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Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources

Issue 6 - Evidence, April 27, 2001 (afternoon meeting)

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TORONTO, Friday, April 27, 2001

The Standing Senate Committee on Energy, the Environment and Natural Resources, to which was referred Bill S-15, to enable and assist the Canadian tobacco industry in attaining its objective of preventing the use of tobacco products by young persons in Canada, met this day at 1: 30 p.m. to give consideration to the bill, and to examine such issues as may arise from time to time relating to energy, the environment and natural resources.

Senator Nicholas W. Taylor (Chairman) in the Chair.

[English]

The Chairman: Honourable senators, we will continue with our hearings from this morning on our study of energy-related issues, following which we will move on to our study of Bill S-15.

Our next witnesses, representatives of the Canadian Gas Association, are Marie Rounding, Rudy Riedl and John Wellard.

Ms Marie Rounding, President and Chief Executive Officer, Canadian Gas Association: Thank you very much, Mr. Chairman. It is good to see you again.

Honourable Senators, good afternoon. My colleagues and I are delighted to be with the committee this afternoon and we commend you for undertaking this important work.

With me today is Mr. Rudy Riedl, who is President, Enbridge Consumers Gas, and also a member of the executive committee of the Canadian Gas Association board of directors.

On my left is Mr. John Wellard, who is Senior Vice President, Sales, Marketing and Business Development for Union Gas Limited. You will find that title is slightly different from the one in your package because it changed just two days ago.

I have kept my prepared remarks relatively short because my colleagues and I are looking forward to addressing your specific interests during the question-and-answer period following the formal presentation. As I go forward, you will find copies of some overheads in your package to which I will be referring, and that you may want to take a look at.

First of all, to tell you a little about ourselves, the Canadian Gas Association or you may hear me say, the CGA represents Canada's natural gas distribution and transmission industry. Our members are responsible for the transportation of natural gas across this country, and for its distribution to individual gas consumers in urban areas, and include: utilities or local distribution companies such as BC Gas, ATCO Gas, SaskEnergy, Centra Gas Manitoba, Union Gas, Enbridge Consumers Gas, Gaz Metropolitain, Enbridge Gas New Brunswick and Sempra Atlantic Gas; pipeline companies such as TransCanada Pipelines and Westcoast Transmission, which transport natural gas across this country; and manufacturers of natural gas appliances and equipment such as Rheem Canada Limited and Rolls-Royce Canada Limited.

Before natural gas can get to homes or businesses, gas producers - a group we do not represent - must drill natural gas wells and arrange for it to be processed to remove impurities. Our involvement begins at the gas pipelines. The business of distribution utilities and pipeline companies is to get natural gas to people's homes and businesses. They move the commodity along once it is out of the ground and processed.

I would like now to turn to the very important issue that you wanted to hear about, natural gas pricing. It was a major issue for our members, and for many Canadians, of course, throughout this past winter.

Commodity prices started to rise considerably last summer. On average, natural gas consumers have had to pay 70 per cent more for the commodity in the 2000-2001 season than they paid in the 1999-2000 season. Some jurisdictions have suffered even higher commodity price increases.

I would like to emphasize that our concern about escalating gas prices arises from our commitment to Canadian consumers of natural gas. Distribution utilities do not profit from the increase in gas prices. That is often difficult for consumers to understand.

When utilities sell gas to their customers, they pass on their costs for the purchases of natural gas to their customers with no markup. It is not permitted under the regulatory process. I know, because I am a former regulator.

Our member companies make their profits only from the distribution and transmission rates. Let's take a moment to examine where prices have been going, using Ontario and British Columbia as examples.

Chart 2 is a little outdated, in that it refers to January prices, but it is a good illustration of the concept I would like to talk about. You can see that the transportation and distribution costs - and that is what our members charge - have remained relatively steady in both Ontario and B.C. That trend is reflected right across the country. The increasing price of the natural gas commodity - and that is the factor that they are unable to control - has driven the bills up.

The Chairman: May I take a moment here to compliment you for numbering your slides. You would be amazed how many presentations we get that are just a handful of slides.

Ms Rounding: You are welcome. I think that what is driving natural gas prices up can be summed up in two words: increasing demand. Demand for natural gas in Canada has risen steadily over the past few years. Of course, demand is expected to continue to rise right through to 2005 and well beyond.

In addition, we are currently meeting some 13 per cent - I have heard others say 15 per cent - of U.S. demand for natural gas, which represents approximately 50 per cent, or even slightly more, of the Canadian natural gas production.

This increased demand has come about for a number of reasons. First of all, a booming North American economy has expanded industry and increased the demand for all forms of energy, including natural gas. Natural gas has many positive attributes that have made it increasingly appealing to consumers and businesses alike.

Natural gas is the most benign fossil fuel for the environment, and consumers are becoming aware that natural gas is the "green" fuel when compared to coal and oil. It can be distributed and used very efficiently. In some parts of the country, it is still the cheapest source of energy, even after the recent price increases.

On top of this, new technologies now enable natural gas to fuel a portion of the increased demand for electricity. I think you probably heard about that this morning. Of course, demand is up because the past winter was one of the coldest of the last 10 years for some parts of Canada, including this part. When the temperature drops, obviously the furnaces go on.

Businesses, even more than residences, demand the commodity, and while you are aware that natural gas is essential to heat homes, it is even more popular for industry.

More than 5 million Canadian customers are using natural gas. As you can see on chart 3, 30 per cent of Canada's primary energy is provided by natural gas. That overall figure is deceptively low. If you look further within those numbers, you will see that residential use of natural gas is much higher than 30 per cent. Almost half the homes in this country are heated by natural gas. That is a lot of households.

The Chairman: Is this just the direct user? Much of our electric power is generated by natural gas. Is that included in this figure?

Ms Rounding: Yes, it is included in the 30 per cent for primary demand at this point. These are the current numbers.

Going back to residences, the use of natural gas is as high as 95 per cent of homes in Alberta and 67 per cent in Ontario. Now to counterbalance that, only 5 per cent of households in Quebec use natural gas. As you know, the commodity is just arriving in the Maritime provinces.

Fifty-one per cent of the country's manufacturers use natural gas. The iron and steel, pulp and paper, and cement industries, among many others, find its clean-burning qualities particularly appealing. In some areas such as chemical production, where three-quarters of companies use natural gas, it is the fuel of choice.

That brings me to the next crucial issue: where do we go from here? There are many factors pointing to the possibility that the light at the end of the tunnel is yet a distance away. Monthly average prices have already dropped approximately 40 per cent since January, but they are not expected to drop to the lows of the past 10 years.

However, the good news is that we are likely to see price stabilization over the next 24 months as current reserves are made market-ready. I think it is important to note that the 40 per cent relates to daily purchases on the spot market, but our member utilities generally have experienced less volatility through their purchasing practices. We can talk a little about that later.

The first reason for optimism is that there is good evidence that the relative shortage of natural gas supply is temporary. Chart 4 shows how much gas is currently available, as well as new supplies from the major supply basins in Canada. As you can see, we are nowhere near running out. We have sufficient supply to meet our increased hunger for natural gas. I am sure you explored that in more depth with CAAP earlier in the week.

One of the major reasons behind why the demand for natural gas is now outstripping available supplies is that when prices are relatively low, the cost to producers of getting gas out of the ground and into the pipes is relatively expensive and time- consuming. However, now that natural gas prices are high and still on the rise, the producers have a tremendous incentive to invest in increased exploration and drilling. That is exactly what is happening.

There is plenty of evidence that production of natural gas and plans for pipeline expansion are on the rise. In fact, drilling in Canada during the year 2000 reached almost 9,000 wells - I think you heard that already this week - 43 per cent higher than in 1999, when 6,200 wells were completed.

While current high prices encourage drilling, access to capital facilities production, infrastructure development and pipeline expansion allow for the movement of much more natural gas from supply basins to consuming areas. The result is downward pressure on prices.

Just as market forces work to increase supply, the demand side of the equation experiences slower demand as the economy stabilizes. More significantly, today's high prices are convincing people to cut back on consumption through conservation efforts. We have already seen evidence of that, and I think this voluntary movement towards conservation, which, by the way, is being promoted to consumers by our distribution utilities, will have a sustained and positive impact on the economy and the environment.

Our industry's experience has been that such market-driven solutions are much more effective than artificially set prices.

I think it is worth spending just a few moments on how the price for natural gas is established in Canada. The price of the commodity used to be established and regulated by the government. As you know, that part of the business has been deregulated since 1985. Now the price of gas is established by competitive market forces.

For instance, consumers now have the option of buying their gas directly from natural gas marketers. Natural gas has become like any other commodity, like pork bellies, like gold, where the price fluctuates with supply and demand. This is also the direction in which electricity is currently moving.

In Canada, local gas utilities, which are regulated by provincial regulatory agencies, must buy the commodity on the open market just like everybody else. They make their profit from what they can charge for distributing the gas, not from the commodity, as I said before. Therefore, they are highly motivated to get the best possible prices for their customers to keep their natural gas competitive.

You will see on chart 5 that natural gas comes from the four main producing areas in North America that are light in colour on this map. Gas flows from these areas through a network of pipelines that span all of North America. As you can see, we are all connected and the market for natural gas is now the entire continent.

In Canada, utilities generally buy their gas supply from any one of a number of centres. Just as airports in Vancouver or Toronto or Montreal are centres for air travel, NYMEX, SUMAS and AECO are centres for the flow of natural gas within Canada.

Chart 6 shows the price of natural gas in each of these centres - what the industry calls "hubs" - since 1999. You can see that generally, after a period of stability, prices in all centres have skyrocketed since last fall.

You can also see the "California" effect at the SUMAS hub - where the chart goes way, way up - which sets the price for natural gas in British Columbia.

Therefore, a complex combination of factors contributes to the variance in price increases across Canada. The practice of utilizing storage, for instance, allows utilities to buy gas year-round, reducing the average annual commodity cost passed on to consumers.

Some utilities purchase hedges or other products designed to manage price risk and smooth the ups and downs of the market.

Finally, timing of the purchases and regulatory differences between jurisdictions are also important. I guess the bottom line is that it is complicated. You cannot easily make comparisons between jurisdictions.

One of the areas I think we should talk about is the efforts to reduce energy usage, whether at work or at home. The CGA takes conservation very seriously.

Our association has just finished hosting three extremely productive energy efficiency workshops that encourage municipalities, builders, architects and engineers to construct more energy-efficient buildings. This is part of a national initiative funded by our member companies, their partners, and also the Government of Canada's Climate Change Action Fund. We are going to be hosting similar workshops in various municipalities across Canada in the coming months.

Our member companies have also undertaken other initiatives that are not just a reaction to the current situation. Utilities have long made public education programs a real priority in their corporate communications planning. There are some sample kits in your package to give you an idea of the range of the free information that utilities have made available to their customers and the public at large.

These kits contain information to help customers manage their energy costs, with advice on such things as installing programmable or reprogrammable thermostats, keeping water heater temperatures down, low-flow showerheads, insulation tips, furnace maintenance suggestions and much, much more. Many utilities have also hosted information sessions for provincial legislators.

A not-for-profit charity called Share The Warmth has started in Ontario and is planning to make its program available across the country. Share The Warmth, in partnership with both gas and electric utilities, contributes to those less fortunate in their communities. Donations from the local community are put to work purchasing heat and energy on behalf of consumers who are at or below the poverty level. Starting this year, it will also begin to deliver energy efficiency upgrades to low income households.

In summary, and looking at chart 7, Mr. Chairman, I would like to leave you with the following messages from the Canadian Gas Association.

First, Canadian Gas Association members are working to assist consumers. Local distribution utilities are the point of contact with the end-use customers, and I think this is a really important point. We are the people who talk to them. I think this relationship was most evident during the past heating season, when utilities used a variety of communication tools to inform customers of the pending gas price increases and to promote energy efficiency tips.

Second, natural gas is less carbon intensive and is environmentally preferrable. With its environmental attributes, we think natural gas, in concert with energy efficiency and renewables, is part of the solution to climate change.

Natural gas is a viable, environmentally friendly option for today and, we think, for the future.

Third, the natural gas marketplace is continental. Since deregulation of the wellhead prices in 1985, the natural gas commodity has been bought and sold within the continental marketplace. The recent increase in demand for natural gas across North America has created both challenges and opportunities for all parties involved in the continental natural gas business.

Fourth, there is no need for commodity price re-regulation. We think the government's decision in 1985 to deregulate the commodity price was a good one. Commodity deregulation has worked. Prices fell dramatically after deregulation in 1985 and a competitive market has been established. Only recently did prices begin to increase, and that was due to market forces. These market forces will further act to stabilize prices over time.

We need a well-defined and efficient approval process for frontier gas. Environmental and regulatory approval processes are important elements in developing industry projects. That said, it is imperative that such processes be as efficient and well-defined as possible, so that they do not become barriers to the timely development of frontier gas. You have probably heard that before.

Lastly, more supplies will stabilize natural gas prices. Recent price increases are being stabilized right now by the market dynamics, which are causing the demand to decrease as increased prices lead to increased conservation efforts by consumers. Nevertheless, more supplies will also have a stabilizing impact on gas prices.

As I conclude this presentation, Mr. Chairman, let me just say that we would be happy to provide whatever additional information you or the members of your committee might require. We do thank you for the opportunity to appear before you today. I know we have touched on a lot of important areas, and we are certainly happy, all three of us, to take whatever questions you may have.

Senator Eyton: One way or another, I have been involved in the gas business for a long time, and I still do not know very much about it. I think my question is going to reflect that.

You mentioned at the beginning of your remarks that producers are not part of your organization and they supply a whole bunch of people. They supply obviously pipeline companies, because the gas has to get here somehow. There are probably bundlers or people that package this stuff and run around trying to sell it. I think you are just the retail people, buying the gas at the best price you can and sending it to customers.

There is a kind of natural conflict between pipeline companies and utilities, local utilities, in the sense that pipeline companies want to sell where they can get the highest price. I look at the map in your material showing a whole variety of pipelines, and those pipelines go almost everywhere. I recognize there are regulations in the U.S., and I am sure there is regulation here as well.

How can you compete against pipeline companies, who presumably want to sell at the best possible price, when there are jurisdictions that are ready, willing - and compelled, in effect - to pay a higher price?

Ms Rounding: I think that Mr. Riedl would like to address this.

Mr. Rudy Riedl, President, Enbridge Consumers Gas: Thank you, Marie. I think that is a very good point. There is just one point of clarification. The pipeline companies themselves are not making money on buying and reselling gas either. They are usually regulated at the national level in Canada by the National Energy Board, which establishes and approves transportation rates.

If you are looking for a party that really benefits, that is really trying to sell high, it is the producing sector, and they are trying to generate as much cash flow as they need to satisfy their investors and be able to drill for more gas to sustain their businesses.

Since deregulation of natural gas prices in 1985, competition has been very severe. Natural gas prices dropped as much as 45 per cent immediately after 1985. Even today's highest prices are about the same in constant dollars as before deregulation 15 years ago.

Therefore it is the producing sector, and fortunately for the consumer, at least in Canada, there are about 700 producers. They are competing with each other at the inlet to the pipelines, whether it is Westcoast going west or TransCanada Pipeline going east.

The Chairman: I have a supplementary question before you go on. Is there any regulation in Canada preventing a pipeline from also being a producer? I notice you have Westcoast on your list.

Mr. Riedl: No, there is not, but if a pipeline became a producer, there would have to be a separation. There are very strict affiliate relationship codes. There would have to be firewalls between that part of the business and the competitive part, because the regulators are very watchful for a possible conflict of interest.

Ms Rounding: I might just add that those rules have been extended as well to the distribution companies. If the distribution companies wanted to buy the natural gas and sell it as marketers, they would have to have a separate affiliate in order to do so. Indeed, both of these companies have separate affiliates now. They compete with the other marketers.

Senator Eyton: I guess I am a little more cynical, but I am glad that we have perfect regulators who are perfectly knowledgeable, and there are no extra benefits when some end product is sold at a substantially higher price. I am just suspicious about where that extra edge goes.

However, I accept your answer and your assurance that the regulators are on top of it, and the pipeline companies are taking no advantage whatever of a higher price when they are the supplier.

Where is the industry going? I think one of your charts indicated that about 30 per cent of Canada's primary energy is provided by natural gas. What are you looking for? Is 30 per cent the right percentage? You are going to come up against reserves and readily achievable production. It seems to me that your industry has to have a longer time frame than five years, or even ten years. What is the right percentage, and within that context, who are the customers you most prefer? Who do you look to as your number one customer? Where do you want to grow?

Mr. John Wellard, Senior Vice President, Sales, Marketing and Business Development, Union Gas Limited: Right now we see tremendous potential for supply from the Canadian basins, the northern basins. We talk about an overall 30 per cent of residences using natural gas, but I think you will find that is anywhere from 85 per cent to 99 per cent in communities in Ontario that have access to natural gas.

Both Rudy's company and my company continue to see 3 to 5 per cent annual growth in residential customers. We believe it is a preferred fuel for them. We continue to actively pursue those.

We believe that natural gas is perfect for use in cogeneration, and that infrastructures will be there if the rates of return are sufficient to warrant the investments. I believe the U.S. is touting a 30 Tcf marketplace for natural gas. We believe that is quite possible. There will be shifts in the market as pricing changes. Those who feel that natural gas is the best fuel will choose it.

We do not have any particular customer in mind, except that we believe combustion is the best use for natural gas. We believe residential homes should be using natural gas. There are a lot of advantages to that. The infrastructure is in place. It is safe and can be delivered.

Senator Eyton: I will ask the question another way. Where do you make the best net buck on the sale? I recognize that a household is more expensive to service; it is smaller and therefore presumably less efficient. I assume large industrial consumers get some sort of discount. Where is your best business from a dollar incentive point of view?

Mr. Wellard: For utilities - and that is what we represent here - their pipes are their investments in the bank. They receive an average rate of return based on all of our customers. It is more expensive to deliver to and service residential customers because of all the safety considerations.

On average, we receive a return based on our entire investment. I could not really say we prefer one over the other. It is the mix in the delivery of natural gas that keeps our costs down and allows us to be competitive. I think we would be less competitive if we served only one. Rudy, do you have any comments?

Mr. Riedl: I just want to respond to what I think is Senator Eyton's direct question. I think you are asking where in our business do we have the highest margin.

Senator Eyton: Net margin, yes.

Mr. Riedl: Clearly the net margin is greatest in the residential market because that is the market that requires most service. My company has one and a half million customers, John's has one million-plus. Piping natural gas to every home, employing those people and maintaining that network, incurs quite a lot more operating and maintenance costs than running a pipeline to a power plant.

Senator Eyton: Yes.

Mr. Riedl: As you correctly assume, the margin on supplying a power plant or General Motors is much smaller than supplying somebody who lives in Toronto or Chatham.

At the same time, we like to have a mix of customers so that we have diversity of demand. That protects us from seasonal fluctuations in demand. General Motors would use about the same amount year round.

Senator Eyton: Maybe not.

Mr. Riedl: Maybe not. Residential customers use it mostly in wintertime. In terms of our target markets and opportunity for growth, I think there will be a tremendous increase in use of natural gas for power generation because it is a clean fuel: The infrastructure could be built within two or three years, as opposed to a decade of lead time for a nuclear plant, or five to seven years for other fossil fuel plants.

Senator Eyton: I would like to come back to my original concern. It was about growth and where you see growth in the industry. According to you, Mr. Wellard, there seems to be no concern at all. You are confident about Canadian reserves. We hear talk about - and in a way we have one now - an energy grid, particularly for natural gas, in North America.

I also understand that the U.S. is looking at a supply problem because of diminishing reserves. Of course, that is why President Bush has talked about Mexico and Canada as good sources for gas. In that context, are you still confident that our Canadian reserves are sufficient to allow you to grow in the way you want, no matter what?

Mr. Wellard: We are confident. We actually believe the U.S. reserves will also increase. We presently buy 30 per cent of our gas needs for our system customers from the U.S. We have a fairly large portfolio coming from the Gulf. Our demands are being met. We have been in the marketplace and have had no problems accessing gas through short-term and long-term contracts. The entire issue has been price, that is, what you are willing to pay for gas at different times.

Senator Eyton: You may be the exception, but we are a massive exporter of natural gas and other energy to the U.S.

Mr. Wellard: We are, and from a portfolio standpoint, 90 per cent of the gas used by our Ontario customers comes from Alberta or Saskatchewan.

When I say "system customers," I should point out that we provide another portfolio from the U.S. We buy gas from NYMEX; we buy gas anywhere we can get it. We use exchanges in gas to move it around.

We see no problem with the current supply. In fact, we see encouraging signs. There has already been growth in supply in both Alberta and the Northwest Territories.

The deeper wells in Mexico will take some time to bring on, but there are some additional plays going on and we expect to see some growth there. We believe the 30 Tcf marketplace can be served and supplied.

Mr. Riedl: Just to add to John's point, with which I agree, Canada currently exports more than half of the gas that it produces. That is clearly significant.

Natural gas exports from Canada to the United States represent about 13 to 14 per cent of U.S. demand. That is a very significant percentage. The supply basins that Marie Rounding indicated in her slide are reaching maturity. The Canadian basins are much younger than the U.S. basins. They will take longer to be depleted, but they will be eventually.

Fortunately, North America has other significant sources. There are already proven reserves in Prudhoe Bay off the shore of Alaska, and there are huge supplies in the Mackenzie Delta.

Within the last 18 months, we connected to supply from the East Coast, Sable Island gas, which is already flowing at half a billion cubic feet a day. Those frontier reserves are our "ace in the hole" so to speak. We think that is where the new supply will come from, although not if prices are at $2 or $3. If prices are at $3.50 to $4, we will see those reserves being developed and pipeline built to the markets.

Mr. Wellard: Another source that is coming on quite rapidly is liquefied natural gas from Venezuela and Trinidad. The projections right now are for one to two additional Bcf coming from those locations.

Senator Kenny: At what port?

Mr. Wellard: There is Cove Point. There are about four points in the U.S.

Senator Kenny: But none in Canada?

Mr. Wellard: None in Canada. The LNG plants in Canada are basically peak shavers. Gaz Metro has one, we have one, and I think B.C. Gas has one.

The U.S. is expanding theirs and bringing in more liquefied natural gas, which will then reduce the demand on the other basins.

Again, that is price-sensitive. You need gas prices in the US$4 to US$5 range to support that kind of infrastructure. It has been quite successful, and many companies are looking at expanding existing imports and even developing new ones.

Ms Rounding: Just to add to that, we are optimistic about supply, but building the infrastructure is also a key issue in making sure you can get that gas to the market. It is really important that there be no barriers to the development of that infrastructure.

Senator Banks: If there were massive LNG imports from Venezuela, would it then be converted, put into a pipeline in the United States and exported to us?

Mr. Wellard: Yes.

The Chairman: LNG goes into the North American grid.

Senator Kenny: Are you not concerned about LNG exports from Alaska and elsewhere?

Mr. Riedl: Natural gas in liquid form is already exported from Alaska because there is no other outlet for that gas, and it goes as far as Tokyo, Japan.

Senator Kenny: Is that not a concern to you?

Mr. Riedl: No. Today we have a very efficient North American natural gas market. A global natural gas market is evolving and LNG is one means of achieving that goal.

Senator Adams: We met with people from the Canadian Association of Petroleum Producers. Are you associated with that organization, or are you different? That association has to do with gasoline and oil. Are you just involved in straight natural gas?

Ms Rounding: We are just straight natural gas. The Canadian Association of Petroleum Producers represents both oil and gas producers.

Senator Adams: We are talking about the pipeline from Alaska down to Yukon or down to the Mackenzie. There may be a natural gas pipeline built either through Alaska or down to the Yukon coast, down to the Mackenzie and down through there to the territory.

If somebody had to build a pipeline to California, should it be the government or the private sector? How do you begin it right now when you guys are saying that you will need the gas in another five or ten years' time? Who should make the decision? Do we have to go to the government, or how does that work?

Mr. Riedl: I would say that the market makes the decision. For example, if natural gas was selling at $2, nobody would be talking about a northern pipeline. The gas is sitting there in Prudhoe Bay in Alaska. They are producing 2 billion cubic feet of gas a day, and they are re-injecting it back into the ground because there is no market. It would cost $10 billion-plus to build a pipeline.

The market will decide. Since the market in North America is so interconnected, it does not really matter to us in Ontario or Canada if that gas goes to California, because that would liberate some Canadian gas that is currently flowing there.

It is so interchangeable that the market will decide when and if those pipelines will be built.

Senator Adams: You say it only goes through Alaska. I think the oil and gas in Prudhoe Bay is owned by British Petroleum, is it not?

Mr. Riedl: Those reserves are owned by large oil companies, and they will have a significant say in which route will be taken and whether Alaskan gas or Mackenzie Delta gas would be accessed first.

Senator Adams: You are missing my question. If your association does not bring gas to Canada down through the territories, through and from Alberta, would you bring in any percentage of the gas coming from Alaska?

Mr. Wellard: From a utility standpoint, we buy gas from any location. We would approach British Petroleum, or whoever the producers are, and we would buy gas at source and then pay the transportation charges. From our perspective, we look at where is the best price for gas and what are the transportation charges associated with that gas to figure out what the delivered price should be in Ontario.

As a utility, we would go to the marketplace and actively bid for gas that we believed we could bring to Ontario cheaper than from any other location. That is how it would work.

We believe both pipelines will be built. The demand for natural gas is such that both pipelines will eventually be built. We strongly support whichever will come the fastest, because we really need more gas in the system.

The Chairman: And the cheapest.

Mr. Wellard: Not necessarily the cheapest right now. Actually, the private sector and the market really need to determine which gas stream comes on first, but whichever can come on quickest will give us the greatest relief from the standpoint of competition for supply.

Senator Adams: There is a current debate going on in our committee and the Senate. We are studying that pipeline. I have a concern about some of the places up there. The environmental people are concerned about the polar bear, Porcupine caribou, and right along the coast, the whales and other mammals. Now we are talking about building three miles short from the pipeline through the coast of Alaska down to the Mackenzie Delta. You are not really concerned as long as the pipeline is built. It does not matter where it will go?

Mr. Wellard: I think Rudy can speak to this as well. We are environmentally dedicated companies. We have strong company policies. We know that the regulatory process and the government process will ensure that whichever pipeline is built, it will adhere to environmental laws and respect nature.

We can support building them by pointing out that we have a marketplace. We believe there is a pretty good process in place in Canada to ensure that these pipelines are built and deal with environmental and native issues.

Senator Adams: I am not really an environmentalist. I have lived up there. I have hunted for so many years of my life, but caribou move anywhere. Between 60 and 80 per cent of the people who live up there do not have a job. I hope that some day, if they extract that gas and oil, more jobs will be created for some of the communities. That is my concern.

I understand that we have been talking about the environment and the Mackenzie pipeline since 1970. I think you know about Tom Berger's inquiry in the 1970s into a natural gas pipeline coming through the Mackenzie Delta. People up there today have more understanding of the environmental concerns. The same concern remains that if a pipeline is built, there should be income flowing to the community.

Mr. Riedl: That is absolutely true. I think to some degree, it is a tribute to the excellent safety and environmental record of the pipeline industry, also the technological progress to the point that pipelines can be built with as minimal impact on the environment as possible.

Senator Kenny: I was curious about what sort of storage capacity there is and where it is located.

Ms Rounding: This is the company with all the storage.

Mr. Riedl: Not all.

Mr. Wellard: Not all the storage, Rudy would argue, and so he should.

There are two different types. There is storage located near the production wells. We search for them, then drill them and develop them where we can.

Mr. Riedl: Generally, they are depleted natural gas fields. The field is found, produced and then converted to storage.

Senator Kenny: And what impact does finding new storage have on your rate base?

Mr. Riedl: That is generally done outside regulation. Operation of storage facilities is regulated in Ontario. The Ontario Energy Board determines how much each utility, whether it is Union or Consumers, can charge for storing natural gas.

Senator Kenny: You would reduce your requirements if you had more storage, presumably?

Mr. Riedl: We have to demonstrate to the regulator that we are not developing more than our markets will support, because if we did that, our rates would go up.

The Chairman: The control is a very interesting point. You keep saying "deregulated" and you talked about the regulations for pipelines and for distribution. Now you are talking about regulation for storage. I suppose it has to be so, otherwise you tell your customers, "We are sorry, those Alberta wells have dried up," and sell your storage for four times what you paid to put it in the ground.

Is there a regulator saying, "Look, you put that gas in the ground at $4.50 Mcf, you can only charge $5.50 on the way out?"

Mr. Riedl: The operators, whether it is Union Gas or Enbridge Consumers, have to demonstrate to the regulator what their costs are.

The Chairman: Then it is like a pipeline?

Mr. Riedl: Yes, it is just like a pipeline.

The Chairman: You cannot make money out of the storage?

Mr. Riedl: Yes. We charge, say 30 cents for each unit to go in and out, whether that unit is worth $5 or $6 or $3. It makes no difference to the operator.

The Chairman: I thought I had discovered a source for making money.

Senator Banks: Storage is just a fat pipeline.

Mr. Wellard: One thing we have to be careful of here is that storage is an integral part of the actual delivered price of natural gas. You should not separate the two. We strongly believe that natural gas has a competitor, that being electricity. I would not really agree with the senator that the storage has to be regulated.

In a marketplace where electricity, natural gas and other fuels are becoming more competitive, we need to look at whether there is a need for regulation, or what level of regulation is required.

I would agree that there always needs to be some level of regulation. At times, we feel there is too much. Storage is part of the competitive price. I would not want to leave you with the impression that we are quite comfortable with storage being regulated. We think it is part of an entire package.

Senator Banks: My father worked for the Canadian Western Natural Gas Light, Heat and Power Corporation, and then for Northwestern Utilities before it became ATCO. My mother was the television host of Blue Flame Kitchen for 17 years, and I put in all those little orange signs across Alberta that say, "danger, high pressure gas line."

You received a little oblique criticism today, but first I want to ask if any of your members include propane gas producers. Is that a separate consideration alltogether?

The Chairman: It is all separate.

Senator Banks: Nevertheless, you were sideswiped a little today when Senator Eyton raised the issue that there does not seem to be a genuine commitment across the board - from automotive manufacturers, power generators, gas drillers, pipeline operators, et al, - to addressing the ecological impact of what we do.

When we discussed that topic with vehicle manufacturers, they told us that gas producers, including the producers of liquid natural gas and other kinds of alternative fuels, do not seem particularly concerned about developing a clean product which is usable in the kinds of engines they would need to produce.

That took us aback, because it made it clear to us, or at least to me, that the solution to that problem, if it has to arrive from a sort of synergistic, cooperative effort, is a long way away.

Do you have any substantive, ongoing research on how to improve the nature of the product that you carry, deliver and eventually sell to retail customers, or do you leave that more or less entirely to the producers?

Mr. Riedl: I will try to answer that, and John and Marie might help me. We do have quite a significant effort to look into the ways natural gas is being used. The product is essentially 90 per cent-plus methane, so you cannot do much with it. It is an excellent product to start with. However, you can either burn it very inefficiently, or very efficiently.

Our major effort on the environmental front is to make sure that it is consumed as efficiently as possible. All of the regulated utilities that CGA represents have programs to promote efficient use of natural gas.

An old-fashioned furnace, for example, would have an efficiency rate of 60 per cent. Forty per cent of the energy would go right out the chimney.

The new furnaces we are promoting now are 95 per cent efficient; a tremendous increase.

We are also looking at industrial applications of natural gas where the efficiency is highest.

John mentioned cogeneration. Rather than just burning gas to produce steam to drive a turbine to generate electricity, we are promoting cogeneration, where a natural gas turbine directly uses the waste heat to produce hot water or steam to heat buildings. That produces efficiency of about 80 per cent versus about 32 per cent. This is where our efforts are aimed.

Senator Kenny: One of the ongoing problems that we hear from car manufacturers about using natural gas as a transportation fuel is the insufficient infrastructure of refuelling stations. I think back to 10 or 15 years ago, when Gaz Metropolitain shut down all six of its refuelling stations in Montreal, effectively cutting off any possibility of using gas-powered vehicles if you wanted to visit that city.

What is happening there, and can you tell us what plans the industry has for expanding its network of natural gas refuelling stations for vehicles?

Mr. Wellard: That is rather a tough one, because the natural gas industry has been trying to support that infrastructure and the development of natural gas for vehicles for many years. Rudy's company, my company and other companies in Canada have spent millions and millions of dollars trying to support this.

The key missing piece is actually the support of the automobile manufacturers.

Senator Banks: They said that of you this morning.

Mr. Wellard: I am sure they did. However, quite frankly, that has been the key. It does not work unless there is a vehicle coming off the production line that can use natural gas.

We use natural gas in many of our own vehicles right now. We use it where we can. We have taken losses on natural gas stations without direct support and without the appropriate vehicles coming online.

However, I do notice a greater push for that in the U.S. We will gladly participate. We are monitoring those situations, as we monitor fuel cells as one potential source of powering cars in the future. A fuel cell in the car may be the alternative, and it may be driven by natural gas.

Senator Kenny: Are you being fair? Is it not an equal problem?

Mr. Wellard: My feeling is, we are being fair. We have been doing this for 10 or 15 years.

Senator Kenny: Is it not really a chicken-and-egg question? The car manufacturers are saying that if they had better infrastructure, they would be able to sell more of these vehicles, and you are saying that you will expand the infrastructure if they put more cars on the road.

Mr. Riedl: I think that is true to some degree . There is a major technical issue with natural gas, and we would be the first ones to admit. It needs to be stored at 3,000 pounds per square inch. You need a very heavy steel or some kind of composite material cylinder. It takes up so much of your trunk that you hardly have any space left for your golf clubs.

That, probably more than anything else, is a barrier to powering the family automobile with natural gas. There is a market for natural-gas-powered vehicles, and that is fleet cabs.

Senator Kenny: Cops.

Mr. Riedl: We succeeded in Toronto, where there are 150 buses running on natural gas. We are converting one cab a day in Toronto. The City of Toronto has been quite helpful in passing a bylaw which allows the owners to keep the cabs on the road two years longer than usual if they are powered by natural gas.

Therefore, the initial conversion cost is spread over a longer period. As a result, we are seeing a lot of cabs - at least if one a day is a lot - being converted.

I believe that it is probably in the fleet operations, the buses, the public transit, the cabs, that the fuel is put to the best use. Ford and Chrysler have now produced dedicated vehicles.

To some degree, you are right that it is a chicken-and-egg question. A private person with a natural-gas-powered vehicle could go up to the cottage and run out to Oshawa, but could not travel beyond that.

Senator Kenny: However, my question was, is the infrastructure expanding, how many stations have you got in Ontario, and how many do you expect to have a decade from now?

Mr. Riedl: It is not expanding rapidly. Essentially, the thrust is coming from fleet owners. The TTC would have its own filling station. The cab companies have their own filling stations. There are about 20 or 30 filling stations.

Mr. Wellard: Cornwall Bus Lines in Hamilton uses vehicles powered by natural gas; it tends to be fleet operations. My first answer was really related to using a traffic corridor like the 401. There just is not the volume of vehicles for that. However, it is a very viable alternative for the fleets.

The Chairman: This morning we had a presentation from small power producers, and they were complaining that the rules to get into the U.S. were tough. In other words, they could not ship power across the line to U.S. consumers as easily as U.S. producers could ship electrical power.

Do you still work on "concession areas" or whatever they call it? In other words, do you try to sell gas across the border? Do you divide it?

Mr. Riedl: There are no constraints on the movement of natural gas back and forth across the border.

The Chairman: Do you have customers down there?

Mr. Riedl: We are not gas producers. Canadian producers sell more than half of their production south of the border.

The Chairman: I was thinking of your distribution network. Are you restricted to just distributing gas to a defined area? In other words, can your colleague deliver gas or build a pipeline into your area of operation?

Mr. Riedl: No. You have to have a franchise. For example, my company has an affiliate company in upper New York State which we operate and manage out of Toronto.

The Chairman: You can sell without restrictions?

Mr. Riedl: A Canadian company could go to Boston and buy the Boston natural gas company, if it could afford the price.

The Chairman: What I am getting at is, you say the industry has been deregulated, but they do not have franchises in power, or there are a lot of areas now without franchises where you can sell power. I was just under the impression that your gas distribution operations still stick to a franchise system. If you want to sell gas in Labrador, Boston or Houston, you have to buy a distributor that already has a franchise there.

Mr. Riedl: That is correct, but it is the same with local electric distribution. We have to distinguish between transmission lines, which bring gas from Alberta to Ontario, for example, and the local distribution network. The local distribution networks, whether for natural gas or electricity, are either municipally or privately owned. Essentially, they are exclusive franchises.

The Chairman: A consumer can make a contract with another producer within your area, and you have to deliver the gas to him at a regulated price?

Mr. Wellard: That is correct.

Mr. Riedl: We are the transporter.

The Chairman: They were arguing that with electric power, they were having trouble.

Mr. Wellard: The one thing we can do in Ontario is sell storage and transmission products and services to U.S. companies. If a U.S. company wants to store gas in Canada and then move it through the country, we certainly have the ability to offer that.

The Chairman: You are not concerned about the freedom to move back and forth across the border?

Mr. Wellard: No.

Senator Banks: Just out of curiosity, Mr. Riedl, what did Enbridge used to be called?

Mr. Riedl: The Consumers Gas Company Limited.

Senator Banks: Did it buy Interprovincial Pipelines?

Mr. Riedl: Actually, it was the other way around. Six years ago, IPL purchased Consumers from British Gas.

The Chairman: Thank you very much, Ms Rounding, for coming with your two assistants. We hope to see you again. Before we write a report, we may need to get some more information from you.

Ms Rounding: We would be happy to provide any information we can.

The Chairman: Honourable senators, we move now to our study of Bill S-15. Our first witnesses are Dr. Sheela Basrur and Mr. Ryan Hicks.

Dr. Sheela Basrur, Medical Officer of Health, Toronto Public Health: Mr. Chair, I will make some introductory remarks, and then turn it over to Ryan Hicks, who is the student trustee on the Toronto District School Board.

I do want to thank you very much for the opportunity to appear today. I recognize that you have had a lot of information presented to you at the hearings that you have held across the country. This being your third go around the corner, I am sure that you know far more about the bill than most people in Canada. I am not going to give you facts that you already know extremely well, but rather I will let Ryan describe the unfulfilled opportunities in view of the bill's current status, and then I will sum up with some comments as the city's Medical Officer of Health.

I would just like to say, before I turn it over formally, that it has been an absolute joy for Public Health to work with Ryan and his student colleagues, both at the board level and within the school system.

I know there are lots of additional creative and collaborative ventures that we can undertake together, particularly in finding initiatives that kids know will work for them, with the right kinds of support from Public Health and from school communities across the city.

Without further ado, I will turn it over to Ryan Hicks.

Mr. Ryan Hicks, Student Trustee, Toronto District School Board: Thank you, Sheela.

Honourable Senators, I wish to thank you for inviting me this afternoon. As student trustee for the TDSB, I represent 300,000 elementary and secondary students. I would like to inform you that on Wednesday night, the Toronto District School Board endorsed Bill S-15. They will be sending a letter home to the students and their parents, all 300,000 of them, asking them to support Bill S-15, because health and education go hand and hand.

They are also going to funnel this down to OPSBA, the Ontario Public School Boards Association, to get it out across Ontario, and then to the Canadian School Boards Association to try to get the rest of Canada onboard.

The Chairman: Could you also mention that writing to the Prime Minister in support of the bill is probably the best way of informing Parliament of what you want done?

Mr. Hicks: Right. I am pleased to be here today before the Senate committee and offer my support for Bill S-15. Dr. Basrur introduced me to the issue and the serious need for greater support for battling the tobacco epidemic.

I will make my presentation from the perspective of a youth consumer of tobacco prevention programs, and particularly emphasize the valuable role that I believe young Canadian students can play in Ontario's anti-smoking efforts.

My experiences as student trustee for the Toronto District School Board have provided me with the opportunity to meet many of my peers, both at school and at workshops on peer leadership that I have helped facilitate.

I have had the opportunity to speak to many of my peers about the issues that are important to young people through their teen years.

Cigarette smoking is almost inevitably identified as an important social and health issue that needs to be addressed by government and society at large.

I am still amazed by the reasons my peers usually give for why they smoke cigarettes. More than half of them say that they started to smoke because their friends smoked. We all know that teens tend to start smoking because they think it will help them be cool and relate to their peers. Someone at school said that smoking was just a way to settle her nerves. In her own words, "Starting high school is explanation enough for why I started smoking."

Most young smokers I have spoken to do not think that the long-term consequences of smoking will affect them because they do not think that they will become lifelong smokers. You do not need to read the literature to understand these relationships. Just spend a day with teenagers in their school settings. They will tell you that despite knowing about the health effects of smoking, many of them began to smoke and will continue to smoke because the short-term gains far outweigh the long-term losses. Anyway, they would say to you, "What long-term losses? I will be able to quit easily when the time comes."

This is the sad truth that still exists today, despite the knowledge about smoking and health that has existed for more than half a century.

The truth is that the anti-smoking messages that young people hear once in awhile are just not having any impact on preventing these children from picking up the habit. A smoking prevention program may have a short-term impact, but this advantage is quickly lost because, more than likely, the messages will not be reinforced once these students graduate into high school.

I remember receiving anti-smoking lessons during my primary grades. They were excellent lessons at the time. I went home thinking about the significant people in my life who smoked cigarettes and feared for their health. I wanted to tell them all the bad things about smoking that my teacher had taught me. I wanted them to quit smoking immediately. However, time is a healer, and you forget all of this after awhile.

Society imparts such positive attitudes towards smoking, with people smoking freely in public places and kids smoking everywhere, that you soon begin to develop the attitude that maybe smoking is not so bad for you. After all, all these people who smoke cannot be wrong about it.

I believe that if there had been more ongoing, intensive efforts with these lessons in school, they would have been more effective. There are so many creative ways for these lessons to be taught. Young teens could write an essay on the practices of the tobacco industry. They could learn about the carcinogens in tobacco in science class. They could learn about the laws that govern tobacco use and ways in which they can influence these laws. The list is endless. The point I am making is that one-shot lessons do very little to deter young children from starting to smoke.

Since becoming actively involved in supporting Bill S-15, I have learned a great deal about what can work and what has worked in successful programs in California, Massachusetts and Florida. The success record in these states provides us with hope that we also can follow in their footsteps and achieve similar successes. Adequate and sustained funding, through Bill S-15, assures us of that hope.

The laws governing the sale of cigarettes to minors are simply not working to keep these cigarettes out of the hands of young people. I can tell you firsthand that it is still very easy to access cigarettes. With almost 30 per cent of youth smoking, obviously accessing tobacco products is not a problem for them.

Ask any young smoker and they will tell you that they can easily buy their cigarettes, either locally or through an older friend who is of legal age. One friend said there is always some greedy person who will sell them. Stores do not care, since they are making more than any fines that they receive. If you need cigarettes, there are always places you can get them.

The provincial regulations which prohibit the sale of tobacco to minors are a good beginning in tackling this problem. For example, a campaign called "Not To Kids Campaign," run by Toronto Public Health, is a great start.

This campaign is aimed at educating tobacco vendors and the public regarding the sale of tobacco products to minors. I am aware that this campaign has produced significant reductions in the percentage of vendors willing to sell cigarettes to minors. With additional funding through Bill S-15, Toronto's "Not To Kids Campaign" could be strengthened.

Another area that really needs to be strengthened relates to the lack of programs that address smoking behaviour within high schools. There are a few odd, scattered lessons in health or parenting classes that might address smoking behaviour for a few minutes. However, these lessons are totally ineffective.

Many kids start to smoke in grade nine or ten. Yet I cannot remember receiving an entire lesson on smoking prevention during these grades.

Grade nine is a particularly sensitive grade, when I know that a lot of my peers began to smoke. You just have to walk past a high school in the morning and see all the kids congregated outside, having their morning smoke, to know that this is a huge concern.

These young people could have really benefited from a strong smoking prevention program offered during the earlier grades. I also know that smoking cessation support is completely lacking in high schools. Many of my peers that I have spoken to in grades 12 and 13 have expressed a desire to quit smoking if support was available. I know that they would take advantage of the program.

Some recent research conducted by Toronto Public Health confirms this need. Focus groups were conducted with male and female high school students to better understand youth experiences with quitting smoking.

Girls showed a high interest in quitting smoking, and indicated that they would be willing to attend a school-based cessation program if it were available. The boys were more ambivalent about quitting smoking. Again, Bill S-15 will provide the funding needed to strengthen support services for youth in this area.

Smoking among the youth population is still very much socially accepted and a part of the popular culture. Somewhere along the line, the health messages have been completely lost. The various levels of government should be very concerned that not enough is being done in the way of anti-smoking advertising campaigns and school programs to mould the attitudes, opinions and behaviours of young people when it comes to smoking cigarettes. Sustained mass media campaigns will help to create a social environment in Toronto that would denormalize smoking behaviour among youth.

I remember hearing radio ads from the "Breathing Space" campaign. They caught my attention and that of many people to whom I spoke. Breathing Space is a media- and community-based campaign aimed at reducing children's exposure to environmental tobacco smoke within their homes. We need more of these types of campaigns to be ongoing, rather than month-long blitzes.

Public Health staff have told me that evaluation of this campaign in terms of raising awareness about environmental tobacco smoke has been positive. We know that advertising campaigns work. We need to get very serious about ensuring that we have national anti-smoking ads aimed at denormalizing the use of tobacco products among young people on a regular basis. Give the young kids a chance to help with developing these ads and they will do a great job. Bill S-15 will provide them with the means to impact on their own lives and the lives of their peers.

Recently, a group of students from across Greater Toronto formed a coalition called "Youth Taking Action Against Tobacco," or YTAT for short. This group has come together to provide a unified youth voice in support of Bill S-15. We have met several times, and we will continue to strategize on ways to advocate with all levels of government to support appropriate anti-smoking policies.

What has amazed me throughout the meetings and discussions that have been held by YTAT is that these people have great ideas. There is a tremendous energy and creativity amongst these young people. They know better than many adults what programs and campaigns will and will not work.

Young Canadians such as these need to be involved and provided with an opportunity for input into these anti-smoking efforts. Groups such as this one could be empowered to make a difference through funding made available through Bill S-15, and have a say in the development of anti-smoking messages and larger campaigns. They speak the language of the youth and can relate to them at a much closer level than adults. They know what youth will listen to. They know what types of images in various campaigns will work and how to get the attention of young people who smoke or are who contemplate beginning to smoke.

I just want to add that I have to recognize this group of students. I have been working with them, I have been getting to know them, and they are a wonderful, wonderful group of students from Toronto and the York region. They have been a great support in getting the message out. They are a great group of young kids.

I would like to conclude my presentation by saying that Bill S-15 would provide a major breakthrough in efforts to curb the smoking epidemic among young Canadians. I have read that nicotine is just as addictive as crack cocaine. Given this, it is astonishing that the various levels of government have not acted more promptly. It really makes you wonder where their priorities are, in view of the recent announcement to provide $20 million to tobacco farmers for kiln conversion. This same $20 million could have had significant impact on the lives of young children in Ontario if it had been used on anti-smoking ads instead of on promoting tobacco products. The federal government owes it to Canada's young children to pass Bill S-15.

Dr. Basrur: My comments are based on my personal reflections and professional opinion, if you like, over the last few years, of seeing a series of bills on this endeavour succeed in the court of public opinion, and fail absolutely in the legislative processes on which we Canadians rely.

Across the street is Toronto City Hall, the centre of my universe, if not yours. As we speak, they are debating, and hopefully not shredding too badly, my budget submission. I gratefully escaped for at least this one-hour break in order to speak on something that I hope will have more of an impact than some of the speeches that I have to make at city hall.

I raise that point because the pressures on the city's budget and health services are extreme. These are very difficult times for the city. I know the federal government is not keen on hearing Torontonians, let us call it "whine," and complain about how we are unique and different and need special status, so I will not even bother doing that.

All I will say is that if we could do this ourselves, we would have. We cannot do it. We rely on the federal government. It is very difficult to be at the street level and see kids take up smoking; to see parents and family members dying of heart and lung disease; to see kids developing asthma and ear infections; to see preventable hospitalizations and queues at the emergency room door; and know that action could have been taken. It is not happening for reasons that I must tell you are totally inexplicable to me.

This issue has been described across the country as a "no-brainer," and I would hope that standard is not too high when it comes to federal representation of the national interest.

I cannot say strongly enough that I do not know what the impediment is. I really do not. The bill makes perfect sense in a variety of ways, logically, technically, functionally. It will be a tremendous boon for the city and for communities across Canada, because for once, we nonentities in the constitutional scheme of things can finally have access to some funds that will make a meaningful difference locally.

The federal government may have the best of intentions in increasing the tax rate on cartons and funding that through Health Canada, but there is no way that they will make that money available to us. Any money to be had at the local level has to go through the federal, provincial, territorial process, and if the province disagrees, it can exert a veto that denies municipalities access to those funds.

A case in point is the money that the federal government has allocated, of the little it spends, for enforcement of tobacco legislation. The Ontario government declined that money, and therefore we have been cut off. I do not think that is right.

That is the system with which we have to live, and the levers of power are in your hands. I thank you for the leadership that you have shown, but I really urge you to find some way of ensuring that the right thing happens. In my role, I am sometimes accused of being political. Frankly, I am a professional and the Medical Officer of Health, and as such, have a duty to advocate for the health of the people of Toronto and to ensure that those significant health needs, which exert great pressure on our health care system, our social services and on longevity and quality of life, are brought to the fore, particularly where there are preventable causes.

You cannot find another combination of diseases or conditions that fit those three criteria of need, impact and preventability in the way that tobacco does. It is the cause of myriad difficulties, death, disability, cost, lost opportunity, lost quality of life, lost potential for kids. It is stunning.

As a professional, I feel obliged to express my opinion that there is a lot of opportunity here that is being wasted every minute, every day, every year that goes by.

As I say, if we could have done something to spur a strategy that would work for us, we would have, but we really rely on the federal government to provide a coordinated, national strategy.

In closing, I will refer to a report produced by a group who studied the Ontario Tobacco Strategy a couple of years ago. That report of this blue chip panel was entitled, "Actions Speak Louder Than Words." I rest my case, in respect of both the provincial and the federal governments unfortunately, but I do hope that times will change.

The Chairman: Thank you, Dr. Basrur.

Senator Wilson: You made a very good case for a free-standing, arms-length foundation to provide funding accessibility. Apart from the funding arguments, are there other reasons why you would support an arm's-length agency?

Dr. Basrur: To be blunt - why stop now? - I do not trust the government to do the right thing with the money raised. There is probably a myriad of reasons for that, ranging from precedent to politics, and it is not my job to try to disentangle it.

All I will say is that history has shown that is not the best way in which to finance local tobacco control initiatives. A 30-second clip produced by the federal government, and broadcast on some week nights on TV when some people may be awake enough to see it, is not going to stop kids from smoking at the local level. That is one thing.

The second point is that there needs to be a critical and independent look at the kinds of programs that are provided at all levels of the system - or not provided, as the case may be. The federal government, the provincial government, local governments, non-governmental agencies, local school boards, et cetera, have many initiatives. Some of them may be terrific, but some are also potentially at cross purposes. Some are not coordinated. Some are reinventing the wheel many times over. Some of them are just not effective.

I understand the foundation would dedicate 10 per cent of the funding to evaluation of specific components. I would hope that when the foundation is actually set up, it will look at how elements of the entire system interact, so that maximum benefit can be achieved from those resources. You cannot do that if you have one entity in control of everything.

Senator Wilson: I noticed in your submission that you used the words "sustainable" and "comprehensive" several times, so that would really sum up your presentation. I hope it is as simple as you say, but I profoundly doubt it.

Mr. Hicks: There is an anti-smoking component in our school phys-ed and health classes, but it is maybe half a period. The teacher has to teach it because it is in the curriculum. The students do not see it as very effective, in part because they did not help to develop it.

They need to be attracted to the information that is being given to them. That can be done through students helping to develop it.

Senator Wilson: Just a comment for the comfort of Dr. Basrur. I received over 400 letters in support of this bill from across the country, which is more than I have ever received on any bill since I joined the Senate.

Dr. Basrur: Thank you very much, Senator Wilson. I realize it was a comment rather than a question, but I would just add a supplementary response.

I understand that a public opinion survey conducted in Toronto last year showed that some 68 per cent of Torontonians either strongly or very strongly support the bill. Those who opposed it did so only because they thought that the funding, and initiatives derived from that, would be ineffective. When told that initiatives in California have reduced the smoking rate amongst youth from 30 per cent to less than 7 per cent, even those who were initially opposed switched their position.

Senator Stollery: I have a brief supplementary to Senator Wilson's question. There is something I would like you to clear up for me. I quit smoking, as so many people of my generation did, when it was proven that smoking caused lung cancer. In the early 1960s, millions of people quit smoking, of whom I was one, because there was no longer any argument that it caused lung cancer.

People of my generation therefore find it peculiar that that knowledge seems to have somehow been lost in the shuffle. I support Senator Kenny's bill, but is not the point that somehow government has to take up a role in reinforcing facts that we all thought we all knew, but which seem somehow to have been forgotten by young people?

I do not know if the effect of smoking on your health is taught in school, but if so, it is clearly not effective. It puzzles people of my generation, because those facts were very effective with us. I cannot quite understand what has gone wrong, to be honest, and I do support Senator Kenny's bill.

Mr. Hicks: The teachers can use all the available resources. They can tell students it has been proven to cause lung cancer. However, we need to empower students, and young Canadians, with the responsibility to help develop these kinds of resources for teachers.

I have always said that when students help to develop the resources for anti-smoking campaigns or anti-smoking education, it is going to come across 100 per cent better than if - sorry - they have just been developed by adults. The youth know what their peers need to hear and how they need to hear it. It is not just the "what." The way it is presented counts just as much.

Senator Adams: Dr. Basrur and Mr. Hicks, thanks very much for presenting to the committee.

I have been on this committee with Senator Kenny for the last four or five years, during which other bills have been killed off in the House of Commons. I hope that will not happen this time.

I would like to see people quit smoking. We have other things to consider besides smoking. We are talking about natural gas, energy and mining. However, I hope we can reduce smoking.

Mr. Hicks and Dr. Basrur, how long have you worked together? We have regular visits to the community from doctors and nurses where I live up in the Arctic. The government is spending $98 million a year advertising on TV, with posters on the walls and warnings on cigarette packages. It is not working in the community.

Cigarette packages tell you that you may die of cancer if you smoke. Yet they buy cigarettes every day at $9 a package where I live up in the territory. Here in the South it is $4 or $5. It costs a lot of money for a person to smoke every day, even young people.

I am wondering where you are going to start, because commercials are not working.

What is more effective for you, or how will you make the youth listen to you in the schools?

Mr. Hicks: It has to be consistent. It cannot be a short-term blitz of information. I remember seeing the commercial showing the woman smoking out of her throat. I thought, wow, that is really effective. However, I forgot about it when all the commercials were over. It has to constantly be there. It has to be long-term.

Bill S-15 can provide the money, through the foundation, to make these types of awareness campaigns long-term, rather than just a couple weeks or a month or so.

Senator Adams: If there is more money, it will be a better foundation, doing better work?

Mr. Hicks: Right.

Senator Eyton: A very interesting presentation. Ryan, you have read Bill S-15?

Mr. Hicks: Yes.

Senator Eyton: And obviously you strongly support it. I read it too, and I think it is a fine bill. I think Senator Kenny has done a great job of putting something together and pushing it. Is there anything that is missing, any suggestion you can make as to how it might be even better than it seems to be today?

Mr. Hicks: As Dr. Basrur said - and I have been saying this also - it is a no-brainer. This bill provides our government with one of the best current opportunities to do something for children. I cannot think of anything that we could add. We could just make smoking illegal, because crack cocaine is illegal, and tobacco is just as addictive.

That is another debate. I know that is not what this is really about. Perhaps that would be a next step - who knows? My only concern when I first heard about this bill was, are students going to be involved? Are young Canadians going to be involved in creating these tobacco control programs? That is the only way that this will really be effective.

As long as students and young Canadians have a voice in this foundation and its activities, you are going to have a lot of happy kids.

Senator Eyton: Dr. Basrur, do you have any suggestion on how the bill might be more effective than it reads today?

Dr. Basrur: After three times around, I think you have got it right.

Senator Eyton: It is good to hear that. I commend your formal approval of the bill, and in particular, the missionary efforts that you have undertaken. I think they should be wonderfully effective.

The Chairman mentioned that the Prime Minister might be one target for a letter-writing campaign. Your local MP is another. In fact it requires everybody talking it up and generating wide public support.

I have a little trouble understanding who the opponents might be. Can you help me with that? Apart from ordinary lethargy or bureaucracy or an unwillingness to try anything new, I cannot imagine anybody really opposing this bill. Yet it has had great difficulty. It has required a major commitment by Senator Kenny, in particular, over a number of years.

Can you help me with that? Who are the people who would make passage of this bill more difficult?

Dr. Basrur: Again, I do not work at the federal level. Clearly this is a federal initiative. The exclusive ability to carry it through or not rests in the government's hands.

In my experience as a civil servant, especially in these times, if the political level requires that something be done, money is found, the staff do it and that is the end of the story. I see it here in Ontario. I see it everywhere.

If you are asking what the stumbling block is, frankly, I look to the people who are in charge of making things happen on a file such as this, which would be Health and Finance and the Prime Minister himself.

Now, what do they have against this? I cannot contemplate what that might be. Does it not make sense? You are going to save money in the long run. You are going to improve the health of kids and future generations of adults. It is a no-brainer politically that everybody wants this, except perhaps a handful of naysayers in Ottawa. It beats me.

Mr. Hicks: Just to add to that, we students say we want this. We support this. Go right ahead. It is the Tobacco Youth Protection Act. It is for us. We are saying that we want it in place. The naysayers should respect the fact that students have taken the time to campaign for this and have put their support behind it.

Senator Banks: Dr. Basrur, you put a sort of challenge to the federal government to, in effect, do something right for a change. You will appreciate that running an undertaking like Canada is extremely complicated. If we gave the required funding to every perfectly reasonable, deserving, well-thought-out, carefully planned request, we would have to quintuple our taxes, we would all be broke and no one would ever open a business in Canada. These decisions are difficult.

Three weeks ago yesterday, the federal government committed $98 million a year to combat smoking. Is that not stepping up to the plate fairly well?

Dr. Basrur: No. That is my answer to the second part. I understand that the presenters from the Ontario Medical Association will be doing a detailed comparison of the Senate bill with the recent government announcement. Therefore I will not try to pre-empt that, but rather speak to the fact that, as I hear you saying, if we did all of the right things that confront us, we would go bankrupt.

With all due respect, it seems to me that it is the role of government to do the right things for the people of this country. If they are truly the right things, we will not go bankrupt. That is point number one.

Number two, this is not going to cost taxpayers money. It is essentially self-funded, and as a taxpayer, I do not understand why there is concern about going bankrupt when they are giving away "free money," so to speak, and simultaneously putting this less-than-adequate initiative on the tax base. Granted, it is not income tax, but it is still tax revenue that could be used for any other purpose. Frankly, some of it will be used for any other purpose, because it goes into general revenue. We will never see it again.

My third point is that if governing this country is so darned challenging for those who have stepped up to the plate to do the job, then surely they should start with the things that come easiest; and this looks like one of the easier-to-reach, low-hanging plums that they should pick now.

Senator Banks: Do you want to comment on that, Ryan?

Mr. Hicks: We see how much money that other states, other jurisdictions, are spending on their tobacco control programs. A lot of students have been saying, when they find out that our government is only spending 66 cents per person while others are spending $13 or more, that Canadians are worth more than 66 cents.

As Dr. Basrur said, the money is not coming from the taxpayers. Do not complain if you are not going to have pay for it.

Senator Banks: Are you old enough to vote yet?

Mr. Hicks: Yes.

Senator Banks: Do you know whether your MP supports this bill and will vote for it in the House of Commons?

Mr. Hicks: My MP, Allan Rock, has not publicly supported it.

Senator Banks: Do you think he has any interest in this matter?

Mr. Hicks: I plan on making an appointment with him, so after that, he will.

Senator Banks: Good. Thank you very much.

Senator Eyton: Why is he not here?

Mr. Hicks: I do not know.

Senator Wilson: I do not know whether you considered sending letters to all the schools, parents and so on. Would you consider organizing a campaign for teenagers to visit every MP in Ontario, since it is full of Liberals? They have the vote. That would make quite a difference to the bill.

Mr. Hicks: That is why we created Youth Taking Action Against Tobacco. One initiative that we are planning is to go to our MPs and tell them that they have to support this. Why are you not supporting this? What is your problem with it? We your constituents are telling you that we want this. Put all your politics, all the back-room stuff that we do not get to see, aside for the sake of our health and our future.

Senator Wilson: Play it until you get a commitment from all of them.

Mr. Hicks: Okay.

The Chairman: By the way, when you visit Allan Rock, you might take Dr. Basrur along. If you ever decide to get into politics, let me know; I want to help.

I want to thank everyone for coming. We are going to hear from the Ontario Medical Association later on, and you are welcome to stay to hear their evidence. Mr. Hicks and Dr. Basrur, the panel appreciates your taking the time to come here today. We will begin our discussions now with representatives of the Ontario Medical Association, Dr. Albert Schumacher and Ted Boadway.

Dr. Albert Schumacher, President, Ontario Medical Association: Thank you, Mr. Chairman.

Good afternoon. I am Dr. Albert Schumacher, President of the Ontario Medical Association, and a family physician from Windsor.

With me is Dr. Ted Boadway, who is the Executive Director of the Department of Health Policy at the Ontario Medical Association.

The OMA represents over 24,000 physicians who practice medicine in the province of Ontario. Our motto is, "to serve the medical profession and the people of Ontario in the pursuit of good health and excellence in health care."

To that end, we represent physicians with the Government of Ontario and are active in many areas of public health.

In the area of public policy, you may have heard of our activities on the "Return to Work" strategy, or our recent, highly publicized efforts on the environment and health or some of our statements on hospital and practice affairs. Over the years, tobacco policy has been a major focus at the OMA.

It should be apparent why this is so. I could recount for you the numbers of people who die each year in this province as a result of smoking. I could give you chapter and verse on the conditions and the enormous health costs induced by all of those illnesses, both fatal and chronic, which befall those addicted to tobacco.

These are important statistics, but I wish to look at it from a slightly different point of view. Let me, as a physician, focus on people - something that perhaps the other witnesses before you cannot do in quite the same way. Physicians see people one at a time. We see our patients suffer, person by person. It is this suffering and the impressive illness statistics which have the greatest impact on us as individuals.

Within blocks of where we sit, in the chronic care institutions and the major hospitals, I know there are literally dozens of people suffocating to death as a result of tobacco addiction. These are our patients, and we struggle to care for them and try to give each of them a dignified and a longer life.

You have seen pictures of cancer in lungs or on a tongue and they may be disturbing and upsetting to you. However, for me, these cases are a reality. I neither want nor need the pictures, because I see these folks in my practice.

When people are in serious trouble, they drop from public view. They enter institutions. They sequester themselves in their homes. They are so unwell that they are no longer able to go about their daily lives.

For physicians, these people continue to be part of our daily lives, real people with whom we deal even more intensively than before.

As a family doctor, I know these people, usually very well. Sometimes I even know the whole family very well. Each of them is like a member of my family. When this grief befalls them, it is something that I experience with them, one case after another, year after year. Let me assure you that there is not one morning, one afternoon, or one evening of work that goes by where we do not see preventable, smoking-induced illness. That is why my fellow physicians have asked me to be here today.

When I talk to my colleagues on this topic, I am talking to people who face this disaster hour by hour, and yet they feel powerless to stop it. I do not have to wait very long, when a group of physicians is discussing issues, before the matter of tobacco comes up. I must tell you that the mood of the conversation will veer from despair to grief, and then often into anger.

Physicians see the OMA as an instrument to collectively express their concerns on this important topic. They ask us to work at the social and political levels to help remedy this problem. As an association, we regularly poll our members and ask them what issues they would like us to focus on. Every time we ask, they reply, "Work on this issue seriously on our behalf."

Therefore the OMA has, for many years, had a focus on this topic, and I will give you only a few of the highlights.

In 1974, the OMA made its first statement on the need to protect others from the effects of second-hand smoke.

In 1983, because there was insufficient public awareness, we hosted the first conferences on second-hand smoke in the province of Ontario in order to foster awareness and to gain allies in the public domain.

In 1996, we published a position paper entitled, "Second Hand Smoke & Indoor Air Quality." This was in response to a need we saw in the public forum. The paper has since been used extensively by departments of health and municipal governments around the province, as they consider policies on smoking in public places.

In 1992, we joined the Canadian Cancer Society's Ontario Division, the Heart and Stroke Foundation of Ontario, the Ontario Lung Association and the Non-Smokers Rights Association to form the Ontario Campaign for Action on Tobacco, otherwise known as OCAT. We realized that we needed allies in the greater public, and that together we could accomplish more than we could alone. This has been a very successful partnership. We have accomplished a great deal together, including supporting the passage of the Ontario Tobacco Control Act and intervention in almost all municipal non-smoking policy debates.

In 1999, we published a paper called "Rethinking Stop- Smoking Medications," which advocated a radical new approach to nicotine replacement products. We are pleased to report that our ideas have been picked up by other jurisdictions internationally and are having an effect in Canada even greater than we anticipated. I have a copy of the World Health Organization's Barcelona paper, which absorbed all of these approaches.

In giving you this brief description, I have touched upon some of our actions in the area. I have done so in order to cement in your minds that this issue is of long-term concern to us, and also to bring our specific interest to Bill S-15 before the Senate.

I would like to describe to you how we will approach our discussion of this bill. We believe there are general principles, which are now well understood, whereby one can judge whether or not a proposal for tobacco control is adequate or not. We would, therefore, first describe to you the standard by which one would judge this adequacy. Then we would like to analyze and compare that standard, both with the recently announced federal initiative and with Bill S-15.

Lastly, I would like to describe to you some of the attitudes the medical profession will bring to the present situation.

Some time ago, the OMA and its partners at OCAT felt the need to elucidate the standards against which a tobacco control program could be tested. After several discussions with our former provincial minister of health, the Honourable Elizabeth Witmer, she struck an expert panel to advise her on the attitudes and attributes that would constitute a comprehensive tobacco strategy.

Because of the OMA's long-term interest in the subject, we were asked to contribute to this panel. We placed Dr. Boadway on the expert panel as our representative because of his long interest in and his expertise on the subject matter.

Dr. Boadway joined a panel of eight, comprised of distinguished academic and medical specialists. I am going to ask him to outline for you the findings and recommendations of the expert panel. The findings of this panel are not particular to Ontario, but in fact are particular to the human condition and can be used to analyze any initiatives contemplated anywhere in the world.

Dr. Ted Boadway, Executive Director, Department of Health Policy, Ontario Medical Association: Thank you, Dr. Schumacher. Our challenge as an expert panel was to make recommendations that were evidence-based and which could also be responsive to changing conditions in the future. We researched the world's literature on the subject and brought in experts from the national and international tobacco control scene. We reviewed the present status of tobacco control efforts in Canada and closely analyzed models here and abroad.

Out of this we made a series of recommendations under nine headings. These are described in detail in our document entitled, "Actions Speak Louder Than Words."

The first thing that became apparent was that anything less than comprehensive approaches to tobacco control were likely to be met with failure. The only intervention which individually has had an effect upon consumption, alone and independently, has been price. All people in society have a price sensitivity point, but children in particular have a tobacco use behaviour that is more price sensitive than that of adults. The reason is clear - children's own personal financial resource base is much smaller than that of adults, and therefore their price sensitivity is more acute.

There is extensive literature on the subject, but perhaps you could not find a more graphic demonstration than our own experience here in Canada. During the period 1981 to 1991, the percentage of Canadians who smoked had dropped from 40 per cent to 31 per cent. This was in a time of increasing taxes on tobacco products.

There was an argument at that time, you will recall, about whether price increase was the operative factor, since it was argued that other social forces were at work. It was a very difficult dialogue from time to time.

However, that argument was simply put to rest in 1994 with the dramatic tax rollback. A Health Canada workshop report described an increase in consumption of 9 per cent between 1993 and 1994.

While price was the only factor that could individually be demonstrated to be responsible for changes in consumption, it became clear that there was now abundant evidence that a comprehensive program could have an even more dramatic and cumulative effect on consumption.

Several states in the United States, in particular, Massachusetts, Florida and California, have instituted programs revolutionary in their comprehensiveness and stunning in their success. Prior to the introduction of the comprehensive program, California's youth smoking rates were similar to our own at about 27 per cent. They have fallen to an astonishing 10 per cent or less. The data, methods, funding and policies have now been studied and the necessary attributes of such programs are understood.

Let me now take you very quickly through the nine areas that need to be considered. I realize that some of these are beyond the purview of the federal bill, but the whole picture is important for analytic purposes.

First, price point pressure remains an essential component of tobacco control efforts. Price affects consumption at all levels, and in particular, has an effect on youth smoking rates and consumption levels. High prices help prevent kids from starting, and if they do start, from smoking as much and therefore achieving the same level of addiction.

Public education must be intensive and mass-media-based in order to complement community-based education programs. Both mass-media and community-based education programs are required.

There must be education about the risks of tobacco, and in particular, about deceptive industry practices. This is called a "denormalization" campaign and shows how far outside of the normal practice of marketing tobacco tactics really are. All of this public education builds support for public policy initiatives.

Marketing, and in particular, packaging, labelling and information disclosure are critical. Consumers must not be misled by the package. Therefore, deceptive labelling on tobacco packages, such as the words "light" and "mild" must be eliminated. Packages should provide real information.

Every product we purchase to eat has extensive information about its ingredients, but additives, smoke emissions or ingredients of tobacco, which are taken into the much more sensitive and vulnerable lungs, need not be disclosed.

Further, manufacturers' colours and designs should be completely eliminated; in other words, we need plain packaging complete with extensive health information and no industry information.

Retail controls are an important part of an overall program. Instead of point-of-sale advertising, there should be point-of-sale health warnings. Vendors and companies who sell to minors should be penalized and governments should provide sufficient resources to enforce compliance. Tobacco products should not appear at cash counter displays to ensure that customers, especially children, do not receive the message that cigarettes, which kill one in two smokers, are a standard product like the candy or potato chips similarly displayed.

Smoke-free spaces should be the norm for all indoor public places. Indoor work places must be safe for all employees. Since second-hand smoke may be the most toxic substance in an employee's workplace, smoking, if it is permitted, should be allowed only in separately ventilated and enclosed spaces.

Cessation for those who already smoke should be assisted by a comprehensive, evidence-based, nationwide system. The OMA runs a Clinical Tobacco Intervention Program here in the province. It is just one program, but there are other good ones.

Government health plans should also pay for nicotine replacement therapy for people who are on their drug benefit plans, something we recommend in our comprehensive paper on stop-smoking medications.

Finance and infrastructure issues are critical. In order to fund a successful program, a minimum of $8 per capita, with a mid range of $10 to $12 per capita, is required. This is a lot of money, but the return on investment is even greater.

In the case of cardiovascular disease, lower smoking rates result in savings in health care costs beginning within weeks. Savings in diseases of the lung accrue almost as quickly. In both cases, the savings are small at first, when people who would have experienced acute events do not. However, the savings begin to accumulate year after year, as people's lungs begin to heal and their hearts do not further deteriorate.

In addition, as time goes by, new cases are prevented. When that happens, cost savings develop major momentum. After seven years, lung cancer cases are being prevented in huge numbers.

This continual increase in cost savings escalates over about 10 years, and thereafter those savings continue in perpetuity.

At the same time as it has to be adequately funded, where you locate the infrastructure for this new strategy is critical to its success. Specific elements of the strategy must be located outside the government in an arm's-length agency. That is so for programs around the world that work. No comprehensive, successful program has ever survived when it has been held within government.

Responsibility for developing and resourcing such an agency, and some of the elements of the strategy, should be the responsibility of the federal Minister of Health, but such things as advertising, community education campaigns and support for smoking cessation should be outside of government.

Research, monitoring and evaluation are necessary to measure the implementation and outcomes of strategy components. In order to do that, strategies must be rigorously evaluated, periodic failures tolerated and change expected. Only through such rigorous examination will the strategy be improved and renewed.

Last, cost-recovery litigation should be initiated, supported by necessary legislation, to recover health costs. What is clear from the research from many sources is that a piecemeal approach to tobacco control will not work. Action must be taken in all of these areas.

Dr. Schumacher: In light of Dr. Boadway's presentation, I would like to analyze two initiatives. First, the initiative announced by the federal government on April 5, 2001, and second, Bill S-15, the Tobacco Youth Protection Bill before you.

First, the new federal initiative. The announcement appears to be going in the right direction, but on analysis, I find it does not meet the objectives.

In the first instance, the amount of money recommended by the government amounts to $3 per capita. This is not an amount that has ever been demonstrated as able to support a comprehensive strategy. There is no medical or academic base to support this number.

Furthermore, there is no method of guaranteeing that this money will continue as promised for the duration of the strategy.

What if the government begins to pick away at the money in small bits and pieces? This is not a dedicated fund and it is not a multi-year guarantee.

Further, we cannot find evidence that the government intends to move important components of the tobacco strategy outside of the government to an independent agency. On the contrary, the announcement spoke of "partnerships." That means, of course, that the government keeps control.

Evidence is clear. Here in Canada and elsewhere, it has been shown that programs under government control will not achieve the hard-hitting public relations and community action required. Independent agencies can operate in a more risk-accepting environment and have a single focus, undiluted by the complicated agenda of the government.

These two profound deficiencies of the strategy are enough to doom it. I have read the rest of the scant information provided on harm reduction, cessation and mass media campaigns, and I am unable to assess them on the basis of the information provided. Quite frankly, if you do not finance it and set it up appropriately, the rest becomes irrelevant.

That closes my comments on a poor proposal, and now I will turn my attention to a good one, Bill S-15, the Tobacco Youth Protection Act.

The single most outstanding feature of this bill is that it would establish a foundation called the "Canadian Tobacco Youth Protection Foundation." The objectives of this foundation are clearly set out and are what the foundation will be accountable for. This foundation will operate in a transparent manner and will be responsible to a board of directors, which in turn is responsible for carrying out the objectives of the foundation, and no others.

One of the laudable objects of this foundation is to examine existing models of best practices for tobacco control and develop a model to be applied in Canada. This direction is one of the most insightful given to the foundation, since we are confident that this is exactly the way to go about forming a successful strategy.

Quite frankly, I look at the objects focusing on statistics, research, communications strategies and prevention, and I support each of these statements as they appear. Nothing, however, compares with the mandate that the foundation should examine the existing models of best practices and review itself from time to time, comparing it with other models.

This is a strategy for renewal. This is a strategy for the future. This allows learning, adaptation and improvement.

Bill S-15 provides an amount of money of $12 per capita. This is an amount with the potential to fund an effective program. The drafters did their homework. However, this bill has an even more interesting feature. It is proposed that this money be raised by levy, and that all of the levy be received and held for the foundation. This means, of course, that there will be a continued and guaranteed revenue stream to fund this initiative into the future.

In short, Bill S-15 is the only proposed legislation I am aware of at any stage of its development in Canada that meets the critical tests of independent, arm's-length authority and sufficient funding. It establishes the objects of the foundation such that the initial direction is appropriate and the future course of renewal is ensured.

It sets up the objects such that success is fostered, and it points the foundation in the direction that provides the maximum possibility of productive endeavour. It asks for research and evaluation. It mandates public education. This bill has features for success that make it totally supportable.

We have looked at the two proposals to see which can measure up to the test of excellence, and to the idea that a strategy should be structured in a way that makes it possible to succeed.

I would now like to consider the question of whether or not the parties proposed to lead this campaign are credible. I have already stated that the establishment of an independent foundation is the master stroke for allowing success.

The federal government collects $80 million a year from these children. Then, it does not even take the ill-gotten tax and put it back into preventing youth smoking.

They committed to examining the feasibility of requiring plain packaging. The government-controlled Standing Committee on Health examined the issue and recommended plain packaging on economic and on health grounds, if a study by Health Canada showed plain packaging would reduce consumption. The study did say that "generic packaging is a reasonable component...to reduce tobacco consumption." However, the federal government did absolutely nothing on plain packaging.

Another example was the promise to replace the Tobacco Products Control Act in order to make health warnings on tobacco packages more effective. We were part of the campaign to get the federal government to live up to that commitment. It took years, and exhausted health community resources, to finally convince the government to move on this matter.

Finally, effective health warnings have come to be, but only within the last year. It took almost seven years to happen.

As for the "comprehensive public education campaign," which again we read about in Hansard, where is the extensive media campaign today? We know what an effective campaign is because we have seen it in other countries, and frankly, we do not have one - another unfulfilled promise.

The promise to reach young women, who it was noted "were starting to smoke at an alarming rate," is seen by most health experts as totally unsuccessful. There is no fulfilment of the promise to use new approaches for reaching groups who have not responded to earlier campaigns, again promised in Hansard.

Finally, let us look at the statement by the Prime Minister in his speech given to the House of Commons on the day in February, 1994, that the tobacco industry routed the federal government, an action that we called a "Craven Cave-in" at the time. He said, "the money generated by this surtax will fund the largest anti-smoking campaign this country has ever seen."

Well, let's look at it. The money generated by this surtax never got a chance to be used for anti-smoking. It was siphoned off into general revenues. With revenues in the first year from the surtax at $65 million, and rising over five years to almost $100 million per year, Minister Marleau reported first-year expenditures of only $30 million, as recorded in Hansard on September 29, 1995, and apparently declining rapidly over two years to only $10 million.

"The largest anti-smoking campaign this country has ever seen" simply became a figment of the imagination - up in smoke.

Then there is the treatment of previous attempts by the Senate to initiate an effective program through previous bills. You know the history better than I do, but from the outside it has been clear that the government did not accept these bills and also failed to develop an effective program.

Instead of finding a way to see the bills through the House, they buried them using a Speaker's ruling. The explanation was given with a straight face, but personally, I am skeptical about this procedural explanation.

Let me state this in no uncertain terms: The tobacco tax rollback in 1994 has been a public health debacle of a type this profession has never seen, one that was predicted by the OMA, materialized as predicted, and was the result of deliberate action in the face of this knowledge.

I use the word "debacle" intentionally, because in the confused rush to solve one problem, another was created. What has happened - an increased adolescent smoking rate from 21 to 28 per cent - was predicted at the time and was a certainty. Tobacco is the number one preventable cause of disease in Canada. The acid test of any government's commitment to public health is its management of this number one threat. Where is the commitment to solving the problem? Where is the comprehensive, integrated program? I question the credibility of the Government of Canada in this arena.

Senators, you have before you a bill that represents a major step forward. The doctors of Ontario support you. We are grateful that you have not given up this fight in the face of intense opposition from your own federal colleagues. This bill offers the best opportunity for an effective approach. We will work with you to see it brought to fruition.

The Chairman: Thank you very much, Dr. Schumacher and Dr. Boadway, for a very hard-hitting and to-the-point presentation.

Senator Wilson: Thanks very much for your presentation. I think you will find a lot of support and agreement from the panel. Obviously this is a political question - it has nothing to do with what should be happening or the information that you have given us - and is twofold.

With whom does your organization work in partnership politically to try to get this through? You also said you would work with us. How do you intend to do that?

Dr. Schumacher: We would certainly be directed by you as to the most opportune things. As much as we may understand where Parliament Hill is and think we know how things work, there is always insight that the professionals and the people who are there on a day-to-day basis can give us.

Our partners across the country include such major players as the Canadian Cancer Society, Heart and Stroke, the Lung Association, and the many anti-tobacco and non-smoking groups. They are in just about every Canadian community and certainly in every community in our province. We have worked with them in bringing forward some very effective programs.

I certainly believe that they fully support what we have said. I do not think that you would hear any different presentation from any of them.

We will certainly bring our combined resources to the task. We have done that through the Ontario Coalition Against Tobacco, and we will certainly bring those efforts into play to ensure the success of this bill.

Dr. Boadway: Since we are really much more accustomed to operating at the provincial level - that is really our little ballpark - we have very much appreciated the advice we received from Senator Kenny and others who have federal experience, because quite frankly, we needed it.

We have also worked with the Canadian Medical Association.

Senator Wilson: Out of my frustration, I recently asked someone very high up in government what non-governmental organizations could do to get some movement from the Tory government. He said, "Well, if something gets into the media, the government twitches and jumps." I do not know what relationship you have with the media, or whether you have any strategy to use that as a tool to raise these questions publicly, because what you have said should be heard much more widely.

Dr. Schumacher: Thank you, senator. We certainly have some experience with the media. Our organization deals with a wide range of public health issues, sometimes several at once.

Certainly of late, concern about air pollution, in this province and across the country, and about water quality, especially in our backyard in Walkerton, have caught the attention of our association. However, it has not in any way diminished our concerns about tobacco.

If you speak to physicians - and it is interesting to see my colleagues advocate with their politicians, both provincial and federal - it does not matter if they are ophthalmologists or radiologists or vascular surgeons, they will bring the same consistent message, unrehearsed and unbriefed, that I bring to my local members.

Senator Banks: Thank you very much for your presentation.

I guess you know that you are speaking to the chamber of "first sober thought" in the case of this bill, because of Senator Kenny's indefatigable commitment and hard work over many years. You are quite right to identify the fact that there are people in the other place who, for whatever reason, seem inclined, at the very least, to withhold their commitment to the bill, as they have in the past. Whatever you can do in that respect would be very much appreciated.

This is almost as much an observation as it is a question, but you may have some insight into it because, as you said, you work closely with these people, particularly with young people. Senator Kenny's particular concern is young people, because while the incidence of smoking among adults has gone down, among young people it is going up.

It cannot be a lack of education in the normal sense of the word, because surely people cannot actually look themselves in the mirror and say they do not know that smoking is harmful. People cannot claim that they do not know that smoking is addictive.

Have you ever come across any explanation, or arrived at any conclusion, as to why someone would begin to smoke in the certain knowledge of those facts?

Dr. Schumacher: Well, Senator Banks, I can try. We are seeing, even in the media, always extremely subtle, under-the-surface attempts to once again glamourize smoking. We are now seeing models appearing with cigarettes and cigars. We are seeing that once again. There has been a constant American influence whereby tobacco advertising in some areas has been more acceptable or is still permitted. There are always under-the-current messages being propagated.

Cigarettes have often been a sign of rebellion. Unfortunately, cigarettes are also more addictive in people who indeed have their own medical problems - attention deficit disorders and so forth. Those people are even more vulnerable to potential continuation of cigarette smoking. It is a tough nut to crack. There is no one good explanation.

However, I want to reinforce that the price sensitivity of our youth to tobacco is a certainty. We have, unfortunately, seen that with that 9 per cent increase in smoking rates. I hate to say that during that 10 years, we have gone from perhaps the best anti-smoking jurisdiction in North America to now likely one of the worst.

If we compare our statistics with California, where 10 per cent of adolescents smoke compared to our 29 per cent, and if you take that as an indicator of health in that population, then that is a huge difference.

That is not a failure of health professionals. We are not the ones telling people to smoke, or doing a poor job of constantly telling them not to smoke. This is a combination of all those government social and fiscal policies that have moved California in a different and superior direction.

Dr. Boadway: We know that 19- and 20-year-olds are not likely to start smoking, because by that age, they do not have the same personal establishment needs that younger kids have.

Trying to get a 15-year-old male or female to listen to a guy with hair like mine does not work very well. They have got me pegged where I am in the age group.

They have these rebellion needs as they grow up, and trying to get a message about long-term health deficit to a 14-year-old is like talking to a door. It does not work. These kids think they are invincible. They know they are strong and they do not think that way. There is a whole range of factors that make smoking valuable for them. Rebellion and establishing personal identity are the most important.

By the time they are about 18 and have a change of mind, addiction takes over, because anybody who smokes for as short period of time as a year is addicted. Therefore a lot of these kids want to quit at 16 or 17, but they cannot because now addiction takes over. It is a very powerful addiction with the same quitting rate, unfortunately, as attempts to quit cocaine or heroin.

There is rebellion and unwillingness to listen - actually inability to listen due to their own complex psychological milieu as they establish themselves - and then getting out of control and becoming addicted. That is a serious problem.

Senator Banks: One more thing has also puzzled me. You must have seen in both The Globe and Mail and The National Post, over the past few months, advertisements by the two biggest tobacco companies actively urging people to support this bill. Those two tobacco companies have spent certainly hundreds of thousands, if not more than a million, dollars on those efforts, because those ads cost a lot of money. What do you make of that?

Dr. Boadway: When my enemy gets behind me, I wonder what is going to happen to my back. I do not know. I cannot figure it out. They are choking off their future revenue stream. Maybe it is your incredible powers of persuasion.

The Chairman: More than one presenter said that by doing so, they are creating the impression that this is an adult vice, knowing that youth would then be attracted to smoking.

Dr. Boadway: I suspect they have made the political calculation that this bill will not survive.

Senator Wilson: Exactly, so they are onside.

Dr. Boadway: They can support something that is a sure loser and then look good in the future. I do not hear them asking Mr. Chrétien to introduce a similar bill in the House of Commons. So far, I have not seen that ad in The Globe and Mail.

Senator Banks: They have urged him to support this bill. They have urged people to write to their MPs asking them to support this bill in the Commons.

Dr. Schumacher: I think they are effectively taking a gamble. I think too, if you look down from 30,000 feet at international tobacco marketing, the biggest emerging markets are 10 years from now, and not necessarily within the borders of the country, or even in North America. The export of cigarettes is one of the ultimate rising markets. As long as they can remain secure in growing the product and receiving farm subsidies and everything else, if they have an offshore market that they can sustain and grow, it could be that our children are only target B instead of target A. Again, that is pure speculation on my part.

Senator Adams: Before I ask my question, I should probably do a little bit of explaining.

Where I live, kids start smoking between the ages of 10 and 14 years old. How long does it take to become addicted to nicotine? Is it a couple of months or is it a year? Can you explain that a little more, Doctor?

Dr. Boadway: It actually varies from person to person. We do not understand exactly why that is so. Let me just talk to you for a second about tobacco addiction.

You have probably heard people who have not smoked for a long time, perhaps 10 years, say, "I picked up a cigarette and I smoked, and bang, I was back on it like that." They are not putting you on, and this is why.

You have receptors for nicotine on the nerve cells in your brain and all receptors have a shape. Every receptor on your nerve cells depends upon its unique shape for what it does. Let us just say it is in the shape of a diamond. It does not matter. When you smoke and the nicotine attaches to your receptors, they actually change shape. Once they have changed shape, you are in an addicted state. They have an altered response to the next molecules of nicotine that attach to them. That change of shape is permanent and people do not develop new receptors. Therefore, when they tell you that 10 years later it was instantaneous, it was.

We know that there are variations in receptor changes among individuals. It takes longer in some than in others. A person can be addicted to nicotine within weeks of beginning. Some people can smoke for a couple of years before they begin to show addictive tendencies.

There are even some people who smoke over the long term and do not have withdrawal symptoms when they quit. They are just very lucky. We do not understand exactly why that is, but they are a tiny minority.

You can safely say that anybody who has smoked for a year, especially at a pack-a-day level, is an addict, except for that very rare individual.

And you are right, kids will do it. It is not a rarity to see a kid who is addicted at 12 years of age because they started at 10.

I might just put in another plug here. The federal rules on stop-smoking medications state that they are not supposed to be given to kids. Why not? If you have 12-year-olds who are suffering and need help to stop, doctors are recommending, ignore the law and give it to them.

Senator Banks: On pain of what?

Dr. Boadway: Pain of withdrawal.

Senator Banks: What is the penalty to you if you ignore the law and give the kid the pill?

Dr. Boadway: Nothing.

Senator Adams: What about second-hand smoke? Do you get lung disease from the effects of second-hand smoke? A pregnant woman may be different. When the baby is born, they can detect nicotine. How does second-hand smoke work in both of those two?

Dr. Schumacher: In that case, there is a difference. You are not dealing with nicotine as the principal addictive agent. It is the 3,000 or 4,000 different potential carcinogens. We see there, and not only from second-hand smoke, all of the effects on children's lungs and nasal passages, including probably a doubling of the rate of asthma in households where one or more people smoke, and a doubling of the number of tonsillectomies, ear tubes and so forth, because of that inflammation and that disease.

Certainly it has been clearly documented that second-hand smoke increases the risks of lung cancer, of heart disease, and of almost every other cancer.

As you are probably aware, even things like bladder cancer are at double or triple the risk as compared to somebody who does not smoke.

I have to say, it is a very unfortunate experiment, but I am going to be interested to see what happens in the future as we have introduced some very potent 24-hour-a-day smoking laboratories in Canada in the form of casinos. Bars used to close at night. In many of those institutions, at race tracks and so forth, smoking goes on 24 hours a day. Many of the people who work there are exposed. Some of them are non-smokers who are exposed to the same high levels every day. I think we are going to see some unfortunate outcomes in the very near future.

Dr. Boadway: The only problem with second-hand smoke nicotine exclusively, is that the receptors of people who were addicted and quit are hypersensitive because they have not had their shake for awhile. The second-hand smoke nicotine floats by, gives those receptors a good rattle, and now they really want a cigarette. It is physiologic. They are not putting it on.

Senator Adams: How about the nicotine patch that is supposed to help you stop smoking? Does that work?

Dr. Schumacher: Yes, nicotine patches are an effective way of helping people to stop smoking. They work extremely well, especially in combination with other oral medication that is available. It is safe.

There are myths out there that if you have a cigarette when you have a patch on, you will die. That is not true. In fact, we believe the safety of nicotine patches is so great that we have recommended their use in pregnant women in our publication. It is much better for the health of the fetus to have the woman stop smoking and use the nicotine patches, because then we only have the nicotine problem to deal with, and that can be tapered off. All of those other carcinogens, chemicals and tars that can affect both the mother and the baby will not be a factor.

Senator Adams: These patches cost money. Are they given away free?

Dr. Schumacher: Unfortunately, they are not. Patches cost about the same as a pack of cigarettes. You are talking of about $5 a day in the case of a one-pack-a-day smoker. They certainly are effective. One thing that we would like to see, and are asking for as part of the overall strategy, is nicotine patches covered under both publicly provided plans, and, importantly, under federal government prescription plans for the people who work for you.

Senator Adams: Maybe part of the $98 million that Senator Banks talked about should go to making it free to the people who want to stop smoking.

Dr. Schumacher: One can certainly try to cost that out, Senator Adams.

Senator Adams: Thank you.

Senator Kenny: First, I would like to apologize for stepping out briefly. It was my last chance before our network left and I took advantage of it, but I apologize for doing that.

I would like to thank you both for your comments. They were thorough, articulate and well-reasoned. However, the government is not there yet. They are trying you on. The $3 per capita is to see whether or not you folks, and the rest of the health community across the country, is going to accept that. Is that enough?

You were very clear today, but we are a small group here. The real question is, can you be as clear with the folks in Ottawa? Because they want to know. It really is a try-on. It is a test of the health community to find out if you are prepared to settle for the $3.

You have done the bill a tremendous service today, but it will not make it without more effort. What can you do to help?

Dr. Schumacher: Senator, you know my commitment to the health issues since your previous bill; you have received my full support. Certainly in my position of influence in my association, and knowing the support of the physicians, we will do everything in our power, from both our individual perspectives and especially from that of our association.

There is no greater public health problem. The tragedies we have faced in the last year in this province, with water, with air, with imported infectious diseases, pale in comparison to what we are dealing with here, especially when we are considering our youth. Therefore it has our primary attention.

Dr. Boadway: How about if we just say it this way? This is not our first or our last kick at this can. We are not going to go away. I think you know that by now. Perhaps you would allow me to politely decline your invitation to tell you what we are going to do next; we will do it anyway.

Senator Kenny: I have great confidence in you, Ted, and go for it.

The Chairman: To finish this off, I think Senator Kenny got at the nub of the problem. Everybody agrees that it is the right thing to do. Under the parliamentary system, the cabinet thinks that what it puts forward has to be done, and we have a number of people who believe that whatever the cabinet says has to be supported, regardless. It takes a great deal of work under a democracy.

The point is that thousands of letters coming in to your MP and your Prime Minister very much have an effect. I think the point to get across is that they are just nibbling at the edge of the problem, and not getting out there and doing something about it. It is not only government members.

You do not have many opposition members here in Ontario, but it does not hurt to speak to them. I have been in either opposition or government for years, and it is amazing how closely the government tries to "you-too" the opposition. If it starts looking like the opposition is going one way, the government does not want to lose votes in that area. Therefore, all I can suggest is keeping up the good work with letters, letters and more letters. Thank you again for coming.

Dr. Schumacher: Senators, thank you very much for coming to Toronto and providing us with the time and opportunity. We appreciate that.

The committee adjourned.

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