are a matter of relatively normal operating practice for airlines.

In the particular case of the year 2000, as Mr. Koslow said, the danger is that you could get multiple failures. We believe we are doing everything we can to avoid that risk, but there is a danger. The ultimate contingency plan, which is one that none of us wish to exercise, is that if it isn't safe, we won't fly.

The Chair: Thank you, Mr. Bellemare. I think some of your colleagues need to explain how we get back and forth in February and March when the weather is not very pleasant.

[Translation]

Mr. Dubé, please.

Mr. Antoine Dubé: I will be referring to a document prepared by the integrated system subcommittee of the interdepartmental task force on the year 2000. In reference to your sector, the officials who signed the document point out that the two main air carriers in Canada, namely Canadian Airline and Air Canada, are making some progress. Canadian Airline is depending almost completely on its American partner. I would like you to confirm that for me. In addition, Air Canada has found that 77% of its systems must be modified or replaced. That's sounds like a lot to me. I would like to hear your reaction to that.

Mr. Jean-Paul Bourgeois (Director, Enterprise Systems, Air Canada; Air Transport Association of Canada): I will let my colleague from Canadian give you the status report for Canadian Airlines.

As for Air Canada, that is indeed the case. We have approximately 320 applications of which 25% must be replaced, partly because of the year 2000 bug. They are also so old that this is the perfect time to dispose of them. Twenty five percent of them are deemed year 2000 compatible and 50% are being converted. Even if the applications that have been—

Mr. Antoine Dubé: Percent?

Mr. Jean-Paul Bourgeois: That is correct. It is 50 and 25%, which means approximately 75%. So, 75% of the applications will be either replaced or converted; 25% will be replaced and 50% will be converted. But they will all be tested, even those deemed to be—

Mr. Antoine Dubé: In the case of Canadian, it would be done in conjunction with American Airlines.

[English]

Mr. Ric Bentkowski (Manager, Year 2000 Project, Canadian Airlines International Ltd.; Air Transport Association of Canada): We began this project with the SABRE group, our service provider, back in 1996. Our intent at that time was to have our mainframe system fully compliant by June of this year.

Our plan is on track. We have replaced some systems and rewritten others. This project has really been an opportunity to review our current business practices and how our systems interrelate. So we're very comfortable with our mainframe system and surrounding infrastructure. Our personal computers will be compliant by November of this year.

[Translation]

Mr. Antoine Dubé: Could you give us the percentages of material that has to be replaced, as Air Canada just did?

[English]

Mr. Ric Bentkowski: The replacement systems are really minimal replacement systems. I would say it would account for less than 10%. The fixing is the majority. That obviously is somewhere between 80% and 90%, but then again, we're integrating some systems. So by and large, we are fixing.

[Translation]

Mr. Antoine Dubé: I would first like to ask a short question and follow with a more important one. Is it true, as we have often heard, that some airline companies will cancel all their flights on January 1st of the year 2000? I realize that will not happen at your two companies, but is it true, as you have no doubt heard, that some companies have decided to not have any flights on New Year's day of the year 2000?

Mr. Jean-Paul Bourgeois: I think those statements apply to parts of the world where it would not be safe to fly or to land. So it will depend on our emergency plan. If there are areas in the world that are not safe, we will not fly to them. However, that does not mean we will not fly at all. That is a bit of an exaggeration. Emergency plans have already been put in place for Canada. They seem very safe and should ensure—

• 1230

Mr. Antoine Dubé: I would now like to follow up on what Mr. Bellemare was saying. This morning, we heard representatives from electrical companies, gas companies and from various types of industry. Every sector, at least those ones, seem well prepared in their particular field. But an airport might be faced with breakdowns, as was said earlier, such as power or gas failures, that no one is thinking about right now. As some groups have requested, I think it would be a good idea to have a master plan for all of these systems, and not just one particular approach for each of these sectors, because you can see they are very intertwined.

Given that, do you think that our society is ready to do a study of all these different areas, including yours, that are all interrelated? If disaster struck everywhere at the same time, you would be affected by it.

Mr. Jean-Paul Bourgeois: At Air Canada, besides checking our internal systems and others, with the assistance of NAV CANADA, IATA and ATA, we will prepare a list of all our suppliers of fuel, electricity and all components, and will ask them to provide us a letter of guarantee that their systems are year 2000 compatible. If the answer is negative, we will prepare emergency plans for these suppliers, to either replace them or to decide what action should be taken. Yes, we are trying to adopt an overall approach.

Mr. Antoine Dubé: In an airport such as Dorval, near Montreal, for example, if there is a general power failure as occurred this year... What happened during the ice storm? What happened exactly? Was the airport closed down? What happened?

[English]

Mr. Clifford Mackay: Well, the answer is eventually it did come to a halt, as you know, for a period of time. That's inevitably what happens when systems reach the limit of their capacity. But to try to answer your question a little more, the reviews and surveys we've talked about are intended to try to answer precisely those linkage types of questions, as well as what is going on specifically in that one operation. It's because of these systemic types of problems that we're trying to do this work collectively.

I think you ask a very good question as to how big the net should be. It is difficult to answer. You reach a point where if you try to include everything you are probably going to get completely immersed in an enormous coordination problem and it just becomes impossible. But through the kinds of processes that we described today, we are hoping we will very much be able to find those interfaces. That is the critical reason for the collective work that is going on, as opposed to the work that is going on in individual companies.

[Translation]

The Chair: Thank you, Mr. Dubé.

[English]

Mr. Lastewka.

Mr. Walt Lastewka: I really appreciate you coming today to inform us on a very critical area. You have also brought out some points where, despite the problems of Y2K, there are some opportunities of bringing systems up to date, upgrading, and so forth. I think that's very good.

One of the areas I have been concerned with is suppliers—and Mr. Dubé started along on that—and especially smaller suppliers. I am sure you have smaller suppliers in the system. Our latest data shows that 43% of the suppliers haven't even started to do anything. What work are you doing from either NAV CANADA or the Air Transport Association of Canada as far as being a little stronger-armed and making sure that suppliers are going to be there and are going to be supplying those items that you require to keep the industry going?

• 1235

Mr. Sid Koslow: In the case of NAV CANADA, we are identifying every supplier associated with our system on which we depend to do critical functions. In each and every one of those cases we are in contact with them. We are asking what they are doing to make sure their service is not interrupted. We have asked them or will be asking them a detailed set of questions. We are asking for contacts in those companies so that we can work with individuals to know what they are in fact doing. But we will be in contact and expect assurance from every supplier on whom we depend for critical service.

Mr. Walt Lastewka: Are you setting any particular dates for them to have completed their work by?

Mr. Sid Koslow: Yes.

Mr. Walt Lastewka: What date have you chosen?

Mr. Sid Koslow : We are about a month away from having them give us a response.

Mr. Walt Lastewka: Is there a date that you've been aiming at?

Mr. Sid Koslow: Yes, we're intending to get their response and then evaluate those responses and work with them to see if there are any weaknesses or any areas that we either have to help in or change suppliers, or whatever we have to do in the next year, so that by April 1999 we are compliant and anybody we are dependent on is compliant.

Mr. Ric Bentkowski: For Canadian Airlines our service supplier process is quite intensive in that we have taken all of our service suppliers and we've assigned criticality to those suppliers. The mission-critical and vital ones we will be meeting face to face with and actually exchanging information as far as plans and where each of us are along in our plans are concerned. Truly, we're approaching this year 2000 issue as a collaborative effort to fix, and we want to maintain our relationships with our suppliers. However, having said that, if in either questionnaire or face-to-face meetings it becomes apparent that suppliers are not intending to do anything or haven't attempted it, then clearly we have to take that into account in our risk analysis contingency planning that begins in November.

Mr. Walt Lastewka: I want to switch over to the area I think Mr. Koslow or someone mentioned—I'm not sure who it was. We talked about safety as number one and how we'll be flying only to the areas that are safe. When does that decision making start to declare which areas are not safe?

Mr. Clifford Mackay: Just briefly, from the airlines' point of view, because scheduling and operating planning gets done significantly ahead of the actual time, some of those decisions will start to be made early next year.

Mr. Walt Lastewka: So early in the calendar year we'll start to have designated weak spots in the world—

Mr. Clifford Mackay: Probably things will be finalized at that time, but airlines have to decide what schedules they're going to fly, and there's a lot of paperwork, as you know, depending on where in the world you fly, to be gone through in terms of regulatory and other requirements. If there are concerns about particular parts in the world, those concerns will start to emerge in about that timeframe.

Mr. Walt Lastewka: Thank you.

The Chair: Thank you, Mr. Lastewka. Mr. Jones.

Mr. Jim Jones: Thank you. What areas in the world are you concerned about right now for the preparedness for the year 2000?

Mr. Clifford Mackay: It's difficult to become too precise about that because again we don't have full information yet, but there are some areas of the world that are less developed in terms of the level of technology they have access to and other things that could struggle here. Some particular areas in Africa are a good example.

Mr. Jim Jones: What about Asia?

Mr. Clifford Mackay: It very much depends on the particular location in Asia. Asia, as you know, has extremely sophisticated systems in some areas and in other areas they're still quite underdeveloped. So it depends on precisely where you're talking about in Asia.

Mr. Jim Jones: What is the preparedness of all of Europe?

Mr. Clifford Mackay: Europe is working on the problem about in parallel with North America, Canada and the U.S. IATA is the organization that is bringing all that data together as part of this global effort that we've been talking about. I think the general expectation is that Europe will move at about the same pace as everybody else. Again, there are individual locations in Europe where there may be exceptions.

• 1240

Mr. Jim Jones: So next year sometime you're going to make the determination of where you're not going to fly to. Are you as well going to not allow aircraft to fly into this country from that location?

Mr. Clifford Mackay: The question of whether or not an aircraft can land in Canada is a question of the certification of the aircraft and those sorts of issues. That's beyond our purview, frankly. Transport Canada makes those judgments.

Mr. Jim Jones: But you could be making a decision that some places in the world are not safe to fly to, so why should we allow anybody from those areas to fly into our country?

Mr. Clifford Mackay: There could be a dozen different reasons why you make a decision not to fly to a particular location. It could have to do with the operation of the airport at that location or it could have to do with some particular element of the air navigation service. It could have to do with a myriad of different circumstances. So to draw the direct conclusion that because you wouldn't want to fly to that particular location an aircraft that comes from there is by definition unsafe...it doesn't directly follow.

Mr. Jim Jones: And whereabouts is the U.S. system? Are they on a par with you right now? Are they ahead or behind of your year 2000?

Mr. Clifford Mackay: With regard to the industry, we're about parallel, but perhaps Mr. Koslow could answer it from the FAA point of view.

A voice: Dave, would you like to take that?

Mr. David Honkanen (Manager, Air Traffic Management Systems Engineering, Air Traffic Management Engineering, NAV CANADA): Thank you. I have been in contact with the FAA. They have a project office set up. We are meeting with them in a few weeks from now to start planning for our interoperability between Canada and the U.S. We're very much parallel with the FAA. In fact, the plan we have developed is based on the FAA model.

The Chair: Thank you, Mr. Jones. Mr. Shepherd.

Mr. Alex Shepherd: Mr. Koslow, I hear stories and rumours, some of them from people who have actually worked on that task force, saying that the air traffic control system in the United States is going to fail, and it's going to fail because they've had to get some of the people who wrote the original programs in COBOL and FORTRAN, people who have long since retired, to rewrite these programs, and there just isn't enough time, quite frankly, between now and the year 2000 to successfully do that.

So I find it surprising when you say we've defined all of our problems and it's “easy to fix”. How do I reconcile those differences?

Mr. Sid Koslow: The United States has a number of special problems. Their main computer is a mainframe that is quite old. The software dates back to about 1970 and uses, in the main, a language called Jovial. That is not our case. I was referring to our situation in terms of being able to assess where we stand and the amount of work that's required to get our system ready for the millennium. I think the most severe problems in the States are not replicated here.

Mr. Alex Shepherd: Okay, but you do acknowledge that there are severe problems in the United States. And clearly we're moving traffic from Canada into the United States. They are our biggest recipient of travellers, presumably. Doesn't that impair our whole air traffic system?

Mr. Sid Koslow: Our intention, as Mr. Honkanen mentioned, is to work closely with the United States to make sure that we know what stage they're at and to assure ourselves that parallel work is going on. And before April 1999, it is our expectation to have interoperability tests with them to prove that the systems are working.

But of course we can only do so much. We need to know what's going on and we need to know the state their system is at. It's obviously up to them to repair their system.

Mr. Alex Shepherd: We've been speaking mainly about the air traffic control system, but once again, one of our counterparts with KLM acknowledges that some of our planes will not fly. Is that true of Air Canada? Is that true of Canadian Pacific? We're talking about on-board technology.

• 1245

Mr. Ric Bentkowski: I really can't comment on KLM statements. They've made a few of them since I guess the initial report came out that they wouldn't fly. I believe they've retracted somewhat.

Essentially, for Canadian Airlines it's quite simple. We're not going to compromise safety. So part of our risk analysis and part of our contingency planning is to ensure that safety is not compromised.

Mr. Alex Shepherd: Is it likely that you will have planes that won't fly January 1?

Mr. Ric Bentkowski: Is it likely? That's sort of like asking me for a guarantee. I don't mean to waffle, but until we really understand where the IATA program is, as well as ATA and ATAC, and we're working collaboratively, it's a very difficult question to answer. If there is a doubt, then we will not fly to a destination.

As far as equipment goes, we're working with our aircraft manufacturers and identifying which components need to be fixed and/or replaced. Will the airplanes be grounded? That's not our intent. That's not part of our overall plan.

Mr. Alex Shepherd: The fact that everybody in this industry is very concerned—

The Chair: Mr. Shepherd, Mr. Bourgeois would probably like to respond to that as well, or Ms. Robinson from Air Canada.

Ms. Janice Robinson (Project Director - Year 2000, Air Canada): As far as Air Canada goes, the only thing I would like to add is that we've had dedicated since last summer to our team the chief avionics engineer of the organization. He and another team of people working with him are dedicated to the interfacing with Boeing and Airbus and some of our other suppliers like Bombardier. They are working on joint testing programs right now in conjunction with the ATA program out of Washington. It's our intention to do all of the airworthiness upgrades and tests required to make sure that the fleet is maintained and operable.

Mr. Alex Shepherd: To Air Canada, you mentioned earlier in testimony that you'd be asking some of your suppliers for certification that they are Y2K compliant. Everyone in this industry, it's clear to me now, is starting to step back from even the concept of talking about compliance, including the people who manufacture. How likely is it that you're going to get certification that all of your equipment is Y2K compliant?

Ms. Janice Robinson: Not only for the equipment, but also a lot of the other mission-critical suppliers are reticent to sign anything that might come back on them in a legal document. So the letters and the correspondence and the questionnaires that we've been sending speak more about year 2000 readiness, which is a term that is becoming more readily acceptable.

The whole stance on disclosure has changed quite a bit in the last year. Companies are becoming much more open, especially now that they have to include their year 2000 readiness plans and costs in their annual reports if they're publicly owned and on the stock exchanges.

One thing that is happening, and this is part of the IATA, ATA and ATAC program, is that vital suppliers will be, as we said, not in the financial sense but in a physical sense, audited by the teams from ATA, IATA and ATAC.

There will be physical on-site visits—several of them, actually—one at the beginning to help the organizations prepare their inventories and identify potential embedded systems that might be subject, and later on in the exercise, another to actually make sure that the work that was planned was actually performed, and to examine test results.

In our case, so far we've identified about 40 critical suppliers and organizations that we will be doing joint testing with.

The Chair: Thank you, Mr. Shepherd. Mr. Lowther.

Mr. Eric Lowther: Thank you, Madam Chair.

There are a couple of areas I'd like to question. First, to the Air Transport Association, I was interested to hear you say so emphatically that you cannot operate without the computer. You're so integrated now with computerized systems that any kind of manual operation is really out of the question, I guess obviously, from that.

I'm also interested in the fact that you're saying safety. Everybody's saying safety first, which is a good thing to say, and there's this idea of having this information database where you feed in who is 2000 ready, I guess, and everybody worldwide can go in and check this, and say this airport or this system is 2000 ready.

• 1250

In all of that, I'm trying to figure out—and we've kind of dug around at this with some of the other questions of some of the other members here—what actually flicks that switch. Who says it's safe? Who gets on the plane? As a person who has to fly back and forth to his riding quite a bit, I kind of wonder when you tell me it's safe, you who have a vested interest that I get my fare—not that I'm implying anything there, but there is a vested interest—how do I know it's safe when I get on that plane. Have you thought about how you're going to give people the assurance that it's safe?

Mr. Clifford Mackay: Let me start by answering who decides. In the case of the individual airline selling that individual fare so that you can return to your riding, it is the decision of that airline whether it is safe to operate that airplane on that route on that day. So very clearly, that's where the accountability lies. It lies with the individual airline when it sells you that ticket, and if the airline does not believe it's safe, then the airline needs to take whatever appropriate measures it feels are necessary. So in that sense, it is very clear.

As to how to decide, that's an extremely complex question, and we've been discussing a lot of the ramifications of that in this discussion. In most cases in Canada—and I use the word “most” because you can never say “all” in this business—we have a pretty high level of confidence that we will be in very good shape well before that magic date. But if there is a concern on an individual route or with an individual system or whatever, it is the responsibility of the airline that is offering the service to do whatever checks they need to do to satisfy the safety requirement.

Mr. Eric Lowther: For the sake of time, I won't keep exploring that. I'd like to go over to the NAV CANADA side of things now and ask a question of Mr. Koslow.

You make a pretty emphatic statement in your publication that you will be ready in time, and on time, and whatever we need it to be, which is good; we don't see that too often in the committee. But at the same time, I wonder if that's hopeful or wishful thinking. One of the things you've said is that half of your effort going forward now is going to be testing, and we talk about your systems being compliant. With that, I wonder, are those systems all systems or just critical systems? That's one part of my question.

The second part is on the navigation systems, as I understand them, which is very limited, but I understand you're also dependent on other systems outside your own, like the satellite technology and things like that, off which you work, and that you may not actually have the hands-on control to test or tweak, as need be, to get yourselves ready for this. So when I look at that reality, the testing, and you don't have all the controls, and I hear this emphatic statement, I want to put trust in your emphatic statement—I want to believe it—but I'm having trouble.

How do you deal with the systems outside of your own, and how can you substantiate that emphatic position you're taking?

Mr. Sid Koslow: Our position is based on having done sufficient work to date that we believe we have identified all of the systems that are critical, that is, that could affect the real-time operation. We've looked at each of them in sufficient depth that we believe we have the scope of the problem well in hand and that detailed plans are in place.

The issue has been reviewed by our president and CEO and by our board. The president has emphatically indicated that we will have the resources we need to complete the job. I think we have laid out, in an engineering sense, the activities that need to be done.

• 1255

As you pointed out, we are leaving in the order of half the time to prove that what we have done is in fact effective. We have, as part of our planned activity, a build-up of testing from individual systems to groups of systems to our whole system to our system plus the interfacing systems.

We believe this is a prudent and comprehensive approach. We also believe that we can go through that entire process, still find problems that are serious, and repair them before the end of 1999.

Mr. Eric Lowther: Now, let's say you did all that. Say your in-house systems were the best in the world. Are there systems outside of what you have jurisdiction over, upon which you are dependent, that may not be ready and that would then force you to say you can't fly?

Mr. Sid Koslow: The only systems we're dependent on are systems that we need information from. In the worst case, we would either get that information manually or not get the information and reduce the service, meaning the amount of flying that could go on. We would pare back in the very worst case, but even in those cases, wherever there's information that would prevent us from doing our job in a normal way, we will plan to test that well in advance of the millennium time period. In the worst case, if for some reason we did not succeed, we would cut back on that kind of service that depended on that kind of information.

The Chair: Thank you.

I want to tell the witnesses how appreciative the committee is that you're able to appear with us today. I want to leave you with one final question. Just to preface that, we heard, with credit to where you're at, how well developed your plans are and where you're going. Earlier today I read this into the record, and I'll read it again:

...consultancy Gartner Group, based in Stamford, CT, has rated Canada the best prepared to meet the Year 2000 challenge—just ahead of second-ranked Australia, and a country mile in front of the United States. But, in terms of what truly animates the world economy we all depend on, that's about as comforting as knowing the mouse is in far better shape than the elephant.

The reason I read this is that because of all the industries we've had before us so far, I would think that the airline industry in particular is largely dependent on what other countries are doing. We know that Canada is moving in the right direction, but I'm definitely concerned about the economic impact of the airline industry not being ready globally, not just in Canada. We also have to be concerned about the Canadian industry being ready, but I'm also concerned about what's going to happen economically.

Take a small, hypothetical example. Someone has planned their wedding in Cuba for January 2 or January 3. On January 1, something goes terribly wrong. Mr. Koslow from NAV CANADA tells Air Canada or Canadian Airlines that they can't fly to Cuba. This person's wedding is planned. There are 20 guests planned. Everyone has paid and is booked. I can see it becoming a real legal nightmare.

As well, I can see the economic impact on the travel industry and the Canadian industry and what that means for our economy. That's one of the big concerns of the committee. As much as you're trying to get ready, all the businesses that feed off of the airlines contribute to the Canadian economy and our GDP.

We can't say enough today that we need you to be ready and make sure that other countries you service and fly into are ready. The economic effect could be detrimental to this country, even though we're ready and they're not.

Just based on the travel and tourism industries, and what you do, as well as for health reasons, it's important for remote areas in Canada to have access to sufficient airline service or there could be tragic circumstances.

I'll ask for just one final comment from either you, Mr. Mackay, or you, Mr. Koslow, before we end the meeting.

• 1300

Mr. Clifford Mackay: Thank you, Madam Chair.

Frankly, I think you expressed better than we did the nature, size and scale of the problem. I can just say that I think the industry is taking this extremely seriously. I don't recall a time when I've seen this level of cooperation or resource dedication at the same level of intensity as we see going on today in addressing this problem.

I don't want to minimize it. It's an enormously complex and serious problem. I think there's only so much we can to convince our colleagues internationally to pay attention and to move as quickly as we all can. I think the good news is that it appears more and more are getting the message. But as Mr. Jones noted, there may still be places in the world where it will be difficult to operate on January 1. We just have to keep doing as much as we can over the intervening period to minimize that impact. I wish I could give stronger assurances, but I think anything beyond that is probably to overexaggerate.

The Chair: Thank you.

Mr. Koslow, did you have a final comment?

Mr. Sid Koslow: I can only echo Mr. Mackay in saying that we certainly acknowledge this to be a very serious problem. We are putting a very substantial effort into solving it, and we will be working with our colleagues in other countries to assure ourselves that the interfaces are working as well.

The Chair: I want to thank you all again for being with us today.

We're going to suspend the meeting for five minutes while we change witnesses.

• 1302

• 1308

The Chair: I'm going to reconvene the meeting. We're studying preparedness for the year 2000 and we now have before us two witnesses. We have from the Department of Fisheries and Oceans, Canadian Coast Guard, Mr. Michael Turner, Mr. Jacques Clavelle, and Mr. Fred Forbes; and from Canadian National we have Mr. Fred Grigsby and Mr. Bright.

I propose that we'll have both witnesses do their opening statements and then turn to questions, and I was going to begin with Mr. Turner from the Department of Fisheries and Oceans.

Deputy Commissioner Michael A.H. Turner (Canadian Coast Guard, Department of Fisheries and Oceans): Thank you, Madam Chairman. We shall try to keep this fairly short so that we can have more time for discussion and questions.

Maybe I could also point out that I have provided the clerk with a copy of the notes we have. I understand that through some delay in the system they hadn't reached you previously, for which I must apologize. Of course,

[Translation]

my comments are available in French,

[English]

and I'll perhaps start off with a quick summary of where we are within the Canadian Coast Guard in this situation.

[Translation]

First of all, Canadian Coast Guard search and rescue, emergency response, marine traffic monitoring, navigation aids and flood control services contribute to the safety, security and economic well-being of Canadians as well as protection of the marine environment. The Canadian Coast Guard's support for the department's fisheries conservation and protection and marine science activities are also a vital component of DFO's activities in these areas.

In the context of the year 2000, these services include functions that the Canadian Coast Guard considers to be "government-wide mission-critical" in accordance with the Treasury Board Secretariat definition and must be given highest priority for year 2000 preparedness activities.

• 1310

[English]

The coast guard provides a wide variety of marine radio navigation services and this function is designated as one of the government-wide, mission-critical functions. All commercial and most fishing vessels rely on these systems increasingly for safe navigation. In addition, the coast guard fleet is extensively fitted with electronic navigation systems and receivers, as well as complementary equipment such as radar, electronic charts and depth sounders. All of this equipment is potentially impacted by the year 2000 problem. Failures could impact on vessels' operational capability to deliver government-wide, mission-critical services such as search and rescue, as well as put their own crews at risk.

Throughout the marine industry, commercial shipping can similarly be affected by the year 2000 problem, as these vessels are fitted with similar equipment. The preponderance of navigation systems and equipment are of the embedded processor variety, which, as your committee will appreciate, is a particular challenge.

In my notes I have indicated where we are with respect to responding to the coast guard's challenge regarding the year 2000 impact on our navigation systems, and the work we're carrying out in terms of due diligence to prepare for this situation. For our radio navigation services, this means that all prudent steps are being taken to ensure a continued, unaffected operation over the millennium period.

In addition, for certain of the government-wide, mission-critical functions the coast guard is responsible for, we're preparing contingency plans in the event of unforeseen year 2000 failures. These contingency plans will be discussed and reviewed with the commercial shipping industry as well, and we will be working in close cooperation with Transport Canada marine safety.

In terms of the navigational systems that are made available for public use, Loran-C has certain characteristics that make it not likely susceptible to year 2000 problems. However, the service we provide through the American global positioning system and the differential correction technique referred to as DGPS may well be affected, in addition to which there is a further complication with respect to the GPS equipment provided through the Americans. In terms of ship navigation equipment, only a portion of vessel navigation equipment is essential to its operation, given the availability of other means to safely and effectively navigate, but we are paying very close attention to the year 2000 problem and coast guard is confident that our own operations will not be affected by on-board year 2000 situations.

May I add in closing my remarks that the coast guard has set up a dedicated project office. I have with me the director general of our technical and operational services directorate, Mr. Jacques Clavelle, and the director of our Y2K project office, Mr. Fred Forbes, who can answer some of the other questions in more detail, of course. In addition, we also have personnel working not only directly with Mr. Forbes but right across the country in each one of our regions, who are tackling this problem. We are close to the completion of our inventory and analysis efforts within at least a few months, and are working diligently to complete that task so we will have sufficient time to make sure we've identified and remedied any situations that are found.

I'll stop at that point, Madam Chairman, and we can return to questions, I understand, later. Thank you.

The Chair: Thank you very much, Mr. Turner.

I'm now going to turn to Canadian National, with Mr. Grigsby and Mr. Bright. Mr. Grigsby.

Mr. Fred R. Grigsby (Vice-President and Chief Information Officer, Information Systems, Canadian National): Thank you, Madam Chairman, members. With me today is Jim Bright, who is our director of IT customer service. He is responsible for ensuring that the Y2K, or the year 2000, project was set up and properly managed.

I am pleased to be here today to share with the committee some of the initiatives we have taken at Canadian National Railway with regard to the year 2000 project. This is not a new subject for CN. Work on addressing the so-called “millennium bug” began in September 1996, and within three months of that date, the magnitude of the problem became very apparent. What had perhaps at one time been identified as merely a systems anomaly was in fact an event that affected every aspect of CN's business and that, if left uncorrected, could conceivably have brought the railway to a standstill for extended periods of time. This inability to operate would no doubt have had a profound impact on Canada's entire transportation and distribution logistics system, possibly bringing the nation's economy to a grinding halt.

Without sounding like the messenger of doom, I would like to provide members of the committee with a brief overview of CN's actions taken to deal successfully with Y2K problems.

• 1315

The first challenge for CN was to deal with its main core computer systems, from systems that control the safe movement of trains to those systems responsible for handling the financial, inventory, billing and customer request data. All had to be identified, converted and tested. Part of this process included a complete inventory of all in-house and/or purchased operating systems and software packages. A review was also made of all of CN's databases. At CN, there are some 41 million lines of code, most of which can be found in a very mixed environment of operating systems.

CN contracted with its outside system support suppliers, Systemhouse and LGS, which is Lafontaine, Gauthier, Shattner, to convert all the lines of code. To enhance the accuracy, while reducing the cost of conversion by some 60%, the results were subsequently run through CN's own in-house test factory. The mechanical conversion of lines of code reduced the time required to complete this process by 50%. As of today, this initiative is 60% complete, with a final target of completion for November of this year.

CN has also addressed those systems that control the safe and efficient movement of trains over its nationwide rail network. This includes signalling systems, wayside inspection and monitoring systems, all crossing and other warning devices and radio networks, all of which are microprocessor-based and could be rendered useless by the date problem. These are all critical safety-sensitive systems, requiring extensive government certification. Currently, CN is identifying each and every piece of equipment it has in its inventory, down to the subcomponent level. In addition, highly specialized test requirements and specifications are being developed. This particular initiative is scheduled for completion by the end of this year.

But beyond its rail network, CN has switching yards, maintenance facilities, electrical shops, locomotives, refrigerated rail cars, buildings with elevators and heat-control systems, containers, lift cranes and specialized work equipment. Each of these items needs to be supplier certified, item by item. In many instances, this involves contacting the vendors through our own legal department and specifically requiring certification of all their products. For those who are not able to comply within a specified timeframe, CN finds alternate suppliers immediately. In other instances, depending on the criticality of the product, CN may eliminate preferred supplier status.

As an example, General Motors, a major supplier of locomotives, is in the process of testing and ensuring every component in CN's highly sophisticated locomotive fleet.

The process of supplier certification is expected to be completed by the end of this year, with follow-up risk analysis and actions being taken through 1999.

CN has also addressed its PC computer, end-to-end data and voice communication networks, all vitally critical to the storage, retrieval and transmission of information. At CN, PCs older than 1995 are non-compliant; therefore our PC asset base must be more current than 1994. Obviously this has significant cost implications. Fortunately, CN basically deals with one supplier. However, it has forced the company to increase its planned acquisition expenditures over the next two years. Priority is being given to Y2K compliance versus satisfying end-user requirements. This has been difficult for some to accept, however, but we are coping.

CN is on schedule to complete end-to-end testing of its entire Canada-wide communications network in conjunction with the Stentor group of companies. This is perhaps one of the most difficult aspects of our operations to test and evaluate. Any component in the end-to-end network could cause system failure. There are no standards or procedures to follow. As a result, we have established an in-house simulation network. This will allow CN to ensure all components in the network are similar to those in the test environment and have been checked. This extensive exercise is being carried out with a number of our telecommunication suppliers, such as Bell, to ensure CN has identified and dealt with any anomalies that might arise.

Over the years, user departments within CN have designed and implemented their own somewhat unique systems, many of which have now become mission critical. For example, CN has a daily information bulletin system that is broadcast to operating employees in the field. These bulletins cover such topics as track outages, traffic embargoes or train detours and diversions. This system was developed by the operations department to satisfy their own needs. Today, information technology supports this activity. There is also a myriad of other home-grown financial and reporting systems throughout the company. In light of this, there was some concern that if each of these systems was not fully identified and understood, there was the possibility they would be overlooked.

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Since beginning the Y2K project, we have adopted a model at IT: if we don't know about it, we can't fix it. The business must ensure their home-grown solutions are included. Ensuring these sometimes diverse systems are compliant through testing and conversion is a major initiative on its own. However, we believe we have inventoried all of the various systems and have developed a program for dealing with each of them and have appropriate plans for their conversion.

As one can imagine, the task of ensuring that all systems at CN, no matter their function or location, are compliant is a Herculean one. What has made that task somewhat easier is the commitment of CN's top executives. Mr. Tellier, our president and CEO, has been extremely supportive of this project from its inception. In November 1997, complete project responsibility was placed under the control of the chief information officer. A steering committee comprised of vice-presidents of various functions throughout the corporation was established to provide direction to, and to monitor the results of, field-level representatives who are responsible for specific deliverables. The steering committee meets monthly, where progress is analysed and any slippage is reported directly to the president and senior executive.

As can be seen, the Y2K project is one that has the direct involvement of the most senior people at CN. In fact, Mr. Tellier has stressed continuously that the Y2K project is the number one priority for CN. This leads me to the importance of communication in CN's overall Y2K strategy.

An extensive communication program has been developed to ensure all of our employees are aware and understand CN progress in dealing with the Y2K issue. CN has established specialized bulletin boards on its e-mail, where employees can find answers to specific questions. This has been augmented by a number of broadcast e-mail messages, directly to all employees.

Working committees overseeing the various aspects of the Y2K project are responsible for informing the people in their own departments. IT has its own quarterly newsletter, which is sent to every employee. Printed reminders are also included in employee pay stubs, and articles on the Y2K project have also appeared in CN's internal employee magazine.

CN's external marketing-related publication, Movin, is used to send information on the Y2K project to the company's customers and suppliers.

With regard to customers, CN is currently modifying or replacing computer systems that it has provided over the years to customers for such activities as equipment ordering or tracing. The company has also dealt with the suppliers to ensure that not only are they compliant but the suppliers' suppliers are also compliant.

Obviously it is vital that there be a constant and adequate supply of products and services critical to the continued operation of the railway. If there's any doubt whatsoever, CN will, if required, increase its inventories to ensure adequate supply for a full year.

Beyond customers and suppliers, there are a host of other partners who interrelate with the railway. There are joint ventures and subsidiaries. For instance, CN has a considerable investment division, which is responsible for a $10-billion pension fund.

There are also numerous other railways with which CN interchanges traffic and data on a daily basis, from the mega-giants to the smallest of the short line operators. The intermodal and international movement of freight by other modes, truck and/or vessel also needs to be addressed. In this regard, CN is currently developing test scenarios with all of its transportation partners. Obviously this is an extremely complex task, requiring synchronization and cooperation.

For example, all of CN's interchange waybills, the documentation required to move a piece of railway equipment, are passed along electronically between the various carriers involved in moving a customer's goods. The impact of a failure of any one link in this communication chain could be as severe as if CN's own internal systems did not work.

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In closing, I believe that CN is in what one could call a good to excellent category. I believe that we have identified and put in place initiatives for every aspect of the corporation's operations. But I'm still worried about the impact of Y2K. At CN things may be in order, but what about the rest of the country, or for that matter, the North American continent?

All aspects of the value chain must be working properly if we expect to manage our way effectively through the upcoming period. There's a lot at stake and a lot to do, but it's not impossible to complete. It takes a systematic approach with extensive executive support. It takes superior project management by dedicated people. It takes education, communication, and partnership.

However, I need not remind the members of this committee that it's now getting rather late in the game. For those who have not started, my advice is to begin immediately. For those who have already started, go faster. It can be done because it must be done. The North American economy relies heavily on our collective success.

Thank you for your attention. Mr. Bright and I will endeavour to answer any question you have about Canadian National Railways.

The Chair: Thank you very much, Mr. Grigsby. I'm now going to begin questions with Mr. Schmidt.

Mr. Werner Schmidt: Thank you, Madam Chair. Thank you, gentlemen, for appearing.

You know, it seems almost, Madam Chair, that as we go along here, things are getting better. I'm particularly impressed with the brief that has been presented to us by CN. It looks good. You put yourself in the category of excellent, and I think so far I would do the same thing. I think the comment you made, “But I'm still worried”, probably explains why you're ahead of the game.

I'd like to know what it is that brought the chief executive officer on line so early. In so many of the organizations we've met, that hasn't been the case. So what was it that motivated CN to be there at the beginning?

Mr. Fred Grigsby: I wasn't at Canadian National when this project started, so perhaps Jim might want to answer that.

Mr. Jim Bright (Director, Business Systems, Information Systems, Canadian National): We were getting concerned in the June 1996 timeframe. We put together our initial project plans.

We went to Mr. Tellier and told him what we needed. His only comment to us was about whether we were sure it was enough. That's because the amount of money we were requesting was kind of low. So it was just a pleasant surprise. Hats off to Mr. Tellier. He's given us tremendous support.

Mr. Werner Schmidt: It has been told to us by I think virtually every witness, particularly the consultants who were involved, that unless the chief executive officers were involved there was going to be real trouble. I think Mr. Monty, the chairman of the task force, made exactly that point. There still seems to be some reluctance in certain quarters at that level.

The other kind of problem we seem to have is that the subordinates often say that everything is okay even when they know it's not. That's because they feel that if they don't say it's okay, the chief will look at them and ask them why it isn't okay, because it's their job to make it okay. So it's a reflection on them. They're going to get fired if they haven't got the thing in place.

So I'm wondering what kind of morale-building this has done within CN to bring you up to this level. Do the people all feel as comfortable as do you who have presented this brief?

Mr. Fred Grigsby: The answer is no, because they have to do the work. They're very concerned. These are dedicated people who are very concerned that there's something we don't know, so we continue to double-check. The company is very focused on this problem from the executives on down. We have made sure that we've had the resources and the people to deal with it.

But I think we all recognize, as I said, that it takes very diligent, hard-working people to bring the right kind of rigour to this kind of problem. It's very easy to become complacent. It's very easy to not follow solid project management principles through to their conclusion. We're endeavouring to do that.

If you talk to our people, I think they're positive, but I think they're worried that we have missed something, and we continue to double-check.

Mr. Werner Schmidt: I'd like to direct some of our vein of questioning to the Canadian Coast Guard. I'll ask them whether in their opinion they could classify themselves as being as high in excellence in their preparation as the brief we just received from CN?

D/Commr Michael Turner: The short answer, sir, would be no, not yet, but we're pushing hard and working to make sure we're there on time. I think we're certainly ahead of many of the people we've spoken with in other parts of the government and in industries we work with in a number of areas, but we're not satisfied that we are up to speed, so to speak, to the extent we should be at this particular date. We have to push harder.

• 1330

Mr. Werner Schmidt: How can you make sure that you do push harder? Is that up to you gentlemen appearing before us here today, or is there some other group that needs to push harder? Who's responsible to get this thing moving faster?

D/Commr Michael Turner: Well, it's our responsibility in large part, sir. But as you'll appreciate, in the government system we are but a small player in a large organization.

In this case, we are, of course, part of Fisheries and Oceans. They have a larger project team, of which we're a part. In turn, we have to rely on Treasury Board for certain guidance. We will, of course, have to depend upon finding sufficient funding in the system as well in order to make some of the changes necessary.

But these are all manageable problems. It's not a question of somebody else having to be reminded that Y2K is an important priority. The Prime Minister has personally stated that and has written to his ministers. The word has certainly filtered down through the system.

If I could pick up on your questions to Mr. Grigsby, in our organization we certainly have been made well aware this is to be considered a very high priority. Within the Canadian Coast Guard, we have certainly passed on that message as well to make sure that everyone understands it clearly.

Mr. Werner Schmidt: It's one thing to make all these nice words, but something has to happen in terms of action. I think you've had clear expression by those from CN and many other people, as you've been in the room this morning, of the interrelationship of all of these activities.

My question to you is very simply this. If we simply let the wheels grind on the way they are now, it'll mean that we'll probably not be ready on time. In fact, there's ample evidence now that the government will not be ready. So what needs to be done in order to make sure that...? Is there a need to marshal people from other departments? I think you identified your department as one of those mission-critical departments. So should you be given resources, maybe not financial ones but personnel, or whatever? What kind of shift in resources has to take place in order for you to be ready and on time for the year 2000?

D/Commr Michael Turner: Well, sir, I should start off by saying I wouldn't want to give you the wrong impression that we're not going to be ready, because I believe we will be ready with respect to all of the mission-critical functions in the organization.

We already have the resources we need in terms of the manpower. We have our specialized engineering staff giving this the absolute top priority. In fact, this has a priority above any other existing or new projects. Certainly within the department, we have a very high profile for this project and the work. I have every reason to believe that we will, in fact, meet that immutable, immovable deadline.

I mentioned that we're not satisfied. That means we need to move faster and pick up the pace a bit, but certainly with respect to the important mission-critical functions and government-wide critical functions, we have every intention and expectation that we will be ready in good time. In fact, we're also accelerating emergency preparedness and planning to make sure that we are ahead of the curve in that sense, as well.

Mr. Werner Schmidt: What really gives me just a slight concern here is your continual expression that you must accelerate. Well, what is it that will actually cause this acceleration to take place? Something has to change, because at the present pace it's not happening. So there must be a change element in here somewhere that you've identified. What is that change element that will cause you to move faster?

D/Commr Michael Turner: I'm not sure I could put a finger on a specific item or issue that will cause us to move faster, as you put it, because the system has already been jump-started, if you like, in order to make sure we do pick up speed. If I had appeared here a year ago, I would have said that there was a significant problem and that we needed to do something, but in fact we've already done it.

What I'm saying, essentially, is that because perhaps we should have started a few months earlier, it has taken an extra effort on the part of the teams we put together in order to make sure we respond in a manner that will make sure we meet the deadline.

Obviously, having sufficient financing available for us will be a very crucial component of this, but I have no indication at this point that this will be a problem. In fact, we are going to give it the top priority within the organization as well in terms of our financial arrangements.

Mr. Werner Schmidt: Thank you, Madam Chair.

The Chair: Thanks, Mr. Schmidt. Mr. Murray.

• 1335

Mr. Ian Murray: Thanks very much. I think I'll start with Mr. Turner.

You mentioned that the coast guard is just a part of a much larger government body. I want to know if you're involved with the interdepartmental task force that's working on this, and if so, have you found that helpful, or do you feel you're pretty well on your own in trying to deal with the problem?

D/Commr Michael Turner: No, sir. We are certainly involved in the interdepartmental task force. Mr. Forbes is directly involved on the project team as well with the department. I'm personally on the ADM advisory committee on information management, which has considered certain aspects of this subject as well.

As a large organization, I think the government departments are trying to be mutually self-reinforcing, if you like. They help each other wherever there's a need for that.

Mr. Forbes might wish to comment on the relationship with respect to the rest of the department and how we're working with the other departments.

Mr. Fred Forbes (Director, CCG Year 2000 Implementation, Canadian Coast Guard, Department of Fisheries and Oceans): As Mr. Turner has said, we are part of the larger DFO year 2000 effort. We're emphasizing the work we need to do in our own sector with the coast guard, but the DFO year 2000 project office is heavily represented at the interdepartmental groups.

We, as the coast guard, are working closely with some of the spin-off working groups that result from the interdepartmental group—for example, the subcommittee on embedded processors. We work with the other departments on that committee and other committees.

We are also at the present time planning to take the lead in the establishment of the research team for embedded processors for the purposes of navigation and communication. We're awaiting Treasury Board funding for that, but assuming that happens in the next little while, then we will be the organization that sets up that research group to acquire and share amongst all the federal departments and provincial organizations, and private organizations as well, information about year 2000 susceptibility of equipment and systems related to navigation and communication.

Mr. Ian Murray: You mentioned the embedded technology, the embedded processors. In fact, Mr. Turner, in your opening comments you said that the preponderance of navigation system and equipment is of the embedded processor variety, and then you also described quite a list of other components.

But when you were bringing us up to date on the status, point number two here, DGPS, it seems that when you were speaking you described it as more of a problem than it appears in the notes that you handed out to us. It said that the coast guard is confident that DGPS will not be subject to a year 2000 cause of failure. I think you said something to the effect that it may be a problem. Is that because of an embedded technology problem?

D/Commr Michael Turner: The particular problem in GPS and DGPS is twofold. From our perspective, we believe the signals that we transmit in terms of the differential correction system will be reliable and we will have taken care of any potential Y2K problem with respect to the embedded processors in that equipment.

However, there are two problems. First, the American system, the satellite system itself, GPS, will go through what's called a weekend 24-hour roll-over in August 1999, which may cause some difficulties. That's a very technical issue, but it has to do with the clock that's on board the satellites themselves.

Secondly, the other end of that system is, of course, the thousands upon thousands of receivers, from many different manufacturers, out there on commercial ships that are using that equipment. So when I speak of the problem, I'm speaking about that from a more global perspective.

As for our part of it, we'll be ready; we have no doubt about that. In fact, in response to the earlier question, I was referring to the work we're doing to make sure we've reacted in time, and I perhaps should have added, as Mr. Clavelle is reminding me, that in fact our schedule internally is to have this thing beat, so to speak, and finish the analysis and the work that's necessary by December 1999 to make sure that we have that sufficient leeway to make sure there's no difficulty.

• 1340

Mr. Werner Schmidt: Do you mean December 1998?

D/Commr Michael Turner: No, before December 1999 so that we have everything fixed, in place, done before that date, so as to give us a little bit of breathing room to catch any last-minute glitches or problems and so that everything we've done is on track for that date.

The GPS problem, as I mentioned, is that there are tens of thousands of people out there with receivers, in commercial ships, fishing vessels, pleasure craft, whatever, and we of course have no way of knowing whether or not all of those receivers will in fact operate properly when the big day comes.

Mr. Ian Murray: I also had a question for Mr. Grigsby.

The Chair: Last question.

D/Commr Michael Turner: By December 1998, we will have a good portion of our work done with respect to the mission-critical systems. But our final target is before December 1999 to have everything finished.

The Chair: November 30, 1999? What do we mean?

D/Commr Michael Turner: I'll ask Mr. Clavelle to explain it.

Mr. Jacques E. Clavelle (Director General, Technical and Operational Services Directorate, Canadian Coast Guard, Department of Fisheries and Oceans): With all our planning to address all the issues we have right now, we are very well advanced in the complete inventory of mission-critical issues right now. We also have done some work in analysing those issues on board vessels, for example. What Mr. Turner was mentioning is that we need to expedite this because we want to finish all this work and make sure that we have also contingency plans well in advance of the December 1999 date. Therefore our plan is to have a complete vision before the end of this year and then address all these very specific items in the course of next year.

The Chair: Thank you.

Sorry, Mr. Murray.

Mr. Ian Murray: I have one last quick question to Mr. Grigsby.

You mentioned how important it is to have the CEO of any company actively involved, and you particularly point out Mr. Tellier's involvement in CN. But you also described a very extensive communication program with your employees, and I want to know if the employees were actively participating in identifying problems that someone else may not have thought of, or are they in a position in most cases to even be able to imagine what could be a problem? I realize most of them out in the field wouldn't. But have you had any feedback from employees as a result of this communications program that maybe would provide some lessons to other companies?

Mr. Fred Grigsby: The centrepiece of Canadian National's approach is to have the people closest to the problem involved in correcting the problem. That gives you a lot of leeway.

We've put an extensive communication system in place to ensure that the message is consistent across the corporation. Canadian National is a large corporation with many different programs and objectives and different activities. So we had to ensure that everybody understood the importance of the project from myself down; I carried Mr. Tellier's power as far as this project is concerned. We want to do this in a manner where everybody feels they're part of it and engaged in thinking about it, because the truth of the matter is when you have this extensive a corporation, a small group at the top cannot think of all the things. We have to get the people involved, thinking as they do their jobs and identifying.

The inventories are being created by people out on the fields. So that's very important to us. I think it's also very important that we all understand what the mission is and we all give that mission priority, and that has happened.

The Chair: Thank you very much, Mr. Murray.

[Translation]

Mr. Dubé, please.

Mr. Antoine Dubé: Since this morning, we have been hearing from businesses involved in a whole range of industries. This is the first time that we are also meeting with people from the rail and shipping industries.

That leads me to the following question: with regard to the year 2000 problem, did the Canadian Coast Guard work with the representatives from the two areas that concern them, or have you at least been in touch? Is there an official or informal committee that encompasses all the other players from the shipping industry? By that I mean port administrators, shipowners, the seaway itself and the pilots on the St. Lawrence. I would even extend that to include small craft, for which there isn't necessarily a group per se, but I will have a question on that later on.

Do you have some sort of committee or structure?

• 1345

[English]

D/Commr Michael Turner: Yes, sir, we are in fact going to be working quite closely with some of those groups, and we are in contact now, through our regional offices and our regional staff, with organizations such as you mentioned, the seaway, the pilotage authorities, the ports and so on.

The challenge here is going to be where there are interfaces between those systems, and I've already mentioned one. One example is us, the coast guard, transmitting radio signals for use in navigation to a pilot on board the ship who is working with certain types of equipment. From the point of view of the commercial industry, it is, of course, their obligation and responsibility to make sure they are up to speed and are able to deal with this problem, but particularly with respect to the other components in the marine infrastructure, such as you've mentioned, ports, the seaway, pilots, etc., it will be important to continue that close relationship—which we've had for many years, of course—on this particular item to make sure that anywhere there's an interface it's understood and there is good cooperation.

[Translation]

Mr. Antoine Dubé: I see you're talking in the future tense. Are there already ties or are they still non-existent?

[English]

D/Commr Michael Turner: My understanding is that they have already been undertaken at the regional level through our organizations, that there are already discussions under way with the various organizations you've mentioned with respect to similar situations or use of common equipment or anywhere where we're a provider and they're a user or vice versa.

[Translation]

Mr. Antoine Dubé: I would now like to address my question to the representatives of the rail transportation sector. You are from CN and I understood what you are doing to prepare for the year 2000. Have you been working with the people from VIA Rail, since you share the train corridor with VIA Rail? There's also a company called CP which, even though it is your competitor, might be able to work with you. CN now has an American subsidiary, and I was wondering whether you are working with it to deal with the year 2000 problem? Do you have an intercorporate committee working on that?

[English]

Mr. Fred Grigsby: As for the other railways—I'll deal with that part of the question first—the railways belong to an AAR, which is a railway association. We use that particular function to pass information back and forth amongst our railways. That's how we track our shipments through the other roads.

The AAR has a committee that is working on that and has indicated it will be compliant. That is the vehicle through which we coordinate and work on the transfer of information from one road to the next. We do not deal directly with CP on this particular issue, but we work with all the railways through AAR. We have shared track with CP, but that's another issue.

Through our marketing department we have put in motion a process that deals with all the customers. We have sent letters to all our customers indicating where we're at. We have also sent letters to all our suppliers and are working with them for compliances. That's more of an EDI, an electronic commerce question, ensuring that we will all be capable of passing information back and forth from the shippers of our customers through to the people they are sending their products to, because we flow that product through. So we've tried to cover off all those aspects, but the main industry effort is through the Association of American Railroads in the United States.

[Translation]

Mr. Antoine Dubé: I have one last question to ask the Coast Guard. During our hearings, the committee has heard about the GPS system that may run into trouble, not only on January 1st of the year 2000, but also in August of 1999. Apparently, changing from 1024 to 0 is not feasible. At least people are talking about it. Are you also ready to deal with that problem, by not waiting until November 1999, because that will happen in September?

[English]

D/Commr Michael Turner: Sir, we are ready from the perspective that we have as a user of the system and as an organization that supplements the signals that come from that system. But it is in fact a U.S. military system, and that is the party that is working actively to ensure that there is no difficulty when the clock roll-over takes place. The primary responsibility for the GPS in terms of our roll-over problem is with the American government. It is a very good example of the kind of situation where an organization can be necessarily reliant on some other organization over which it has virtually no control. You will appreciate that our ability to influence the American military is slight, to say the least. They are, however, very much seized of the importance of this issue, and we have very close relationships with the United States Coast Guard on this matter.

• 1350

Furthermore, because we are the supplier in Canada of the differential correction signals used for general navigation, we also have a number of in-house experts and have been working very closely with a group from the University of Calgary that probably has the finest expertise in this area in Canada. They are one of the best in the world in GPS technologies because of the use of this technology in surveying and positioning in the oil industry.

The group in Calgary and our own people have been looking at a number of the difficulties inherent in the general GPS and subsidiary applications field. From everything we've seen so far, we think that will certainly be manageable. And yes, we will also have contingency plans available. But the biggest risk, as I mentioned earlier, is with respect to third-party users of the signals and whatever kind of equipment or receivers they may have—whether it will be able to cope with the problem or whether something internal to that receiver could cause a problem for some third party.

The Chair: Merci, Mr. Dubé. Thank you, Mr. Turner.

Mr. Shepherd.

Mr. Alex Shepherd: Mr. Grigsby, your railway just bought a significant railway in the United States. How are you merging that and how does it affect this problem?

Mr. Fred Grigsby: Because the merger process will take another year at this stage, we're not involved in that. They have to take care of that issue themselves, but they are taking care of it. Illinois Central is not part of Canadian National Railway, as I understand it, until after the merger process goes through, so we're really not in a position to talk about them. However, I do know they are treating the problem very seriously and it's my understanding they will also be compliant.

Mr. Alex Shepherd: So you're not operating that railway at this moment?

Mr. Fred Grigsby: No, sir.

Mr. Alex Shepherd: The process I hear from most people working on this issue is that they inventory the problem, define the problem, repair it and test. Where are you with this? Do you have a complete inventory of their non-compliance?

D/Commr Michael Turner: I would hesitate to say that we have a 100% complete inventory, but it is virtually complete. I hesitate to say 100%, because one is constantly stumbling over new little things that turn out to have an embedded processor somewhere that we weren't aware of. That's why I would certainly subscribe to the comments made earlier by our colleagues from CN about the involvement of personnel throughout the organization. People throughout our organization have been sensitized to this issue and it is at the operational level that from time to time somebody says, “By the way, did you know that?” and points out some little piece of equipment on the wall or something we hadn't suspected.

So we have an inventory and it is in the thousands of items. Fred is managing that system, of course, but we are still getting the occasional addition to it.

Mr. Alex Shepherd: So we haven't even got to the last stage. We don't even have a comprehensive inventory, let alone starting to repair it. It's not—

D/Commr Michael Turner: I wouldn't say that's fair, sir. The fact that you will always find items to add to the inventory as you go through the process doesn't mean you don't have one. We are already embarking on a detailed analysis of exactly where the problems are with the embedded processors, and they are in the process of actually remediating and fixing some of those problems.

Mr. Alex Shepherd: I was on one of your coast guard ships not long ago. I think it was called the Sir William Alexander.

D/Commr Michael Turner: Yes.

Mr. Alex Shepherd: Do you have an assessment for that ship? Can you tell me what's compliant and non-compliant on that ship right now?

D/Commr Michael Turner: I'll let Fred speak to that particular one.

Fred, you might also refer to the work that's being done through the contractors at CGI-Oerlikon with respect to the analysis of the ships.

Mr. Fred Forbes: Thank you.

If you were to ask me to produce an inventory and an assessment of the Sir William Alexander at this point in time, I couldn't do it, but with a little bit of data gathering I think I could come pretty close.

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You also have to realize that the Sir William Alexander is one of over 100 fairly large ships that have been identified as being mission critical. We're trying to address them all, but it's a massive undertaking. We have a lot of technical expertise that resides in the coast guard. A large portion of that is being applied to answer the kind of questions that you've asked, but it's not enough, so we have embarked on an outside contractor to help us with that assessment. The inventory is reasonably complete, but that's only the start. The assessment is of vital importance to determine what the issue is.

Mr. Alex Shepherd: The reality is that we haven't even started to look at repairing this.

The Chair: The last question was for Mr. Shepherd.

Mr. Alex Shepherd: We don't even have an inventory of our ships.

Is it likely that ship can go to sea on January 1, 2000?

Mr. Fred Forbes: My assessment is that all the ships will be able to safely go to sea on January 1, 2000, and carry out their missions. The problem we face is verifying that. For example, we identified 580 items on a ship we just assessed that potentially are year 2000 affected. Every ship probably has a similar number of those.

You've probably heard from other people that in the order of 5% to 10% of embedded systems will be susceptible. In the case of this vessel that I have detailed figures on, the number was much lower than that. The potentially susceptible equipments on that ship were less than 10. It's a manageable problem.

The Chair: Thank you, Mr. Shepherd and Mr. Forbes.

Mr. Lastewka.

Mr. Walt Lastewka: Madam Chair, I too wanted to ask some questions of the coast guard, and I was thinking along the same lines of inventory.

I understand that you've done your inventory, but you're still looking for those flyers that you missed and so forth. My concern was in terms of getting an idea of what you've completed. You had your inventory. How much work has been done?

As well, I was concerned when you mentioned earlier that December 1999 is your target date, knowing full well there are customers and other stakeholders that you have to interrelate with. I'd like to get some definition there.

D/Commr Michael Turner: Perhaps I could break that into two parts.

I would ask Mr. Clavelle to respond to the later remark regarding the target date—I may have given the wrong impression on that one—and then Fred Forbes can speak to the specifics about exactly where we are in terms of remediation. I would just preface that by saying we are not working in a consecutive or linear fashion, where you do all of the various inventories and make it perfect, and then proceed to start on remediation bit by bit after you've done analysis and so on. We're trying to make sure that as we finish the inventory we are working on analysis and proceeding with remediation in parallel, depending on the situation in the various regions.

Jacques.

Mr. Jacques Clavelle: In the process of the inventory, I think we've moved along on that. There may be some verification later on, but that's understood.

Also, we are now addressing each of the ships. We may not have a specific list by ship, but we have it by category of ship and we are addressing it this way. We have over 100 ships that need to be addressed. We felt it was better for us to clearly identify the problem, indicate where the problems are, and then we will apply the remedial actions to the rest of our vessels by categories and so on. I think we're well under way in this whole process.

On the notion of December 1999, I think we didn't express ourselves properly. We want to have finished and be out of the year 2000 concern well before the deadline. That is why we will put in additional resources now to move on in making sure we address this issue before the deadline happens.

No, we are not aiming for December 1999. It's not our goal.

Mr. Walt Lastewka: What is your target date?

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Mr. Jacques Clavelle: Our target date right now is to have a complete understanding and have done the remedial action on the government-critical issues. In addition to that, we have DFO and coast-guard-critical missions as well that we need to address. This is how we will meet that.

Mr. Walt Lastewka: So what is the target date to getting the mission-critical items completed?

Mr. Jacques Clavelle: We can't tell you that right now, because we are working on this whole process.

Mr. Walt Lastewka: Mr. Forbes, you said something about how they're waiting for Treasury Board funding. Can you expand on that? You've asked for funding?

Mr. Fred Forbes: No, I'm sorry. The reference was to the research committee that they want to set up for researching susceptibility of navigation and communications equipment. There is a submission to Treasury Board being handled by some organization, which escapes me at the moment. That's what we're waiting for. That was my reference to Treasury Board funding.

The Chair: Last question, Mr. Lastewka.

Mr. Walt Lastewka: I just want to finish that same one.

Is that in part and parcel with the Y2K program?

Mr. Fred Forbes: Yes, it's under the interdepartmental year 2000 committee and the working groups that are part of it.

The Chair: Thank you.

D/Commr Michael Turner: That is not the situation for the coast guard, sir. We are not waiting for some kind of submission or funding from the Treasury Board. That was a special case of an interdepartmental committee that Fred was referring to.

Mr. Walt Lastewka: They're waiting for funding and it's tied into Y2K?

Mr. Fred Forbes: Only for the research on the navigation and communications systems, which will be a government-wide research project to share information.

Mr. Walt Lastewka: What about your customers—

The Chair: Mr. Lastewka, that was your last question.

We have a bit of a time constraint here. Question Period is going to be starting shortly and I have questions from Mr. Schmidt and Mr. Bellemare that I will entertain.

Mr. Schmidt, please be brief.

Mr. Werner Schmidt: Yes, thank you, Madam Chair.

I am very deeply concerned with the tenor of the answers we received from the coast guard. I'm looking and I did a little arithmetic here. You have 100 ships, and 365 days from now is April 21. That gives you roughly 3.5 days per ship, working every day between now and April 21, 1999. It gives you some time to fix some things up.

I am very concerned. There is no deadline as to when things are going to be done. You don't have a complete inventory. I don't see how in the world you can logistically do this and give us any feeling of comfort that you really are in control of the situation. I don't think you are.

D/Commr Michael Turner: I would have to suggest, sir, that we have a fairly good handle on this. It's not a question of having perfection, which I hope you will appreciate.

Mr. Werner Schmidt: I'm not asking for perfection. I'm just asking for something that's reasonable.

D/Commr Michael Turner: Yes, sir.

The question of how many ships you do per day really isn't a relevant measure, I would have to suggest. The ships we have come in classes, essentially, groupings if you like, which have very close or identical equipment on them. When we do a detailed analysis of one particular class of ship as to exactly what needs to be fixed, it may for example cover cover 10 or 12 of them. Then teams go out in each region and do it.

When we made reference to the fact that pinning down the final date to have the government-wide mission-critical functions completed isn't yet possible, it's because we are in the analysis phase right now with each of the classes of ships, ourselves and external contractors, to know exactly what the fix will be and how long it will take. But this is not expected to be a matter of being down to the last minute or anything. It's expected to be something that we will have well in hand over the period between now the latter fall of 1999.

We have no expectation or anticipation that there will be unusual or unexpected problems that we cannot quickly resolve. In fact, in the work that's been done to date, the extent of the analysis side of the equation has been that our problems are quite small in terms of the percentage of systems once they're actually checked out and measured.

The problem with all these systems is that you identify thousands and they keep coming out of the woodwork. I'm sure that even after 2000 we'll find others we didn't know about.

The important thing is to analyse exactly which are the critical ones, how do they operate and are there any difficulties, and we are certainly on schedule in that sense.

Mr. Werner Schmidt: I have this final comment. I think it was you, Mr. Turner, who commented that we keep stumbling across new problems. I thought to myself, that word “stumble” is probably exactly what you're doing in this whole problem. I rest my case there.

The Chair: Thank you, Mr. Schmidt.

Mr. Bellemare, could you be brief, please.

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Mr. Eugène Bellemare: Your ships are connected to our satellite system, are they not?

D/Commr Michael Turner: There are communications satellite systems and navigation satellite systems, both.

Mr. Eugène Bellemare: We were told at this committee that this summer there are probably going to be some breakdowns in that satellite system. There's no way of fixing it unless you want to send some astronauts, like plumbers, up there to fix things up, and that's an impossible task at this point.

What's your reaction to this? What happens if this comes true and the satellite system that affects your ships blinks out? Have you got a contingency plan?

D/Commr Michael Turner: The basic answer to that, sir, is that in almost all cases navigators at sea have a multiplicity of systems, rather than just relying on one. And it's certainly the case with the coast guard ships. They're very well equipped in that sense. And if the sat-nav systems should fail, for whatever reason, on a particular ship, then we have others to fall back on, including the Loran-C system, which we also operate, and of course more basic systems after that.

The question of whether a particular satellite might fail or not fail I can't really speak to. I don't know who you were hearing, of course, but the way the GPS systems works, sir, is there is a constellation of satellites and you need to be able to see a certain number at any time to get a high-quality fix in two dimensions or a greater number to get a high-quality fix in three dimensions. The chances of a particular satellite failing and putting out the system is virtually nil. The chances of multiple failures of a number of satellites such that the quality of service will be diminished would appear to be extremely low, according to everything we've seen from the United States' government.

Mr. Eugène Bellemare: So you don't feel that what we've heard here in committee about the probabilities that they are going to malfunction this summer is a problem?

D/Commr Michael Turner: Sir, I can only say I haven't read the testimony. I would have to go back and check that. I'm only reporting on our own knowledge of how the system operates, as the organization in Canada works closely with it and of course provides a differential correction system.

Mr. Eugène Bellemare: And you have contingency plans?

D/Commr Michael Turner: Yes.

Mr. Eugène Bellemare: Thank you.

The Chair: Thank you, Mr. Turner.

I have one final question.

Mr. Grigsby, in your comments and in your statements, you talked about embedded chips and how you're trying to deal with the problem. You may have heard my comments earlier about the economic impact of transportation via planes, but now we're talking about rail and we know what a strike can do. I'm concerned that not only do you have to deal with the economic impact and the concerns of businesses moving goods and people, but we have to deal with the safety factor of the rail crossings and so you have it all the way down to the consumer.

What assurances can you give us that we're going to ensure that all those rail crossings are going to be dealt with? I live in a very rural area, which has a number of them, and we're in the process of putting new ones in. I'm assuming the new ones that are going in don't have problems, or is that a false assumption?

Mr. Fred Grigsby: We're assuming that there are not any that are okay. We're checking every one; so we're not making the assumption that even the new equipment we've bought is okay. We plan on being completed by the end of this year, and then we will use next year to basically test for the year. We will also have in place contingency plans for midnight of the year 2000 for all our systems, if they don't work, including checking our tracks and checking all our switches before freight is moved down them.

The Chair: Thank you.

I want to thank you both for being here. And Mr. Turner, I want to let you know that you may want to look at your plan in light of the fact that the CIO from Treasury Board will be coming back in September before this committee and gave us different time lines than you're expressing today for final completion of all government departments. So you may want to take a look at his testimony before the committee and where we're going.

But we all recognize it's a serious problem and that you recognize it's a serious problem, both on behalf of the coast guard and on behalf of rail. We want to ensure that all of our transportation modes work so that we don't find ourselves in any critical or emergency situations, and I thank you for being here.

I want to remind committee members that we're moving to 362 East Block after Question Period and we're now breaking for Question Period.

Thank you very much.