:
Thank you, Mr. Anderson.
I see no other point of order.
We're here today, pursuant to Standing Order 81(4), to deal with the main estimates for 2008-2009, votes 1, 5, 10, 15, 20, 25, and 30, under Department of Natural Resources, referred to the committee on Thursday, February 28, 2008.
We have appearing before our committee today the Honourable Gary Lunn, Minister of Natural Resources. Welcome.
From the Department of Natural Resources we have Cassie Doyle, deputy minister, and Richard Tobin, assistant deputy minister. So welcome, to all of you.
Mr. Lunn, I understand you have a presentation to make. Go ahead and make your presentation, and then we'll get directly to questioning. Go ahead.
:
Thank you very much, Mr. Chair.
It's great to be back before the committee to talk about the main estimates. As you've pointed out, I'm joined here by my deputy minister, Cassie Doyle, and Richard Tobin, my assistant deputy minister.
Mr. Chair, as I begin, we're all very much aware of the enormous economic growth of the natural resource sector right across Canada, even more specifically within the energy sector, which is providing tremendous benefits to Canadians.
In 2006 our natural resource sectors contributed 13% toward Canada's GDP and accounted for nearly half of our domestic exports. The natural resource sector contributed $91 billion to Canada's trade surplus, and that is one of the reasons, Mr. Chairman, that the Canadian economy remains so strong today.
Along with this rich resource endowment also comes an enormous responsibility to ensure that we develop our natural resources in a sustainable way. I believe, Mr. Chair, that we can build our country's strengths in a responsible manner, with innovation and the ingenuity of the Canadian people, a world-class investment climate, and open and transparent regulatory systems.
There are three strategic objectives, Mr. Chair, that must drive our natural resources. The first one is economic competitiveness, where natural resource sectors are productive and competitive so they continue to contribute to the well-being of Canadians. Equally important is environmental responsibility, where Canada is a world leader in responsible development of the use of our natural resources. The last one is safety and security, where knowledge of our resources and our country strengthens the safety and security of Canadians.
Let me begin with economic competitiveness. Rising commodity prices and increasing global demand have benefited most of the natural resource sectors. The future of Canada's competitiveness relies on our ability to apply knowledge and innovation to our strategic assets and to our rich resource endowment. As you know, the competitiveness of Canada's natural resource sector is built on innovation. These are knowledge-based sectors, and our government is focused on fostering science and technology. The significant science and technology expertise at Natural Resources Canada sharpens the competitive edge of Canada's resource sectors.
Mr. Chair, the forestry sector remains an important contributor to our economy. Despite an increasing number of challenges, including the downturn in the U.S. housing market and the rise in the Canadian dollar, here again innovation and knowledge will be key in helping enhance our competitiveness in this sector. Our government has created a long-term competitive forest industry initiative that supports innovation and assists the forest sector in moving towards higher-value products and exploring new markets. We have led the creation of the world's largest public-private partnership in forest research and development--FPInnovations.
Mr. Chair, recently this committee heard from witnesses, including FPInnovations, regarding the unique opportunities and the challenges facing the forest industry. Your committee has also suggested convening a forestry round table. In a response to this, I will be co-hosting a forestry round-table discussion on the paths to a prosperous future of innovation and markets, in conjunction with the Forest Products Association of Canada and FPInnovations, on May 13. We did have some discussions with both of these industry groups, seeking guidance from their members, and it was believed that a focused approach would be the best way to bring all the stakeholders together to have a focused, good discussion, and that is in fact what we're going to do.
It will be a great opportunity. We would welcome the participation of all the committee members. As well, the following day is forestry day on the Hill. There will also be a number of meetings following that with various caucuses and an opportunity to have a good discussion over those few days on forestry.
The input received from this session, along with other mechanisms, including public consultations of the Canadian Council of Forest Ministers' draft, Vision for Canada's Forests: 2008 and Beyond, will help outline our priority actions for the sector over the longer term. I hope you'll be able to participate in these important discussions.
The second strategic objective that I outlined earlier is critical. In developing our natural resources, it is essential that we do so in an environmentally sustainable way.
We will continue to deliver successful initiatives for energy efficiency, renewable energy, and clean energy. We have invested over $3.5 billion to our ecoENERGY efficiency initiative, to our ecoENERGY renewable initiative, to our ecoENERGY for biofuels and to our ecoENERGY technology initiative.
Our government is committed to a safer, cleaner, and more secure energy mix in Canada. This year we are investing over a quarter of a billion dollars in carbon capture and storage that will significantly reduce greenhouse gas emissions by capturing carbon dioxide from coal-fired industrial plants. This includes the world's first fully integrated clean coal electricity generation facility combined with carbon capture and storage. This project in fact will be happening in Saskatchewan.
Again, this is an enormous opportunity for Canada to lead the way on the development of technology and innovation. We're also investing in geological research on carbon capture and storage potential in Nova Scotia. As well, we're partnering with the University of Calgary to further examine the regulatory, economic, and technological issues to accelerate the deployment of this important technology.
We're also investing $300 million to support AECL and the development of its next-generation nuclear power reactor, the advanced CANDU reactor, and its ability to maintain safe and reliable operations at Chalk River laboratories. Canadians know that nuclear power generation is safe. It's clean and it's emission-free. It's based on Canadian technology that uses Canadian resources.
Finally, Mr. Chairman, the third strategic objective is to promote the safety and security of Canada. As the committee is well aware, the Prime Minister places a strong emphasis on developing opportunities in Canada's north. Investments in geo-science and mapping will help industry discover and develop new energy and mineral resources. Building on this strength in our most recent budget, the Government of Canada invested $34 million over two years for the northern geological mapping and logistical support for the polar continental shelf project.
These investments will provide enormous economic potential for developing resources in remote communities, including the north. Not only are we pursuing the sustainable economic development of this region, we are building on our capacity to support Canadian sovereignty.
Our recent investment of $20 million in seabed mapping, for example, will promote the scientific basis needed to demonstrate Canada's claim in the Arctic for our submission under the UN Convention on the Law of the Sea.
Mr. Chair, I had the opportunity, the week before the break week, to visit where we have 25 researchers from the Department of Fisheries and Oceans and Natural Resources Canada working together to make our territorial claim. It was an amazing experience to go right out onto the polar ice cap and see first-hand what our scientists are doing.
Dr. Ruth Jackson is our lead scientist, and the work they're doing there, the data they're collecting, will be absolutely vital to Canada making a successful claim for a part of the continental shelf the size of the prairie provinces combined. It's very important that we continue this work.
Again, I want to applaud this. I had an opportunity to see first-hand what they're doing. There are very specific rules on how we will make this claim. I believe it's critical that we are successful in this claim so that we ensure that we have the jurisdictional control, not only about the potential economic opportunities, but, even more importantly, that we control the ground rules--what the environmental standards are and how we are to ensure that this is done to the highest standards to ensure environmental protection for future generations.
The north is a very important part of our country, and I'm pleased, as I said, to have been there to see this first-hand.
Finally, I must mention an important initiative to improve our regulatory systems. The government is taking action to improve the efficiency of the regulatory approval processes through the creation of the major projects management office. This investment of $150 million over five years, together with a number of federal agencies, will provide industry with a single point of entry into our federal regulatory process. This will give Canada's natural resource industries greater certainty, improved predictability, and increased transparency, while strengthening the integrity of the overall regulatory process. This will ultimately mean more timely reviews that will aid in attracting critical investments. This is an improvement in the governance that Canadians have been seeking, and I'm proud to report that we are delivering.
Mr. Chair, this government will build on Canada's rich endowment of resources and the skills and ingenuity of our people to keep our economy competitive, to meet our environmental responsibilities, and to contribute safely to the security of all Canadians. Our government is committed to developing policies that maximize the potential of Canada's natural resources. As natural resources continue to rise in strategic importance in the global economy and as concern increases for the future of the planet, our government is creating a sustainable resource development for the advantage of all Canadians.
I would like to thank you for giving me the opportunity to appear before you this morning, and I look forward to your questions.
Thank you to the minister and deputy minister for appearing today and for answering our questions.
Thanks also for the invitation to the forestry round table on the day on the Hill. Unfortunately, I may not be here for the 14th. I'll be at home. One of our mills is closing, and there will be an event there on the 14th. That's the last large mill in my riding that will be shut down. We're hoping a buyer comes along between now and then, but it doesn't look promising.
On that topic, Mr. Lunn, when I first came to this committee, I think it was within the first few months of meetings, you came before us. I think it was the first time, and we talked about raw log exports. You said that you were very concerned about that. I'm wondering what steps you've taken or what you have done to curtail raw log exports from this country since that time. That's one of the largest reasons our mills are closing down. It's because they don't have any logs to mill. They are being exported.
My second question is with regard to the ecoENERGY program. You've answered some of this in your answers to the Bloc. I have people in the riding who have had inspections, and the inspections cost approximately $400. The amount of money they got back was $400. They felt that this didn't really give them much hope. They didn't see this as a big incentive for doing the work. Unfortunately, they had to spend around $11,000 to get their heat pump. I have been asked by them to ask a question about why it is so high and why there is not much of an incentive.
My last question is about the ecoAUTO program. That was discontinued, and I'm wondering why that was discontinued. I know a number of people who took advantage of it, and it was successful, in their minds. I wondered, from Natural Resources Canada's point of view, why it was scrapped.
Let me try to address your three questions. First of all, on the raw log exports, you're correct. This is 's responsibility, but I have had discussions with him, as well as with my other colleagues. has raised this with me a number of times, with equal concern.
There are issues. We have to be careful we don't trigger any kind of trade action within the softwood lumber agreement. That is one of the mitigating factors.
We've had discussions with the province. I know on the softwood lumber agreement there were opportunities for discussions dealing with this issue, but again, has the lead.
I should say that one of the things we're trying to do within the forest industry.... And you've talked about your mills closing. We recognize the difficulty this is placing, especially on some of these small-industry towns right across Canada, the one-industry towns. That's why the announced $1 billion in the Community Development Trust, so that there could be some money going out to help these communities, to help these families, and to help these workers, not to mention the money we're investing in forestry innovation and in looking for new markets.
We're committed to doing that. We're working with FPInnovations and the Forest Products Association of Canada to continue, and we absolutely believe that the forest sector is an important part of our economy and will continue to be for some time to come.
But I take note of your concerns on the raw logs. There are different people with different schools of thought. The province is engaged in this as well. So again, I know people are looking to see if there are things that can be done. There is no silver bullet, though. Just thinking that if you stopped the shipment of logs, those mills would come back tomorrow.... In fact, all of those mills on Vancouver Island have access to every single log first, before one log goes south of the border. Any Canadian mill is going to have access to those logs before they're exported. That's an important note to make.
On the ecoENERGY program, the reason we asked the homeowner to pay their audits was that we wanted their buy-in. What we found from the previous program was that the homeowner didn't have to pay for the audits, so a lot of people were just getting audits but then not doing any of the work. We felt that by having the homeowner at least pay for the audits we could actually increase the amount of the grant, which we've done. The average grant is just around $1,000 across Canada; there will be some that are less and some that are more. But we believe the program is working, and it has great participation.
I don't know the specifics with respect to the ecoAUTO program, only that we've put a significant amount of money in the budget looking at our auto sector for innovation, looking at how we can work with the industry. We have a great auto manufacturing sector in Canada. They've been world-class in building automobiles and manufacturing some of the best in the world. We know the auto sector is having a tougher time. For SUVs and pick-up trucks, the market has virtually collapsed in the United States, so the auto sector is definitely looking for other opportunities. They're all engaging in more efficient vehicles, which is great, and our government is trying to work with them to ensure that happens.
On the ecoAUTO program, though, we felt it was better to move money into doing that kind of work with the auto sector in the development of more fuel-efficient vehicles, and that's why we decided to make that change.
:
No question. Listen, it's not just the United Kingdom, it's also countries like China; they are putting 1,000 megawatts of new electricity on the grid every 10 to 14 days, primarily coal.
So there are enormous opportunities for coal. We're seeing this growth in different parts of the globe. An enormous amount of global energy is coming from coal. Canada has an opportunity to be a world leader in the development of this technology. Our department does a significant amount of research right here in the labs at Bells Corners. With their oxy-fuel process, they can take virtually all of the pollutants out of the stack.
I said earlier in my speech that we have committed $240 million for a Saskatchewan project, the world's first fully integrated clean coal with CCS. There are clean coal plants, and a few of them are operating. I don't have the details, but there are a few. We are doing carbon capture and storage. Weyburn, Saskatchewan, is an example; it has one of the largest ones in the world. There are other CCS projects around the globe.
This is bringing the two technologies together for the first time. You're seeing a lot of growth. I've had discussions with my counterpart, the Secretary of Energy, in Washington. The United States has significant interest in this as well. These discussions also come up with my colleagues at the International Energy Agency.
I personally believe there absolutely is an opportunity for Canada in the development of this technology, but I actually think we need to get this technology into countries like India and China. We need to do everything in our power if we're going to make an impact on the environment on a global scale. And that's where the great benefit is.
Absolutely, this is one of the reasons we're investing in this technology. There is an economic gap. This is very expensive technology. As with any new technology, there's always an economic gap, but as we get started, that economic gap will narrow. We've seen it in Hibernia, we've seen it in the oil sands. That's why we're quite excited to get this project off the ground.
:
Thank you very much, Mr. Chair.
I have two troubling questions, Minister. The first is why would you, knowing full well that the committee had passed a frank and clearly worded motion expressing its direction that the Prime Minister convene a full national summit on forestry, still go ahead with a three-hour session, knowing it would be inadequate for what this committee had set as a direction?
We've called your office for a list of invitees, and we've been told that it cannot be revealed to the public. So one can't help but feel there is some hidden agenda here, Minister.
Our report, which we've been labouring on for many, many weeks, won't be ready, but you would think it would be the focus of why you would bring people together, so they could start working on what we have proposed to the government as a direction, rather than going through all of the sludge work we've gone through. It really will set a national and international agenda for us, not a provincial or territorial one.
So I would question first of all why you would undermine this committee while knowing what our wishes were.
I guess the second question I would have is that this committee passed a resolution for $1 billion for forestry, but the amount provided was $330 million a year, and it was given carte blanche to the provinces. My question is that when we have a chance to have some influence with $330 million a year, why wouldn't we say at that time that these are some of the ambitions, directions, and goals of the federal government, as opposed to just transferring the money?
Thank you, Mr. Minister.
:
Thank you very much, Ken.
First of all, with respect to the forestry round table, for one thing the timing of it is because it's forestry week. We thought that's a great opportunity. There will be a lot of the folks who are going to be in town for forestry. In fact, the next day is forestry day on the Hill. So logistically it's a lot easier for some of the invitees.
I'll be honest; I wasn't aware that someone had said you couldn't see the list of invitees, but let me tell you about some of the people who have been invited. Not to mention all of you around the table, there is FPInnovations, which is a leading public–private research institution; the Forest Products Association of Canada....
By the way, we've consulted with both of those agencies, who vastly represent a large section of the industry, and have said: we've done some work and we think an afternoon is what we should need; bring some people together, as well as union leaders—some of the stakeholders such as those. We're looking for a good discussion around this event.
You say you wanted the Prime Minister to lead it. No one should challenge this Prime Minister's commitment on forestry, nobody. He's the one—and we'll get to that in your second question—who put $1 billion into the community development trust. He's the one who, in our first budget out of the gate, had $400 million for forestry. We hadn't seen those kinds of commitments by the previous government, in all fairness, to forestry.
So we have put in significant funds. We worked with the industry to ensure that this money was flowing through to agencies to look at innovation, at new market opportunities, and there was our commitment on the pine beetle.
We work as a government. In all fairness, Mr. Boshcoff, your party is standing up in the House of Commons saying the Prime Minister is a one-man show. Now you're coming here and saying, “How come you're involved? You're just the minister responsible for forests. Why don't we get the Prime Minister?”
We work as a team. We really do work as a team, our entire cabinet, just as I work as a team with my deputy minister. We talk daily. We are all focusing our eye on the ball, on getting the job done, and you can rest assured that the Prime Minister will pay very close attention to this forestry round table.
Your second question was why give it to the provinces? We recognize that some of the most difficult part involves the communities that are being affected by the downturn of the forest sector. Some of the challenges are unprecedented. The forest industry was never geared to being competitive at a par dollar. U.S. housing starts are off by 25%; that's where 80% to 85% of our market goes.
So how do we help those communities? Who's best to deliver initiatives to help the workers themselves?
Just let me finish, Ken. I'm giving you a straight answer.
It's the provinces. Why would we in Ottawa want to deliver programs to these communities? We gave that money to the provinces with a focus to help these communities in the downturn of these sectors in the economy, and in fact we think they're in a far better position to deliver these programs than we are here from Ottawa.
:
Thank you, Mr. Chairman.
Good afternoon, Mr. Lunn.
I don't want us to get bogged down in the figures, but roughly speaking, if you factor in contributions from other departments, the government has invested somewhere around a billion dollars this year in atomic energy, for security, etc.
On the other hand, when you consider the amount of money invested in renewable energy—and let's not talk about biofuels for the moment because that's another issue and I'd like to come back to it later—you decided to allocate $111 million to it. This is completely out of wack in my opinion because that envelope includes wind energy, passive solar with water, active solar with air, biomass for heating, wave energy, run-of-the-river hydro electricity—that's on the horizon—gasification of garbage. There's also geothermal energy and included in that, and I want to stress this, there's deep geothermal energy and low-level heating geothermal energy to produce electricity. According to a report published in the United States—and this is valid for Canada—by 2050, if we were to invest in deep geothermal energy alone, we'd produce all the electricity we need, and that's from the heat that's found in the ground.
So given this—and I'm sure you're aware of these projects—you have decided to invest $111 million and almost 10 times that amount in nuclear energy. Don't tell me where you're investing the money, Mr. Lunn; I know where it's going. Tell me why you're not investing more in renewable energy. You said earlier, and rightly so, that there is major economic development, and that half of our exports come from natural resources and that you are very sensitive to the environment and health and that because of all that we don't need any reassurance. We need reassurance when it comes to nuclear energy, but not for that. Tell me why you're not investing more money in these forms of renewable energy.
:
Mr. Chair, could I respond to that?
It's currently not designed as a fund that's out there for a request for proposals. It's a partnership fund designed around four or five key priorities with FPInnovations.
The board of FPInnovations comprises industry members from across Canada, the provinces, and some academic people as well. In most regions of the country they've gone out and negotiated collaborative arrangements with universities and with provinces more focused on the regional issues.
For example, there's a very active agenda being developed in Ontario, and one in Newfoundland and Labrador. I'm not sure about Nova Scotia, specifically, but certainly we've worked very closely with the firms in Nova Scotia, as well as with the Nova Scotia government. Some of the priorities around that agenda are around setting the agenda for future investments, things like nanotechnology, things like unique attributes of the Canadian fibre so as to get a competitive advantage in applications in, say, specialty pulps, as well as uniquely Canadian shelter systems using wood, the non-residential use of wood in terms of construction. So there are a number of priorities, designed around setting an agenda for the future.
If there are specific interests from some of your firms or organizations, I'd be quite happy to take them and forward them to FPInnovations for consideration. They've been very active out there, actually, in dealing with firms across the country.
We also have a value-added wood program that we partner with the provinces and the industry and FPInnovations in putting what we call industrial advisers out in the field. And they actually visit individuals--mainly small value-added firms--to give advice on process control, on marketing, and on investment in terms of making them more productive and more competitive.
:
Thank you, Mr. Chairman.
I would like to welcome the deputy minister. On December 3, 2007, your government announced the eligibility requirements for $1.5 billion in biofuel production incentives available through the ecoENERGY initiative. That policy is intended to increase corn ethanol production from 212 million litres in 2003 to over 3 billion litres in the coming years; quite an ambitious plan.
Have you analyzed how much energy is spent through corn ethanol combustion compared with how much energy is needed to produce corn ethanol? Has your department done such an assessment? If so, could you table it with us?
I was also surprised by a number of studies that show that 1,700 litres of fresh water are needed to produce a singe litre of ethanol, and that 12 litres of noxious waste are released into the environment, including pesticides and fertilizers.
Earlier, you spoke about a guideline from the Prime Minister's Office concerning regulations. I would like to remind you that another guideline dating back 25 years calls on all departments to conduct a strategic environmental review of policies, plans and programs put forward by the federal government and departments.
Have you carried out a strategic environmental review of your biofuel production incentives policy, particularly with regard to corn ethanol production? Is there such a strategic environmental review? If so, could you table it with the committee?
I'm going to change topics and talk about the National Energy Board. Recently the NEB approved two more pipelines--Alberta Clipper and Southern Lights--that will transport, it's proposed, raw bitumen to refineries in the U.S.A. Some arguments have been made that this will impact jobs in our refineries in Canada.
I understand that we don't have the capacity at this point, but at some point, if we were to build that capacity, we would not be able to turn off the pipeline and supply our own refining jobs here in Canada, because there's a clause in NAFTA that says we can't do that.
The other thing is that this would increase production of the oil sands by significant amounts and add to our greenhouse gas emissions. We already know that most of our GHGs are coming from oil sands.
It also speaks to the security of our energy--again, based on the clause in NAFTA that says we can't turn off the tap and also our commitment to supply U.S. markets by a percentage. The more we ship, the percentage stays the same but the more they're entitled to.
Given the minister's statement previously on the objectives of NRCan about environmental responsibility, safety and security—I'm talking energy security in this instance—and economic competitiveness, I'm just wondering, how does the pipeline project fit in with those objectives? Does the National Energy Board have different objectives from those of NRCan, and that override our environmental sustainability objectives?
That's a fairly wide-ranging question. I'll do my best to make some comments on it.
The National Energy Board, as you know, has the specific mandate to review projects, infrastructure projects particularly that cross interprovincial or international boundaries, and so is very much involved with the Clipper and Southern Lights. It doesn't set trade policy per se. As you mentioned, we are subject to larger trade agreements such as the North American FTA.
It is the case right now that the capacity for refining and upgrading is below the amount that's actually being produced out of the oil sands. I just want to mention that the reality of the oil sands is that it's growing in terms of its production. In fact, in relationship to GHGs, it's not at all the highest or largest proportion of GHG emissions in Canada--in fact, that honour goes to the electricity sector in this country--but it is the fastest-growing area of GHG emissions. Those were addressed recently in “Turning the Corner”, the regulatory framework announced by the Minister of the Environment. It will make a big difference in terms of the amount of emissions from the oil sands.
Just going back to what the minister was mentioning, our strategic objectives at NRCan are very much around economic competitiveness, environmental leadership, and the safety and security of Canadians and our natural resources. We do work on that in conjunction, very closely, with the provinces. As you will understand, a lot of the determinations on the pace of development rest with the provinces in terms of their ownership of the resources.
But we have a particular role to play, and we do that through our own department and through the portfolio agencies like the National Energy Board, who are prescribed by their own act in terms of how they make their decisions. As I mentioned, they make them within the context of existing trade agreements and our trade obligations.