[Recorded by Electronic Apparatus]
Thursday, May 9, 1996
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The Chairman: I'd like to call the meeting to order, please.
We are going to be dealing with two different topics today. First of all, we will be hearing from the Prospectors and Developers Association of Canada - welcome, gentlemen - on our mining regulations study. Following that, at noon, we will be hearing from Natural Resources Canada on our rural economic development study.
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So without further ado, Mr. Andrews, I'd like to turn the floor over to you and ask you to make a brief presentation. I know that our committee members have many questions that I'm sure they will then want to direct your way.
Mr. Tony Andrews (Executive Director, Prospectors and Developers Association of Canada): Thank you, Mr. Chairman.
Good morning, ladies and gentlemen. I appreciate the opportunity to appear before the committee to discuss with you some aspects of your current focus on regulatory reform. I believe you're wrapping that one up, actually.
My name is Tony Andrews. I'm the executive director of the Prospectors and Developers Association of Canada. As you know, it is a national organization with a focus on the exploration sector in Canada. Our members include both senior and junior companies, and about 4,000 individuals. I'm pleased to be accompanied today by a representative of one of our member companies, Mr. Leonard Surges, who is the director of environment for Noranda Mining and Exploration Inc.
Mr. Mike Filion, vice-president of exploration for Teck Corporation, was supposed to be here today. He's based in Vancouver, where something came up, and he sends his regrets. He has to stay in his office in Vancouver today, unfortunately.
Mr. Chairman, the format of our presentation today will be as follows. Following some brief introductory statements by me, I will turn things over to Len, who will focus his comments on the interim report of the committee, as well as other aspects of regulatory reform and environmental aspects, from his company's point of view in particular. Following that, I will then spend a few minutes on the subject of recent exploration trends in Canada and worldwide, drawing the links between that and the work of the committee on regulatory reform.
I'd like to confine my introductory remarks to simply acknowledging the fundamental importance of the work of this committee on regulatory reform. I very much appreciate the amount of time and effort that's been spent by the committee on coming to grips with this pretty complicated issue.
As I will attempt to point out to you later, we believe regulatory reform is a keystone to our industry's future competitiveness. In a mining world that has changed very significantly over the last five or six years, your work is a critical beginning point, for there are many regulatory flaws and costly inefficiencies that affect us on a provincial level as well. We are encouraged to see at least some of the provinces following your lead, though.
However, it needs to be said that the mineral industry does not want regulatory reform at any cost, and we are just as adamant as anybody in demanding that high environmental standards be maintained through the regulatory reform process. It's interesting that oftentimes it's forgotten that people in the mining community are Canadians as well and they hold environmental integrity as a high priority.
Finally, I will state that I completely understand the anxiety and concerns that suggestions of change stimulate in representatives of some environmental groups. However, for everybody's sake, regulatory reform must proceed. We must simply work together to make sure it's accomplished in the right way. As a member of the minister's advisory committee on the Whitehorse Mining Initiative, I have some plans about actually getting the environmental groups and the mining industry together, hopefully through that body.
Mr. Chairman, those are my introductory remarks. I will now turn it over to Len to take it from here.
The Chairman: Thank you.
Mr. Leonard Surges (Director of Environment, Brunswick Mining and Smelting Corporation Limited): Thank you, Mr. Chairman and members. I appreciate this opportunity to contribute to your committee's study of environmental regulations in the mining sector, and I do so from the perspective of an integrated base metal producer.
Noranda's aim is nothing less than to be the world's premier diversified natural resources company. We have recognized for some time that environmental performance is a key determinant of our success. As a result, we were one of the first Canadian companies to adopt in 1985 a formal environmental policy at the level of our board of directors and to issue an environmental report to our stakeholders in 1990.
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We are committed to continual improvement of our environmental management systems and performance, but we are also very convinced that there is an urgent need to improve the regulatory environment in which we operate if we are to create jobs and economic opportunities in Canada.
In recent years I have represented the industry in two multi-stakeholder initiatives: the Whitehorse Mining Initiative, which I believe you are familiar with, and the AQUAMIN Project, a scientific assessment of the aquatic effects of mining in Canada. I'm also a member of the national advisory group for the Canadian Council of Ministers of the Environment Harmonization and Rationalization Initiative.
Each of these initiatives has highlighted the issue of regulatory overlap and duplication, but the government response to date has been disappointing. I'm heartened by this committee's interest in this issue and the government's intentions as expressed in the Speech from the Throne.
I want to emphasize at the outset that we do not call for a complete withdrawal of the federal government from environmental regulation of mining. In fact, we agree that some functions may be better performed by the federal government or in a cooperative manner, but it is equally true that other functions are best performed by provinces or territories. The current system is neither effective nor efficient and cannot be sustained in a climate of fiscal restraint without sapping our competitive strength.
Dr. Miller of the Mining Association of Canada and other witnesses have previously testified concerning the major issues that confront our industry. I intend to focus on selected issues today and to provide specific examples of regulatory overlap and duplication, based on my experience as a mine regulator as well as an operator.
I will close by relating my remarks to the committee's interim report.
Let me begin by demonstrating that our industry is encumbered by unnecessary overlap and duplication. My examples will be drawn primarily from New Brunswick, for two reasons.
Firstly, the mining industry is of fundamental importance to that province, with the value of mineral production in 1995 surpassing $1 billion for the first time.
Secondly, I'd like to dispel the view that effective provincial regimes are in place only in the larger jurisdictions, but I will be prepared to discuss the situation in other provinces or territories during the question period.
The most serious area of overlap is in environmental assessment, because of the chilling effect on the investment climate for mineral exploration and development. Key concerns with the federal statute include the scope of assessment, the failure to establish a single lead agency with the responsibility to drive the process, and the failure to establish mandatory time lines for assessment processes and decisions. Each of these issues should and must be addressed by regulations.
Turning to New Brunswick, the province promulgated an environmental impact assessment regulation in 1987 that applies to a wide range of private and public undertakings, including any commercial production of a mineral. That process applies to any new mine development within the province, while the Canadian Environmental Assessment Act would be triggered only in certain cases.
The government issued a discussion paper on reform in 1993, but has delayed regulatory reform at the provincial level pending proclamation of the federal act, as well as the current CCME initiative. New Brunswick's intention now is to proceed with reforms in 1996 that will facilitate joint federal-provincial reviews without imposing an undue burden on other projects that do not trigger the federal statute.
Turning to fish habitat management, subsection 35(1) of the Fisheries Act prohibits disruption, alteration, or destruction of habitat except in accordance with an authorization, while responsibility for administration of the pollution control provision in section 36 has been assigned to the Department of the Environment. The effect therefore is that the Department of Fisheries and Oceans is responsible for managing water quantity, as well as other physical impacts, while the Department of the Environment is responsible for managing water quality. More recently, specific administrative procedures for authorizations were promulgated through the fishery general regulations 1992.
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Previous witnesses stated without elaboration that requirements for protection of fish habitat exist only in some provinces. Again, I will focus specifically on New Brunswick.
New Brunswick's watercourse alteration regulation applies to any work within thirty metres of a watercourse and is intended primarily to safeguard fish habitat. Unlike the federal authorization scheme, which applies only if fish habitat will be impacted on and is not intended to be an approval scheme for all work, a watercourse alteration permit is required for any such work within thirty metres of a watercourse. Specialist advice and comments are invited from federal departments and a field biologist from the provincial Department of Natural Resources and Energy visits the site to ensure the proposed mitigative measures will be adequate and the conditions of the permit are met when the work is conducted. The efficacy of this scheme is in fact acknowledged by the Department of Fisheries and Oceans, which accepts the provincial process as one of the means by which the federal department may discharge its own statutory responsibility for the management of fish habitat.
Stream crossings, which include bridges, pipelines, and other types of crossings, may also trigger the provisions of the Navigable Waters Protection Act. That legislation was until recently administered by the Department of Transportation. Reorganization of that department and the assignment of the Canadian Coast Guard to the Department of Fisheries and Oceans offer an immediate opportunity at the federal level to integrate or otherwise rationalize administration of navigable waters and fish habitat provisions.
Both of these provisions are included on the law list and may therefore trigger the Canadian Environmental Assessment Act. A key issue is the scope of the project to be assessed. Unfortunately, as I indicated earlier, regulations have yet to be promulgated to clarify the required scope.
Our view is that the scope should be directly related to the trigger. By way of example, if a mine triggers the act, then it would be appropriate to consider all incidental work, including, for example, any roads leading to the mine and culverts. On the other hand, if the sole trigger is the culvert, it would be inappropriate to assess the associated road and mine. A broader issue, however, is whether a federal assessment is in fact appropriate for a project, such as a minor culvert, which does not have the potential for impacts that would be of national significance.
This issue, I might point out, is important not only for our industry but for many others, and particularly for woodland harvesting.
I turn to pollution control. Subsection 36(3) of the Fisheries Act prohibits the deposit of any substance deleterious to fish into waters frequented by fish except in accordance with an authorization. The principal authority for effluent regulations is found in subsection 36(5), which is the basis for the metal mining liquid effluent regulations. Those regulations apply only to new, reopened, and expanded metal mines and do not apply to gold mines where the value of gold recovered by the process of cyanidation accounts for more than 50% of revenues.
I turn to New Brunswick once again. The water quality regulation prohibits construction, modification, or operation of any source, sewage works, or waterworks except in accordance with a certificate of approval. An approval may be issued for a maximum period of five years, subject to terms and conditions prescribed by the minister, and may be revoked or amended at any time. Those terms and conditions are legally enforceable unless explicitly stated as targets or objectives. An approval therefore is a very powerful but flexible instrument that can be tailored to meet site-specific environmental protection needs and other circumstances.
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Like other provinces, New Brunswick entered into an agreement with Canada and agreed to impose effluent quality requirements that are at least as stringent as those in the federal regulations. The reality is that the province goes well beyond the requirements of that agreement, applying similar requirements to mines that are not subject to the federal regulations, including existing metal mines, industrial mineral operations and gold mines.
Approvals are also used to implement requirements for point source and environmental effects monitoring, as well as reporting. While the federal regulations apply only to commercial production, an approval is required for any source, whether from advanced exploration, during development, production, closure, decommissioning or reclamation.
Previous witnesses have stated mistakenly that industry compliance rates collapsed from 85% in 1982 to 48% in 1988 and attributed this to the delegation of responsibility for enforcement to the provinces. In fact, the compliance rate reported for 20 mines was 95% in 1982, declining slightly to 84% for 30 mines in 1986 and rising again to 87% for 49 mines by 1990. Even this comparison is a little misleading, as the 1982 data were simply incomplete. Moreover, these statistics are based on a very strict interpretation of compliance. In any event, at no time has responsibility for enforcement of the regulations been delegated, although agreements concerning freshwater fisheries management were concluded many decades ago with some provinces.
While it is not an issue in New Brunswick, monitoring and reporting is also a concern in several other jurisdictions. Mine operators may be required not only to report data to two or more agencies but in fact to sample at different locations, monitor for different parameters, and report that data in different formats. Failure to resolve such a situation can significantly increase administrative costs, both for industry and governments, without producing environmental benefits. I might add that it also creates potential for conflicting interpretations based on different data.
Lastly, let me touch on the Canadian Environmental Protection Act as it applies to mining. Two sectoral regulations and one other regulation under that statute also impose unnecessary duplication. Although the department's own regulatory review recognized this fact and recommended appropriate action, none has been taken. Our industry is especially concerned that forthcoming amendments could lead to further duplication and federal-provincial conflict in the fields of waste management and could inhibit the movement of recyclable materials to Canadian smelters.
The first example is the asbestos mines and mills release regulations, which regulate releases of asbestos fibres to ambient air. The asbestos industry is concentrated almost exclusively in the province of Quebec and therefore is not national in scope. While the adverse effects of exposure to harmful concentrations of asbestos fibres are well-established, there is no evidence that a federal regulation is required in this case either to protect public health or the environment. In fact, the most highly exposed population is likely to be the workforce, which is clearly an area of exclusive provincial jurisdiction.
Turning to my second example, the secondary lead smelter release regulations apply to two primary lead smelters located in British Columbia and New Brunswick, as well as to several secondary lead smelters. Once again, the adverse effects of exposure to excessive concentrations of lead is well-established and is not the issue. But there is no evidence that a federal regulation that applies to the primary smelters is required either to protect public health or the environment. In fact, both primary smelters are regulated by far more comprehensive provincial permits and approvals that deal not only with lead but with other contaminants of concern such as arsenic, cadmium and other elements of interest.
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British Columbia issues its air and water permits under the authority of the Waste Management Act, while New Brunswick issues approvals under the authority of the air quality regulation and the water quality regulation.
Lastly, I would note that the storage of PCB wastes regulations also result in unnecessary overlap and duplication, not only for our industry, but for others as well. This was in fact recognized by the previous interim order, which recognized the provinces had legally enforceable requirements with similar force and effect. However, the government has failed to conclude equivalency agreements recognizing that other jurisdictions have legally enforceable requirements with equivalent force and effect as required by the Canadian Environmental Protection Act.
These examples illustrate the reality of duplication and overlap from the perspective of an operating company. Other witnesses have underestimated, and in fact trivialized, the number of federal regulations that apply to mining. The number of regulations is a very poor measure of effectiveness or efficiency. The real issue ought to be first, whether environmental objectives are achieved, and second, the balance between environmental benefits and economic and social costs. Unnecessary duplication increases costs both for industry and governments without delivering corresponding environmental benefits.
In comparing regulatory or other approaches, therefore, and in identifying opportunities to improve the overall framework for environmental management, it is most desirable to focus on objectives or outcomes rather than on a specific instrument, tool or language. It is also important to identify specific functions that need to be performed and to consider the relative strengths, weaknesses and capabilities of governments in order to design a more effective and efficient framework.
There is in fact a very strong need for a federal role in science because science provides the underpinning for policy. Likewise, there is a need for a strong federal role in the field of technology development and international agreements in an increasingly global economy. Other opportunities for federal leadership include development of technology-based effluent quality regulations and environmental quality guidelines and objectives.
On the other hand, provinces are better positioned to deliver programs that ensure compliance and to implement more stringent site-specific requirements where appropriate.
I will return to these points in commenting briefly on several key recommendations from the standing committee's interim report.
In recommendation 8, the standing committee recommended that the Department of Fisheries and Oceans rapidly take steps to apply its no net loss policy across the country in a consistent manner. That policy fails to consider other resources uses or users. While we could endorse a goal of no net loss, the departmental policy elevates it to the level of an overriding objective that is incompatible with the government's policy of sustainable development.
A broader criticism of the act itself was levelled by the Pearse commission, which identified the Fisheries Act as an obstacle to the development of an integrated federal water policy due to its absolute focus on fish to the exclusion of other legitimate water uses and users. It is not surprising that this policy and the habitat provisions of the act have been a key factor in every mine development I am aware of that has been delayed, including the Kemess and Huckleberry projects in British Columbia, as well as the Musselwhite project in Ontario. I strongly support Dr. Miller's suggestion that the policy itself needs to be reviewed by cabinet.
Turning to recommendation 9, the standing committee recommended the formal delegation of freshwater fish habitat management to the provinces. The department's own program review in fact also identified a similar opportunity but proposed that section 35 should be administered by the environment department. While either alternative would be preferable to the status quo, our view is that the responsibility should be delegated to the provinces in order to integrate land, water and habitat resource planning and management. Furthermore, a clear and timely decision on whether or not the habitat provisions will be triggered by a project must be made and communicated to proponents.
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As previously noted, regulations are also urgently needed to ensure that the scope of any federal assessment, including an assessment triggered by the habitat provision, is appropriate and the assessment is completed in a timely manner.
Turning to recommendation 10, the standing committee made a recommendation that section 36 and related sections of the act, including the relevant regulations, should be amended. The difficulty in fact arises not from the regulations themselves but with interpretations of the general prohibition in subsection 36(3) by the courts, as well as subsequent efforts by regulators to apply similar reasoning to justify permit requirements that are more stringent than the regulations themselves.
Use of the acute lethality test using undiluted effluent is indicative of a hazard to fish, but certainly it does not reflect the real risk posed to fish as a result of exposure in the environment to a particular contaminant concentration over a given period of time.
Subsection 36(3) should be amended to clearly reflect a more appropriate emphasis on risk arising from exposure rather than hazard. Also, the act should be amended to provide for equivalency as well as administrative agreements with provincial, territorial, or other governments. A useful model is provided by the Canadian Environmental Protection Act.
The last recommendation I'd like to touch on is recommendation 12, which recommended that the metal mining liquid effluent regulations should be harmonized with provincial effluent regulations. The final AQUAMIN report will be released shortly, and a government response will follow. We support the AQUAMIN process and recommendations and urge the government to act on all of the recommendations.
That report in fact recommends implementation of a cooperative national environmental protection framework that includes a federal regulation, site-specific requirements, and environmental effects monitoring while recognizing that the design and delivery of the regulations could be influenced by other initiatives.
Our view is that the federal government should lead in the development of national regulations but the delivery of those regulations should be delegated to provinces and territories through administrative or equivalency agreements.
In closing, I would like to reinforce Dr. Miller's comments concerning the complementary roles of the federal and provincial governments in mineral policy, geoscience, mineral technology, and mine regulation. There is no duplication in those aspects, and each is necessary if we are to maintain a strong mineral industry. A similar, cooperative national framework that respects the competence of the provinces as well as the expertise of the federal government is required for environmental regulation of the sector.
There is also an opportunity to work with our industry building on the partnerships established through the Whitehorse Mining Initiative and AQUAMIN, as well as on the strong industry response to the accelerated reduction or elimination of toxics program. Those opportunities could include examination and implementation of alternative approaches that achieve clear and agree-on environmental objectives earlier and at lower cost to Canadian society.
Thank you very much for your attention.
The Chairman: Thank you very much.
Mr. Andrews, do you want to add something briefly?
Mr. Andrews: I'm looking at the time and I'm getting a bit concerned, as you probably are too. My presentation is focused entirely on exploration. I would understand if you want to move right into some questions for Mr. Surges. So I leave it up to you. My presentation is about 15 minutes.
The Chairman: Is your presentation written?
Mr. Andrews: No, it's in the form of a slide show. It's dependent on showing you graphs.
The Chairman: I will leave it up to the committee. We really have time to do one or the other, not both. We've got Natural Resources coming in afterwards.
Should we have questions or do we want to see the slide show?
Mr. Stinson (Okanagan - Shuswap): I have some concern here. We're talking about an issue that I find to be of great importance to Canada, but now you're telling us that these people come down here and we're under time constraints. I have difficulty believing this.
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The Chairman: Mr. Stinson, as you know, we have a fixed period of time when we hold these committee hearings. They last two hours. We have two sets of witnesses today and each set is given one hour.
These sets of witnesses will be given an hour. Really what they are saying is we have a choice. We can spend our time asking questions or we can spend some time watching the slide show. There is absolutely no suggestion that they be given less time than they would normally be given or than any other witness is given.
Mr. Reed (Halton - Peel): Mr. Chairman, I realize both these presentations are incredibly important. Mr. Surges has hit a home run with his response to our work and there are questions that arise. Can we work in something on exploration as well?
The Chairman: Mr. Andrews.
Mr. Andrews: I think we started at around 11:15 a.m. Am I correct in thinking we have until 12:15?
The Chairman: That's correct.
Mr. Andrews: Then maybe right now we could put some time into questions for Mr. Surges and if I have 15 minutes at the end I can do my thing.
The Chairman: Okay, we'll do it that way.
[Translation]
Mr. Deshaies (Abitibi): I have a few questions for Mr. Surges. As for Mr. Andrews, as he belongs to the Association here in Ottawa, I imagine he could come back and give us a better presentation if we don't have the time to hear him today.
Mr. Surges, you represent the Noranda Group, a very large business which creates many jobs in my riding of Abitibi-Témiscamingue. There is always a contradiction between job creation and concern for the environment. People who are concerned about the environment say: "It's true that these are jobs, but resources only have a relative life." We use ores, but they destroy the environment. They can kill fish, trees, cause acid rain and so on.
Why am I talking about this? Because you were one of the people who talked with the environmental groups in Whitehorse and entered into sound agreements. Is Noranda currently trying to improve its relations with the environmental groups?
[English]
Mr. Surges: Yes, we are. Of course the development of those relationships really requires an ongoing commitment on our part and a willingness on the part of the public to engage in meaningful dialogue on the issues rather than a swapping of insults. But the answer is yes. We try to do this, both at a community level in proximity to our operations and at the broader provincial and national levels.
[Translation]
Mr. Deshaies: A number of witnesses have said that industry is making a big effort. Furthermore, over the past 10 years, we have observed a vast improvement in the mining industry's effectiveness in reducing pollution. Environmental lobbying before the Standing Committee on the Environment and Sustainable Development often prevents change.
Proposals have been made to improve certain situations, but environmentalists are often a little afraid of giving anyone free rein. For them, that's sticking one's head out somewhat. Couldn't we continue the Whitehorse policy so that the solutions we come up with here can be implemented quickly?
Has the Canadian mining industry any short-term solutions for lobbying the environmentalists so they can share your production objectives?
[English]
Mr. Surges: First let me say that the environmentalists provide a very legitimate although different perspective. They make an important contribution to the discussion. However, as I indicated previously, if we simply maintain very fixed positions, then it's difficult to see how we may move forward.
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I believe, as you have indicated, the Whitehorse Mining Initiative represented an important breakthrough in that respect, and I'm very pleased to be able to tell you the AQUAMIN report, which will soon be released, is once again a consensus report. It was prepared by all stakeholders, including the environmental community.
That having been said, the Whitehorse Mining Initiative really, while the objectives, principles, and goals were agreed on, requires a commitment on the part of all stakeholders to move forward on the recommendations that pertain to them. We within the industry have been trying to work according to the spirit of the Whitehorse Mining Initiative accord. On the other hand, we continue to await an indication that governments will do likewise.
[Translation]
Mr. Deshaies: You are often involved in federal-provincial regulatory issues. Is there a positive climate so that each party, the federal and the provincial governments, can adjust its regulations so as to increase your industry's production and efficiency? Hasn't there been a more positive willingness to move ahead in recent years?
[English]
Mr. Surges: Certainly I am encouraged that there's a little more emphasis on objectives and perhaps a little less on the specific means by which they're achieved. But there's also a certain amount of self-interest, I must say, and frankly I think a reluctance on the part of federal regulators involved, again, to trust the competence of the provinces in delivery. What this is really all about in the relationships between ourselves in industry, the environmental community or other representatives of the public, and indeed governments is credibility and trust.
[Translation]
Mr. Deshaies: Do you think that some issues should fall strictly under the provinces' jurisdiction? Do you think we could separate provincial issues from federal issues? For example, there is often duplication in the legislation. A province often passes the same act as the federal government and vice versa. I'm sure the industry concurs in that statement.
Do you think the provincial government could administer federal statutes within the province and vice versa so that the industry has a single window for obtaining permits more quickly?
[English]
Mr. Surges: Our view is that there's a legitimate role for both governments. In saying that, I certainly am not advocating the maintenance of the status quo, as I believe the environmental representatives have done. What I am indicating is that if a regulation is to be based on technology, that technology is the same from Victoria to St. John's and there's no reason why that ought to be developed repeatedly between jurisdictions. Furthermore, a national regulation to us also has some benefits in international perceptions of Canada's environmental regime as well as of our industry.
That having been said, there's perhaps an opportunity in provinces that have very complex regulatory regimes to consider repeal of those, but there's a very, very critical role for the provinces to play in imposing more stringent requirements than the national baseline regulations, where they're justified and required to protect fisheries and other resources. That's a vitally important role. It has to be done on a site-by-site basis, and it cannot be done through a federal regulation.
The Chairman: Mr. Stinson.
Mr. Stinson: First of all, let me thank you for coming here, and especially thank you for making us aware of your concerns about the report we previously put. If we don't understand what your concerns are, we'll never get to the bottom of this, the same as if we don't understand what the environmentalists' concerns are.
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I strongly believe that, in just about all the mining locations, exploration and so forth I've been on across Canada, most if not all mining companies and all people who work in the mining industry are very environmentally conscious, at times probably far more than some environmentalists.
I agree that there are problems. Most of them have been addressed.
My main concern here is that as we're doing all this we have held up and we still are holding up mines that have the potential of going ahead, even if marginally at this point in time. Our unemployment rate is suffering because of this. This is my opinion, and I would like your opinion on this.
It's fine - we can pat ourselves on the back and say how nice and good we are while we are shutting everything down. But we still buy the finished product - is this not so? - from the countries that now are taking over the mining industry in the world.
Do you have any idea of how many potential properties are being put on hold because of this overlap in the environmental end of things between the province and the federal government?
Mr. Surges: I think it's possible. Dr. Andrews may have more specific information on that than I have, or it may be addressed in his presentation.
Mr. Stinson: Thank you. That would be one of the questions. If you can't get it today, you might get me these numbers and these facts later.
We hear how the money in the mining industry is escalating in this country. I have a serious concern when I hear these kinds of figures being put forward. When you look at $964 million today compared to the upwards of $1 billion we were spending ten years ago - and that's in then dollars and this is in 1993 dollars.... It scares me when people use statistics of this nature to bring their case before us. I would like to get that clarified too.
Mr. Surges: I know for certain that Dr. Andrews is going to address that. Let me simply say that the real measure of whether we are going to be in the mining business in the long haul is not how many dollars we spend in a particular year but whether in fact we're adding to our inventory of mineral reserves. That's the measure, and that's the area in which I think there is serious reason for concern.
Mr. Reed: Mr. Surges, you touched on a large number of very important points. In the interest of time, I'm going to have to condense these questions.
You suggested that there should be national regulations administered provincially. The experience we've had with the Fisheries Act, it being a federal act administered provincially, in Ontario, which is the only province of which I have some working knowledge, has been that often there's a tendency to pass the buck where something appears to be a sticky wicket provincially. It's then thrown back to the federal ministry to be sorted out. I suppose fisheries may not be the fairest thing, because they're so subjective in the way they are administered.
I wonder if you'd comment on that, what appears to be a ``when in doubt, bail out'' syndrome that can take place.
Mr. Surges: First, as I indicated in my presentation, I need to emphasize that there's some confusion about what has or has not been delegated to or administered by the provinces. The simple fact is that there has been no such delegation in terms of either pollution control provisions or fish habitat management. What there was many years ago was a delegation of responsibility for fisheries management generally. That's the first point I would make, as I think you need to be very clear about exactly what duties are to be delegated.
Second, the key issue is accountability, as opposed to passing the buck, so to speak. Again the Canadian Environmental Protection Act might provide a useful model. It certainly sets out some matters that need to be considered before the federal government would enter into an equivalency agreement, and if a province doesn't deliver its end of the bargain, then in fact that arrangement would need to change.
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I think it's far better to place that responsibility firmly on the shoulders of one government or the other, rather than to maintain the status quo, where when two people are each responsible the result is that nobody is in fact accountable and much time is lost in trying to reconcile their views.
Mr. Reed: That's excellent.
You spoke of the green movement, and there's no question that in the last 20 years it has had an influence on public perception. But there has been nothing that would counter that in terms of education of the public.
What happens very often is the positions of the green movement get skewed to suit their own ends. Occasionally I've accused them, saying that they're always saying something is terribly wrong because if everything was right they'd be out of business. I wonder if you could comment on that and how we could inject the other side of the story, which is a legitimate story that must be told.
Mr. Surges: I think that in the past couple of years we've recognized the importance of doing that. I think the members of the committee are aware of the Keep Mining in Canada campaign. Next week, as an example, the launch of National Mining Week will also elevate the importance of our industry.
Much more needs to be done. It needs to be done at a community level. It needs to be done through our schools, because the simple fact is that our citizens don't really recognize that if it isn't grown, it's probably mined instead. We take for granted things such as automobiles and the wiring in our homes and the appliances we use, very often without relating any of those things to the mining industry.
We recognize that if anybody is going to move forward in that area, it needs to be a partnership between the industry and government. In New Brunswick specifically, the provincial association is presently developing a multimedia presentation for use at the grade 6 level in schools in cooperation with the provincial Department of Education. I know that similar initiatives have been undertaken in British Columbia and elsewhere.
That obviously is not going to change attitudes overnight. It represents a very long-term investment, but in time it will have a positive impact.
The Chairman: Mr. Andrews, we probably have time to squeeze in your presentation, if you want to begin.
Mr. Andrews: What I'm going to provide you with in the next few minutes is a brief analysis of Canadian and worldwide exploration trends. I thought this would be appropriate and useful for the committee at this time, since on the one hand you have been hearing all along from a number of different quarters that we have trouble with our investment climate, but you must also have seen recently evidence that we are experiencing a recovery of exploration investment in Canada.
I will provide you with what I hope is a clear analysis of exploration trends, Canada and worldwide, and I'll look at this recovery. What's behind it? Is it sustainable?
I'd like to state at the beginning that this recovery has nothing to do with any improvements in the investment climate. In fact, it's happened in spite of it and in spite of the regulatory impediments, which, as you know, still exist.
What I will show you is that this recovery that we're experiencing right now is very delicate. In large part it's the result of two major discoveries in Canada, and it's very subject to the whims of the markets. We have to keep in mind that our needs are in the long term, so the big question is one of how to sustain this recovery.
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This particular slide gives just a few definitions that will apply to all these figures. I think I'm going to skip explaining most of those, other than to say that most of the information from this is derived from Natural Resources Canada statistics. When it isn't, I'll let you know.
On this next slide, you'll recognize this figure; I'm sure you've seen it before. It shows explorations expenditures in Canada by junior and senior companies, with the juniors on top and the seniors in black.
If you concentrate on the latter third of this slide, you'll see a marked downward trend between 1988 and 1992, with 1992 being the lowest point in the 26 years shown on the graph. While metal prices contributed to this decline, a major force was a surge of interest worldwide, the opening up of developing countries, and a deterioration of the investment climate in Canada. The second trend you see there is one that suggests a recovery in the last few years, commencing in 1993.
This next slide is a blow-up of the previous one, showing the recovery since about 1992. Again the seniors and juniors are broken out here, with the juniors on top, and the seniors on the bottom in the cross-hatched pattern.
You'll see that in 1992 we had a little over $400 million in total exploration. This rose to about $750 million in 1995, and we're projecting $950 million of exploration expenditures in 1996. The most important thing to note on this figure is how much this recovery has depended on the junior sector - that top pattern - and that red line should be above where it is now, parallel to the top of the 1992 bar.
In 1992 the junior activities corresponded to 21% of total exploration that year. In 1996 it will constitute 40%, but, more importantly, it will constitute 70% of the recovery when using 1992 as a base - in other words, all that above that red line. Remember, the junior companies are entirely dependent on the markets, which are subject to the whims of investors.
The next slide is the same slide as the previous one, but with a different breakdown. Here we break out expenditures specifically on diamonds, both expenditures that have been in Labrador since the Voisey Bay discovery and general expenditures, which are at the bottom in a cross-hatched pattern. Note that in 1993 virtually all recovery is directly due to diamond exploration, which was spurred on by the discovery of the Lac de Gras deposit in the Northwest Territories. In 1994, 7% of the recovery is directly due to diamond exploration. In 1995, 53% is due to diamonds - and now the Voisey Bay discovery in Labrador - and in 1996, 40% will be directly due to those two discoveries.
A discovery like Lac de Gras has a tremendous ripple effect on the industry. For example, intense exploration for diamonds in the Northwest Territories leads to the discovery of many other deposits of different commodities. For example, BHP is spending $7 million this year on two gold projects that it discovered in the Northwest Territories as a result of its diamond exploration. In fact, Lac de Gras in a way led to the discovery of Voisey Bay, because they were searching for diamonds at that time.
So once a discovery like this has been made, it leads to tremendous excitement in the investment community and facilitates the raising of capital for all kinds of commodities. The Lac de Gras and Voisey Bay discoveries not only directly contributed to the recovery that we're experiencing now, but were fundamental to spurring a general recovery as well, as illustrated on the cross-hatched pattern on this graph.
Based on this data, then, we can characterize the current recovery in Canada as follows. In absolute dollars, we're looking at an increase from $385 million to $945 million projected for 1996. However, it is fuelled primarily by the Lac de Gras and Voisey Bay discoveries, and it is dependent, to a large extent, on juniors and the capital markets - and that's fickle money. We have to be concerned about how sustainable this recovery is.
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Basically what's happened is that the excitement over these two discoveries has transcended the regulatory impediments for the time being. Canada is now the flavour of the month. But we must remember other countries have been the flavour of the month, such as Venezuela, which was the darling of the investment community one moment and the pariah the next, primarily because of developing uncertainties of mineral tenure and the regulatory regime in general there.
I would also like to put this $945-million exploration expenditure figure projected for 1996 into the context of our reserve picture for base metals. These figures illustrate the steadily declining reserves of base metals in Canada, a trend that has persisted now for fifteen years. Here we see the trends on the top graph for lead, on the bottom one for zinc. Here we see similar trends for copper on the top and nickel on the bottom.
Fortunately for us, the incredible Voisey Bay discovery will correct the nickel trend in one fell swoop in the year 2000, if we assume it is permitted and goes into production. Needless to say, Canadian base metal deposits supply feed to smelters and refineries across Canada, provide the bulk of business for rail freight, and represent extremely valuable mining infrastructure that we want to keep, and keep active.
In this context it's important to note that Natural Resources Canada has estimated it will require exploration expenditures on the order of $1 billion a year for ten years in a row to replenish these reserves. So we need to keep our thinking fixed on the long term, and we need to have a recovery that is sustained.
This, very briefly, is what is happening in Canada. Let's look more at the global scene.
There are three key points to focus on here. First, this figure illustrates a number of mining properties held by Canadian companies worldwide and compares the number of properties in Canada with those in the rest of the world. Note the vast majority of properties have been held in Canada, and between 1992 and 1995 they looked relatively flat. However, we also see a dramatic increase in the acquisition of properties overseas. Compared with Canada's totals, these overseas holdings have increased from 33% to 61% in this period from 1992 to 1995. If I was the owner of a Canadian store and this was a chart showing my competitors, I would be very concerned about retaining my market share.
The second key point is illustrated on this figure, which is derived from Metals Economics Group statistics. This figure shows exploration spending by location from 1991 to 1995 and divided into various regions. What you're looking at there is the United States, followed by Canada, then Latin America, Australia, the Pacific region, and the African continent. What we see is strong support for the notion that Canada is indeed losing market share of worldwide exploration capital, and at an alarming rate. But how can we rationalize the two observations of a recovery in Canada, especially in 1994 and 1995 and projected for 1996, together with a situation of declining market share on the global scene?
A large part of the answer to this can be found in the third key point, which is illustrated on this figure and which shows the global pool of exploration capital from 1992 to 1995. Again it's Mineral Economics Group data. We can see here the global pool has been increasing from 1992 to 1995, with a marked increase from 1994 to 1995, on the order of $1 billion. So it seems the global pool of exploration capital has been increasing at a faster rate than the capital has been invested in Canada. This provides a rationale for the question posed in the previous slide: how can these two trends co-exist?
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The global increase in available capital, as seen here, is no doubt the result of the opportunities in developing countries, but especially the discovery of world-class deposits recently, such as the status of BREX and Voisey Bay deposits, which have caused great excitement in the markets, and the availability of more funds.
At this point in time we begin to realize we have to thank our lucky stars for Lac de Gras and Voisey Bay and the buoyancy of the markets in general, but we still have to keep in mind that the markets are by nature capricious.
To illustrate in more detail the dynamics underlying this combination of recovery at home and loss of market share worldwide, I'm going to show you the results of a recent PDAC survey on the exploration expenditures of Canada's eleven largest mining companies, as you see here.
As illustrated on this slide, the survey shows a significant increase has occurred in the exploration spending by these eleven companies. These are the budget totals each year. In the past five years the spending has doubled, reflecting the worldwide general trends.
The next slide shows the proportion of expenditures of these eleven companies going to Canada versus the rest of the world. In the top diagram we see a gentle recovery in Canada from 1992 to 1996 - those are the cross-hatched, smaller bars - and in marked contrast, a dramatic increase in spending in the rest of the world - the higher bars. The bottom of the figure simply measures this in percentage terms. The percentage of budgets going to Canada decreased from 41% to 28% in 1992 to 1996, and the percentage going to the rest of the world increased from 59% to 72% with those eleven major Canadian companies.
Our survey of Canadian junior companies is not yet complete, but we are fairly certain that similar trends will emerge and to a higher degree.
On the basis of that analysis we can make the following observations. Although we are experiencing a recovery right now in absolute dollar terms, we must recognize the fact that this recovery is fueled by two major discoveries in Canada: it's highly dependent on juniors and capital markets, which are capricious in nature, and it has been climbing on the back of an increasing global exploration pool.
Finally, there is the very sobering fact that in spite of our so-called recovery, Canada's global market share of exploration capital is decreasing at what appears to be an alarming rate.
For all those reasons we have to be concerned about the sustainability of Canadian recovery and how we will maintain our competitiveness for exploration capital in the future. We have to keep in mind that to replenish our base metal reserves we need exploration spending of about $1 billion each year for ten years.
So what do we need to do to sustain our recovery and remain competitive? Well, if you ask any company what the most important factors are in deciding where they're going to explore, they will tell you those are geological potential, security of tenure, and the policy and regulatory regime of the country.
Canada has great geological potential; there's no argument there. As long as there are no more Windy Craggys, Canada has one of the best tenure systems in the world.
The main problem we are dealing with is a highly flawed regulatory process. Our goal must be to address this problem through regulatory reform and develop the most efficient regulatory system in the world that at the same time maintains environmental standards. Then we will have all three of those parameters.
I will tell you I think there's a great opportunity for Canada right here. The global industry is robust, but Canadians are learning that working overseas is not all apple pie. Sometimes it comes down to the choice between corruption in Indonesia, bureaucracy in China, or a bad regulatory process in Canada. So if we can solve our regulatory impediments, I truly believe Canada will retain its competitive edge.
That's my presentation, Mr. Chairman.
The Chairman: Thank you very much, Mr. Andrews. I'm glad we had an opportunity to hear that.
I wonder if it would be possible to have those slides photocopied and provided to us. I think that would be of interest to the members. Would that be possible?
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Mr. Andrews: Absolutely, Mr. Chairman.
The Chairman: I'd appreciate it if you could do that, and I'm sure the members would as well.
Thank you very much, both of you gentlemen. I think you've provided us with some excellent testimony here today. I appreciate the opportunity and thank you.
We'll take a break and change gears here. Thank you.
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The Chairman: I would ask the next witnesses to approach the table, please.
The second part of our committee hearing today is on a different topic: the natural resources committee's review of natural resources and rural economic development. We're pleased to have, from the Department of Natural Resources, Mr. Hardy, Mr. Everell, and Mr. Whelan. Is that correct?
Mr. Yvan Hardy (Assistant Deputy Minister, Canadian Forest Service, Department of Natural Resources): Plus Mr. Glen Kentall, who is replacing Bill McCann, who's currently in a cabinet session.
The Chairman: Thank you very much.
Welcome. I will ask you to make an initial presentation, and then we'll go to questions from the members.
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[Translation]
Mr. Hardy: I'm going to present a brief
[English]
overview of the departmental involvement in rural development. Then we'll go to some brief sectoral presentations. I'll follow mine with forestry and then we'll take over with the other sectors.
First of all, we want to thank you for the opportunity to be here today. We're a very strong believer that natural resources are the backbone of the rural economy. We welcome the remarks in the Speech from the Throne where the emphasis was put on rural communities. Also, we as a department are working, and will be working even more closely, with Minister Goodale's initiative on a rural renewal strategy with our colleagues from other departments, Ag Can and IC.
I will spare you the litany of numbers on the role of natural resources. Some documents will be distributed to you and they will spell that out. But there are a few numbers we cannot avoid, just to set the record straight, and one of them is that between forestry and energy and mines we're talking about 13% of the GDP of the country and $54 billion in the balance of trade. If we take into account that most of this activity is happening in a rural environment, that is a very important contribution. There are, as you know, about a quarter of a million direct jobs, not to count anything indirect generated afterwards.
As I said too, more important than all of that is the fact that these activities are happening in the rural environment, for the most part. I am being conservative here in saying about 500 communities in the country are dependent on forestry or a combination of forestry and mines or energy, which is a lot. It's fair to say, I believe, that along with agriculture you can go across the country and say no natural resources in this country and we would be another country, with definitely another type of economy, and probably not on the top lists of the World Bank or other agencies like it that rank countries.
For my department, Natural Resources Canada, as you might know, because we tend to see each other every once in a while and repeat the same thing to some extent, I suppose, our efforts are directed at a number of things, but again it's fair to say sustainable development is definitely one of the key efforts of our department. Sustainable development for what reason? For a strong industrial sector that can compete in the global market. I can't help but underline the last few words here: ``compete in the global market''. We're not alone there.
So there are quite a few challenges to meet here. As I said, international competition is one.
International competition takes many shapes and forms. It could be foreign investment. It could be new technologies that bring new countries into the market. For example, in forestry some of the tropical timber for a long while was considered unusable for pulping. It is now, with new technologies and so on. Lower wages and all kinds of factors, plus the green consumerism that comes in from different angles...and meeting consumer demands, which have definitely been changing and are being shaped by the overall environment.
Specifically our efforts, departmental-wise, are in a number of places. The policy arena is one place we're very active in, whether it's at the national level, coordinating efforts, looking at regulatory regimes, or it's at the international level, again in coordination, presenting Canada's views and defending our position, whether it's S and T and information infrastructure to compete in the tough world out there....
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Definitely our industry has to be at the edge of science and knowledge and our country has to provide to this industry the best knowledge infrastructure - and you'll hear more about that - gathering the statistics to know where we are, monitoring the trends, and so on.
So in order to provide our industry with an open market and new technology, that's the drive of our department.
Recent examples of that - and my colleagues will come with more specific examples - are the work we are doing with the support of the minister on the regulatory reform in the mining sector; the new mineral and metal policy on sustainable development; in the domain of science and technology, a new, environmentally benign approach to pest management using biological instruments instead of chemicals; new technology to extract petroleum from the oil sands production; and extended productive life of mines. They are all new, contemporary examples of what is being done within this department.
So whether we're talking about oil sands research in Devon or geoscience or geomatics, the name of the game is resource development and sustaining this development in a socio-economic environment that needs stability, given the fact that our industry is scattered across the country in small communities that can be very vulnerable.
Examples of that are recent discoveries of ore bodies in the Manitoba-Saskatchewan area. Again I mention the oil sands research, with the potential, with the new technology of extraction, of 40,000 new jobs being created over the next 25 years.
So we're all there.
The other message I want to leave with you is twofold.
All too often, unfortunately, there's a notion that the natural resources industry in this country is backyard, low-tech, and so on. To the contrary, it's a very high-tech and knowledge-based industry, whether we're at the tree harvesting level.... There are not many people roaming around the forest with an axe and a bucksaw any more. These people are driving a half-million-dollar piece of equipment based on computers, and so on. It is the same in the mill, the same in the mining and the oil industries, the same in the management of our forests and our mineral riches, where the high-tech, whether it's in the form of information acquisition from a satellite or using information technology, biotechnology....
I want to leave here the message that we're dealing with a very high-tech and also high-salaried industry. Our people working in natural resources benefit from salaries that are far above the average in the manufacturing sector, and of course by that contribute to the rural economy.
The last message is that NRCan is very actively involved in working with partners, whether they're industrial or provincial ones, providing some kind of national coordination, but also being present in many international fora, such as the OECD, FAO, the United Nations, WTO, and so on. I was listening to the previous witnesses, and there's not much difference there. We have to be very alert and present because the competition is there and is alert.
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Mr. Chairman, this is the overview for the department. Depending on your choice, I can go right to presenting an overview of the forest sector or I can answer questions.
The Chairman: Perhaps you could very briefly give an overview with your three sectors, and then we'll go to questions.
Mr. Hardy: I agree, Mr. Chairman.
[Translation]
I am briefly going to present the forestry sector, the Canadian Forestry Service, which is part of the department, and give you an overview of the forestry sector in Canada.
Once again, I won't give you a litany of figures and statistics. Documents have been distributed to you that will provide you with those figures. I see that Mr. Bélair is looking at a map. That map is brand new. It was distributed during the Semaine de l'arbre et de la forêt, this week. It shows the national distribution of communities relying on forests, with three different levels.
As you can see, the forestry industry is present right across the country. Of course, there are some concentrations, but the industry is not absent anywhere. There are 337 communities in the country where more than 50 percent of the economy depends on forests. That's enormous.
[English]
There is some variability, of course, between the east and west coasts. In eastern Canada, these communities tend to be more numerous, but smaller. In western Canada, they tend to be a little less numerous, but they are larger communities. Overall, however, it's a pervasive presence that of course creates jobs, wages and salaries, which are the backbones and motors of the local economies. As I mentioned earlier, whether it's papermaking, the solid wood industry, or the harvesting of the wood in the forests, all of these jobs are better-paying than the average in the manufacturing sector, along with the same thing in the coal and petroleum industries and so on.
Sustainable development is definitely the key to the well-being of these communities. In the past, there were some ups and downs. Sometimes, I suppose, it is fair to say the long term was put aside for the short term, but today our personal efforts - and it's only fair to also say the industrial and provincial efforts - are aimed at maintaining and improving a certain equilibrium, so that the communities enjoy a more stable environment.
In terms of forestry, it translates into a better quality and higher quantity of wood available, which can be achieved in many ways, and in an environment that is respectful of both the environment and expectations - and this is also in the context of higher demand for forest products.
Although the competition for new products is very keen, let's not forget that many countries in the world are changing their status to underdeveloped, developing countries, and countries joining the developed world. Their consumption of forest products is increasing, whether it be of paper for writing books in schools or newspapers, or for construction of facilities and so on. So there is a demand for paper and for forest products, and the country has to have an industry that is able to compete and to supply this demand while keeping an equilibrium in what our natural resources can produce. That's the challenge, and that's why the CFS likes to be qualified as the champion of sustainable development in our attitude, programs and activities, whether they be at the policy level or with our provincial, industrial and non-governmental partners.
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Recent examples of these efforts are the criteria and indicators of sustainable development that define a level playing field worldwide, and what is sustainable development and whether or not it is science and technology. To this end, the Canadian Forest Service has undergone a complete reorganization of its program, and we are in the implementation phase right now. Our research is now being geared around ten networks delivered from five centres in the country and addressing ten topics of national and international interest. Such interests include the socio-economic stability of communities, developing a so-called SIGIF to better manage the forests. Other initiatives include the model forest network, which in effect is putting into practice the principle of sustainable development. It walks the walk, in other words.
With our industrial partners, FERIC - the Forest Engineering Research Institute of Canada - we are developing a more benign way of harvesting wood without disturbing the environment, thus favouring natural regeneration. With Forintek, we're working on solid wood products, codes and practices. The last coup, so to speak, was to have a major country and trading partner, Japan, accept the Canadian standards. As a result, today we are supplying Japan with 60% of its wood products and timber. Again, this translates into jobs in rural communities.
We are working with other departments, too, which I don't want to de-emphasize. It's very important to work with DIAND and natives, for instance, and with our colleagues at Foreign Affairs and International Trade on the quarantine trade barriers and so on, along with other things involving softwood lumber. Sometimes we are working as experts, at other times we are working as facilitators, but we are very much present there.
In terms of the science that's being developed, we have a recent example, and it's actually very contemporary. One of our researchers from our Victoria lab was given a departmental award yesterday for his work on the pinewood nematode. Because of the work of this individual, we were able to understand the biology, the reproductive behaviour of that particular beast, and how dangerous or not dangerous it can be to spread it to other countries. Finally, his work was more than an instrumental key for Canada in having acceptable trade conditions with the western European countries.
Our efforts are also aimed at maintaining an open market and at providing factual information on forestry. That's why it's important to gather this information: to have it at your fingertips. Are we cutting more wood than we're producing in this country? Is the forest shrinking or getting larger?
I just mentioned quarantines when I spoke about the pinewood nematode, but there are ongoing examples of that all the time. Of course, there are the global issues or what I would call the levelling of the playing field out there. Some examples are the criteria and indicators that were very useful in sending messages to other countries that Canada is way ahead of the parade in terms of implementing sustainable development. But now let's understand for ourselves what it is we're talking about. We're not ready to take on attacks from every side with a very loose definition of what the expectations are.
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So we're out there defining the expectations with international partners so that our industry and, by ricochet, the rural communities have a very bright future in front of them.
Thank you, Mr. Chairman.
The Chairman: Thank you.
Mr. Deshaies, do you have some questions?
[Translation]
Mr. Deshaies: I have a brief question for Mr. Hardy.
We know that the greatest natural resources for the rural communities are mines and forests. The problem stems from the fact that, with improved tools, we need less and less personnel. There are therefore fewer and fewer jobs for the rural population.
What can the Department of Natural Resources do to improve the fate of rural populations? High technology is not an option for rural populations. You can be plugged into the Internet all you want; that doesn't necessarily create jobs immediately. Can your researchers find another stage of development for the regions?
Mr. Hardy: There are two parts to your question. First, there's the question of technology. So that technology can go beyond the south and the urban areas, the Canadian Forestry Service has made, and is continuing to make, praiseworthy efforts in private and public forests using SIGIF technologies, which are, to all intents and purposes, an application of GIS forest management techniques.
Today, we have come so far that we can receive an image prototype via satellite in order to update the maps and the information is immediately processed and used in support of the decision. This is being done in rural areas because that's where the provincial industry is.
I also spoke of the efforts we are making with some of our federal colleagues, and I mentioned a few of them.
I did not mention the Department of Human Resources Development or the regional development agencies, but we are focusing our attention on the importance of the forest resource. This resource could produce cheap jobs if we incorporated it in the overall economy.
How could we treat forests and make them produce more? It is important to remember that, in Canada, in light of the level of management of our forests, there is a balance between what we extract from the forest and what the forest produces.
We know perfectly well that forest production levels could double or even triple as a result of adequate investment in silviculture. These are activities that create jobs.
To answer your question, I think we are reaching a first limit. The completely natural approach to management has virtually been exhausted and cannot meet the demand of the next stage.
Mr. Deshaies: I noticed that only 26 percent of the areas used were developed. This committee examined clear-cutting and we were able to learn how forest renewal worked.
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The issue is entirely new and we hope your department will join with other decision-making bodies so that the rural communities can develop more jobs in the future using this new technology.
[English]
The Chairman: Mr. Reed.
Mr. Reed: Mr. Hardy, I know there's an area you have jurisdiction over in CANMET and it enters into partnerships with private industry to develop technology and so on. It has always been of keen interest to me personally that in rural development things such as in situ processing become a value-added addition to the raw resource, which historically we have moved out on its own. Historically, Canada became very used to shipping raw materials. But we know the long-term, sustainable future of a community is going to be dependent on more elements, utilizing the resource base that's there. I was wondering if you could explain some of the things your department does in developing new technology, new things that will ultimately assist in that kind of rural development.
Mr. Hardy: Thank you, Mr. Reed. We'll have two answers to that. I'll give you an answer on forestry and then ask my colleague to comment on the CANMET approach and the mining, metals, and energy side of the thing.
In forestry, as I mentioned in my presentation, the work on the forest products themselves is being done in partnership with industry and by three institutes that are independent of government but to which we contribute either financially or through working alongside them. PAPRICAN is the institute, totally funded by industry, for pulp and paper. It tends to be big and it tends to work on big technology and big changes; the breakthrough types of things.
In opposition to that, FERIC and Forintek, which we fund, in part, tend to work with the smaller industries, which are very much spread out into the rural environment. That's where you find the small and medium-sized enterprises that very often go beyond the primary transformation of wood products. A recent example of the work being done is the new technologies for particle board, which were almost totally non-existent fifteen years ago and have tended to stay medium in size and to be in the communities rather than to be the big, multinational type of industry.
We have also had, and still have, some initiatives, along with other federal government partners, in the development of exactly what you were mentioning, making things happen right there in the field, with the people, a program that was called Trials and Experiments. That is still going on, and it has been very successful in bringing in new technologies, or developing or fine-tuning these new technologies, along with partners right there on the spot. For instance, we had a fair amount of success by adapting harvesting equipment to small-scale operations, working with FERIC and local or regional partners, universities or associations.
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So there is still a fair amount of initiative.
Of course - I always come back to the same thing, but it's very true - most of the methodology and technologies being used currently in Canada to manage the forests are derived from our research. So, directly, people do not realize that, but when you have a forest fire and you get to it within the first two hours of its existence.... You could put it the other way around: you should have a big fire and provide jobs, but the jobs will last for only a week. That's through our technologies, so they're very present there.
Mr. Reed: You are one of the best-kept secrets in the country and you don't get the amount of publicity and promotion you deserve. I've been going around and making discoveries that really had their roots in CANMET.
Mr. Hardy: Mr. Reed, I came as head of the CFS three years ago, and I can tell you that what you're saying here is very high on our strategic priorities. I'm whipping the troops so they'll be less modest and do a bit of boasting.
The Chairman: Mr. Bélair.
[Translation]
Mr. Bélair (Cochrane - Superior): I will put my question to Mr. Hardy. Over the past two or three years, we have seen a very marked decline in Natural Resources Canada's involvement in the field, at the local level. I am always thinking of the improvement of Canada's rural regions. Obviously, the forests are extremely important for us.
Could you tell the committee about recent developments in genetics? Earlier, you talked about high technologies. Obviously, in the pulp and paper industry and in the lumber industry, the future belongs to those who can modernize and adapt.
This also applies to genetics. How can we make trees grow more quickly, strengthen their fibre so it is more solid and less is required in order to make pulp, so that the quality of lumber exported to the United States and throughout the world is improved? Could you elaborate on that for the committee?
I'm looking for something that I can pass on to my producers when they tell me they aren't hearing any government news about harvesting, silviculture and the quality of paper and lumber.
Mr. Hardy: Thank you for that question, Mr. Bélair. I could make a 15-minute speech on it, but I'm going to try to do it all in three minutes.
With respect to the agreements, it's important to go back a little way in time. A seed orchard creation program was proposed, seed orchards being the conventional way of improving the genetic quality of seedlings.
Today in the country, approximately 50 percent of the seedlings produced by the provinces and the industry in general come from what are called genetically improved seedlings, which grow more quickly. In some cases, they display greater resistance to certain insects and, in others, they produce longer fibre.
Enormous efforts have been made in this area and, in professional terms, we are a little like you. Many of our employees loved the period of the agreements when there were all kinds of initiatives, but times are different now. Other times, other customs.
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As for research, there are 10 research networks. One of these networks is called Plant Biotechnology. This is the modern way of talking about genetics. Genetics used to be carried out in a very painstaking manner, by controlled cross-breeding. We had to wait 10 or 15 years before we got a new generation of trees. Today, we use biotechnology.
We are working at the cellular level. This is what is called somatic embryogenesis. With the reorganization, by the end of August, we will have a network that is based in Sainte-Foy. This will be the largest concentration of research scientists in this field in Canada. These scientists will be working on all commercial tree species.
This is a field where centralization may be useful. We can work with Douglas Fir in growth chambers and test tubes in Quebec City and Victoria, and the same is true of black spruce. There's a great deal of synergy with Laval University just opposite.
Mr. Bélair: Mr. Hardy, is all this information transmitted to the small forestry producers in particular, for example, to those who produce five million seedlings per year? Obviously, with a small quantity such as that, you can't afford to conduct research and development. How can Forestry Canada become useful for them?
Mr. Hardy: We have always had highly effective, but highly unobtrusive mechanisms. Most of the technologies and methodologies for managing forests in Canada originated with the Canadian Forestry Service and the Department of Natural Resources. Relations with the provincial partners must also be taken into account, but that should not been seen in solely political terms.
There's also the scientific community's modus operandi. Scientists were very often content to make a discovery and communicate it to their colleagues. It was published in the scientific and professional journals, the information was put into practice and, between the start and end of the process, one lost sight of the origin.
Today, with our reorganization, we have set up a special technology transfer unit to go directly to the source and do advertising or marketing.
Mr. Bélair: That's absolutely necessary and you confirmed it earlier. My fear has always been that Forestry Canada is playing an increasingly unobtrusive role. We are limiting ourselves to research, development and the international promotion of our products, but in the field ... That's what I always recommend.
How can our small producers, our small sawmills, our small pulp and paper mills benefit from Forestry Canada's discoveries? How can these people benefit from what Forestry Canada is doing today?
Mr. Hardy: I thank you for your comment and I can assure you that we share that orientation and approach.
The Chairman: Mrs. Cowling.
[English]
Mrs. Cowling (Dauphin - Swan River): My question is on rural economic development and sustainable development for the long term. It relates directly to my colleague's question about jobs in rural areas and in his community.
How does the role of Natural Resources, with respect to science and technology, rate in a global setting? In fact, in that global setting it does have an impact on the jobs, because those jobs at home are creating that atmosphere in the global setting. I'm wondering how we in Natural Resources Canada rate in that global setting. Are we leaders? Where are we?
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Mr. Hardy: I have no fear of saying we are leaders in all the natural resource sectors we are present in. Of course I know more about forestry, but I've been sharing with my colleagues their experiences, knowledge, and learning about their sectors. NRCan is the leader in the development of new technologies, new knowledge, in the general field of natural resources. CFS, for instance, is definitely the largest forest research organization in this country. I've been touring the country recently, meeting with my provincial colleagues. I've made that statement to all of them, and all of them agreed not only with the statement but that they depend on us for their science and technology and new approaches.
The Chairman: I have a number of questions for you. I'm going to take a couple of minutes to put them and I'm going to ask you to have relatively short answers, because I want to get a number of these questions done. I'm going to take you back for a second to the beginning of this session of Parliament, to the throne speech, and I'll quote a very small section of it:
- The Government will move forward in the coming session to make sure that all Canadians
benefit from economic prosperity.
- That was in a portion of the throne speech on rural development.
Mr. Hardy: Yes. We are currently working on our business plan. Yesterday the management committee of the department was looking at that very subject, and what we have there is job growth and sustainable development as our priorities, and the government's priorities.
At the sectoral level we have exactly the same thing. I mentioned that in the CFS we are currently putting together our strategic plan for between now and the year 2000. What we put forward was, first, who are our clients, and very quickly you get to the rural environment.
The Chairman: If I ask you to share those action plans with us, plans specifically directed at improving the economic prosperity of rural Canada, could you provide me with such a document? This is very specific; specific action plans that say specifically NRCan will carry this out in order to accomplish this in rural Canada. Do those exist?
Mr. Hardy: At the moment I don't believe I can provide you with a specific document. If I remember correctly, we're aiming to have a departmental business plan by mid-June or something like that. At that moment I believe you will have a specific document that will outline the strategic directions of the department.
The Chairman: Secondly, is it the intent at the bureaucratic level within the department to designate a task force, or whatever you want to call it, of senior personnel whose job it is to carry out the direction of the government in the throne speech; that is, to make NRCan operate towards improving economic development in rural Canada?
Mr. Hardy: A reorganization of the department took place last summer with the creation of a new branch for strategic planning and policy, which is focusing exactly on that. Previously the department was very sectorally based and we were very often lacking this horizontal approach. That's a very practical step the deputy has taken.
The Chairman: If I wanted to ask who was going to be responsible, it would be the individual who is in charge of strategic planning?
Mr. Hardy: That's right.
The Chairman: And who is that?
Mr. Hardy: Mrs. Janet Milne.
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The Chairman: Do you know offhand what percentage of NRCan's employees are based in rural Canada, using the definition that Statistics Canada gave us the other day? Can you get me that information? I would be interested in seeing that.
Mr. Hardy: We can.
The Chairman: One of the issues that has come up in terms of rural development is the need for us, as a nation, and particularly in rural Canada, to go beyond just harvesting our natural resources - using ``harvesting'' in the broadest sense, it could be mining, fishing, or whatever - and have the actual transformation, the value-added, taking place in rural Canada. In your research and development, or in any of your other initiatives, have you specifically looked at developing assistance to communities or to companies so they can do more of the value-added in rural Canada, as opposed to having the natural resource shipped out and value added somewhere else?
Mr. Hardy: The quick answer on that is that if I take all the elements of your question, I cannot say yes to that. If I take it element by element.... Do we work on value-added? Yes. Do we work on value-added for jobs in rural development? Not necessarily, because it wasn't a forefront preoccupation to direct everything at rural development.
If we go back in the past a little bit, when the MDAs and FRDAs were active, yes, we were very present there and doing things with value-added on the resource itself or, once the resource was harvested, in the transformation phase.
The Chairman: I'll give you a specific example.
A new mine is being opened in a particular community in remote or rural Canada. One of the things we know about every mine is that it will eventually close. We have a community that is forward-looking and knows that at some point in time that might not be the sole basis of its existence. So the community comes to NRCan and says, ``You have had a lot of experience in the mining industry over the years. What should we do as a community now, at the beginning of our mine cycle, to make sure that our community will prosper the most from that mine being here and perhaps exist long afterwards?'' Is that something that NRCan will do?
Mr. Hardy: Not only will do, but is doing.
I will ask my colleague to comment, but I mentioned that very point in the presentation: having a longer productive life of mines.
Mr. Glenn Kendall (Director, Policy Analysis and Coordination Division, Department of Natural Resources): There are two points in response to your question in respect of value-added processing.
The first is that one of the laboratories of CANMET is devoted especially to metals and materials research. That means precompetitive research such that Canada has a position to transform minerals and metals into products. All the projects done in that laboratory, as in all the CANMET laboratories, are done in conjunction with industry. It's an important part of what the department does.
In respect of taking advantage of mineral development at the community level, as you say, mines open and mines close, and the decisions related to value-added processing are fundamentally economic ones.
You are probably aware that for very large-scale deposits, notably Voisey Bay, we're told that there is excellent potential for further processing, a refinery or possibly a smelter, in the province of Newfoundland and Labrador.
Through our research on metals and materials and through our ability to make our industry competitive, that's fundamentally how our department can assist communities to take most advantage of mineral projects.
Mr. Dan Whelan (Director General, Energy Resources Branch, Department of Natural Resources): Could I add an example from the energy area?
As Mr. Hardy said, the problem is that on a global scale it's hard to capture that, but as you start to talk about specific examples, as Mr. Kentall did, you begin to see how it works.
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I have to mention the area of oil sands technology. I think there was reference to that earlier. The work our western research centre is doing in Devon, outside of Edmonton, in collaboration with provincial researchers and the oil industry, is trying to establish ways to increase the upgrading of oil sands in Canada, specifically in northern Alberta. That's an area where you are talking about extending the economic activity that would take place in Fort McMurray over many decades, perhaps even centuries, as they move towards greater and greater breakthroughs in technology to permit continuing exploitation of what is an almost inexhaustible resource.
The Chairman: Just one last question, then I'll wrap it up. If I were a business individual in Fort McMurray and I wanted to take advantage of doing some value-added work that tied into the tar sands development, could I go to NRCan as a business person and say I need some help in developing my business plan, my strategy for taking advantage of this natural resource? Would that be available from NRCan?
Mr. Whelan: The assistance someone would receive in developing a business in the Fort McMurray area.... It takes place on a much larger scale than simply assisting people with business plans.
I mentioned the research we're undertaking in order to unlock access to these resources. Perhaps even more important is the activity this government took in the last budget, in which it provided specific increased tax incentives to expansion of oil sands plants, which is going to mean tremendous opportunities for everyone involved in the Fort McMurray area, from the largest oil sands producers to the smallest local service company. Indeed, we're anticipating some major announcements about increased expansion over the next few weeks by the companies there.
So our work isn't just in the research area, and it's not specifically in counselling firms on business plans. That would be more in the area of Industry Canada. But in collaboration with the Minister of Finance our minister was able to respond to the National Task Force on Oil Sands Strategy and provide significant fiscal incentives in the last couple of months.
The Chairman: Thank you very much, gentlemen. I appreciate the time. I'm sorry we were a bit delayed.
This meeting stands adjourned. Thank you.