Proceedings of the Standing Senate Committee on
National Finance
Issue 26 - Evidence - February 4, 2015
OTTAWA, Wednesday, February 4, 2015
The Standing Senate Committee on National Finance met this day at 6:45 p.m. to study the expenditures set out in the Main Estimates for the fiscal year ending March 31, 2015.
Senator Joseph A. Day (Chair) in the chair.
[Translation]
The Chair: Honourable senators, this evening we are continuing our study of the Main Estimates for the fiscal year ending March 31, 2015.
[English]
As honourable senators know, this committee studies the Main Estimates throughout the year and produces a final report at the end of the fiscal year, which is coming at the end of March. We take great interest in the reporting cycle for government expenditures and follow the process of supply through three parliamentary supply periods or cycles. We look forward to reviewing the Main Estimates for the coming fiscal year, which will begin on April 1, but the Main Estimates will be out before that and we will be required to deal with interim supply that allows us to continue to study the estimates following the beginning of the fiscal year.
This evening is our last planned hearing with respect to the Main Estimates for this particular fiscal year, and we're very pleased to welcome from the Atlantic Canada Opportunities Agency, Ms. Denise Frenette, Vice President and Chief Financial Officer, Finance and Corporate Services; and Mr. Stéphane Lagacé, Director General and Deputy Chief Financial Officer, Finance and Administration.
From Public Works and Government Services Canada, we welcome Mr. Robert Wright, Regional Director General, Atlantic Region; Mr. Ryan Pilgrim, Director General, Budget and Cost Management, Finance and Administration Branch; and Joan MacKinnon, Regional Director, Cape Breton Operations, Atlantic Region.
From Marine Atlantic Incorporated, we welcome Mr. Paul Griffin, President and CEO; and Shawn Leamon, Chief Financial Officer.
I would propose to begin with Atlantic Canada Opportunities Agency, then go to Public Works and Marine Atlantic. We'll have introductory remarks from each of you, and then we'll engage in a question and answer session.
We have one hour set aside for this particular panel, so I'd ask honourable senators to keep their questions to the point and likewise, with all due respect to our witnesses, if you could answer succinctly and briefly. If you have the need to expand at length, perhaps you could undertake to provide us with a written response in that regard.
We'll begin with Ms. Frenette.
[Translation]
Denise Frenette, Vice President and Chief Financial Officer, Finance and Corporate Services, Atlantic Canada Opportunities Agency: I am pleased to appear before you this evening to discuss the expenditures set out in the Main Estimates for the fiscal year ending March 31, 2015. With me today is my colleague Stéphane Lagacé, Director General of Finance and Administration.
[English]
Created in 1987, the Atlantic Canada Opportunities Agency, commonly known as ACOA, is dedicated to helping the Atlantic region realize its full potential in terms of productivity, innovation, competitiveness and growth.
The agency delivers upon its mandate by managing activities under four main pillars: enterprise development; community development; policy, advocacy and coordination; as well as internal services. Throughout 2014-15, ACOA has continued to support small- and medium-sized enterprises, or SMEs, in becoming more innovative, productive and competitive.
Through its suite of programs, such as the Business Development Program, the Atlantic Innovation Fund and the Innovative Communities Fund, ACOA is helping SMEs to acquire new technologies, adopt lean manufacturing initiatives and develop their business skills so that they are prepared to grow, diversify and maximize the opportunities that will flow from major projects in the regions in the global supply chain, such as the current shipbuilding initiative.
The agency also continues to encourage commercialization of research and development undertaken in the region and to help Atlantic firms strengthen their international business capabilities and expand export trade, especially in light of the opportunities that will be presented by the Canada-EU trade agreement.
In 2013-14, ACOA invested more than $222 million toward 1,071 projects. From 2008-13, each dollar invested in businesses by the agency contributed more than $5.40 to the GDP in Atlantic Canada, and the region's GDP is estimated to have been $1 billion higher than it would have been without the agency's support to businesses.
[Translation]
In terms of community development, ACOA continues to work with community leaders and economic development agencies in Atlantic Canada to identify and encourage opportunities for local economic growth, particularly in rural regions and regions that are far from major centres. We also work together to identify and put in place economic diversion strategies to confront challenges that have an impact on the Atlantic region, such as the exodus.
[English]
With regard to its policy advocacy and coordination role, ACOA continues to be a lead advocate for Atlantic Canada's economic development opportunities and priorities. Working with federal and provincial partners and stakeholders, the agency concentrates on issues of importance to various parts of the region, such as energy, resources, knowledge-based industries, ocean technologies and bioscience, in order to address the region's economic priorities and form a coherent approach to economic development.
ACOA pursues all of these activities while continuing to follow through on its commitment to enhance internal management and support, to engage in employees and to ensure the continued provision of an excellent service to Canadians.
[Translation]
You also invited Enterprise Cape Breton Corporation to appear before you this evening. That organization was dissolved on June 19, 2014, and its activities were transferred to ACOA and Public Works and Government Services Canada.
[English]
At that time, ACOA became responsible for the economic and community development activities of Enterprise Cape Breton Corporation, commonly known as ECBC, and the budgets related to these activities were transferred to the agency. This means that ACOA became the main federal organization responsible for the direct delivery of programming dedicated to maximizing opportunities in Cape Breton.
Through its programming that is flexible to the needs of entrepreneurs and communities, ACOA has maintained a level of funding and quality of service that business owners and community leaders in Cape Breton were accustomed to receiving.
Other activities such as real property holdings, the environmental remediation of former mine sites and the human resource obligations of the former Cape Breton Development Corporation were transferred to Public Works and Government Services, PWGSC. Mr. Robert Wright, Director General for the Atlantic Region at Public Works, is here this evening to talk to you about the former activities now falling under that department.
You invited us this evening to speak to you about the agency's estimates, and it will be my pleasure to answer your questions in this regard. Before taking your questions, I want to mention that the 2014-15 Main Estimates show a total authority of $288.5 million. However, it's important to note that since the tabling of the Main Estimates, ACOA has received additional authorities of $11.2 million through Supplementary Estimates (B), bringing the total estimates to date to just under $300 million.
Again, I would like to thank you for the invitation to meet with you this evening, and I'm happy to answer your questions in this regard.
The Chair: Before I go to Mr. Wright, could you confirm or otherwise that $11.2 million, the additional amount under Supplementary Estimates (B), was a result of the Cape Breton Development Corporation coming into ACOA?
Ms. Frenette: That's a separate amount. The monies coming into ACOA relating to ECBC were deemed appropriated, and the amount of money was divided between Public Works and ACOA. ACOA's share for this year is $5.6 million.
The Chair: Thank you. Maybe somebody will get into the deemed appropriation in due course, but I'll go to Mr. Wright now.
Robert Wright, Regional Director General, Atlantic Region, Public Works and Government Services Canada: Mr. Chair, honourable senators, I am pleased to be here today to discuss the program responsibilities that have been transferred from the former Enterprise Cape Breton Corporation, or ECBC, to Public Works and Government Services Canada.
[Translation]
With me today are Ryan Pilgrim, Director General of Budget and Cost Management, and Joan MacKinnon, Regional Director for Cape Breton Operations.
As Denise Frenette, the vice-president at the Atlantic Canada Opportunities Agency, explained in her opening remarks, on June 19, 2014, Enterprise Cape Breton Corporation was dissolved, and its responsibilities, human resources and funding were transferred to both the Atlantic Canada Opportunities Agency and PWGSC.
[English]
The new program responsibilities transferred to Public Works and Government Services Canada fall under three main areas: the management of lands environmentally impacted by coal mining activities, the management of former miners' benefits, and the portfolio management of the real property holdings. It is important to note that these responsibilities align well with PWGSC's mandate as a common service provider for the Government of Canada. I will now describe each one in greater detail.
Turning first to environmental management, PWGSC has significant expertise and experience in this area and has already played a leading role in remediating the environmental legacies of industrial activity in Cape Breton. For example, it was the lead federal department in successfully remediating the Sydney Tar Ponds and Coke Ovens, a legacy of Cape Breton's steel production.
The 200-year history of coal mining in Cape Breton, at more than 50 sites, also led to the need for extensive work to deal with waste rock, mine water discharge, soil contamination and other impacts.
When coal mining activities ceased in 2001, PWGSC worked closely first with the Cape Breton Development Corporation, or DEVCO as it was called, and then with ECBC to lead the development and successful implementation of the former mine site closure program.
These former mine sites have now been remediated. Long-term maintenance and monitoring plans are in place, and six water treatment facilities treat approximately 6 billion litres of water every year to ensure that acidic mine water in these dormant mines poses no environmental risk.
With regard to the second new area of responsibility, PWGSC is now accountable for managing the delivery of benefit programs to former DEVCO employees, including former miners. To provide a picture of the scope of these activities, this year there are 350 participants in an early retirement incentive program, 295 individuals receiving medical benefits, 765 individuals receiving life insurance coverage, 1,730 active Workers' Compensation claims, and 300 individuals receiving subsidized coal.
The third and last new program responsibility is the management of a diverse real estate portfolio encompassing over 800 properties covering some 12,500 acres. The bulk of the properties is linked to the historic coal mining operations, a portion of which PWGSC will have long-term custodial responsibility.
Also in the portfolio are resource lands, residential and commercial lands, and office facilities linked to ECBC's economic development mandate.
PWGSC has made it a priority to develop a portfolio management plan for these properties. As the federal government's centre of expertise for real property, PWGSC already manages one of the largest and most diverse portfolios of real estate in Canada and is thus able to draw on a large body of expertise.
[Translation]
In summation, PWGSC's main focus during this transition period has been to ensure continuity of operations. I am pleased to say that transition activities have indeed gone relatively smoothly. Throughout this period, there has been no interruption to payments to vendors and contractors, or to pay and benefits. Environmental stewardship, portfolio management and human resource obligations have been met without disruption.
[English]
In closing, I would like to underline that PWGSC will continue to meet its commitment to manage this new portfolio of work while providing excellent service to Cape Bretoners and best value to Canadians taxpayers.
Thank you Mr. Chair and honourable senators. My colleagues and I would be pleased to answer your questions.
The Chair: Ms. MacKinnon, are you one of the individuals who transferred from Enterprise Cape Breton to Public Works Canada?
Joan MacKinnon, Regional Director, Cape Breton Operations, Atlantic Region, Public Works and Government Services Canada: I am one of the employees of Public Works who has a background in real property, so it's a new role.
The Chair: You manage a piece of that new portfolio.
Ms. MacKinnon: That's correct.
Paul Griffin, President and CEO, Marine Atlantic Inc.: Good evening, Mr. Chair and members of the committee. We are happy to be here this evening to talk about Marine Atlantic and our budget appropriations for 2014-15. With me is Mr. Shawn Leamon, Chief Financial Officer for Marine Atlantic.
Prior to the meeting I had some material put together that I believe has been distributed to the committee, so if it's okay with the chair, perhaps I can go through that material and make a few comments.
The Chair: We have it in both official languages.
Mr. Griffin: I will start on slide 2.
Marine Atlantic is a Crown corporation, which was created in 1986. Our head office is in St. John's, Newfoundland. We operate three port facilities, one in North Sydney, Nova Scotia, one in Port aux Basques, Newfoundland and the other in Argentia, Newfoundland.
In terms of background, when Newfoundland joined Confederation back in 1949, the ferry service between the mainland of Canada, Nova Scotia, and the Island was accorded special status under the Newfoundland Act. Initially the services were provided by CN Marine until 1986 when Marine Atlantic was created.
The company offers a year-round daily ferry service on a 180-kilometre route from North Sydney, Nova Scotia, to Port aux Basques, Newfoundland and Labrador. We offer a seasonal service that runs three times a week between North Sydney, Nova Scotia, and Argentia, Newfoundland. That route is about 520 kilometres. On slide 3 we have a graphic to demonstrate the routes.
Marine Atlantic offers an essential service. We transport almost all of the non-air traffic passengers into the island. We also carry over half of all the goods that enter the Island of Newfoundland, including about 90 per cent of the perishable goods such as fruits, vegetables, fresh meat, and almost all danger just goods. This would include dynamite, medical gas, chemicals for the offshore oil and gas industry and so on.
Basically we form part of the Trans-Canada Highway and therefore form a key piece of the transportation infrastructure in Atlantic Canada.
In terms of traffic volume, last year we carried about 323,000 passengers, 115,000 passenger vehicles and a little less than 100,000 commercial units.
Our commercial traffic is fairly constant all year long as is the consumption of goods. Our passenger and passenger vehicle traffic sends to spike during the summer, particularly during the tourist season that runs from about the middle of July until the end of August.
In terms of our commercial traffic, the 100,000 units, about half are transport trucks, which include the vehicle and the driver. The other half are drop-trailer units whereby a transportation company will drop the trailer to one port. We would put it on the ship and take it off on the other side.
We operate a fleet of four ro-pax vessels, which are roll-on and roll-off passenger and freight vessels. They are four of the largest ro-pax vessels in North America.
The vessels are also ice class because of the existence of ice in the Gulf of St. Lawrence, particularly during the spring, March and April.
We have about 1,350 employees and about 1,025 full-time equivalent employees. The difference in numbers reflects the fact that we have a higher number of employees in the summer during tourist season.
On slide 5 I have a graphic. Our vessels are approximately 200 metres long. They're in a class of ferries called Super ferries, the largest ferry class. To give the committee an idea of the size of the vessels, they can carry 525 cars or 100 transportation trucks. To give you an idea of that volume, if we were to take 525 cars and line them up bumper to bumper, it would be a line of traffic about 3 kilometres long. So they are very large vessels.
I'm going to move to slide number 6 and talk about some past challenges we've had, which I hope will give the committee an understanding of the journey we've been on over the last five or six years.
In 2009, the Office of the Auditor General carried out a special exam. They completed an audit of our operations and highlighted some challenges. They concluded that Marine Atlantic was at risk of failing to meet its constitutional mandate at that time based on the fact that we had a lack of capacity to meet our traffic demand and our service reliability was not where it ought to have been. We had low levels of customer satisfaction, and we had a lot of business processes related to asset management maintenance that needed to be reviewed and overhauled.
Following that report, Marine Atlantic put together a revitalization strategy that had a number of pillars, including asset renewal. The core of asset renewal was the replacement of some of our older ships with newer ships of greater capacity. It also included revenue generation, a focus on cost-effectiveness, renewal at the management and organizational level, and some governance enhancement as well. The board of Marine Atlantic has been very active in the revitalization of the organization.
We were very happy when, in Budget 2010, the Government of Canada committed over $521 million in new funding to support Marine Atlantic's plan.
I'm going to move to slide 7 and talk a little bit about the results of the investment and the plan we put together. I'm going to highlight a couple of areas.
Our on-time performance, which is one of the things that the Office of the Auditor General noted during its special exam, was at 68 per cent in 2009-10, well below the industry average for ferry companies. In 2014-15, this current year, we forecast the on-time performance to be 92 per cent, an improvement of 2 per cent from last year when we were at 90 per cent. That puts us in a very good place in terms of industry comparables.
While we improved on-time performance, our operating cost has reduced dramatically. I have a chart that shows the operating cost per unit of traffic carried. It's decreased from about $285 in 2009-10 to about $265 in this current fiscal year.
What's even more important is that the level of satisfaction of our customers as we measure it through our surveys has increased dramatically, as has the reputation of the organization. So we're very pleased with the progress we've made based on that five-year investment. We're currently in the final year of that five-year appropriation.
I'm going to move to the very last slide, which covers our statement of operations for this current year. I will pass it over to Mr. Leamon, who has some comments related to the forecast.
Shawn Leamon, Chief Financial Officer, Marine Atlantic Inc.: I'm going to give a very high-level overview of the statement of operations. The Marine Atlantic forecast operations for fiscal year 2014-15 is presented on an accrual basis according to public sector accounting standards. The main financial components are reflected in the statements.
Anticipated revenues this year are about $104 million. This is made up of user fees paid by our customers for transit and services provided onboard our vessels. Expenses of $240 million are anticipated, leaving a deficit, before government funding, on an accrual basis of $136 million.
Marine Atlantic is funded from the fiscal framework on a cash requirements basis. The $127.5 million provided in the Main Estimates is sufficient to enable the corporation to meet its financial obligations, goals and objectives for 2014-15.
Mr. Griffin: We hope that this short discussion has provided some background for the committee and provides a little insight into our budget requirements. Again, I'd like to thank the chair and the committee for having us here this evening, and we'd certainly be happy to answer any questions. I will address any particulars about the financial statements, particulars and so on, and ask Mr. Leamon to answer any strategic or operational questions.
The Chair: Thank you very much to both of you.
Before I go to my list of senators who have expressed an interest, Mr. Leamon, your figure of $127 million that we see this year for Marine Atlantic is 17.4 per cent less than last year. You say with $127 million you can meet all your obligations this year. What did you cut out or where did you get other revenues?
Mr. Leamon: We've been increasing our revenue base year over year by different means, looking at our tariffs and deciding just how much tariff increase we can apply to our tariffs each year.
We've also looked at our operating and planned sailing schedule. We've been able to match our traffic offering better with the planned schedule. We've been able to get savings from fuel reduction and from labour reduction as a result of providing less of a schedule throughout the year.
We had targeted our overtime. There was a substantial reduction in overtime with cutting it in half, basically. We focused a lot of effort on fuel savings as well in relation to a shore power initiative that we implemented.
From a capital perspective, as our infrastructure investment, the $521 million mentioned by Mr. Griffin, a lot of that was front-end loaded. We had a lot of infrastructure improvements that occurred in the first part of that five-year funding. As we queued up that funding and the infrastructure, basically the reduction went from about $70 million in a year for capital and infrastructure improvements down to $16 million this year.
The Chair: Thank you. There may be other questions to follow up on that. I just wanted to lay the groundwork for our discussion.
Mr. Wright, I see in the Main Estimates that Enterprise Cape Breton had roughly $50 million in its vote last year, and about halfway through the year, it was transferred. Five million went to ACOA. In straight line accounting, $25 million was for the second half of the year, $5 million to ACOA. Was the other $20 million transferred to Public Works?
Mr. Wright: That deemed transfer for Public Works and Government Services Canada was $31.5 million.
The Chair: Forty-nine was the total. That's helpful.
What is the number of employees you took on as a result of the deemed transfer?
Mr. Wright: We took on 16 new employees located in Sydney, Cape Breton.
The Chair: What is the total number of employees that you have at ACOA?
Ms. Frenette: We have taken on 31 employees.
The Chair: That was added on to what previously?
Ms. Frenette: To ACOA's number? We have about 560 employees.
The Chair: And 113 more; is that correct?
Ms. Frenette: No, 31 more.
The Chair: That's helpful. Thank you all very much.
Now I will go to my list of senators.
[Translation]
Senator Boisvenu: Thank you, Mr. Chair. I have learned a lot about the Maritimes. I realize that I did not know much about that region. Out of curiosity, I would like to ask an initial question. If I wanted to get to Newfoundland, how long would it take to go by ferry from North Sydney to Port aux Basques?
[English]
Mr. Griffin: Between North Sydney and Port aux Basques, it's about six hours during the day. During the evening it's a little over seven. We slow down a little bit during the night crossing to allow our passengers to get a little bit more rest.
[Translation]
Senator Boisvenu: That was an easy question. Now, I have a more difficult one. I looked at the administrative costs in the agency's budget. Why is there a difference between the regions of Quebec, Western Canada and the Maritimes? The administrative costs for the management of your budgets are 17 per cent in the Maritimes, 20 per cent in Western Canada, and 14 per cent in Quebec. Do you have national standards for administrative costs related to budget management, or are the regions left to themselves? There is a six-per cent difference between the region where the administrative costs are the lowest and the region where they are the highest. Is there a reason for that?
Ms. Frenette: All the agencies were created separately to meet the economic realities of the regions they serve. Atlantic Canada covers a wide area that includes many rural areas. The nature of our programs is such that we have to be very active on the ground. We have numerous points of service. So the structure of our programs represents costs that are different from those of other agencies.
Senator Boisvenu: For the variations or cuts that seem to be negative in all the budgets, which budgetary positions were affected by the net effect or bottom line? Was it the administrative costs or the grant programs?
Ms. Frenette: In the context of its fiscal exercise, the government requested cuts to both operations and program delivery. The cuts were shared.
Senator Boisvenu: The cuts were also well-distributed between the administration and — Have you thought at all about the costs related to the administration of the budgets? Compared with the other departments — As a senior official who worked for the Government of Quebec for 30 years, I recall that the administrative costs should be around 12 per cent compared to service delivery. Are you doing any thinking about this to determine whether you need to reduce your administrative costs as much as possible so that client services are not affected, particularly grants or professional advisory services?
Ms. Frenette: Yes, of course. We have made internal review a priority to see how we could rationalize our operations and reduce our operating costs. We have chosen to make these cuts so that we do not reduce the envelopes allocated to the programs. The agency has also undergone two consecutive cutback exercises and reduced its workforce by 24 per cent as a result.
Senator Boisvenu: Mr. Griffin, congratulations on your rationalization work. A cut of 17.4 per cent is still significant and, if I understand correctly, you had it both ways: you increased revenues and decreased expenditures.
What was your clients' reaction? Often, when rates are increased, the level of satisfaction changes proportionally. How did the people you serve react to this exercise?
[English]
Mr. Griffin: I think I mentioned in my opening remarks that we did have challenges in the past with service reliability. What customers seek first and foremost in a transportation service is the ability to carry the traffic — in other words, capacity — along with service reliability. So those were the two big issues, two big concerns, of our customers.
As Mr. Leamon pointed out, we have found many ways to utilize the new assets that we have in terms of new vessels and new shore-based infrastructure, to reduce maintenance costs, to utilize the assets more effectively. One of the realities in transportation is that unplanned operations are very expensive, so if you're running on schedule, the costs tend to be lower.
In transportation services generally, whether it's sea, air or rail, particularly in public transportation, cost is always an issue and a concern. We have had some tariff increases in the last number of years, as Mr. Leamon pointed out. Based on the customer satisfaction surveys that we do — that's of our passenger traffic, residents and tourists — and the research that we do with our commercial customers, they would suggest that, while they are not happy with price increases — and we don't expect our customers to be happy with price increases — the overall level of satisfaction is higher. We believe it's because we're delivering a much better product for an incrementally higher price.
As Mr. Leamon said, we are focused a lot on cost reduction because costs are always increasing — materials costs, labour costs and so on. We're really focused on minimizing the impact of those increasing costs so that we can reduce, as much as possible, the tariff increases to our customer base.
[Translation]
Senator Chaput: If I understand correctly, you are separate agencies that meet specific needs in the regions. We have here before us the Atlantic region and Quebec. Who looks after Ontario? Is there an agency?
Ms. Frenette: The English acronyms are FedDev and FedNor.
Senator Chaput: Very good. Is there a specific one for Ontario?
Ms. Frenette: There are two: one for southern Ontario and one for northern Ontario.
Senator Chaput: Among the factors for economic development in your regions, be it the Atlantic or Quebec, what is the most lacking in the regions you serve? What would be the biggest challenge, the biggest need for the Atlantic region and for Quebec?
Ms. Frenette: I can answer for the Atlantic region. The representatives for Quebec will be able to answer the second part.
Senator Chaput: I am sorry; they are not here.
Ms. Frenette: In the Atlantic region of Canada, the make-up of the Atlantic region is, itself, a challenge. The region is mainly rural, and the development of rural communities becomes very important.
Our population is mostly SMEs. So particular focus is given to working with businesses of that size and developing programs that meet their needs.
Senator Chaput: There was something called the Community Infrastructure Improvement Fund, which has been shut down or will be. What do you think about the track record for the improvement fund program? Also, how many community infrastructures have been supported through the program?
Ms. Frenette: The last program offered to develop community infrastructure was the Infrastructure Development Program. The expenses related to that program reached $16.6 million.
Senator Chaput: Was that amount spent?
Ms. Frenette: Yes.
Senator Chaput: How many projects did it support, do you think?
Ms. Frenette: I do not have the number of projects here with me this evening.
Senator Chaput: I have another question. There was also a fund for communities in New Brunswick that was for economic development. It was used to fund local projects, such as building new facilities and new infrastructures.
Do you have an idea of how many communities in New Brunswick benefited from this fund?
Ms. Frenette: We did not have a fund.
Senator Chaput: There was not one?
Ms. Frenette: We received a small envelope to fund special initiatives, but there is no fund or program as such for New Brunswick.
Senator Chaput: Perhaps I did not express myself properly. There was a fund for this kind of initiative. Is that correct?
Ms. Frenette: Yes. In total, we had an envelope of $6 million in 2012-13 that was reserved for projects in New Brunswick.
Senator Chaput: Was that amount spent?
Ms. Frenette: Yes.
Senator Chaput: The full amount?
Ms. Frenette: Yes.
Senator Chaput: Thank you.
The Chair: I apologize for not mentioning that the two Ontario agencies were invited. They are not here this evening, but we may be able to invite them to appear again in the future.
Senator Rivard: If I may, Mr. Leamon, I would like to come back to slide number 8 of Marine Atlantic's presentation. Something there piqued my interest. In terms of the foreign exchange currency gain, am I to understand that you are talking about $289,000 and not $289 million?
How do you make a gain on the exchange? Do people pay in a currency other than Canadian dollars, or are these loans that were contracted in other currencies? Is that the origin of the gain? In that case, I would understand that you posted a gain of $289,000.
[English]
Mr. Leamon: Yes. We have a charter vessel arrangement with a company in Europe, and we pay the charter rate in euros. Basically, any exchange gain or loss that we would incur on a euro basis would be reflected here.
[Translation]
Senator Rivard: On your balance sheet on slide number 8, I don't see the results of these operations. In your assets, if you have a depreciation of $35 million — I don't know what the percentage is, it is somewhere between 5 to 10 per cent — does that mean that you have $300 to $400 million in assets, with the largest amount from vessels or ferries?
[English]
Mr. Leamon: Yes. We have on our balance sheet about $200 million in assets that are made up of vessel terminals, different assets to run the organization, docks, trucks and the like.
[Translation]
Senator Rivard: Since I don't see anything about interest or debt services in your expenditures, am I to understand that the government paid for your assets and transferred them to you? You need to replace the fleet once it becomes outdated, but I am surprised to see in your expenditures that you have no financing costs. I can only assume that these are net assets. If they are, is it because they have been paid for by the Canadian government?
[English]
Mr. Leamon: Yes, that's correct, all our capital.
[Translation]
Senator Rivard: So the Canadian government paid for them. Now, in this case, why do you have the depreciation? Is it because the equipment is yours? Do you expect to be able to replace the fleet using future revenue if it becomes outdated?
[English]
Mr. Leamon: In the current arrangement we have, we don't generate revenue or have any type of asset renewal arrangement. All of the assets currently are funded from the fiscal framework, 100 per cent.
[Translation]
Senator Rivard: One last question. I am not going to ask you for a list of all the typists you might have, in addition to the vessels, but I gather that the vessels represent 90 per cent to 95 per cent of your assets. What is the rest made up of? Buildings, wharves?
[English]
Mr. Leamon: Yes, it would be buildings, wharves, equipment and ramps that allow us to board the vessels. We have three terminals, quite significant warehousing, as well as administration buildings.
[Translation]
Senator Rivard: Mr. Leamon, could I ask you to forward the value of your assets to the committee? I am asking you because there is still a $35 million depreciation for new acquisitions. I would like to see the breakdown of that: how many vessels, the current costs, and so on.
[English]
The Chair: Are you able to help us with that?
Mr. Leamon: Yes, absolutely. We can provide a complete listing of all our assets.
Senator L. Smith: Mr. Wright, there is a very interesting challenge and opportunity that you have inherited with the assistance of Ms. MacKinnon. It was interesting to see the management of the assets you have and some of the challenges you face.
Is there a lifespan on this project? What objectives do you have? You're a property manager, trying to fix up contaminated sites. Can you give us some background? Besides managing the assets, how long will it take? Are you going to be there for the next X number of years? What do you expect to get out of it? Will you sell of the land? Will you help an industrial development? Will you work with the Atlantic group to build the local economy? If you could give us a little background, I think that would be helpful to our committee.
Mr. Wright: I will preface my comments with the fact that we are new owners of the programs and in the midst of putting together long-term plans.
That said, this is a long-term obligation and responsibility we're taking on. These are a number of legacy items. As an example, for the three areas of responsibility that I laid out, there is a story for each of them. I'll quickly go through those.
The first one, the environmental management of lands impacted by coal mining operations is a long-term custodial responsibility. We would think that this is a 50-year plus period of management and monitoring.
We are now at a point where most of the major capital investments have been put in to remediating the sites and putting in place the mine water treatment facilities, et cetera. Over the next few years we will be moving increasingly more into monitoring and managing, so you will see a decrease in expenditures over time.
Senator L. Smith: Do you have the solutions to remedy the contaminated sites or are you just managing a situation? There are two differences.
Mr. Wright: It's a risk-based approach in the sense that we are preventing environmental contamination, and there are two main sources of concern here. The coal mining activities in Cape Breton took about half a billion tonnes of coal out of the earth, leaving about 3,200 kilometres of tunnels. That space can now fill with about 1.9 billion litres of water. There is a chemical reaction that occurs when water is introduced to pyrite, which is an iron sulfide that creates an acidic condition, and the irons and other metals become saturated in the mine water. It is important to capture the mine water and treat it. That's what we're doing so that it's not introduced into the environment in a contaminated state. That's very important.
The other piece is that with all of the coal and rock taken out of the earth, there were large piles of waste rock. A lower concentration has the same type of pyrite, and groundwater and rainwater would mix with this. The same chemical reaction occurs and there's runoff. What we have done there is essentially put down impermeable covers so rainwater cannot come into contact, put soil over that and then grass. Many of these sites have been returned to recreation facilities, sport parks and walking trails. I would say we do have the solution, but it still requires long-term maintenance.
The second area of responsibility goes with the benefit programs provided to former miners. There are kind of two switches on those benefits — when people turn 65 and at the end of life. So there is an end to that program over time, and that is a significant expenditure for the responsibilities that we have. Over the next five years, those will decrease by half. They will continue on a downward trend and over the next 20 years it will become a very small piece.
Senator L. Smith: Do you have a measurement in terms of capacity utilization, and if so, where are you at? I was looking at your revenue, and I'm wondering how close you can get. You've done a great job of getting it from point A to point B, but is there a point C? That would give us an understanding of where you are in terms of your volume. How much can you generate with revenue and how much more volume can you pick up with your assets?
Mr. Griffin: That's an excellent question, senator. As a matter of fact, it's a question we're often asked by Transport Canada who we have a wonderful working relationship with as well.
Our capacity tends to vary. It varies by time of year, day of the week. If we look at freight going into the province, into the Island of Newfoundland for the retail business, we see a lot of freight going in toward the end of the week, because a lot of the flyers and the sales at Canadian Tire, Walmart and Loblaws start on Friday or Saturday. There tends to be a fair amount of freight then. During the winter, it's a little bit less.
One of the things that impacts our utilization as well is the transportation of dangerous goods. I mentioned that earlier on. For instance, when we have a very heavily restricted cargo such as dynamite, we're restricted by transportation of dangerous goods legislation to 12 passengers. When we have less dangerous goods, but still dangerous, we're limited to 51 passengers. In that case, we will put on drop trailers, or trailers without drivers, and some passengers.
The utilization in the summer, when we have a mix of passenger and commercial traffic, tends to be higher. If you can picture a transportation truck at 73 feet long, we can fit passenger vehicles quite literally in between.
In terms of overall capacity utilization, we're at about 70 per cent. If we look at the broader ferry industry, our vessels are mostly like the large ro-pax class vessels in Europe, in the Baltic Sea, in the Mediterranean and so on.
Private companies in those industries and areas tend to look at increasing the capacity on their routes when they get to authorization in the 65 to 70 per cent range.
To answer your question, we certainly can and are working on increasing the utilization on the existing sailings we have because we can generate extra revenue with very little in the way of incremental costs. While the theoretical capacity is not at 100 per cent, the practical capacity at 70, 75 per cent is about the maximum before we have to add sailings. When we add sailings, of course, we burn extra fuel and add extra costs.
Senator L. Smith: Mr. Griffin, maybe you could present us with a one-pager on the impact of the potential Canada- Europe trade deal. How would that affect your business opportunities? In the marine business, obviously you suffer from seasonality and the highs and lows of different times of the year and probably the weather conditions, et cetera. It would be interesting to see what both Newfoundland and the Atlantic provinces could gain from this deal.
I know it's early and probably another 12 months away. They said 18 to 24 months when they started, but I'm just wondering if you have any strategic plans to figure out what you can gain in your business.
The Chair: Anything you can share with us would be appreciated. You did mention the Canada-Europe trade agreement, so if there is anything you can share at this time, having in mind that it's still an agreement in principle and there are some factors. We don't know what is going to be in there.
Senator L. Smith: That was you, Ms. Frenette. You talked about it, and we're very interested in seeing what people are really going to try to do with it.
The Chair: That's okay? We need your indication of "yes'' so that we can put it on our list here.
Ms. Frenette: Yes. If I have a few minutes just to talk about how we're organizing to take advantage of the opportunity.
The Chair: What we would like you to do is put that in writing, if you could. Time is not our friend right now.
Ms. Frenette: That's fine. Thank you.
The Chair: We have another panel. As much as we would like to stay on with you, the others are waiting to be heard as well.
[Translation]
Senator Maltais: Mr. Griffin, I understand that your ships don't sail the Caribbean, but rather waters with ice for much of the year. When you have those vessels built, are there specifications for the hull? We know that the strength of a ship is its hull. Are there more detailed specifications than for the hulls of the vessels that sail between Vancouver and Victoria?
[English]
Mr. Griffin: That's a great question, senator. The vessels that we utilize are built to an international standard, ice- class 1A or 1B. Ice class requires a number of specifications for the vessel. One certainly includes the thickness of the plate that's used in the hull so that it can deal with ice conditions. The propellers at the stern of the vessel, along with the rudders, are also reinforced. They are heavier than you would find on a vessel that didn't require the ice-class specification.
Fortunately, we don't see heave ice all that often, although last year was a very cold winter, as you know. A lot of ice in the Gulf of St. Lawrence moves down into our route, and because of the ice-class requirement, we could move our passengers safely. Safety for Marine Atlantic, like all transportation companies, of course, is the first priority.
We did have to get the assistance of the Coast Guard a few times to help us through particularly heavy ice, but these vessels are quite capable of moving through ice that's up to maybe five or six feet in thickness.
[Translation]
Senator Maltais: I imagine that your insurers check your hulls regularly. But tell me one thing: Does your company serve the Labrador coast?
[English]
Mr. Griffin: No. In the past, when we were part of Canadian National Marine, we provided ferry services throughout Atlantic Canada and also on the coast of Newfoundland and Labrador. When the government announced its national marine policy back in the 1990s, those services in Atlantic Canada besides ours were privatized.
The ferry services on the coast of Newfoundland, including the ferry service between the Island of Newfoundland and the coast of Labrador were all transferred to the Province of Newfoundland and Labrador, and they operate the services today.
[Translation]
Senator Maltais: Do they go all the way to Hopedale?
[English]
Mr. Griffin: I'm sorry, I'm not sure.
[Translation]
Senator Maltais: One more quick question: Do you serve St. Pierre and Miquelon?
[English]
Mr. Griffin: No, we don't. A year-round ferry service between Fortune, which is on the Burin Peninsula, and Saint- Pierre et Miquelon is provided by a private operator.
[Translation]
Senator Maltais: You talked about explosives. There is a federal law about that. Are explosives properly tracked and monitored in your area? In Quebec, there are a lot of ferries and they are tightly monitored. I would imagine that you have the same level of oversight, correct?
[English]
Mr. Griffin: Yes. There are Transport Canada regulations that control the transit of dangerous goods, whether it's by road, rail or sea. We abide by all of those regulations. We're regularly audited by Transport Canada. We have our own internal audits as well.
Since it is a safety concern, we pay very close attention to that. We provide lots of training, monitoring and oversight for our crews as well.
Senator Wallace: Ms. Frenette, as all of us from Atlantic Canada are well aware, the National Shipbuilding Procurement Strategy has huge potential and reality for all the country, but in particular for our region. I'm wondering what role ACOA is playing in developing and implementing a strategy that would enable Atlantic Canadian businesses, including small and medium sized, to maximize the benefits from that shipbuilding strategy, which is a $38 billion strategy. It's huge.
Ms. Frenette: As you mentioned, it is a significant project for Atlantic Canada, and ACOA has developed an Atlantic Shipbuilding Action Plan. We are really focusing on our SMEs taking advantage of this opportunity of $38.6 billion.
To date, a range of activities has been undertaken. We've helped 2,000 representatives of the business community from urban and rural Atlantic Canada to get more informed in terms of the procurement process, how to establish contacts with key domestic and international stakeholders and prepare themselves so that they are well positioned to take advantage of this contracting opportunity.
This has been accomplished by organizing supply information sessions for businesses throughout the region and special industry showcases and events that allow businesses to showcase their capabilities and meet face to face with prime contractors and potential subcontractors under the shipbuilding contracts.
ACOA has also been promoting access to our programs because we do have programs that will help businesses take advantage of activities that will prepare them. We would like to encourage them, through innovation, skills and productivity improvements, to acquire certifications that will better prepare them to take advantage of the opportunity.
Senator Wallace: The shipbuilding will be focused in Halifax where the yard is, but all of us from other parts of the Atlantic region want to see benefits maximized for our areas as well. The particular programs you have, are they directed towards accomplishing that and ensuring that opportunities and awareness are created throughout the region in all provinces?
Ms. Frenette: Yes. All of our activities target all of our Atlantic-based companies to take advantage of these opportunities throughout Atlantic Canada.
The Chair: Regretfully our time is up. If I had time, I would have spent some time asking Mr. Wright to explain your report that says that coal mining activities ceased on Cape Breton Island in 2001, 14 years ago, yet there are still 1,730 active Workers' Compensation claims. Maybe you could explain that.
The other very interesting one is the 300 individuals receiving subsidized coal. Are you importing coal to Cape Breton to meet this subsidization undertaking?
Mr. Wright: Thank you for the questions, Mr. Chair.
On the second question first, we're buying the coal from Nova Scotia Power, who is importing the coal. That long- standing arrangement is in place as part of the benefits package that was put together when coal mining operations were shut down.
On your first question on Workers' Compensation claims, at the end of coal mining operations there were a number of Workers' Compensation active files, and that has continued. New claims have been put in subsequent to the end of coal mining operations. Individuals put in claims based on a physical impairment or a disease. They claim and demonstrate evidence that there's a link to having worked in the coal mines. That is one of the biggest components of the financial obligation, and it's one of the most long-standing ones into the future as well.
The Chair: Thank you, Marine Atlantic, Public Works and ACOA. We appreciate you being here and the work that you're doing for Canada.
We're dealing with economic development agencies for Canada. As I indicated earlier to Senator Chaput, Ontario was not able to be here, north and south, two separate agencies, but we can meet with them later.
We will now hear from the Economic Development Agency of Canada for the Regions of Quebec. We welcome Mr. Marc Lemieux, Executive Director, Corporate Services; and Jack Noodelman, Acting Director General, Departmental Finances Branch.
From Western Economic Diversification Canada — and perhaps in your short introductory words you can indicate to us just where you're based — we have with us Mr. Jim Saunderson, Assistant Deputy Minister - Alberta Region; and Mr. Francesco Del Bianco, Director General, Strategic Services and Advocacy.
I understand that each of you have brief opening remarks.
Marc Lemieux, Executive Director, Corporate Services, Economic Development Agency of Canada for the Regions of Quebec: Thank you for your invitation. I will begin by presenting some general information about Canada Economic Development before speaking on the Main Estimates.
As part of its commission, Canada Economic Development, CED, promotes the start-up and growth of businesses and helps them to become more competitive, productive, innovative, and active in foreign markets. CED supports the regions in their efforts to mobilize and attract investment to improve Quebec's economic well-being. CED also contributes to the vitality of every region of Quebec, paying special attention to communities with slow economic growth.
[Translation]
Its 12 business offices make CED a well-established presence throughout the regions of Quebec. CED works with businesses, mainly SMEs and not-for-profit organizations, supporting them in their development efforts by providing financial support to carry out projects.
CED's three priorities for the 2014-15 fiscal year, which are a continuation of those presented in its most recent reports on plans and priorities, are as follows: support the maintenance and growth of enterprises; contribute to strengthening the economy of communities and regions; and continue the agency's transformation and modernization to improve its efficiency.
[English]
Under its Quebec Economic Development Program, the QEDP, CED also helps to strengthen the economy of communities and regions struggling with economic development issues by providing targeted and temporary support. In July 2013, CED launched the Economic Recovery Initiative for the economic revitalization and reconstruction of Lac-Mégantic in support of this community struck by disaster. With a total budget envelope of $35 million, the initiative included three components: reconstruction assistance, $20 million; direct assistance for businesses and not- for-profit organizations, $10 million; and assistance in the form of two investment funds managed by the Mégantic region Community Futures Development Corporation, $5 million.
[Translation]
For example, CED contributed to the rehabilitation of Lévis and Salaberry streets, which reunited the downtown area, and provided financial assistance to enable a business affected by the disaster to resume operations. CED also supported the creation of a pedestrian walkway in central Lac-Mégantic, so that residents and visitors could reclaim the new downtown. A dedicated team is on site and is working closely with local partners to make sure that their needs are clearly understood, to guide them through the economic development process and to identify potential funding options. In 2014, the team attended over a hundred meetings with entrepreneurs, town officials and local economic stakeholders.
In addition, CED is continuing its community support efforts through the Canadian Initiative for the Economic Diversification of Communities Reliant on Chrysotile to which $50 million has been allocated over seven years. The initiative is intended to support communities and businesses in the Des Appalaches and Des Sources MRCs in their efforts to transition to new economic activities. Several projects are under way as part of this initiative.
[English]
Isothermic Doors and Windows Inc.: The goal of the project is to increase the company's productivity and production capacity by expanding the plant and purchasing new equipment to increase and consolidate its production units. That's a project of $1.3 million.
Canatal Industries Incorporated: to improve the firm's productivity and step up marketing activities in the United States so as to promote Canatal's expertise with major purchasers.
[Translation]
CED representatives continue to be on the ground to answer questions and requests from businesses and organizations to guide them through the economic development process.
The Linguistic Duality Economic Development Initiative (EDI) is also among the tools available to CED. Through the EDI, CED seeks to stimulate the economic development of Quebec's official language minority communities. In 2014-15, CED expects to invest over $2.6 million to carry out projects. This financial assistance is a continuation of CED's efforts under the Roadmap for Canada's Linguistic Duality 2008-2013 and continues to reflect commitments under Part VII of the Official Languages Act.
[English]
For 2013-14, CED's efforts were as follows: a total of $226 million in grants and contributions invested in economic development projects; 1,150 projects supported by CED to make a tangible difference in the regions of Quebec; 7,391 businesses receiving assistance directly from CED or through organizations funded by CED.
[Translation]
Every dollar spent by CED in 2013-2014 generated $2.62 in investments in the regions of Quebec. As found in the 2014-15 Main Estimates, for the current fiscal year, CED's total expenditures in grants, contributions and operating costs are expected to total $247.8 million. Of this amount, $205 million is to be invested in grants and contributions for economic development projects, with the balance being used for operations.
As indicated by our activities in the field so far, you can be confident in CED's commitment to continue its unflagging support for small and medium-sized businesses and the growth of every region of Quebec. CED's activities are tailored to the economic situation in Quebec and contribute to business development and community vitality. CED has the necessary resources to meet its goals for the year 2014-2015.
The Chair: Mr. Lemieux, thank you very much. We will now hear from Mr. Saunderson.
[English]
Jim Saunderson, Assistant Deputy Minister - Alberta Region, Western Economic Diversification Canada: Honourable senators, in response to the very first question of the evening, I'm based in Edmonton but pleased to be here today with my colleague, Francesco Del Bianco, who is normally based in Ottawa. He is our Director General, Strategic Services and Advocacy in our Ottawa office.
[Translation]
Thank you for the opportunity to speak to this committee about my department, Western Economic Diversification Canada, known by its acronym WD.
WD was established in 1987 to diversify the economy in Canada's four western provinces.
[English]
Under the Western Economic Diversification Act, the department is mandated to promote the development and diversification of the economy of Western Canada and to advance the interests of the West in national economic policy, program and project development and implementation.
[Translation]
WD offers a variety of programs and services to support economic diversification and development in western Canada.
[English]
The Main Estimates for the department in 2014 totals $158.9 million. Additional authorities of $6.4 million have been provided through Supplementary Estimates (B), increasing our total appropriation to date to $165.3 million.
WD uses transfer payments to invest in and support projects through external proponents. Just as importantly, WD provides leadership to bring together other federal and provincial departments, post-secondary institutions and the private sector to work together on solutions to problems or to take advantage of opportunities within the Western Canadian economy.
On the funding side, there are two principal service and program mechanisms. First, WD provides transfers to third party delivery organizations that offer business development services to targeted groups, including rural communities, women and the francophone community. This collection of organizations we call the Western Canada Business Services Network, or WCBSN.
[Translation]
For the majority of its programming, however, WD directly invests in contribution agreements that support economic development and diversification activities. There are two components for this portion of its programming.
[English]
The first component is the Western Innovation Initiative, or WINN, launched by Minister Rempel in the fall of 2013. We have notionally allocated $100 million over five years from existing resources to provide direct, repayable contributions to small- and medium-sized enterprises in Western Canada in order to bring new technologies to market.
The second component provides non-repayable contributions to not-for-profit organizations, such as industry associations or academic institutions, to undertake projects that will improve economic outcomes in Western Canada.
[Translation]
As part of the Industrial and Technological Benefits Policy and the Defence Procurement Strategy, WD also plays an active role in supporting western Canadian businesses in accessing opportunities related to federal defence procurement. The department also has a mandate to advocate for western Canadian interests in national economic decision-making.
[English]
Of course we deliver these programs and services in accordance with our Program Alignment Architecture and it's on that basis that our estimates are presented.
The first element of our PAA is the business development and innovation, which will constitute about $101 million in the Main Estimates for the current year. This will support Western Canadian businesses, industry and research organizations to enhance innovation, productivity and global engagement.
The second element is community economic growth, which in our Main Estimates is $34.5 million, which will support communities to advance their economies and adjust to changing and challenging economic circumstances.
The third element is policy, advocacy and coordination, about $10.7 million in our Main Estimates, which will advance the interests of Western Canada in the development of policies and programs by establishing cooperative relationships with key stakeholders. And of course all this is supported by our internal services.
[Translation]
Within these programs, WD has identified six priorities that focus our programs and services on areas that respond to stakeholder needs, align with Government of Canada priorities, and promote jobs and economic growth.
[English]
Our first priority is innovation, where WD focuses on strengthening Western Canada's innovation capacity by investing in projects that will bring new technology-based products, processes and services to market and convening key stakeholders to strengthen the innovation marketplace in the West.
Following this is skills and training development, where the department supports projects and facilitates partnerships that will deliver post-secondary training to generate sustainable, long-term jobs in the West.
Third is Aboriginal economic growth, where we engage with Aboriginal entrepreneurs and small businesses to identify opportunities for economic and skills development in those communities.
Fourth is trade and investment, where we work to enhance small business participation in international business, particularly in emerging markets.
Fifth is federal defence procurement, where we work to enhance the ability of Western SMEs to capitalize on federal defence procurement opportunities.
The final priority is the revitalization of our Western Canada Business Services Network to ensure that its members are maximizing their economic impact and are aligned with the Government of Canada and departmental priorities.
In addition, like the other regional development agencies, we often offer non-core programming on behalf of the Government of Canada. For example, we recently completed delivering over 700 projects under the Community Infrastructure Improvement Fund that was included in Budget 2012, and some of our efforts in delivering other programs have earned positive mention from the Auditor General.
[Translation]
As I have briefly outlined, WD offers a range of regionally sensitive program and services that respond to the specific economic challenges present in western Canada.
[English]
The department is continually assessing ways to deliver more effective and efficient programs and services and will continue to address the needs of the West as they evolve.
Mr. Chair, I would be very happy to respond to questions.
The Chair: Mr. Saunderson, how many employees are in your agency?
Mr. Saunderson: Three hundred and ten.
The Chair: And that has been pretty steady over the last few years?
Mr. Saunderson: It's declined a bit over the last few years as a result of the reductions that our department and others undertook as part of the Deficit Reduction Action Plan in Budget 2012. We also had a bit of a spike coming out of Budget 2009 to deliver some of Canada's Economic Action Plan programming.
[Translation]
The Chair: How many employees does your agency have?
Mr. Lemieux: Just over 360 employees.
The Chair: Thank you. I will give priority to the senators who have signed up to ask questions or make comments. Senator Rivard from Quebec, the floor is yours.
Senator Rivard: My question is for Mr. Lemieux. I had questions about Lac-Mégantic, but you have already answered them in your presentation. I sure hope that this issue is behind us.
I am not worried, but I see that your operating budget has been slashed by $625,000 compared to last year. Can you tell me what cuts you have made: in programs or by letting people go? How do you account for the $625,000 reduction in your operating budget?
Mr. Lemieux: We are talking about a net reduction of $600,000 in the operating budget. There have been cuts to the operating budget, which is the end of our reduction plan. There was also a net amount. We have increased our operating costs to cover new projects, including the initiative for Lac-Mégantic, economic development and linguistic duality. There were additional funds for the Canadian Initiative for the Economic Diversification of Communities Reliant on Chrysotile. The net amount is $600,000, representing 37.9 per cent.
Senator Rivard: That is 1.6 per cent. I have one last question. I have often had the opportunity to participate in the proceedings of the official languages committee. We are mostly used to hearing francophone minorities outside Quebec complain about the programs being underfunded and inadequate. I realize that, in Quebec, the minority is the anglophone community. Since we are talking about official languages, I assume that you are referring to the anglophone minority. You want to invest $2.6 million to carry out projects. Can you give us an example of a specific project that will use much of the $2.6 million for the benefit of the English-speaking community?
Mr. Lemieux: Actually, the example I could give you is the Fonds d'emprunt des Laurentides, which was set up under the new 2013-18 initiative. In 2013-14, the agency supported the Fonds d'emprunt communautaire, a non-profit organization that provides microcredit and seed money to support anglophones in the Laurentian region. The agency's contribution was $153,000 over two years and four months.
Senator Rivard: You are constantly receiving applications. Can the $2.6 million meet all the requests, or only a small fraction of the applications that you might get in a year?
Mr. Lemieux: I think the envelope will be invested over the next few years and that it will meet the needs.
Senator Rivard: Thank you.
Senator Boisvenu: We will continue in the language of Molière. Mr. Lemieux, I would first like to congratulate you on your participation in the reconstruction of Lac-Mégantic. I come from the Eastern Townships, so I have followed the case closely and, when I was in the area, I talked to the socio-economic stakeholders in the region. You played a leading role, and I say this without any political intentions. I feel it is important to stress that.
I will come back to this issue later. I also want to congratulate you on your operating budgets. You are very good with the administrative costs. I did the math. You are at about 14 per cent in administrative costs to manage your $250 million. As administrators, we must make savings in the administrative costs of our programs. This prevents cuts to customer services and helps maintain the quality of service.
Let me go back to Lac-Mégantic. I know that this issue cannot be resolved in one day; it will take a few years. Does your department make decisions regarding Lac-Mégantic as you go along or do you have a long-term plan to rebuild the area?
Mr. Lemieux: On behalf of the department, thank you for your comments. For Lac-Mégantic, there is an envelope of $35 million over seven years, so for a good chunk of time. Our team is always on site, it is a team dedicated to this issue and it is still actively working with economic players in the region to ensure the success of the initiative.
Senator Boisvenu: We know that Quebec is also very involved. The current government in Quebec City — I will put a less political and more pragmatic spin on this issue. Do you have a good collaboration when it comes to the financial analysis of projects? Do you manage to invest, both on a federal and on a provincial level, as efficiently as possible?
Oftentimes, when two levels of government get involved — and occasionally three levels of government, if we include the municipal level — some efficiency is lost. Is maintaining that efficiency in the investment of taxpayer dollars truly one of your concerns?
Mr. Lemieux: I would say it is. I think coordination takes place on the ground, and the Quebec government's partners are definitely among the stakeholders with whom we coordinate to carry out the initiative and meet community members' needs.
Senator Boisvenu: Over this seven-year period, how much money will you have invested in the rebuilding of Lac- Mégantic?
Mr. Lemieux: The initiative represents an investment of $35 million over seven years.
Senator Boisvenu: Is that a firm budget or could it potentially be increased, especially considering what will be happening with the environmental protection component, which sort of came out of nowhere? Is this budget firm, or could it potentially be changed if additional costs were incurred?
Mr. Lemieux: At the federal level, a number of partners are on the ground, and we each have our own mandate. For the agency, the initiative is in the amount of $35 million to support the community and restart economic activities. We have other partners, other departments, whose job is to take care of other aspects, such as the environment.
Senator Boisvenu: Transportation and so on.
Mr. Lemieux: Yes.
Senator Maltais: I will join with my colleague in congratulating you on your work, especially when it comes to companies that have decided to embrace technological change in order to become more competitive with respect to exporting. This adds a great deal of value for Quebec and for other provinces.
The Government of Quebec announced it would close CLDs. I think that, after some time, it assessed the situation and finally decided to close up shop. Do you find that CFDCs are working well? Are they still serving their purpose? Are those organizations competing with or complementing your department?
Mr. Lemieux: Yes, CFDCs are organizations that are part of the Community Futures Program, which is available across the country. In Quebec, CED continues to set aside funding for that community. I think that envelope is worth nearly $30 million, which is in line with our program reference levels, to continue to support this community development initiative.
Senator Maltais: I have one last question. If I remember correctly, you used to have a program for young entrepreneurs. We know that one of the problems young entrepreneurs face is funding. It's not easy to find capital when you have a good idea, but don't have any money. Those companies often become large. There are some examples in the Quebec City region. Is that program for encouraging young entrepreneurs still accessible to young people who want to really work for the future?
Mr. Lemieux: Perhaps Mr. Noodelman could answer.
Jack Noodelman, Acting Director General, Departmental Finances Branch, Economic Development Agency of Canada for the Regions of Quebec: Of course, young people have access to the start-up portion of the program. Moreover, each CFDC administers a youth fund that targets young entrepreneurs in particular. They have an opportunity to obtain funding directly from CED through our program, and indirectly through CFDCs, which we support by way of our community futures program.
Senator Chaput: My questions are for Western Economic Diversification Canada. In your 2014-15 Main Estimates, the operating budget was reduced by $3.5 million, or 8.6 per cent. What sectors were the most affected by that decrease in your operating expenses?
Mr. Saunderson: The decreases in the estimates for the fiscal year are cuts that were announced a few years ago to reduce the federal deficit. The decrease also has to do with the end of the infrastructure program.
Senator Chaput: In vote 5, your grants and contributions were also reduced by about 11.7 per cent. Which grant and contribution programs were affected by this decrease?
Mr. Saunderson: This also had to do with the ending of the Canada infrastructure fund. That two-year program was announced two years ago. Basically, the sunsetting of that program explains the decrease.
Senator Chaput: Regarding your Western Diversification Program, I was wondering if you could provide us with concrete examples of projects related to economic development that used to be funded, but will no longer be funded now that the program has been cut.
Mr. Saunderson: If I have understood your question correctly, I would say that this program was created to help communities improve their infrastructure such as skating rinks, curling rinks, and so on. However, the core of our programs — economic diversification and actions to improve innovation within the economy — has remained the same.
Senator Chaput: That's still there. In your presentation, you talked about various components — repayable and non-repayable contributions, as well as other activities. Can you tell us what percentage of those contributions will be allocated for each western province?
Mr. Saunderson: We don't have a specific target for each province. Our approach is to approve the best projects, regardless of where they come from. However, I think that under WINN, the Western Innovation Initiative, which funds projects in all provinces, the funding for projects across all provinces is reasonable.
Senator Chaput: Are you able to meet most of the needs? Can you help all those who submit a request?
Mr. Saunderson: Unfortunately, my experience tells me that it's impossible to meet all the needs. However, I think our response has been reasonable, and considering the priorities established by Minister Rempel, I think we can target the best projects.
Senator Chaput: You are saying that those projects are meant to improve economic performance in western Canada.
Mr. Saunderson: Yes.
Senator Chaput: Do you assess that performance? How do you do that?
Mr. Saunderson: It's not easy. Obviously, the current issue of falling oil prices has shown that western economy must be diversified. In order to evaluate our success, we have to collect measures to determine how successful our projects are. We try to produce a performance report at the end of every fiscal year.
Senator Chaput: I have two other quick questions.
The Chair: Two more questions?
Senator Chaput: Sorry, but I am the only westerner here this evening.
The Chair: In that case, you can ask two more questions.
Senator Chaput: You also deal with Aboriginal economic development.
Mr. Saunderson: Yes.
Senator Chaput: You say that you hold discussions with Aboriginal entrepreneurs. Have you gone beyond the discussion stage? What I mean is, do any Aboriginal entrepreneurs now request assistance from Western Economic Diversification Canada?
Mr. Saunderson: That's a good question, as Aboriginals may play a more important role in the west than in the rest of Canada. Over 50 per cent of Aboriginals live in the western part of the country.
To meet the new priorities established by the minister in 2013, we are beginning to explore that potential, and some of our projects are more focused on training Aboriginals so as to increase their participation in the resource sector. In addition, we have seven community futures development corporations that are dedicated solely to Aboriginals.
Senator Chaput: There are seven of them?
Mr. Saunderson: Yes, seven out of the ninety corporations in the West.
Senator Chaput: So Aboriginal entrepreneurs can now use your assistance programs?
Mr. Saunderson: Absolutely.
Senator Chaput: Are there many of them?
Mr. Saunderson: There are some, but innovation is a priority for entrepreneurs. Aboriginal entrepreneurs often run other types of businesses that can turn to community futures development corporations for assistance. The Canada Business Network also provides advice on managing a business.
Senator Chaput: So you work together?
Mr. Saunderson: Absolutely.
Senator Chaput: I have to ask a question about francophone communities in Western Canada, or else my colleague will be disappointed. I know that you support francophone communities in Western Canada, but can you tell us how much money is provided to Western Canadian francophone communities every year?
Mr. Saunderson: We are proud of the work we do with francophone communities in the four Western provinces. We are in touch with four francophone economic businesses and we provide them with a total of $3.9 million annually.
Senator Chaput: What percentage does that account for?
Mr. Saunderson: Perhaps slightly over 3 per cent.
Senator Chaput: Thank you very much.
[English]
Senator Wallace: Mr. Saunderson, as the name of your organization makes clear, the diversification of the Western economy is a major focus of your group. To follow up on Senator Chaput's question about the success you've had to date, I had a sense that you have some methods of measuring your success going forward. Have you started from the premise that you want to establish particular targets that, for example, the oil and gas industry may account for whatever percentage of the economy in Western Canada and that you want to bring up another area to a certain targeted percentage? In other words, do you have targeted objectives that you are able to measure against at year's end?
Mr. Saunderson: We do have targets, and we report against them in our Departmental Performance Report. Over the last year we have adjusted those projections. Therefore, given the length of time it takes from when we initiate a project to when it will actually deliver the results, there will be a bit of a lag before we can measure some of those targets.
Your question points to part of the difficulty with this. I mentioned earlier the decline in the price of oil. That's going to have the effect of reducing the percentage of GDP in the West that is attributed to the oil and gas industry; therefore, the rest of it will go up. But I think it would be improper to come back here a year later and claim success for my department having changed the ratio of non-oil and gas related GDP in the West because of some measure that my department —
Senator Wallace: Maintain the status quo in the other industries and the percentage would go up.
Mr. Saunderson: Obviously we track these things, but your question highlights the complexity of reporting back and what we can really claim as attribution from our activities.
I do like to think, though, that over time, with the development we have put into medical research in Manitoba, for example, and into ICT, telecommunications in Alberta, that there is a stronger presence there now than there would have been if we had not been making these efforts.
Senator Wallace: Since diversification is a major focus of what you're doing, does that mean that when you're allocating funds and approving and encouraging certain projects — there would be some, for example, in the oil and gas industry that may be a great opportunity, but you would tend not to go there because you would simply be building on what has been the strength of the Western economy. In other words, you would purposely not focus on the area that has been the source of economic strength and look at these other areas. Is that fair to say?
Mr. Saunderson: I think it is. We are looking at those six priorities that I was speaking about earlier. Innovation is one. There is certainly innovation in the oil and gas sector, and to the extent that that has environmental benefits or could be exported as knowledge — not as a barrel of oil — internationally, that would be attractive to us.
I think as much as anything, though, in that sector, which is a large one, our role is more of a convening function in terms of, for example, bringing players together.
I was at a meeting sponsored by the provincial government, by the former premier there, and he brought together venture capitalists and other people not just in the oil and gas sector. One of the remarks that stuck with me was that we see each other in Heathrow more than we do in Calgary.
We have started to take the initiative to bring people together to make sure folks are connected, that they know each other and that they can work together, even without our grants and contributions money, to address these kinds of problems.
Senator Wallace: I was interested when you made it clear in your presentation that your organization is an advocacy group in the West and a facilitator to bring various governmental and non-governmental groups together.
When you were saying that, I was comparing it to what my understanding is of ACOA in Atlantic Canada. It seems to me that your organization has a different focus. I'm not sure how familiar you are with ACOA, but it strikes me that the two organizations are both creating economic development in their geographic areas, but it seems to me you're taking a different approach than ACOA with this facilitation and advocacy, which I didn't sense was the strength of ACOA.
Mr. Saunderson: It's too bad that Denise is not here so we could carry on the conversation. It's probably a matter of degrees more than in kind.
I think one of the comments Denise made earlier was about the need to customize the regional development work in each of the regions of Canada to meet its needs and opportunities. I think that's part of the answer. The oil industry would be a good one. It's a big, strong industry in many ways. It doesn't need a lot of my department's very limited resources, but we can sometimes bring people together that might not otherwise have come together. It could be a different situation in the Atlantic.
Senator Wallace: Does your organization coordinate or compare notes with the other economic development agencies in other parts of the country? You know them on a first-name basis, so is it to be expected that there is a close working relationship amongst all your organizations?
Mr. Saunderson: I think there is. Marc and Jack and I have known each other for a long time. I was the CFO for the department before I came into my current job, so we very much compare notes, and our deputy ministers meet quite regularly to work together.
Senator L. Smith: Mr. Saunderson, what impact will the falling oil prices have on your planning as you look into the next fiscal year, which we start on April 1?
One of the other questions I had is tied to John's question about Minister Rempel's plan to put $100 million into small- and medium-sized businesses to create more of a supply chain for bigger companies. When will you start to see some benefits from that?
My last question is this: When you do planning for the West, do you do it by province? How do you do it? How do you focus? There are different economies. Winnipeg, Manitoba, is very different from Saskatchewan. Saskatchewan has some similarities to Alberta, and B.C. is on its own in Lotus Land. I wonder, from your planning perspective, how do you look at it?
Mr. Saunderson: I think that's three questions in one, so I'll try my best.
Senator L. Smith: It is, but I wanted to get them in because we only have three or four minutes left. I also wanted to make sure you felt at home with this.
Mr. Saunderson: With regard to the oil price, it's not the first time we've seen a similar drop in oil prices or in other commodities. Along with other federal departments, we are watching very closely to see what the impact will be. So far we haven't seen any on any of our projects that have been approved where it might have been. Despite the reductions in capital expenditures that you have seen oil companies announce, there are still billions of dollars of expenditures happening that will need trained people. So we're watching and cautious, and we'll monitor that closely.
There may be some impacts on our provincial partners, as Marc was saying, such as Quebec. We work closely with all four province governments. They're going through their issues and we're watching that closely as well.
With regard to the WINN program, we are seeing the benefits already with the 20 projects announced by Minister Rempel in Calgary last June. These projects are starting. The technologies they will be developing are moving forward. People are being hired and many of these, I'm comfortable in saying, are going to succeed and result in sales not just in Western Canada but internationally.
Senator L. Smith: And the technologies are in what area?
Mr. Saunderson: They're in a whole range of areas from ICT to medical devices, environmental sciences, so-called clean technology.
Senator L. Smith: Not just dedicated to the oil patch.
Mr. Saunderson: No, absolutely not. That would not be fair to say at all.
In terms of planning, you're right: The West is a large, complex place with four very different provinces with large cities and remote communities. We take all of those factors into consideration in building our plans for the year.
The Chair: That is right on time and we will conclude for this evening. Thank you very much for being here. We appreciate the work you're doing.
I didn't ask the question as to whether we should anticipate seeing any further appropriation for you in Supplementary Estimates (C). I'm assuming you won't be getting further funds in (C), but maybe you could quickly answer that.
Mr. Lemieux: No, we have nothing planned for that exercise.
Mr. Saunderson: We have nothing at this point either.
The Chair: Then we won't be seeing you until we get the Main Estimates for next year, and perhaps we'll follow through with some of the projects that you're involved in. Thank you very much.
(The committee adjourned.)