Proceedings of the Standing Senate Committee on
National Finance
Issue 14 - Evidence - July 5, 2010 - Evening meeting
OTTAWA, Monday, July 5, 2010
The Standing Senate Committee on National Finance, to which was referred Bill C-9, An Act to implement certain provisions of the budget tabled in Parliament on March 4, 2010 and other measures, met this day at 6 p.m. to give consideration to the bill (topic: Parts 15 and 18).
Senator Joseph A. Day (Chair) in the chair.
[English]
The Chair: I call this meeting of the Standing Senate Committee on National Finance to order. This is our eighteenth meeting of the committee in relation to Bill C-9, budget implementation act, 2010.
At our previous meetings, the committee heard from various departmental officials and outside stakeholders who are interested or impacted by this proposed legislation. This evening we will be focusing on Part 15 and Part 18 of the bill, which deal with AECL and Canada Post.
With our first panel we will return to Part 18. We have had some discussion with respect to Part 18 thus far, and that is Atomic Energy of Canada Limited. We are very pleased to welcome this evening Mr. Jan Carr, Former Chief Executive of the Ontario Power Authority, and Mr. Bryne Purchase, Executive Director of the Queen's University Institute for Energy and Environmental Policy.
[Translation]
This evening, we have only one hour for this committee meeting.
[English]
Bryne B. Purchase, Executive Director, Queen's University Institute for Energy and Environmental Policy: Thank you. I believe there would be widespread agreement on the following propositions: Nuclear generating technology will experience a fast growing global market over the next 20 years, especially now because of its low carbon footprint; the best markets will be in Asia, that is in China and India, South America, Russia, South Korea, South Africa and the Middle East. The North American and European Union markets will be soft, delayed by a combination of slow economic growth, still troubled financial institutions and the high financial risk for new nuclear projects. Perhaps a little more controversial, AECL's new reactor design, the ACR-1000, even if completed, will not be sold in Canada because neither the Ontario government nor the federal government will take the huge financial risk to build it; neither will any private enterprise.
Nuclear power reactors are not BlackBerrys. They are closer to the Avro Arrow in terms of international marketing. Governments, either directly or indirectly, dominate that market. The companies best positioned to serve the global growth markets, as well as their own home markets, are the Japanese-American entries, Westinghouse and General Electric Nuclear; Mitsubishi Heavy Industries; AREVA, the French company; and Rosatom, the Russian company. Each has its own light water technology. They have greater financial scale, vertical integration and greater political clout than AECL.
As a result, I fully support the Government of Canada's decision to sell, merge or otherwise partner AECL with a more globally competitive entity in order to leverage Canada's nuclear capabilities more fully.
My only caveat is that the government should commit to an independent review, perhaps by the Auditor General or some other competent independent body, of any deal in order to determine the degree of risk transfer; the probability of any future liability to taxpayers of Canada; and the strategic logic of the deal in terms of strengthening Canada's competitiveness and leveraging its assets in the global nuclear power industry.
Jan Carr, Former Chief Executive Officer of the Ontario Power Authority, as an individual: Thank you. Good evening. I am here as an individual. I have no personal, economic or professional interest in the outcome of this, so I am here at your invitation and happy to answer any questions you have. By introducing myself I will give a little hint about who I am and what areas of questions I might be able to help with. I will also conclude with my view on the situation, in the same way as Mr. Purchase has given his view.
First, as you mentioned, I retired recently as chief executive officer of the Ontario Power Authority, which was the highlight of a 38-year career, all of which has been in electric power. Prior to that job, which incidentally involved responsibility for both the long-range planning and the procurement of generating resources for the province of Ontario's electricity system, I was vice-chair of the Ontario Energy Board. Prior to that I worked as a consultant; either as an engineering consultant or a management consultant on some of the business and financial aspects of the electricity industry.
Those were my day jobs. Part-time jobs have involved a number of board positions, some of which I continue to fill. I mention this because these, of course, bring one into close association with some of the issues of transactions like privatizations, mergers and acquisitions. I have been on boards of publicly traded companies, on privately owned corporate boards, as well as public non-profit organizations, including a heavy involvement in a company that invested in triple P, or public-private-partnership type projects.
One of the things I have been doing in retirement is attempting to contribute to the level of public understanding that exists on energy in general. Given the situation that Canada has as an energy economy and is an energy country, it is in a rather sad state of repair — the public understanding that is. Among other things, I helped to organize last October a conference held here in Ottawa with the Council for Clean and Reliable Electricity, along with the University of Waterloo, on nuclear power.
I am hoping that this report was distributed to everyone. This is a summary report from that conference and I would like to take a moment to read the one-page conclusions from it. They are rather dense but they give a good idea.
The reason for the conference was the expectation that the Government of Canada needed to get going with the decision on the future of Atomic Energy of Canada Limited. I am deeply interested and pleased to see that there is some progress being made.
Our perception was that the holdup was a degree of fear that governments and Parliament may have over the public perception of nuclear power, in particular the areas of cost, safety and waste disposal. These are the three big bugbears that the industry appears to have and so we addressed them. If I could, I will take a moment to read the conclusions from the summary paper coming out of that conference.
Nuclear power is an essential ingredient for meeting global energy needs while simultaneously reducing the production of greenhouse gases and making progress on the alleviation of poverty. The nuclear industry does not enjoy unqualified public confidence, in part due to concerns around safety, waste management, which have no foundation in factual experience. The nuclear industry's reputation for delivering late and over budget is exaggerated but has some basis in fact.
Canada's CANDU technology has a role to play due to its unique characteristics, but its full potential cannot be realized with the present commercial structure of its owner, AECL. The Government of Canada's announced corporate restructuring of AECL is a positive step towards realizing economic benefits from the substantial investment it has made over many decades in nuclear power.
Nuclear power's contribution to future global energy supplies will be limited by the lack of capacity in the existing supply chain. It will also be limited by the challenges of propagating to new entrant countries the comprehensive regulatory oversight and peer review programs that are essential to maintaining safety standards and a regime of non-proliferation treaties.
Overall, the promises of Canadian economic success, while making a valuable contribution through its nuclear industry to reducing geopolitical tensions by facilitating sustainable energy supplies, far outweigh the challenges in realizing these goals.
To facilitate this, the Government of Canada should act on its announced intent to restructure AECL without delay. As well, the nuclear industry should address its chronic inability to complete projects on time and on budget such that commercial performance achieves the same high standards it has achieved in both its technical operations and its safety record.
That was a summary of a day's discussion among experts from the industry that I think captures it very well.
Finally, I would like to conclude with my view of where we are and in particular Part 18 of Bill C-9. The government's stated policy of reorganizing and commercializing with private capital I believe is correct. However, the government should keep some involvement, and I say that for several reasons. First, there is a very significant potential geopolitical element to the energy sector. Nuclear power and the unique properties of the CANDU technology actually puts Canada in a very good position in that situation in a global context. We like to see ourselves as reducing global tensions. Energy is one of the tension points and the CANDU technology has immense opportunities that are unique to that technology to deal with that. For that reason, the government should think seriously about retaining a minority commercial interest in the company when it has otherwise brought in commercial capital.
The process outlined in the bill is the correct one. Time is of the essence. It is a great pity and it would have been much better if Ontario had made a decision more supportive of AECL and CANDU than it did. That being the case, the value of the company today is less than it was yesterday, and the value tomorrow will be less than it is today. This is a depleting asset and time is of the essence. For that reason, I support the process of making a decision that is outlined in Bill C-9.
The Chair: Thank you, Mr. Carr. I assume that you were referring to that part of AECL dealing with the electric power generation.
Mr. Carr: Indeed.
The Chair: That is as opposed to the other aspect of AECL dealing with the isotope production and research.
Mr. Carr: Yes. I have views on the isotope issue, but those are views of talking to my neighbours, not expert views on the medical isotope business.
The Chair: Your comment was quite clear that there is tremendous potential for this technology and you would like to see it continue as a going concern with the government having some interest in whatever that going concern might be.
Mr. Carr: Yes.
The Chair: You are aware that the legislation provides for the possibility of dissolution, winding up, amalgamation? They are all there.
Mr. Carr: Yes.
Senator Baker: As the chair pointed out, the legislation is really a blank cheque because it allows the government to make whatever decision it wishes to make; it allows the government to create corporations; it allows it to sell off assets, to amalgamate or dissolve.
Do either or both of you wish to express an opinion on what you thing the government will do? What do you think is the intent of the government?
Mr. Purchase: The legislation, in my mind, reflects the fact that it is simply uncertain as to what deals are out there; no one knows in advance what might be possible. We know what we would like to achieve in the way of access to foreign markets and strengthening of the corporation in various ways, but no one knows for sure what that exactly will look like.
I agree that the language looks offensive when you read it. That language strikes you very forcefully as a blank cheque, as you put it.
Having said that, I could not — perhaps Mr. Carr has a different view — think of how it could be constrained and yet still seek out a fulsome review of all the potential or opportunities that might be out there. I do not think there is necessarily all that much interest, notwithstanding the enormous potential of this industry and the technical quality of many of the assets we are dealing with here.
I sympathize with the government, notwithstanding the offensive nature of that language. I sympathize with the government in searching broadly for a deal. My way of approaching that is to hook them at the tail end and say to them, explain the deal to us; have some independent entity review the deal and give us their opinion as to what you did, effectively. Did you enhance all the things you wanted to enhance in the way of leveraging all of Canada's nuclear assets?
I would tack it on to the end, rather than constrain the deal upfront somehow.
Senator Baker: Mr. Carr, what do you think of what the government intends to do? You have explained what we would like to see done but what do you think the government intends to do?
Mr. Carr: I am acting on the assumption that the government intends to follow the advice they received that is contained in a report written by Rothschild, December 2009, which listed two or three objectives. I do not disagree with Mr. Purchase's comments. I regard the legislation as it stands as enabling, and it will be a complicated structure. It does not make sense to tie one's hands as to exactly what the form of that structure will be at this stage of the game.
I would come at it from a different point of view. I have heard several people ask why the government needs to have Part 18 or any legislation. They own the thing; they should be able to sell. I can sell things as an individual without seeking legal permission to sell. Mr. Purchase might have a comment on this, because he was deputy minister when the Government of Ontario went to sell Hydro One and it came to a crashing halt before a judge when someone brought an injunction that the government did not have the authority to do it. I am almost seeing Part 18 as a housekeeping matter, just to clarify that the government does indeed have the authority to do as it wishes with the property it owns.
Senator Baker: Mr. Carr, you were very explicit in your recommendation that the government maintain, as you said, "a minority interest."
Mr. Carr: Yes.
Senator Baker: Why are you suggesting a minority interest when you recognize that for a competitor in the market like AREVA there is a 78 per cent state-owned share of that company? Why are you suggesting that here in Canada we only maintain a minority ownership of shares?
Mr. Carr: The main thing that needs to happen, for the benefit of the technology, the Canadian economy and the company, is in fact to introduce what I call commercially motivated capital. In other words, nuclear power engineering is not a social service; it is a business. That is best carried out by private capital.
The reason I am suggesting a minority interest is such that it does not therefore scare off commercial capital, which abhors being in a minority position. Anyone who is going to put capital in will want to be in a commercial control position, a majority.
I am suggesting that the government retain some interest for non-commercial reasons. There are many geopolitical aspects related to nuclear power that frankly could be used very handily by the Government of Canada in its international diplomacy. These are not commercial matters. These are relieving global tensions. These are providing energy to countries like India, which has an enormous growing appetite for energy. If all that energy is conventional energy, the way that our energy is at the moment — oil and coal, et cetera — this will have a profound effect on the balance of payments and the transfers of wealth around the world and will increase tensions, no question.
I can go into details if you like, but I think the peculiarities, uniqueness, and technical details related to the flexibility of the CANDU nuclear cycle in effect make it a powerful tool for peace and, frankly, reducing geopolitical tensions. To me, that is something that any government would like to be associated with and retain some interest and control in.
Another secondary factor is that nuclear energy, because it is tied up with things like non-proliferation treaties and various other things, inevitably involves some state-to-state activity whenever there is a transaction involved. The Prime Minister of India had a meeting with the Prime Minister of Canada not that long ago with regard to nuclear energy. It was not about CANDU, but it was nonetheless a nuclear discussion.
The success of the CANDU technology under new ownership will inevitably benefit from support by the Government of Canada, hence a minority interest.
Senator Baker: Have you heard of CANDU clean, a process used for cleaning? It is one the new technologies of the industry. It was developed, as I understand it, over the years in that AECL had joint contracts with AREVA at various locations in the world, recognizing that a great industry is not just in the building or purchasing of reactors but in the refurbishing of reactors and in maintenance contracts. I thought we were on pretty safe ground for the future in that area in that we were now taking part in many contracts around the world relating to that service of cleaning and that we had a robot. However, you say it is a "diminishing asset."
Mr. Carr: The asset being AECL. Most commercial companies are valued on the basis of their order book, in other words, how much revenue can it be counted on to earn over the next number of years. In the absence of an order book, a potential purchaser will make some guesses, but in the end they are just guesses. An order book is always better than guesses.
AECL does not have a long order book. The main asset, as I see it, is intellectual property, and the main aspect of intellectual property is the people. Those people are retiring and will move away. The company is unable to attract orders, in part because of a lack of confidence in its future, in part because of a lack of confidence in its future and in part because of a lack of action by the government to clarify the future. It is the same reason employees will drift away. In the end, there is nothing left.
Time is of the essence. AECL is a decaying asset as it stands, in part because it does not have an order book and its main resource, therefore, is intellectual property.
Senator Baker: Have you noticed the number of litigations between AECL and AREVA in the courts of late?
Mr. Carr: I have not.
Senator Runciman: Thank you for being here tonight. You both mentioned the lack of a decision in Ontario. I am wondering about the timing of the Ontario decision in terms of your backgrounds and your thorough understanding of the needs of the province with respect to energy.
When do you think it is critically important that Ontario make a decision in this regard? Do you have any views you would like to offer?
Mr. Purchase: If I can put it this way, they have been fortunate, by virtue of the recession, which has given them some breathing space in terms of making a final decision on a new nuclear plant and on refurbishment of the existing plants, because they are all sitting there waiting for some decision. If you are going to build new capacity in Ontario, then you will not refurbish some of the older stuff at Pickering B, for example.
Nothing can move ahead, and yet this is 50 per cent of Ontario's electricity supply. It is far from a slam-dunk done deal, technologically speaking, to refurbish. We experienced that at Pickering A, for example, when we refurbished. Two units were refurbished are still not functioning at high levels of utilization.
I am told there are problems with the Bruce Nuclear Generating Station. These all add up. These machines sooner or later wear out, and we are at grave risk and with a huge bet on nuclear in Ontario. We do not have a long time to resolve these issues. I think the ACR-1000 is now simply not likely to be built, but maybe the Enhanced CANDU 6 would be built. If you do build it, these things have to be there on time because you are probably decommissioning some existing nuclear. This is an intricate timing phenomenon and it is important that it be on time and, obviously, on budget; however, on time is more important than people often understand.
Senator Runciman: How does it tie in with the commitment to close down coal and the new requirements the federal government is talking about with respect to coal as well?
Mr. Purchase: Coal was always the fallback resource for Ontario when nuclear plants did not work. That is one reason our emission levels went up in the late 1990s, because many nuclear plants went out of commission and were taken off line, so we used more coal. Obviously, our CO2 and other emissions went up dramatically in that period of time, but coal has been useful as a fallback. I am not entirely convinced — we will see — that coal will not yet be used in the future. These issues are quite complicated and we cannot simply be without the electricity supply in the province. We are not doing ourselves any favours by creating a great deal of uncertainty about the future of electricity supply in the province.
Senator Runciman: I recall these conversations around the Ontario decision and the questions asked in the Ontario legislature with regard to the future of CANDU and AECL if Ontario did not select the Canadian built reactor. I am looking for feedback from either one of you. Would that be the death knell for AECL? Ontario did encourage other bidders, as we know; I think two or three were involved in the original bid process. How critical is it that when Ontario ultimately makes a decision, that the decision is CANDU?
Mr. Purchase: I am sure Mr. Carr has a view on this, but my view is that it is absolutely critical to the future of the ACR. If we will not take the risk of building the reactor in this country — and I am not saying we should, because I do not know exactly what the status is — but if we will not take that risk, I doubt that any other country will take that risk. There may be a niche market with the Enhanced CANDU 6 because it has certain desirable properties as a technology, as Mr. Carr mentioned. I think maybe you can be a niche player. I would like to see more on that in terms of proving it.
I do not see a future for the company without generation III technology.
Senator Runciman: Without an Ontario decision.
Mr. Carr: I will take a more positive view than that. When I said that Ontario could have been more helpful, obviously the most helpful would be to place an order for a new build. To answer your question, Senator Runciman, about the deadline, it was two years ago. The build time is 10 years, and we are eight years away from when we need to replace 500 megawatts of nuclear power.
Ontario made a decision for Ontario's reason. I was not on the inside at that point and I do not know the reasons. Rumours are that the price was too high. Certainly I think the procurement process was the wrong one. If you wanted to design a process to drive the price up, you could not have done a better job. It does not surprise me that the price tag gave everyone pause. In that regard I do not criticize the Ontario government for not making the decision.
Having said that, and having said as the government did, that the company that was the only company that was compliant or closest to compliance with the bid requirements was AECL. That is the home team. There are 30,000-odd employees who live and pay taxes in the province of Ontario. Would you not think that you would have said that in a slightly more positive fashion to add some value to the company, as the people of Canada are now attempting to privatize it at the maximum value?
My criticism was not so much the decision of Ontario or the timing of it as, frankly, it damned AECL with faint praise when it could have actually helped the situation for everyone.
Senator Runciman: Mr. Purchase, you talked about four possible buyers for AECL: AREVA, Westinghouse, General Electric, or a consortium of Canadian companies. I heard this morning that AREVA was quoted in the Quebec media indicating a lack of interest in participating, that it was too big a gamble for the company to consider. Do you want to speak to that?
Mr. Purchase: I wrote something to that effect. I think it is 18 months or two years ago that I thought AREVA, at that time, would be interested in acquiring AECL. I think they have probably lost interest, because what are you buying now? The Canadian market is not big. If you buy the company, how many new reactors will we build in Canada? The Ontario market definitely looks shaky now. In Western Canada there is not a huge interest either, in Alberta or in Saskatchewan. In New Brunswick, possibly, but I do not see that anytime soon, since you have to export a good deal of the power that you would produce.
Senator Runciman: AREVA is sticking its nose in there, too.
Mr. Purchase: The Canadian market does not look like it has many viable projects. Eventually, perhaps, yes, or maybe there will be big public policy which would drive us in that direction — some form of carbon pricing or who knows what in that regard. Right now, however, it is looking pretty soft. Getting into the Canadian market has a little less urgency, using the acquisition as a way of entering the Canadian market.
I am more upbeat now with the possibility that there may be a deal with a country, such as India, government to government, straight up, and possibly China. India looks like it would be most likely because they have a history of heavy water technology and utilize it still. Remember that most of these countries, with the big growth markets, want their own technology. I think we could help them with that, but they will want their own company.
Senator Runciman: How politically palatable would that be, though?
Mr. Purchase: We seem to have turned the corner on some of these issues with respect to proliferation and nuclear weapons.
However, that is where you have to go with these things. These are not BlackBerrys. These consumers are completely different and do not make impulse purchases; these consumers are thoughtful. They have plans about what they would like to do and they want to leverage these huge infrastructure projects. After all, what is it if it is not a huge infrastructure project building a new nuclear plant? They want to leverage it to get maximum benefit for their own economies as well.
Senator Mitchell: You have pretty much answered this question but I would like you to summarize what, therefore, is left in AECL? There are a number of plants, but they are getting older. There is intellectual property, but at least the ACR-1000 might have some questionable value. The older CANDU technology is apparently still working but it is getting old. When you scrape it all away, what is there actually to sell and what kind of price do you think we would get for it anyway?
Mr. Carr: I do not know what kind of price we would get. To answer your question about what we would sell, first, AECL does not own any plants; it owns the technology. Technology is intellectual property. Intellectual property consists of patents and things like that, but you do not need to buy a company to get access to use the patents. You can work out licensing agreements, and so on. In the end, what you are buying is the people. You are buying the brains. You are buying the human resource. That is what the value of AECL is, it seems to me.
Senator Mitchell: If you let them go down?
Mr. Carr: If you let them go down then there is nothing there, and that is my point, exactly. When a company is in the doldrums, in terms of its shareholder not making a decision on what direction it wants to go, having announced a policy but not moving forward with it with expediency, these are the reasons why people change jobs and do not place orders with the company, because of the indecision.
Time is of the essence. It is a wasting asset. I would prefer not to focus on specific designs such as the ACR-1000 or CANDU 6. Clearly those are important and commercially significant in terms of value. However, if we look beyond that as to the capability of the technology, I have no doubt that if AECL went out of business and the CANDU flag fell, someone else would come up with exactly the same technology under a different name. Why? Because it is very good technology. Mr. Purchase refers to it as a niche, but it is an important niche.
First, it uses natural uranium instead of enriched uranium. This has enormous implications if you are Turkey or a non-aligned country and you want nuclear power, and you do need nuclear power if your economy is growing. Some of these countries do not have any other source of energy and do not want to import hydrocarbons because that gets into other entanglements, foreign exchange issues, et cetera.
The natural uranium reactors, the CANDU system, can also burn the spent fuel from the enriched uranium reactors, which is everyone else's design. I have called it the blue box of the nuclear industry. AREVA might be interested in it. Why? Because they have something that uses enriched fuel. I forget the ratio, but it is something like one CANDU reactor for every three of the other kind actually makes better use of the nuclear fuel. This makes sense on a portfolio basis.
How you market and develop that is another matter. This is not easy. I wholeheartedly agree with Mr. Purchase's BlackBerry analogy; that is absolutely correct. That is the promise. That is what you are buying into.
In addition, I do not want to be dismissive of the scientists and engineers and know-how but, quite frankly, a lot of this stuff is generic in the sense that it is not tied to the CANDU technology. If you can buy a company that has these resources, this also gives an opportunity for the Canadian nuclear industry to grow out of CANDU. We are not stuck to CANDU. We have human resources and know-how in nuclear technology that is absolutely applicable to technologies other than the CANDU technology. However, it requires marketing and commercial capital, a vision and some corporate direction. These are the promises that I see and this is why an investor might be interested in it.
Senator Mitchell: In your description, it strikes me that if AREVA or some other foreign firm were to buy it, there is no reason for them to leave anything in Canada, whether the 30,000 jobs need to be in Canada at all. My corollary to that is a concern that was raised in another committee I attended about the focus this brings to research and development and can that be sustained or how can that be sustained if the government does not have a direct interest and involvement in it.
Mr. Carr: I do advocate some continuing involvement. I emphasize a minority. To your question earlier, senator, I explained why a minority.
I think that is true, but I do not think people are as mobile as some people think they are. If AREVA buys it, how many people will pick up from Mississauga and move to Paris?
Senator Mitchell: Maybe that is why they will not buy it.
Thank you for the interesting answers. If the French government holds 78 per cent of AREVA, why can a Canadian government not own a good chunk of AECL? We have lots of experience. I am from Alberta. The federal government made a tremendous investment in the oil sands. It never would have been anywhere near where it is today without that initiative. Just about the time that nuclear technology and energy generation is taking off around the world, fuelled by nothing less than climate change, which this government does not want to acknowledge enough, we will get out of it. Other countries and other major corporations are in it and will take advantage of that opportunity that finally is there for us to grab. We just have to convince Ontario and a few other places here about the homegrown market. You hardly ever get that. You can then spin it off from there.
Mr. Carr: We have seen examples in Canadian National, Air Canada, Petro-Canada of sophisticated and staged privatizations that involved, among other things, public offerings to the general Canadian public. Introducing private capital does not necessarily mean selling to AREVA. In fact, I think we might well be surprised that the potential investor is not yet identified because this might be a portfolio purchase for someone. Consortia are actually far more nimble and inventive sometimes than an existing company that is already in the business.
Mr. Purchase: The better analogy with the oil sands is Cameco in the uranium business, a world-class player now, 25 per cent of the market or something to that effect.
If you start with something like the resource, then we can build the expertise. Whether it comes out of the government sector or where it comes from does not matter. Ultimately, it can compete globally.
AECL is a technology company and it is competing in a global market. It is partly about the quality of that technology, but it is competing in a market where governments dominate and where decisions are made not just solely on the basis of some kind of commercial bottom line. They are made for a host of other reasons, in particular with this technology, related to geopolitical considerations.
Can we compete effectively in that market? I happen to believe that this is more like trying to sell advanced weapons internationally, although we have been reasonably successful to date with reactors. However, going forward, we are talking about heavy-duty involvement of governments around the world in countries such as India and China, South Korea and so on. That is a whole different kind of marketing. Many other kinds of decisions or considerations enter into that. To play in that market, you have to be willing to be there and have serious political clout.
I do not think it is entirely the same. In other words, this is a little different when you are talking about this company than if we were talking about what to do with Cameco, for example, if Cameco were still a government owned company.
Senator Marshall: Thank you, gentlemen, very much for appearing here this evening.
Other witnesses who testified on this issue have spoken about the large amounts of government money that have been put into AECL. After hearing your testimony, I get the impression they will certainly not recoup the money they have put into it. At what point will they get something for it? Is it likely or possible that they might end up just giving it away?
Right now, while there is an asset — and I know Mr. Carr referred to it as a decaying asset — the government keeps putting money into it. What balancing point do they expect not to get anything for it and possibly give it away or pay someone to take it? Could you speak to that?
Mr. Carr: I think the chances of giving it away grow daily. That is the nature of a declining asset, that one day it is worth nothing. I do not think we are at that stage.
In terms of the money being put into it, here things get confusing because one of the problems of AECL is it is not structured like a conventional corporation. It is structured financially more like a government department. The accounting is weird from a corporate point of view. Therefore, it is unclear exactly how much money government has put into it in terms of investment, particularly if you start thinking of it as two corporations within one skin — the Chalk River research side of it and the other being the power reactor division, which has been the focus of our comments this evening.
In point of fact, any analysis I have seen is the power reactor division actually makes money, and the amount of money they make pretty much offsets the money lost by the research division. Of course, government money is going in there as well, keeping it all even and providing the cash flow levelling, and so on.
Fundamentally, all except for the last year, I think, the power reactor division has basically turned a modest profit if you looked at it as a single stand alone entity. I do not know, if you did proper accounting on that, if you would get the same answer because I do not know what return on equity is ascribed, or if any is, in fact. It is still a little unclear.
Senator Marshall: My understanding is that the government keeps putting it in but nothing is coming back out.
Mr. Carr: That is the nature of government departments, is it not?
Mr. Purchase: In economics there is an expression: You have to let sunk costs sink; or the equivalent: Do not throw good money after bad. While that is a good, sound business principle, my experience is, in the political marketplace, that is a lot harder to do, and that may turn into one of the problems here.
Senator Ringuette: Mr. Carr, did I just hear you say that AECL had made profits?
Mr. Carr: Rothschild did some analysis that was published in December. I am not sure if I have that information with me. I did print some things out of the report. It says:
AECL does not have historical financial information for CANDU Inc.
CANDU Inc. is the half that we are talking about and goes on to say:
However, it has historically reported revenue and expenses for the CANDU reactor division, which closely approximates the CANDU Inc. financials.
The table below provides the historical income statements for the CANDU Reactor Division. Note that the negative income in 2009 is primarily a result of cost overruns in the refurbishment contracts.
The only year that they show a loss is 2009. I would have to say that the net income is not astounding, given the size of the investment, but it is not negative.
Senator Ringuette: Exactly. I was told that the revenue generated by AECL through its different divisions was put into a general revenue fund of the Government of Canada. I have to check on that.
Mr. Carr: I am not an expert on what happens, but I can tell you that it is not financed like a conventional corporation. It is financed, in effect, like a government department, which would coincide with your view.
Senator Ringuette: That would reaffirm what I have been told. I agree. You say that the CANDU and the enhanced CANDU technology are great technologies. You say that because of environmental issues and because of growth and demand for electricity, there is great opportunity. Are we throwing the baby out with the bathwater in the way that we have been approaching it?
My understanding is that the potential is great, but that there might be concerns with marketing capability. However, I think that can be acquired through different means, such as through a new partner. From your expertise, Mr. Carr, what is required so that AECL will become a good investment for Canadians?
Mr. Carr: I think it requires commercial restructuring. As I have said, I think that it needs to be backed by commercially motivated capital. That will never come from the public sector; it is that simple.
Until that aspect is sorted out, it does not make any sense to start talking about the amounts of money because, it is not just the amount of money but it is the motive behind the money, where the money comes from, what the incentives driving that investment are and what the plans are. These are the things that will take it to success, not unlimited bank rolling of adventures.
Senator Ringuette: AREVA is a mainly owned Crown corporation, and it seems to be doing well.
Mr. Carr: Yes.
Senator Ringuette: I do not see why Canadians could not be doing the same.
Mr. Carr: If I may, the approach to doing business in the Republic of France is quite different than the approach to doing business in most other places of the world.
Senator Murray: I am sorry I came in a bit late, Mr. Carr, just as you were completing an answer, and I heard you say that it is better not to try to impose conditions on the government in this bill. As a matter of fact, I think I agree with that because if I had to draft conditions, I do not know what conditions I would attach to it.
That, however, does not solve the problem that I and others see, which is that we are giving carte blanche to the Governor-in-Council to do anything from restructure, merge or dissolve all or any part of AECL. I have read the law that was passed in 1946 along with the Debates and so on. Our predecessors got into it by the use of the declaratory power, because it was "a work for the general advantage of Canada."
I thought I heard you suggesting setting up some kind of expert panel to look at the deal once it is done and express their opinion as to whether the government has done a good job or not. Did I misunderstand you?
Mr. Carr: Actually, that was Mr. Purchase's suggestion, yes.
Senator Murray: Anyway, if that is the case, that is not much comfort for those of us who are concerned about giving carte blanche to the cabinet on this matter and who feel that there should be some way that "we" — that is, Parliament — can pronounce on the matter before it is finally concluded.
Mr. Purchase: I agree with your statement when you said that you looked at it and you could not think of exactly how you might constrain the deal upfront —
Senator Murray: We did privatize Air Canada, CN and Petro-Canada with conditions. You could go that route. I am not interested in putting conditions into the act. What I am interested in is preserving some power for some body, preferably Parliament, over and above the Governor-in-Council, which is the Minister of Finance if the truth be known, who takes quite a one-dimensional view of the thing. I do not blame him because he is Minister of Finance, but he came here and sat where you are sitting a couple of weeks ago and said, "AECL is bleeding money." I appreciate that, but there is more to it than that.
Mr. Purchase: My hope is that if you subject a government to a review after a deal is done and if the government has to go with all of the information related to that deal — in this, I would say do not tell me there is some commercially sensitive information that this expert panel or the Auditor General cannot see. Have some purely independent entity pronounce on the quality of the deal in terms of the degree to which it has achieved the government's objectives, which I believe are to enhance the nuclear industry in Canada.
I would have thought no government would want, after a deal is done, some highly expert group or the Auditor General saying, "This was a bad deal for Canadians." I think it would constrain you in the course of your deal to ensure that you would actually produce something that you think would pass that test.
Senator Murray: I am not sure what the government's objectives are. Mr. Paradis will be here either tomorrow or the next day, and I will ask him: Has the cabinet given you a mandate? What is the policy framework within which you will now proceed to dispose or otherwise of AECL?
Do you think those are fair questions to ask him?
Mr. Purchase: Yes, I do. I think in a couple of the documents that I read, I believe the one that Mr. Carr was reading from, the Rothschild report, it listed certain general conditions that they expected a deal would satisfy. If they were held even to that, those are fairly significant. If they get a deal and they can tick off all of those positively, that would be good.
Mr. Carr: There are three, just to be clear: First, safe, reliable and economic options to address Canada's energy and environment needs; second, control costs to the government while maximizing return on investment; and third, position Canada's nuclear industry to seize domestic and global opportunities.
If I may embellish one comment here, we focused on AECL and its ability to go forward in the world and succeed, but AECL and the CANDU technology is the central part of a much bigger industry than just AECL. In fact, the bulk of the industry is not AECL, but the bulk of the industry cannot succeed without AECL succeeding.
Senator Murray: They told us that. We have had them here. Thank you.
The Chair: Could we have a copy of that document to which you refer?
Mr. Carr: These are just excerpts. The full document is on the website. It is the Rothschild report to Natural Resources Canada.
Senator Dickson: We will make copies for everyone.
The Chair: Thank you. We now have a copy.
[Translation]
Senator Hervieux-Payette: I want to get back to the fact that Ontario did not go ahead because of the recession. Did the issue of risk sharing for the two reactors not also play a part? Ontario did not want to fund research for a new reactor because there have not been any new ones in a while. The federal and Ontario governments had to agree on a risk-sharing formula.
[English]
Mr. Carr: Yes, that is in fact correct. I think there is more to it than just the need. In fact, I do not take much confidence in the downturn of the economy, and, therefore, the declining amount of need for electricity as a reason for not making a decision on the nuclear new build. The real driver behind needing to build new nuclear reactors in Ontario is not what is happening with the demand for electricity but what is happening with the supply of electricity. The supply is disappearing because the existing plants are reaching the end of their useful life.
The Ontario decision, as you correctly say, senator, was conditioned, in part, by the risk sharing, and that is why I did mention briefly that the process was not the appropriate process. It was designed almost to create a high price by putting risks on to the supplier. This is all scuttlebutt because it is all supposed to be secret, but my understanding is that the reason only one bidder was compliant was it was the only one who actually met those conditions. The rest of the suppliers said the risks were ridiculous and would not take them.
[Translation]
Senator Hervieux-Payette: My second question is about the commercial component. You spoke about financial assistance and private capital. In the wake of the financial market collapse, who in the financial world will provide the financing and shoulder the risk involved? You said that the government must retain a minority interest, but the transaction must be structured based on risk sharing. Who on earth is prepared to invest — regardless of the hedge fund and given the minority interest — in developing the third or fourth generation of the new reactor? How will you share the risks involved in building reactors in the future? Who will pay for them? I have here the results of some studies. Everything I have read so far indicates that new technologies have not been tested elsewhere, not in France, not in Russia and not in Japan. Who is going to take the technological risk?
For all practical purposes, when we talk about investments, would we not say that France is taking technological risks to help the nuclear sector advance and to provide electricity for all of Europe, including its neighbours, like Germany? When they invest, it is for the entire European market.
I would have liked you to provide us with more details regarding your restructuring because you are talking about private capital. As for safety of the operations and financial security, without the participation of the federal government, I do not see how the deal could be made.
[English]
Mr. Purchase: Senator, I agree with you, notwithstanding that there are obviously private companies involved. However, those private companies, that is to say, General Electric partnering with Toshiba and Hitachi Westinghouse, have all kinds of government connections and involvement of the Japanese and the U.S. government. No nuclear power plant is being built or has ever been built anywhere in the world that was not heavily subsidized by a government. With this technology, simply, no one will take the risk. It will not get built by private enterprise without heavy government involvement. That is a fact.
The problem you have with AECL is that you must have access to those big markets. You cannot just build one or two or three reactors. If you have a brand new design, my guess would be you would have to have at least 20 of those in order to begin to get a return on your investment. You have to have major international marketing muscle to get into these markets that are dominated by governments and with their own national champions. There is AREVA in Europe, obviously, the Russians have an entry, and it looks like the Germans will be leaving the French consortium and going with the Russians. China will no doubt have an entry. The point I am getting at is I agree with you entirely. This is not an industry in which there will be many private enterprises. It is not the BlackBerry. It is a whole different kettle of fish in which governments are deeply involved.
Senator Marshall: There is a $3 billion liability on the books of AECL called "decommissioning and waste management provision."
Do you think that the federal government will have to honour that liability?
Mr. Carr: I am not familiar with that issue specifically, but harking back and linking to the previous discussion about risk and who takes risk, risk is a broad category and there are many subsidiary risks in that. It is not a question of structuring a deal in which 100 per cent of the risk disappears. It is a question of structuring a deal where the risk is shared so that best value occurs. As governments effectively control the liability for decommissioning by rules, by setting law, then, clearly, they control the risk. Therefore, they are the logical people to accept that risk rather than the private sector, who will have to put an enormous price allowance on to cover whatever the government might make its mind up doing.
Bruce Power is probably the best example. Bruce Power leases the site from Ontario Power Generation, I believe, and Bruce Power turns over the spent fuel to Ontario Power Generation to manage. They do have not responsibility for managing the waste because no private company could take that responsibility because the laws of Canada are unclear on it. That works extremely well, and Bruce Power has taken on enormous risks, contrary to what Mr. Purchase is saying, in using private capital to finance the refurbishment of the reactors. They have done it, admittedly, with the contract backed by the Ontario Power Authority, and there is a difference; it is not government. However, that contract merely says if you produce electricity, I will buy it from you. It does not say if you screw up on managing the plant, I will cover you; it does not say if you do this wrong or that wrong or you make a bad guess you are covered. The company absorbs a huge amount of risk, but not all risk because the company is not in a position to manage some of those risks. The cheaper way of managing it is to leave it with other parties.
Senator Ringuette: I have a Conference Board of Canada document entitled The Economic Impacts of New Nuclear Investment in Canada. Table 3 of that document shows three different scenarios: AECL losing its place in the world as a nuclear entity, AECL wining in a world of constrained demands, and AECL wining in a nuclear renaissance world. If AECL wins in a renaissance world, we are looking at an $82 billion impact on the GDP. We are looking at close to 500 million person years in employment. We are looking at $31 billion in labour income. The potential impact is extraordinary.
I will ask my question again: What would it take for AECL to be a great investment for Canadians?
Mr. Carr: I will go back to my answer. I think it needs commercially motivated capital. I do not think it can be run as a government department any longer.
Senator Ringuette: That commercial capital can be raised by issuing maybe 30 per cent of shares and getting a marketing team on board that could have tentacles all over the world and credibility, and a prime minister of Canada who believes in the Canadian nuclear knowledge and its absolute security. We have not seen any meltdown in regards to any CANDU reactors.
The Chair: We will take that as a statement. You may or may not wish to respond. You have already given an answer to the question. We are out of time by 15 minutes. We have to learn to tighten our questions up a wee bit.
On behalf of the Standing Senate Committee on National Finance, I would thank Mr. Purchase and Mr. Carr for sharing their obvious wealth of knowledge and insight into this industry. It is very helpful to us. We have to struggle with what appears in Part 18 of a 24-part bill, but the background you have been able to provide to us will be very helpful in doing that.
Our second panel this evening will focus on Part 15 of the bill, dealing with Canada Post.
[Translation]
This evening, we have the pleasure of welcoming Ms. Claire Bolduc, President of Solidarité rurale du Québec.
Claire Bolduc, President, Solidarité rurale du Québec: Mr. Chair, I would like to thank you for inviting Solidarité rurale du Québec to share its comments on Part 15 of Bill C-9, involving postal service.
We received this invitation late, but we will be able to provide you with a written document before the end of the week. However, we did have the opportunity to study the information submitted to us, and we have a few comments that can be summed up in a single idea.
First, I would like to remind you that Solidarité rurale du Québec is first and foremost a coalition of large Quebec organizations, which, for almost 20 years, have campaigned for and worked on the revitalization of the Quebec rural world.
In 1997, the Government of Quebec recognized Solidarité rurale du Québec's accomplishments by giving us the mandate of advising it on cross-Quebec rural issues.
This is why Solidarité rurale du Québec provided advice on a national policy on rural areas adopted by Quebec. Quebec is still the only province that has a policy on rural development. Quebec also has its own ministerial responsibility and the advisory body I represent here today.
In addition, Solidarité rurale du Québec has always campaigned for and supported the idea that the development of the rural world cannot be exclusively based on sectoral policies, be they for forestry or agriculture, but must be based on a policy that takes into account all the realities of today's rural world.
I would like to remind you that, today, only 7 per cent of the rural population makes its living from farming activities, 93 per cent of the rural population from other activities, and 95 per cent of Canada's land is rural.
In fact, in its recent analysis, the OECD — in a report submitted last June 7 — demonstrated that only policies that take into consideration all the various activities in rural areas are constructive and innovative.
Solidarité rurale du Québec has suggested on several occasions that the federal government adopt a comprehensive rural policy to reflect Canadian rural realities, whether in terms of services, community vitality or economic diversification. However, I come before you today with a single message regarding a specific public service. Bill C-9, specifically its Part 15, which concerns the Canada Post Corporation, is made up of one paragraph, or rather one sentence of only 20 words, whose impact on the rural world could be damaging in the short term and dangerous in the mid to long term.
This really shows the government's lack of vision when it comes to the reality of Canadian rural communities. It also shows the lack of a comprehensive policy.
Bit by bit, sector by sector, decisions are being made that defy logic. If we look at them one by one, the decisions are often minor, but when put together, they have a totally devastating effect on the rural world, especially in the access to services. Here, we could talk about decisions made in the world of transportations, of telecommunications and, as in this case, in the world of postal service.
We were startled to see, in a 900-page document, 20 words that could drastically change the accessibility to Canadian postal services in rural communities. These 20 words, which I venture to say were added to the document in a very underhanded way, could cause a rapid decline in services for rural communities. However, to my knowledge, all Canadian citizens are subject to and pay the same taxes. We found it odd to see those 20 words in a 900-page document.
If the federal government intends to deregulate the postal service and reduce services provided to Canadians, it must do so in a clear and open manner. The issue should be the subject of a specific bill, which would be debated publicly. However, the government is proposing to open up the Canada Post Corporation Act on the sly.
Deregulation should — and must — be the subject of a separate debate, a transparent debate where everyone can express their opinion. However, what I am asking you this evening, in the interest of supporting an open and transparent democracy, is to do away with the 20 words amending the Canada Post Corporation Act. Removing these 20 words would not in any way compromise Bill C-9, and if the intention is genuine, drafting specific legislation on the subject will enable everyone who wants to provide an opinion on the future of mail and Canadian postal services to do so.
You know, you were right to ask for our opinion, since we have extensive expertise and keep a close eye on the rural world in Quebec, in Canada and abroad. This enables us to clearly state that these 20 or so words are bad for rural Canada. They do away with the idea that a universal service for all Canadians can be established. It is no secret that all those advocating for deregulation, those who defend it most fiercely, still recognize the fact that deregulation has always had and will always have a negative and damaging effect on rural communities, which are sometimes less populated, further away and more isolated. Even the most passionate advocates for deregulation are always careful enough about the innovations they propose and make sure to suggest modifications for the rural world. However, today, under the pretext of introducing more competition, the government wants to undermine the ability to provide a universal service to Canadians living in rural communities. This is unacceptable.
I remind you that Canada Post has been given an exclusive privilege, but each privilege comes with an obligation. In this case, Canada Post is obligated to provide all Canadians with a fair and equitable public service. Affecting one aspect, the privilege, is weakening the obligation.
If you believe that private delivery companies are prepared to meet the needs of rural Canadians, think again. Private companies are market-driven, and this inevitably leads them to engage in fierce competition, to follow the money and the volumes that justify services, and to neglect anything that is less profitable. As a result, rural Canadians will suffer.
In conclusion, I would like to repeat my suggestion to the Standing Senate Committee on National Finance to support rural Canadians through concrete action. I am asking that you refuse to endorse Part 15 of this bill. Many arguments can be provided in favour of or against deregulation, but in the present situation where everything has been done on the quiet, deregulation would be very damaging for rural individuals. Proposing that postal services be deregulated by slipping 20 words into a 900-page document is bordering on the improper.
I am asking that you refuse to endorse Part 15 of the bill, to withdraw from the bill the 20-word passage amending Canada Post Corporation's mandate. I hope that, if debates are held on providing postal services for Canadians, we will be able to discuss the topic openly and transparently.
The Chair: Ms. Bolduc, thank you very much for your comments. We will begin our question period with Senator Banks from Alberta.
[English]
Senator Banks: I agree with your argument. I understand the balance between monopoly and obligation and I agree that this is a bad part of this bill. I also agree that it ought not to be here and that Canada Post ought not to be disadvantaged in this way. However, my argument is not about the substance. I am sorry that I am first because it is kind of academic, Ms. Bolduc.
I am a member of the opposition; I am a Liberal. We generally look at things differently from members of the government side. Sometimes, we do not hesitate to oppose those things regardless of the colour of the government.
You said that in order for the government to be able to do certain things like this, it must have widespread debate, consultation and discussion if it is to be democratic. I do not think that is right. We elect people to govern us and the government must be allowed to govern. That is what the government does. That is how and why we elect people in this system, notwithstanding the fact that some of us are opposed to this undertaking by the government.
I agree with all of your arguments about substance but I take issue with your contention that it is in some way not legitimate for the government, if it can, to do this. Do you follow my argument? Can you argue with me just for 10 seconds, with the indulgence of the chair?
[Translation]
Ms. Bolduc: I understand your argument about elected representatives. They have mandates from the electorate; they have put forward, announced, committed to and implemented certain programs. Canada Post Corporation currently offers a universal service available to all Canadians. This is why we are asking for a debate, which could be held in the House of Commons, so that we can provide Canadians with information about services offered to them. This debate must be open and transparent. I agree that people are elected to make decisions, but at the same time, they have to clearly and openly state their intentions.
[English]
Senator Banks: This bill, including this provision, was debated in the House of Commons and will be debated in the Senate, although the Senate is not elected. The people we elected to govern us debated it. Does that not take care of it? Do we have to have a referendum when the city council wants to put up a red light on the corner of two main intersections or can the municipal government, provincial government and the Government of Canada sometimes not just do things that are governance?
[Translation]
Ms. Bolduc: I see your point, but I would like to get back to the main issue at hand. We are talking about major changes here. A bill like Bill C-9, which is a 900-page document, calls for debates on a number of very important topics, such as nuclear energy and, more specifically, Canada's involvement in the nuclear industry. In our opinion, slipping 20 words that could drastically change a universal service into such a lengthy bill is an underhanded way to do things. I really doubt that any long discussions were held, even in the House of Commons, about these 20 words. This is why we are raising a red flag and asking that these 20 words be withdrawn from the document. If changes are to be made to the way Canada Post Corporation functions, they should be made clearly and openly.
As soon as we turned our attention to this issue, we did our homework and conducted the necessary research. There was very little, if any, discussion regarding this short, 20-word passage, which thoroughly changes a universal Canadian service.
As for the remainder of the document, I agree that discussions did take place; debates were held on Bill C-9. Nevertheless, certain elements that could have a major impact slipped into the bill in a somewhat curious way, and we must be able to look into this situation.
[English]
Senator Banks: I agree with what you think ought to have happened.
Senator Marshall: You are talking about how this section will adversely affect rural Canada. The current legislation, in section 14, talks about Canada Post:
. . . the Corporation has the sole and exclusive privilege of collecting, transmitting and delivering letters to the addressee thereof within Canada.
That is what the current legislation says. In Part 15 of Bill C-9 concerning the Canada Post Corporation Act, clause 1885 proposes a revision to section 15 of the Canada Post Corporation Act. The revision says that the current section "does not apply to letters intended for delivery to an addressee outside Canada." I do not see how that affects rural Canada.
We heard testimony today that many businesses in Canada have been participating in this remailing industry over the last 20 to 25 years, thinking that they were complying with the legislation, and have gone through a lot of economic turmoil because they are no longer able to do this. It seems there was more impact on rural Canada by not allowing those small businesses to participate in that part of the industry than that amendment would affect rural Canada. It seems like it is the reverse. I do not agree with your comment that the section affects rural Canada.
Could you explain that again?
[Translation]
Ms. Bolduc: It will affect rural Canada because mailing costs are standardized for all Canadians — whether in Labrador, Quebec, British Columbia, Nunavut or Prince Edward Island — regardless of whether we are talking about delivery in Canada or abroad.
As soon as Canada Post Corporation loses the exclusive privilege for the mail, even for letters sent abroad, the question to be asked will be what mail transportation will cost rural Canadians. The same thing happened in a number of cases, whether involving Internet services, transportation services, and any number of services provided for Canadians. The result was the same: costs skyrocketed as soon as deregulation took place without appropriate protection for rural communities.
I would like to know why a letter I want to send to my brother, who lives in Paris, would cost more if I was sending it from Ville-Marie, in Témiscamingue, than from Montreal or Ottawa. This is exactly what will happen to rural Canadians once deregulation takes place.
Our point is not to argue for or against deregulation, but rather to state that if we are going to do so, let us do it in a clear, open and transparent way, and not buried in a bill on the national budget. Let us have an open debate on the issue, one that could hear different points of view, that is, your points of view and those of the rural community.
As things currently stand, I do not believe that many rural communities have noticed these 20 words in a 900-page bill. The way the government went about this is a great cause for concern.
[English]
Senator Marshall: However, this section of the budget bill does not disallow Canada Post from participating in that part of the industry. It can still participate. It is just allowing other companies privately to participate also. I do not see where it negatively impacts services to rural Canada because people in rural Canada can still use Canada Post. I do not agree with your argument.
As for debating in an open forum, Senator Banks is correct. This concerns only three lines in the bill, but I cannot even think how many hours we have been debating those three lines. I must say that I do not agree with your comments in that area.
Senator Runciman: Thank you for being here today. I appreciate the concerns you have expressed about the status of post offices in rural Canada. That has certainly been a concern for mine for many years in Ontario.
I share Senator Marshall's perspective in that I think your concerns related to this legislation are unfounded. I do not think it has any impact, and it has not had any impact that we can quantify because this relationship and this structure have been in effect for the past 25 to 30 years.
You said earlier that this legislation makes basic changes. Actually, the legislation does make any change at all. What it does is maintain the status quo, which has not affected rural Canada in any way that anyone here can identify.
I am curious, though, about your organization. How many members are in your organization? Does it cover all of Quebec? Do you have representatives throughout the province? How is your organization structured? Please tell us about your membership.
[Translation]
Ms. Bolduc: The founding members of Solidarité rurale du Québec are a coalition of about 15 national organizations with a total of 800,000 members. This includes municipal unions, the Mouvement Desjardins, l'Union des producteurs agricoles, which includes the forestry sector, local and regional organizations, and individual members. The national organizations, representing 800,000 Quebecers, are the voice of almost all the rural population, but not only people living in rural areas are involved. There are also people who are interested in the rural world, given the interdependence and interrelation between rural and urban populations.
Solidarité rurale du Québec was created in 1991, in order to counteract the decline of rural communities in Quebec, to reverse their accelerated decay. Since that time, many of these rural communities have become prosperous once again. In Quebec, more than half the rural regions are attracting more residents than they are losing, and their growth rate is double that of the cities. Important initiatives, such as the National Policy on Rurality, have enabled these rural communities to develop.
We represent all the people and organizations that live and work in rural communities and participate in these communities.
[English]
Senator Runciman: That is impressive. Is the Canadian Union of Postal Workers involved in the organization?
[Translation]
Ms. Bolduc: The FTQ is involved. The unions that are our members are the Fédération des travailleurs et travailleuses du Québec, the CSN and the CSQ. Our members are major organizations. Smaller unions are members only through their mother organizations.
[English]
Senator Runciman: Does that cover workers in post offices throughout Quebec as well? Are they part of this umbrella organization?
[Translation]
Ms. Bolduc: Unfortunately, I cannot tell which union the employees of Canada Post in Quebec belong to. I do not have this information.
[English]
Senator Runciman: As an organization concerned about the future of post offices and rural mail delivery, have you ever sat down with CUPW to talk about the future and what role they could play with respect to enhancing the possibility of keeping most, if not all, rural post offices viable? Have you ever had that conversation?
I say that because I spoke to the representatives of CUPW here today about upcoming negotiations. There are already strike threats. I think we have had 12 postal strikes in 19 years. It seems to me there is a role that the union could play here to enhance the future security of rural post offices, rather than simply making continuous demands on government. Is that a conversation that you have had with those people?
[Translation]
Ms. Bolduc: We have talked about it with the postal workers. We have also discussed it with rural municipalities and an umbrella organization in Quebec, called the municipalités régionales de comté [regional county municipalities].
We have also discussed this issue with the various citizens committees in rural areas, which are significant in number. There are a little over 1,000 rural municipalities in Quebec. And in these municipalities, citizens committees are fighting to keep services in their communities; we have also discussed the issue with them.
So yes, Solidarité rurale du Québec has been addressing this topic for 12 years now, and has been working on keeping postal services in rural communities, in a way that is fair for all rural Canadians. Yes.
Senator Chaput: I would like to add a quick question to Senator Runciman's question. In my capacity as a senator, I received a letter from the Canadian Union of Postal Workers asking us to exclude Part 15 from Bill C-9.
The Chair: We all received those letters this afternoon. They said the same thing.
Senator Chaput: Part 15 of Bill C-9 would allow outboard international remailers to collect letters in Canada in order to distribute and deliver them abroad.
In your opinion, will the proposed amendments increase the competition between Canada Post and independent carriers that deliver abroad? If that is the case, what would the consequences be, especially since Canada Post is required to be financially self-sufficient? Would mail for Paris, for example, cost more?
Ms. Bolduc: In relation to rural communities, Canada Post has an exclusive privilege now, and the privilege comes with a duty of public service. Changing one weakens the other, and that is clear. Over the years, we have studied all deregulated services. We can see the collapse of services in rural communities. Sometimes it happens very quickly, sometimes it takes a few years, but the results are always the same for the rural communities.
Our interest here today is both in the fact that we are talking about an exclusive privilege, which might weaken the duty, and in the fact that we are doing this through a bill on the national budget and public finances while — as you just said — Canada Post is an organization that has to be financially self-sufficient. This is being done through the back door.
It is mainly this way of doing things that bothers us, and it is mainly for this reason that we say the question has to be brought out in the open.
Senator Chaput: I understand.
Ms. Bolduc: If the debate on the bill took place in public, you would get the arguments from both sides. I understand that there would be arguments for and against, but they would be made openly.
Senator Chaput: Does the weakening of services mean either a reduction in services or higher costs for the same service?
Ms. Bolduc: Precisely.
Senator Chaput: That weakens a community.
Ms. Bolduc: Precisely.
Senator Chaput: Could you tell me, as a Liberal senator from Manitoba, what you think about the Liberal Party's approach that is committed to come up with a charter for rural postal services in Canada and that is sensitive to protecting universal service, rebuilding and maintaining postal services in rural communities and consulting more extensively with the communities?
Ms. Bolduc: The great value of an organization like Solidarité rurale du Québec is not supporting Liberal or Conservative propositions but rather thinking globally. We have been asking the government for a number of years to agree to a national rural policy. A rural policy implies the responsibility of looking at all impacts of a decision on all rural communities. That is what we are asking.
Quebec has a rural policy, the Politique nationale de la ruralité. That does not solve all problems at once, but it forces us to think about the way we do things in rural communities, the way the government does things and gets involved. It changes things radically, and for the better, I must say. Our rural communities are doing better than they did in 1991, although they are still having difficulty. A number of the federal government's decisions have a direct impact on the rural population of both Quebec and Canada. These are piecemeal decisions made in a haphazard and disconnected way. I applaud you for being able to think of a rural policy for postal services. We are calling for a Canadian rural policy that includes all services and all activities of the Canadian government.
Senator Chaput: Thank you.
Ms. Bolduc: Thank you for your question.
Senator Ringuette: I completely agree with you on the short-lived debate about the 20 words. In 2007, the current government introduced those 20 words in Bill C-14 only. The bill was referred to the House of Commons Transport Committee for further study. There was a debate initially, but the witnesses were opposed to the 20 words to such an extent that the government dropped the bill. Elections followed in 2008.
In 2009, the same 20 words were reintroduced in a new bill, now called Bill C-44, but the government did not even bother to start the legislative process by sending it to a committee for study. That is when Parliament was prorogued, which still leaves us today with those 20 words as part of a 900-page bill, with no real prior public debate.
I have the following question: in 2007, when the 20 words were introduced for the first time, did you at least have the chance to testify before the committee in charge of studying the bill?
Ms. Bolduc: I was not with Solidarité rurale du Québec in 2007. Jacques Proulx was there. But, since 1994, Solidarité rurale du Québec has stepped in many times to discuss Canadian postal services.
I am sure that 2007 was one of those times, and our efforts made a difference on many occasions. We also intervened in 2008. We received a report about the future of Canadian postal services in the spring of 2009. We got involved in that and also provided comments on the various parts of the report.
Our message is always the same. What keeps the people of a nation together? It is the services, privileges and values that they all share from coast to coast.
We are currently saying that the big losers in the process of deregulation will be the rural communities. They will be the big losers of any mechanism that revokes or cuts off the exclusive privileges of Canada Post, because those privileges go hand in hand with the obligation of providing equitable and equal services for all Canadians. It is clear, and that has always been our message.
And we repeat: think globally about the implications of any measures you take because they affect our rural communities. Ninety-five per cent of Canadian territory is rural. We are fortunate to have all that space. We want that space to be inhabited and recognized as Canadian territory, our home. Let us not be blind. That territory is highly sought-after both in Quebec and in Canada, as are its resources. If we no longer have any values or services that connect us, what will happen? Canadian services are the link and common values that are important for society.
If we want to change them, let us do so openly. I know that the last interventions since 2008 were vicious attacks against the changes to the Canadian postal services. You say that the debate on the bill was very vicious, and that the bill died on the Order Paper. Can we not understand that people want to maintain a Canadian postal service that is consistent, equitable and exclusive in keeping with the exclusive privileges already in place? Can we not get that?
Senator Ringuette: The message of Canadians was crystal clear.
Ms. Bolduc: Absolutely.
Senator Ringuette: That is why those 20 words were included in the bill, to finally put an end to the debate. Earlier today, we had representatives from what I call "remailers." There are five or six in the country, but the three main ones are foreign postal administrations that come here looking for high volumes of overseas commercial mail and, therefore, depriving the Canadian company of this service. They made it very clear that we should not get all worked up, that people here would not lose their services, that they were looking for something different, which had to do with commercial service only. Commercial service is what allows Canada Post to provide an individual service, including to rural areas.
They made it crystal clear. They corroborated what you said.
Senator Ringuette: Do you have a solution for us, given that it is in a budget bill? The government's decision to include this aspect in the budget was a way of tying parliamentarians' hands behind their backs to say that it is they who decide. What is the solution for removing those 20 words? We can try, but what tools can we use, aside from the support of people like you who share the same message and vision?
Ms. Bolduc: We must be vocal about it. People must realize what is going on. That is the role of an organization like Solidarité rurale du Québec.
It is also the role of organizations in three other Canadian provinces that protect the rights of rural communities in those provinces. In Quebec, the job will get done. There is no doubt about it. We are going to make the situation known to the rural communities in Quebec.
But the demographic weight always works against rural communities. We must aim at something else, something more fundamental. We must remind the government, parliamentarians and all Canadians of the importance of rural communities for Canadian society as a whole. Canada's collective wealth, and Quebec's too, relies on the activities of the rural communities that supply the cities.
We just have to mention mines, agriculture, forestry, and fishing. None of that happens in Vancouver or Montreal.
Senator Ringuette: Energy too.
Ms. Bolduc: The same goes for energy. We must remind all Canadians and parliamentarians of the importance of rural communities to our collective wealth. That is what we are doing.
In Quebec, we are lucky to have access to a study done by the Conference Board of Canada; rural communities are Quebec's other economic driver. If that applies to Quebec, it applies to all of Canada. What happens in cities largely depends on the outcome of rural activities. Not seeing that is depriving ourselves of the strongest asset we have in Canada, of what secures our prosperity.
That is happening and it is interdependent. As long as our decisions are strictly based on demographics, on simple mathematical calculations, we will always impoverish our rural communities and we will continue to support organizations that care about profit, but have no sense of service to the entire community. So, we will become poorer as a society.
The day no one is left in rural communities, we will not even be able to claim sovereignty over our territory in Canada. Remember that these territories are rich in resources and highly sought-after.
Senator Murray: I am an independent senator. I am strongly opposed to several parts of this bill. I understand very well why you would be opposed to this part being included in an omnibus bill. I even introduced a motion to split the bill. Unfortunately, the motion was defeated by the Senate.
Having said that, I fail to understand how your overwhelming fears of privatization, deregulation, and continuing the closures of rural postal offices can materialize because of those 20 words.
From the testimonies we have heard here today, a competitive climate has existed for a quarter of a century and Canada Post has been able to do business effectively in this competitive environment.
There is a whole dispute behind the proposed amendment. At one point, someone realized there was an ambiguity, even a contradiction, between the English and French versions of the act. Canada Post went to court and won. The government decided to keep the status quo and that is the purpose of this bill.
You talk about transparency. I agree that it should not be included in this bill. But in both theory and practice, I do not see how your concerns can be justified by these 20 simple words that are strictly meant to keep the status quo that has worked in favour of Canada Post for 20 or 25 years.
Ms. Bolduc: When an opening like that is created, we have to worry about what follows. The 20 words as such can confirm a status quo, but companies are not necessarily advertising right now because perhaps they do not have the right to remail mail.
Once it is confirmed, we have changed the rules of the game. That is what is dangerous. It will not happen overnight, but over the medium term. It will happen in 5, 8 or 10 years.
But at the end of the day, we opened a door and these services will slowly but surely fall apart. If that is what we want, let us do it openly and have an open debate. At the moment, we agree that those 20 words do not belong in Bill C-9.
Solidarité rurale du Québec's experience confirms that, every time we said that something was not such a big deal, every time we have allowed that way of doing things, it has always ended up costing rural communities the services they had a right to. And we can give a host of examples.
Senator Murray: I have lived for 25 years in a rural region that depends on postal services like these, I assure you.
Ms. Bolduc: Do you have access to high speed Internet?
Senator Murray: Yes.
Ms. Bolduc: In Quebec alone, there are almost 200 communities that do not even have access to high speed Internet.
Senator Murray: But that has nothing to do with this bill.
Ms. Bolduc: No, it does not. But even so, it gives you an idea of what could happen. We do not have regulations requiring Internet services to be available across Canada and so there are rural communities that do not have access to them. And that is what is going to happen with postal services.
Senator Murray: I share your concerns about the fate of rural areas, I assure you. But the issues you are raising are far greater than the issue raised in those 20 words.
Ms. Bolduc: But those 20 words are opening a small door that can become very big and can pose major problems.
Senator Murray: Thank you.
The Chair: Thank you, Senator Murray. Ms. Bolduc, on behalf of the Standing Senate Committee on National Finance, I thank you for attending this meeting and for explaining your position very well. Keep up the good work.
Ms. Bolduc: Thank you.
[English]
The Chair: Honourable senators, that is it for this evening. Thank you all for being here. We are under way at 9 a.m. tomorrow morning in the same room with Minister Merrifield.
(The committee adjourned.)