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Proceedings of the Standing Senate Committee on
Agriculture and Forestry

Issue 27 - Evidence - Meeting of April 23, 2015


OTTAWA, Thursday, April 23, 2015

The Standing Senate Committee on Agriculture and Forestry met this day at 8 a.m., to consider Health Canada's user fee proposal respecting pesticide cost recovery.

Senator Claudette Tardif (Deputy Chair) in the chair.

[Translation]

The Deputy Chair: I welcome you to this meeting of the Standing Senate Committee on Agriculture and Forestry. I am Senator Claudette Tardif from Alberta, deputy chair of the committee. I would like to start by asking the senators to introduce themselves.

[English]

Senator Moore: Wilfred Moore from Nova Scotia.

Senator Enverga: Tobias Enverga, Ontario.

[Translation]

Senator Maltais: I am Senator Ghislain Maltais from Quebec.

[English]

Senator Oh: Senator Victor Oh from Ontario.

[Translation]

Senator Fortin-Duplessis: I am Senator Suzanne Fortin-Duplessis from Quebec.

[English]

Senator Unger: Betty Unger from Alberta.

[Translation]

Senator Dagenais: I am Senator Jean-Guy Dagenais from Quebec.

The Deputy Chair: Today, the committee will examine Health Canada's user fee proposal respecting pesticide cost recovery, pursuant to the User Fees Act, S.C. 2004, c. 6, subsection 4(2). Pursuant to subsection 4(4) of the User Fees Act, the proposal tabled in the Senate was referred to our committee on Thursday, April 2, 2015.

Section 5 of the User Fees Act allows for the committee to examine the proposed user fee and submit a report, if it wishes, to the Senate containing its recommendation as to the user fee in question. The Senate may then pass a resolution approving, rejecting or amending the recommendation made by the committee pursuant to section 5 of the User Fees Act.

Honourable senators, we are pleased to have with us officials from Health Canada's Pest Management Regulatory Agency: Richard Aucoin, Executive Director and Jason Flint, Acting Director General, Policy and Regulatory Affairs Division.

Thank you both for accepting our invitation to appear. I now invite you to make your presentation, followed by a question period.

Richard Aucoin, Executive Director, Pest Management Regulatory Agency, Health Canada: Honourable senators, I am the Executive Director of Health Canada's Pest Management Regulatory Agency. I am very pleased to be here today with Jason Flint, my director of policy and regulatory affairs, to discuss the proposed revisions to the cost recovery regime for pesticides, under the User Fees Act.

As the regulators of pesticides, we are responsible for managing the risks associated with a broad spectrum of products, from consumer insect repellents to agricultural and forestry chemicals, to products used in aquaculture. Pesticides are critical to the health and well-being of many Canadians and to the profitability of many sectors of the economy — in particular, the agriculture sector. Agriculture is one of the largest users of pesticides, and its needs often drive the development and introduction of new pesticides.

As regulators, we are keenly aware of both the risks and the value of these products to Canadian agriculture.

[English]

Madam Chair, when it comes to pesticides, Canada, as you can probably appreciate, is a relatively small player representing only about 3 per cent of the global market. Canadian growers have traditionally found it difficult to gain access to new technologies for uses other than larger acreage crops like grains and oil seeds. However, in the last few years that has changed significantly. More and more, we are seeing products being registered in Canada at the same time as the major markets like the United States and the European Union, and with the same use patterns. This is the result of a much more global regulatory system, an achievement of which we at PMRA are particularly proud to have played a significant role.

Canada has long been regarded as a leader in its risk-based approach to pesticide regulation and recognized by stakeholders for its commitment to regulatory alignment and international regulatory cooperation. This year marks 20 years since the creation of PMRA within Health Canada, and the changes that have occurred, we think, within that time are quite remarkable. We have gone from piloting joint review and work-sharing approaches with regulators, with the United States, to conducting international joint reviews with regulators, with multiple countries around the world, as a primary course of business.

While growers are still looking for new ways to address ever-changing pest problems and challenges in agriculture, their focus has shifted from not only gaining access to the new technologies but also to the realization that access to export markets may be hindered if those markets do not accept that technology or do not accept pesticide residues on those commodities entering those markets.

Recently, PMRA has begun to work more closely with agriculture and Agri-Food Canada to identify which pesticide-specific trade barriers are of highest priority and of significance to Canadian exporters. We hope to provide a lot more specialized scientific knowledge and expertise, as needed, to assist in resolving some of these market access irritants. We are also using our regulatory expertise to contribute to international food safety standards setting through the Codex Alimentarius Committee on Pesticide Residues and are looking to do much more work bilaterally with foreign jurisdictions to help resolve some of these differences in the maximum residue level standards where they create barriers to the free movement of safe and healthy food.

PMRA's increasingly important role in international regulatory cooperation on pesticide and food commodity safety has been resource intensive and will continue to require active leadership and participation. Global regulatory alignment of our policies and approaches will be essential to meeting our broad health and safety objectives in the future.

Stakeholders have been strong in their support for these efforts and have supported the need to continue to modernize our cost recovery regime, as a potential means of supporting those objectives. That brings us here today.

[Translation]

I will now like to turn the floor to Jason Flint, who will provide some background on the pesticide cost recovery proposal currently before the committee.

Jason Flint, A/Director General, Policy and Regulatory Affairs Division, Pest Management Regulatory Agency, Health Canada: The current regulations prescribing fees for processing applications and supporting the regulatory system were introduced in 1997 and have not been changed in the last 18 years. As you can imagine, the complexity and volume of work associated with pesticide regulatory activities and their related costs have increased over those years.

We hope that the committee is supportive of the changes being proposed.

[English]

Four years ago when PMRA started to develop this proposal, we began with a detailed activity-based costing of the various pesticide-related regulatory activities undertaken by the department. We also heavily engaged stakeholders in discussions about the pesticide regulatory system and their views on how it was functioning. We spoke to a variety of stakeholders, not only the pesticide manufacturers that pay the fees. We spoke to academics and NGOs as well as agricultural producer groups and other pesticide users.

Some of what we heard in those discussions served to reinforce many of our efforts over the years. We received many congratulatory comments on our ability to meet our published performance standards for processing regulatory applications from industry. We also received lots of support for our international regulatory cooperation efforts, through the OECD Pesticide Programme, the NAFTA Technical Working Group on Pesticides and more recently through the Regulatory Cooperation Council Joint Action Plan. Our continued efforts in global joint reviews were of significant interest.

Stakeholders recognized the potential impact on Canadian agricultural exports of pesticide-related international food safety standards and recommended that PMRA step up its work in supporting Canadian trade objectives through participation in the development of these standards.

Stakeholders also urge PMRA to enhance its involvement in other international efforts to align regulatory science policies through international bodies that I mentioned earlier and recommended that several business improvements be undertaken mostly related to information technology and public outreach.

Of note, stakeholders were quite adamant that funding enhancements to these priority activities need to be considered in parallel with any possible or potential revisions to PMRA fees.

The proposal that was tabled on April 2 was developed through a series of consultations with both fee-payers and broader stakeholder community, including the Minister of Health's Pest Management Regulatory Council. The majority of fees related to applications from industry were established at approximately 30 per cent of the full cost to the department of providing the service. The fees were benchmarked against similar fees in other jurisdictions and adjustments were made to reduce some fees to address the differences. Fee mitigation is also provided to support small business and compensate for the Canadian market size. The proposal is affordable by the industry and will not significantly impact key pesticide users such as agricultural producers. We built upon existing structure with these fees adjusted as described and a small number of changes, either additions or removals, in order to better reflect the work that PMRA currently undertakes.

PMRA's current budget allocation is approximately $43 million, including about $5.5 million in revenue from fees. If approved, the new fee structure should generate an additional $4.5 million to $5 million in revenue. Stakeholders have been supportive of the proposal but with the condition that any public resources freed up by the increased fees are reinvested back into PMRA in order to address the priorities they have identified and are not offset by reductions to PMRA's budget.

[Translation]

In conclusion, Madam Chair, we believe the new cost recovery regime for pesticide regulation is reasonable, based on solid evidence, and affordable. We also believe that increased resources could help address the priorities of both government and stakeholders.

This modernized cost recovery regime will help us meet the needs of all Canadians through a pesticide regulatory system that continues to prevent unacceptable risks to human health and the environment, and is modern, efficient and economically sustainable.

The Deputy Chair: Thank you very much, gentlemen, for your interesting and succinct presentation. We will now move on to questions from senators. I will start with Senator Maltais, followed by Senator Enverga.

Senator Maltais: Thank you, Madam Chair. Welcome, gentlemen. We were provided with a comparative table of costs. It is a bit difficult to understand, as we are not experts on cost recovery. Do you have the tables? I assume you do. They provide proposed fees, current fees and average costs to Canada. I see that the differences are large. For instance, let's look at the basic application fee for label review and/or processing. The proposed fee is $1,133, the current fee is $262 and the average cost to Canada is $3,777. Some of the differences are difficult to understand, and I would like you to explain those differences and how it all works.

[English]

Mr. Aucoin: Thank you for the question, senator. The fees were originally established in 1996-97, I believe, so we have a long period of time during which we have been operating under that fee. The work has become significantly more complex and the science has evolved substantially over that period of time. The types of information and studies that we now have to take into consideration before we make regulatory decisions have evolved and expanded substantially. We recognize that it has increased substantially not only from a cost-of-living perspective but also in regard to the actual nature of the work.

We can no longer do anything in a quick and cursory manner when we talk about pesticides. They are by nature hazardous chemicals. So we need to be very careful on how we make regulatory decisions around them. As Jason mentioned earlier, we did an extensive costing exercise to understand what it actually costs us today in the 2000s to do that work. We came up with that new cost. We took a number of principles into consideration, as Jason mentioned. For example, it was important to understand the impact of those changes on industry, in particular small business and manufacturers, and whether it would be passed on to the user community. We looked carefully at each change in fees and what the impact of that would be potentially.

We also looked at how those kinds of activities were carried out in other major comparative countries such as the United States, Australia and the U.K. We tried to benchmark ourselves against those countries, in particular the United States, which, as you know, is our major trading partner, to make sure that when the manufacturers come in with new technologies, they consider both the Canadian needs of our producers as well as the U.S. producers. We wanted to ensure that we had a regulatory environment and a cost of those regulatory activities that was not too far off from what they would expect in the United States.

We have a much smaller market, so we established fees that we think are about 30 per cent of the cost of doing the work. That benchmarked us comparably to other jurisdictions around the world without essentially costing us out of the market, if you will. If we made our fees too high, it would potentially be a disincentive to industry to enter the Canadian market.

[Translation]

Senator Maltais: Just to make sure I understood correctly, the fees have not increased in 18 years, right?

Mr. Aucoin: Yes.

Senator Maltais: Today, after 17 years, the pesticide issue has changed a lot; it has become a lot more important, complex and international in scope. It also costs a bit more, which is perfectly normal. What kind of an impact does that evolution have on the consumer — not on the individual, but rather on grain producers such as soy, corn or wheat producers? What kind of an impact can it have on their costs?

[English]

Mr. Aucoin: I will turn the question over to Jason Flint, who has done the bulk of the work directly with stakeholder groups in consultation looking at potential impacts. Maybe I will ask him to respond to the question.

Mr. Flint: The cost of the fees that we put into the regulatory system is not the most significant cost with respect to bringing a pesticide product to market. We conducted some of the cost-benefit analysis and found that the cost that could be passed on to the consumer, or in this case the agriculture producer, was in the neighbourhood of 0.1 per cent. For the farmer, we're really talking pennies per acre for the majority of the products that they're using so it shouldn't have a significant impact on their bottom line.

[Translation]

Senator Maltais: Thank you, Mr. Flint. I have one last quick question. Is Health Canada working with you on registering new pesticides, and on evaluating those that have been removed from the market, future pesticides, and pesticides registered by companies and pesticide producers, as well as by farming associations? Does Health Canada have a say in that file to ensure compliance when it comes to the health of Canadians and, of course, the requirements of those to whom our products are exported?

[English]

Mr. Aucoin: PMRA is essentially a branch of Health Canada. We are part of the department and our primary mandate is, in fact, both health and environmental protection. That's our primary mandate. All the scientific reviews and studies and work we do in support of regulatory decisions have that primary mandate under the Pest Control Products Act front and centre. We work closely with our stakeholders. As you can appreciate, pesticides are important to the agricultural sector, so we work closely with the agriculture department and with all agricultural stakeholder associations and groups. We are integrated within the department in ensuring that we do the risk-assessment work.

Senator Enverga: Thank you for the presentation. In a study of agricultural innovation, some witnesses talked about PMRA's efforts to harmonize the process for new products internationally. For instance, PMRA is part of the NAFTA Technical Working Group on Pesticides. The PMRA also works with the Organisation for Economic Co- operation and Development's Working Group on Pesticides, as well as the Regulatory Cooperation Council. My question is: How will the increased revenues from higher user fees help the PMRA to pursue its efforts towards international harmonization?

Mr. Aucoin: One of our greatest successes at PMRA has been the achievements we have had in both contributing to and supporting, I suppose, the regulatory alignment of the way pesticides are reviewed and examined around the world. We started off being very active in the NAFTA technical working group and have, for many years, worked closely with the U.S. EPA and our colleagues in Mexico to try to not just align the work we're doing but also to share the workload amongst the different countries.

We then took that practice over to the OECD and are very active today in OECD in doing joint work-sharing and global joint reviews amongst many different countries around the world. The benefits to us are certainly that we get access to the best science in the world when we do that. We also make sure that Canadian producers have the best opportunities for access to new technologies as they're introduced globally.

This is the kind of work we do now. But in the future we see that we have to do even more on that. We have to continue to expand our efforts globally to make sure that Canadians have access to that science and that the users of pesticides are at the table when some of these new technologies are being discussed by some of these global manufacturers and there are discussions about where and when to introduce those technologies into those countries.

Canada has a big leadership role in the OECD right now, in the working group on pesticides. We need to maintain that effort, and that's one area that we need to continue to support with cost recovery revenue in the future. A second very important area is the work we do on developing food safety standards. Pesticide residues on food commodities, as I indicated earlier, is an area now where Canada is realizing that, even though we have, through these kind of OECD and NAFTA working groups, really substantially increased the access of Canadian growers to new technologies as they have come in — we have facilitated a lot of that work — we have to do some of this work in foreign markets as well because some of these pesticides and some of these pesticide residue levels may or may not be accepted in foreign jurisdictions. That can hinder Canadian agricultural exports.

That's another key area that is supported by stakeholders. With this cost-recovery proposal, we will put additional effort into doing what we can, at least, to provide specialized expertise to departments like Agriculture Canada that are trying to advance market access for Canadian producers.

Senator Enverga: As a follow-up to that, it looks like it is important for PMRA to reinvest their increased revenues gathered from these higher fees. I want to know what additional activities PMRA has planned in order to better serve the stakeholders in this sector.

Mr. Flint: Ms. Richard already started to discuss the concept of supporting international trade and addressing trade barriers, particularly in relation to pesticide residues on food. That was one area where stakeholders said they really wanted to see some investment.

The second area is the alignment of science and policy approaches, so a lot of the work we have done through the OECD in the past, again, enhancing that, particularly as part of the global joint reviews. That's one of the areas where we are really finding we have worked for many years to align the requirements. Now, when a joint review is done, it is done based on the same data package. Everybody is looking at the same studies. If it comes to Canada, it is also coming to the European Union, to the U.S., possibly to Mexico or China or other countries at the same time to be looked at.

As you are evaluating this, you start to see there are still some differences potentially in the way you are looking at things, or in the approaches or policies that you have in the different countries where there are some slight differences. That is an ideal opportunity, at that point, when you are participating in these global joint reviews to say, "Now, we need to look and see why there are differences. Do there need to be differences? Should we be adopting a different approach based on what other countries are doing?" So investing in these areas where these differences may still exist.

The third large area that we're looking to invest in is around our business practices. The majority of our performance standards, for example, are already aligned with other jurisdictions around the world.

There's a couple, though, that were a little bit longer, and, with the increased fees, they wanted to see some shortened performance standards. So we were looking at shortening a couple of performance standards.

Also, we need to renew the electronic infrastructure that we have. As you can imagine, the submissions that we receive are quite large, and so they're all electronic now. For the last 10 years, at least, we have been receiving all of our submissions electronically. That system needs to be updated and also made more compatible with working with other countries internationally. If you are working on a package that has between 10 and 30,000 pages of scientific studies in it and you are communicating back and forth with foreign regulators, you want to make sure that you have a system that supports that. We're looking at doing some investments there.

The last area where we were asked to do some additional investment in is around outreach, so making sure that the Canadian public and stakeholders have a better understanding of what it is we're doing and the decisions we're making and making sure that we're not only transparent but clear and that the information we have is accessible to Canadians.

Those are the significant areas that we were asked to make investments in.

Senator Moore: Mr. Flint, I want to make sure of the numbers here. I think you said the PMRA currently brings in $43 million a year in fees, or is that your budget?

Mr. Flint: That's the total budget.

Senator Moore: What do you bring in annually now in fees?

Mr. Flint: About 8.5 on average; 8.5 million of that 43 is from revenue from fees.

Senator Moore: If this proposed increase goes ahead, it will bring in an extra five?

Mr. Flint: Four and a half to five, yes.

Senator Moore: So you are looking for two things here, as I read it. One is the increased application fees as per the tables that are attached to the brief. Second, you want to introduce an annual fee adjustment.

Mr. Flint: Yes.

Senator Moore: Right, so the two things. There is one thing I don't understand, and maybe you can explain this to me. I look at this summary, which I think your office prepared. It talks about PMRA seeking authority to re-spend and, down below, that the increased fees will be reinvested. What do you mean by "re-spend"? If you get the money, you are going to spend it on what you say. What kind of a word is "re-spend"? I have never heard of that before. You can't spend money twice, the same dollar; it can't be done.

Mr. Aucoin: That's a good point.

Senator Moore: What is that? And "re-invest"? This is one fee.

Mr. Aucoin: As you can appreciate, as part of the process, we will be seeking the authorities to re-spend these revenues. That is, normally —

Senator Moore: You are seeking the authority to spend them. You are going to get the money from these people who apply and so on and the fee-payers, and you are going to take that money and spend it on these different things you talk about.

Mr. Aucoin: Right. That's correct. As you can appreciate, the fees would normally accrue to the Crown, and so there is a process for us to go and seek the authorities necessary to have those fees not go directly to the Crown but be, in fact, spent, or re-spent, by us.

Senator Moore: I just like to keep this stuff so that taxpayers understand where the money is going. "Re-spending" is not a word that you hear in the normal course of business.

With regard to the annual fee adjustment that you are seeking, based on a five-year weighted average of public service wage adjustments, what five years?

Mr. Flint: That would have been not last year, the year before and the previous five years. A large portion of our cost comes from salaries and, of course, it was fairly comparable with the general cost of living increase across Canada.

Senator Moore: So the five years ending with the 2013-14 fiscal year.

Mr. Flint: Yes.

Senator Moore: I may be wrong, but it seems to me that that period we had a year or so when the CPI increase was nominal, if anything. So I don't know about this 2 per cent. I don't want to support something that's inflationary. Have you got those numbers and could you share those with the clerk, so we can have the base of that figure?

Mr. Flint: Yes, we can show you those numbers.

Senator Moore: You mentioned that Canada has 3 per cent of the global market of pesticides. Who are the big players internationally and what percentage do they have?

Mr. Aucoin: Certainly, the United States is probably the largest market. China and — I think Brazil is probably one of the biggest players in the pesticide industry right now. They have had a huge surge in their agricultural production over the last number of years. They're a really big player.

Senator Moore: If you don't have those figures, could you send those to the clerk as well? I'd like to know where we stand and who the big players are by percentage. Do you have those figures here today or can you send them?

Mr. Flint: Roughly the U.S. is about a third and the European Union is about a third. They're the two largest players with respect to the pesticide market.

Senator Moore: Okay. When you conducted your Canada-wide consultations through the Health Canada website, did you hold any public meetings?

Mr. Flint: We had the document that went out. We didn't hold meetings with the public more broadly, like town halls or anything like that. But we held meetings with different groups of stakeholders and made webinars available. We would do things over the Internet so people could participate if they wished.

Senator Moore: You said you received comments from only seven stakeholders. I'd like to know who they were, what the nature of that was, so if you could send that list in that would be helpful as well.

There is one other thing. As you probably know, maybe you don't, our committee conducted a study on bee health and we're now in the throes of completing our report. Some of the evidence that came before the committee was in regard to the protracted length of time it was taking for an application to be processed and registered. If you get this increase in fees will that help expedite your processing and registering of applications? We heard it takes anywhere from 10 to 20 years.

Mr. Aucoin: Just to clarify, senator, there were some concerns expressed in the context of the bee studies and things with respect to certain pesticides that were already registered for the purposes of pest control. Some of those have had a conditional registration. So a couple of those chemicals were and have been conditionally registered for a period of one, two or beyond 10 years. There have been some concerns expressed from a number of stakeholder groups that this needs to be explained and understood. We are in the process of reexamining how and when we issue conditional registrations and how we can seek to avoid those in the future.

Currently, we issue very few conditional registrations. That's a bit of an anomaly, those chemicals. It's a series of reasons, events happening around the neonicotinoid chemistries for bees, including the fact that the science has evolved substantially in that area of pollinators and bees. Some of the studies that we asked for at the beginning of that process, there were not even scientific protocols developed yet to conduct them.

Senator Moore: You'll await those studies. Would you issue a conditional, once a year? It sounds like it's not something you do often.

Mr. Aucoin: Currently I think we are in the 2 per cent of the regulatory decisions that we make that would be conditional registrations. Historically, we had a much higher percentage of them that were conditional, but we worked carefully to reduce that. Part of it has been a very high level of standardization of the kind of data and information we need to make decisions with, for example, through —

Senator Moore: Is that standardization internationally?

Mr. Aucoin: Internationally in terms of the data we're receiving, so there are much smaller occasions where we think there is still a little bit more information that we need that would be confirmatory.

[Translation]

Senator Dagenais: Senator Moore already started the question I wanted to ask about an annual assessment or a five- year projection of PMRA's funding.

You are trying to anticipate costs. Senator Maltais mentioned that no adjustments have been made in 18 years. Does your organization's funding include a reserve fund — some sort of an actuarial reserve — so that, should the costs exceed those you anticipated, you would have a reserve fund you could not touch?

[English]

Mr. Aucoin: I understand that there are no provisions available for us to create a carry-over fund. We're fortunate that to this point over the last five years, for example, the amount of revenue that we have received from application fees, regulatory charges, the $8.5 million, $9 million has been relatively stable. So the workload coming from those applications has been relatively stable and we have been able to forecast out and manage our financial situation quite well. But currently there is no provision for a reserve fund or carry-over fund.

[Translation]

Senator Dagenais: Are you also not expecting any unfavorable variances that could interfere with your reserves at some point? You say the situation has been relatively stable from year to year.

[English]

Mr. Aucoin: Correct. Under the User Fees Act, one consideration that we have to keep in mind is that as we go through this user fee proposal, we will fall under the User Fees Act and under that act there are specific provisions about what happens if you don't continue to meet the performance standards that you have established and that you are recovering fees to support. So we could see a situation that if we're not able to meet our performance standards, we have to then think about fee mitigation down the road for those applications for which we're not meeting performance standards.

So there is a little bit of danger of a kind of cycling effect where if you start to have to refund fees, it's not a true refund. But if you have to reduce fees for submissions, if you don't meet your expectations then you can get into a bit of a vortex of an even greater problem. But we've been able to manage our financial situation very well. We're meeting our performance standards writ large. Revenue is relatively stable and increasing, I think reflecting the fact that there is continually new technology coming into the agricultural sector and Canada is routinely a part of that introduction of new technology into North America. So we're kind part of that user community, if you will, of the manufacturers. What we're seeing now is that we should update those fees so that there is a reasonable sort of public and private cost of the work that we're doing. As we've said, the stakeholders are identifying the need for reinvestment in a number of critical areas if the agricultural sector will continue to be competitive and profitable in the future.

Senator Oh: Our agri-food products are exported to the international market. It is important that we earn food safety quality for that international market. This quality of safety and control of our agri-food products cannot be compromised. It is so important. The market is so huge. When I travel overseas, I always ask where the food comes from. If it's from Canada, I eat it; so I thank you for your good work.

You said that your operation is $43 million a year? How big is your workforce?

Mr. Aucoin: PMRA has a workforce of approximately 375 to 380 FTEs.

Senator Oh: Do you work closely with provincial agricultural departments?

Mr. Aucoin: We work very closely with our provincial colleagues both in terms of agriculture departments and environment departments, which typically have a role in pesticide regulation for the provinces. We tend to work with both environment and agriculture departments.

Senator Oh: Sometimes I go to farmers and ask who inspects. They said that sometimes an inspector comes to inspect their farms.

Mr. Aucoin: That's correct.

Senator Oh: That's during the time of harvest. Who are those inspectors? Are they federal or provincial?

Mr. Aucoin: They're potentially from both, but PMRA has a robust compliance and enforcement program. Together with our colleagues in the regions and programs under a bureau of Health Canada, we have a large number of inspectors devoted to examining agricultural practice, specifically pesticides being used by producers, and to ensuring that they're being used correctly. We have an annual program of inspection across the country to make sure that everything is being used the way it should be used, recognizing that sometimes there are human health and environmental consequences if they're not. It's a strong program.

The provinces also have a role to play often in certifying and training the farmers. So they may have a role to play, depending on the province, in how farmers are using chemicals.

Senator Oh: Do you have any idea of the total volume of pesticide use in the Canadian agriculture business?

Mr. Aucoin: I believe we have a dollar value of approximately $2 billion to $2.2 billion in pesticide sales in Canada.

Senator Oh: How much will your fees increase on that volume?

Mr. Aucoin: It will be 30 per cent. I think the question is: How much will the fees increase?

Senator Oh: Yes, a ballpark figure. You will have new fees. What will the percentage increase be?

Mr. Flint: Our fees are $8.5 million and an additional $4.5 million will be raised in fees.

Senator Oh: It's not a significant impact on the total.

Mr. Flint: No.

Mr. Aucoin: It's $4.5 million — a 50 per cent increase in fees. If you're a fee payer, it potentially looks like a significant amount. Jason mentioned earlier that we've done an analysis to ensure that the fees passed on to the farmer will be extremely small.

Senator Oh: Food safety cannot be compromised.

Mr. Aucoin: No.

[Translation]

Senator Fortin-Duplessis: Welcome. This is quite an interesting topic. I would like to know a bit more about the survey.

In your presentation, you talk about cost-benefit analyses. In August 2014, you commissioned a cost-benefit analysis to estimate the fees and charges proposed by the PPN for pesticide registrants, manufacturers, distributors and users. That exercise included a survey to assess the impact of the proposed changes. I saw further down that only 24 of the 45 registrants representing a broad mix of companies responded.

My question is simple. Are you planning on requesting more surveys in the future? If so, at what rate — after one, two or three years?

[English]

Mr. Flint: The survey you're referring to, I believe, is a business impact test that was done in advance to gauge the impact on individual businesses that would pay the fees. We are anticipating that after three years we will revisit the fees to see what the impact has been in fact to try to gauge whether the fees need to be adjusted or modified in some way.

[Translation]

Senator Fortin-Duplessis: So there would be another survey after three years?

[English]

Mr. Flint: Yes.

Senator Unger: Mr. Flint, you spoke about the stakeholder review and you have already answered questions. When you did this review, were the answers to your questions consistent or did some stakeholders have points that were completely different from others? What was the consistency?

Mr. Flint: Again, this was a series of consultations over a number of years. At the start, the questions were more divergent and there were a lot more of them. Towards the end, as noted by Senator Moore, only seven written comments were received on our proposal at the end of the day because of the fact that we had consulted several times with industry and clarified our approach. There were a couple of fees at the end of the day that had questions around them.

For the most part, stakeholders are supportive of the approach we're taking with respect to the increase in fees and the desire for additional work to be done by the Pest Management Regulatory Agency to increase investment in certain areas.

Senator Unger: The more you consulted, the fewer and less diverse the questions were.

Mr. Flint: There were a few individual fees on which there were comments.

Senator Unger: You were establishing user fees for microbial and semiochemical pesticides. Due to a lack of experience, you decided that user fees were premature. Would you explain the difference between these two?

Mr. Flint: Semiochemicals are used to communicate and change behaviour. For example, pheromones are the common one that we use. They are a sex attractant for insects. They can be used to attract all the males of a particular insect and trap them rather than having to use a traditional pesticide, which would be designed to be toxic and could have a greater impact on other insects.

Microbials are micro-organisms, some of which are soil-borne. They can be used either to out-compete other pests or they can have some insecticidal effects. For example, Bacillus thuringiensis, BT, is commonly used by organic producers and has a pesticidal effect on certain types of insects. That's the base difference between the two. Generally, this is an area we tried to support in the past because semiochemicals provide a non-toxic approach to controlling pests and the microbials are generally a less hazardous class of products.

Senator Unger: I hope the semiochemicals don't apply to humans because there are perfumes that contain those pheromones.

Basically, you have explained the importance. Would you apply that to honeybees? Obviously, to me, the microbial ones would be more toxic. Would you give examples or an example?

Mr. Flint: To honeybees, for example, a lot of the semiochemicals, the pheromones, are focused toward moths and those sorts of pests. As such, because it's an attractant, we're not actually applying a pesticide that bees would be susceptible to. Bees are a non-target organism. We don't generally try to kill bees; we're trying to kill other plant pests. So the semiochemicals and the microbials are generally specific to a certain type of insect, in which case they would be more beneficial when applied around bees.

They're limited in the number we have, and they're not necessarily effective in all situations. So we have to balance that out with the fact that they are one of multiple tools that would need to be used by a farmer to control a pest problem at times.

Senator Unger: So you're targeting pests and not bees, but there would be an effect on bees. I assume that the semiochemical ones would not really have an effect, but the other ones would.

Mr. Aucoin: Maybe I could just add, senator, a lot of the microbial pesticides are very specific to a certain type of insect. So, for example, there are some microbial pesticides that only affect the caterpillars that are feeding on leaves and so would have absolutely no impact on bees because they are very different biologies. Many pesticides are very targeted in how they act on the pest and that's one of their great beneficial attributes. Other pesticides are much more wide-spectrum and can potentially harm almost any insect, so that's where we really have to be careful in how we use them.

Senator Unger: Back to fees, will there be a set of different fee schedules for these things now that you have had a chance to study them longer?

Mr. Flint: Yes, we are actually proposing that we introduce a series of fees for these microbial pesticides and semiochemicals. It's a much lower rate than we have for other chemicals. We're hoping to encourage the use and the registration of these products, particularly since they are, for the most part, created by smaller companies and sometimes for more niche markets. So we have set up a separate set of fees, and it was, of course, compared to the U.S. system as well. So the lowest possible fee that could be charged in the U.S. system is what we used as the basis for establishing fees in Canada.

Senator Unger: Certain pesticides have a problem with regard to us conducting trade with the EU. This should all be science-based, so I'm wondering if, when you have your consultations — and you mentioned that your work was more collaborative than ever before — what do you do or do you do anything, are you able to, if you suspect that a country is, for whatever reason, usually a trade barrier — or it could be a trade barrier — not bargaining in good faith?

Mr. Aucoin: Our role is really to provide the science and the scientific expertise to explain the basis for Canada's food safety standards. Hopefully, in looking at the basis for a foreign jurisdiction's food safety standard, we can also understand what data and information they've used and how they came to that conclusion to have a different standard. That's our primary role. Other departments like Agriculture Canada, for example, have a central role in arranging trade agreements. We're providing support to those departments in those kinds of negotiations where they have discovered what they believe to be a trade barrier that's not founded on science. We can provide more expertise to help to facilitate that discussion.

Senator Unger: Do any disputes usually get resolved?

Mr. Aucoin: I think we work collaboratively with so many countries now on the establishment of new standards that we're also harmonizing or aligning the way we set those standards so, increasingly, it's harder and harder to rationalize why some of those standards are different. Countries are challenged to sort of show us the science, show us the information they used to establish that standard. There is also Codex, an international standard-setting body. That is also another forum where some of that challenge occurs. I think we're being helpful in that regard, and part of this cost-recovery proposal is that we do more in support of other departments, as the leads in some of these discussions.

Senator Unger: To my thinking that should be number one. Thank you very much.

Senator Moore: Gentlemen, in our Library of Parliament assistant's brief we see three tables showing the proposed fee, the current fee and the average cost. One table is an application for issuance or amendment of a certificate of registration of a pest control product. The second is other applications related to a pest control product. And the third is the application mentioned by Senator Unger with regard to microbial or semiochemical pest control products. What's the breakdown in terms of percentage of applications? Which is the heaviest applied for? Do you have that?

Mr. Flint: Table one.

Senator Moore: This is the application for issuance or amendment of a certificate of registration of a pest control product. Is that the heaviest applied for?

Mr. Flint: Yes.

Senator Moore: What percentage would that be of total applications?

Mr. Aucoin: Probably 90 per cent of the applications are for these kinds of applications. The second table, as you note, has a lot to do with getting research authorizations.

Senator Moore: I see that. What is that? What's the last one? How is that 10 per cent remainder split up between two and three?

Mr. Aucoin: Two and three are very different purposes. I don't have the numbers to say what the breakdown is. We only do about 150 research permits per year. We have thousands of applications a year and only about 100 or so research permits.

Senator Moore: I don't know anything about this stuff, so it's interesting. In table 1, 5(b) the current fee is 24,000, going down to not quite 6,000, for exposure data accompanying an application for a major new use. So what is that and why is that dropping?

Mr. Flint: All of the fees on table 1 are different components. So if somebody was registering a pest control product, we would have different data requirements depending on what the submission was, and then we would charge them appropriately to review whatever data was submitted. What you find is that, under 5(a), (b) and (c), all fees are relating to the review of exposure data. That would be data that would allow us to understand better how, for example, a user would be exposed to a pesticide. For example, it could be a dermal absorption, how much is absorbed through the skin, different information about that.

Senator Moore: Such as the possible negative impact of that pesticide on a person using it?

Mr. Flint: Right. What you're finding is that, when we went back and reassessed, as we have standardized the data over the years, 5(a), which is the initial data package on exposure, has become more robust over the years as we have gotten more knowledge. We don't have to use 5(b). It is often not used as much because there is less data required as we have a better understanding now of how the exposure standards work. There is less data required to come in and therefore our costs are less to review.

Senator Moore: Has this been enhanced by the international standards that are being used more in your work?

Mr. Flint: In part, yes.

Senator Moore: Number 11, there's no current fee. Let's protect the data. No current fee now is $2,000. So what is that?

Mr. Flint: That is for the registration of generic pest control products. So we have a system in place now, we have recently changed, put in regulations in 2010, I believe, or 2012 that creates a different system for the registration of generics. Generic pesticides are where, after a certain number of years have gone by, companies can apply and say I wish to rely on all the data provided by a previous registrant.

Senator Moore: The intellectual property asset has gone?

Mr. Flint: Right. There's the concept of the patent that protects the innovation itself. We also provide protection for the fact there are often millions of dollars used to generate these studies they submit to the regulator, so we provide data protection for that.

For a certain number of years, you cannot rely on that data. It is just for the person that generated it. After that period of time, we allow other companies to come in and register a generic product. If additional data has been provided to improve or —

Senator Moore: The original?

Mr. Flint: After it is originally registered. If the original registrant comes in and has new data they provide and a generic company wishes to register a product, then we say you should have to compensate them for that. We would go through and conduct an assessment of all the submissions that we received in the last 12 years and ask, "Is there any data that has been submitted to us that supports the registration that you need to gain access to as a generic registrant?" We provide that data to the generic registrant. They would then be required to go and negotiate access with the data learned.

Senator Moore: What is the period of time during which the patent is protected before it becomes generic and then people can come in and ask to rely on it?

Mr. Flint: When somebody comes in to register a brand new active ingredient, a new pesticide, they're given 10 years of exclusive protection. That means they cannot be required to have anybody else rely on their data. It is market exclusivity.

Senator Moore: No one else can see it?

Mr. Flint: Right.

Senator Moore: Ten years go by and I have an idea to enhance that product, so what do I do?

Mr. Flint: If you have exactly the same product, you would like to provide a cheaper version of this to farmers, you would like to produce something that is chemically equivalent to the original product, a generic version, then you can come in and rely on all of that original data submitted to register the product 10 years earlier, and you don't have to pay any compensation for it at all.

All you have to do is come in and show that you are chemically equivalent and that's the precedent product on which you want to register. If they have provided additional information, expanded the use pattern and added minor uses to support agriculture, and you wish to have those minor uses on your label, then you have to pay compensation, if it's been done within the last 12 years.

Senator Moore: To pay compensation to the original data owner?

Mr. Flint: The data owner, the person who generated the data. Or if we require as part of a re-evaluation that they generate some new scientific study to show that their product continues to be safe and can be allowed to remain on the market, then as a generic you would also be required to compensate them for that new data that they were required to produce.

Senator Moore: This number 11, this protected data: That fee applies to me coming in with these extra add-ons? That doesn't apply to the data already sitting there?

Mr. Flint: It applies to the generic. If the generic is saying, "I would like to register," then they would have to generally put in an application that would include fee number one, the basic application fee. It would include a review of the chemistry and to show that they're equivalent. They would pay this fee, which would ask PMRA to go through all your records and make sure that you can provide me with a list of all the data that you used to support regulatory decisions during that period of time for which I have to seek access for compensation.

Senator Moore: That's a one-time fee, is it?

Mr. Flint: Yes, when a generic comes in they have to pay that fee.

Senator Moore: Okay. There are two others in table 2. They're small items, but there are no current fees and, again, research notification and actual notification. So I take it that up to now you have not charged anything —

Mr. Flint: Correct.

Senator Moore: — to process two items?

Mr. Flint: Correct.

Senator Moore: Yet they are an integral part of this research application?

Mr. Flint: Yes. Well, it's the difference between a notification and an authorization, right? So for research notification, if you meet certain criteria, you simply have to inform us that you're going to be doing this. It is usually a less-involved process versus an authorization that would come in with more information. It is a much bigger process.

In the past we have allowed the notifications to come in at no charge and now we're going to be recovering some of the costs associated with those notifications.

[Translation]

Senator Fortin-Duplessis: On page 24 of your fee proposal document, under section 6.7, you talk about the proposed penalty structure. Since this is a complicated matter — at least for me — I would like some further explanations.

I would like to know whether you often have to impose a penalty for a target being missed. The penalty can be monetary or not, but have people ever ignored the penalty?

[English]

Mr. Flint: In the case of the proposed penalty structure, it is actually more of a penalty that's imposed upon PMRA as a result of the User Fees Act. So the User Fees Act, when it was written and approved by Parliament, includes within it a requirement that user fees have a public performance standard and if that performance standard is not met, then the fees in the subsequent year would be reduced.

For example, if we are processing a certain type of application and we are meeting our performance standard with respect to the amount of time it takes to do those reviews, 90 per cent of the time, then we continue to charge the full fee for the review of that submission.

However, if our performance drops below 90 per cent, then our fees in the subsequent year need to be reduced, as a penalty on the government agency, for not actually meeting their published performance standards.

So anybody who would come in with a similar type of submission in the following year would have a fee that is reduced. If we had 80 per cent performance last year that would mean we could only charge 80 per cent of the fee for that category of submission in the following year. Then at the end of that year our performance would be assessed again and if it was brought back up above 90 per cent then we could charge the full fee. If our performance went down, we would have to perhaps charge a lower fee, down to half of the fee.

It is not really something within our control. By amending these regulations, we are becoming subject to the User Fees Act and this is one of the provisions of the User Fees Act for which we will now be accountable.

[Translation]

Senator Fortin-Duplessis: Are many people currently ignoring that penalty? Do you impose penalties often?

[English]

Mr. Aucoin: We are not currently under the User Fees Act. So we're not currently subject to these penalties. We're kind of grandfathered now, I think is the term. After we go through these revisions, we will fall under the User Fees Act, so it is in the future that we have to worry about this provision.

[Translation]

Senator Fortin-Duplessis: It is currently not in effect.

Mr. Aucoin: No, not currently.

[English]

Senator Enverga: My question is more on table 2, which is more on the research component. What is happening here is that, currently, when you look at the current fees, they are really low. How do we compare with other countries? Would you think that increasing the fees will reduce our investment on research and development in Canada?

Mr. Flint: In fact, some concerns were raised so we haven't increased the number of categories for research authorization. Originally we only had two, authorization or notification. We now have different ones, full research authorization and lower fees for some other categories. We have done that to try to recognize that in some situations we can perhaps support a lower fee for some types of research authorizations to ensure that we're not actually impeding innovation.

The highest fees are generally used for large-scale trials that are more beneficial to the industry, for example, for showing efficacy to prospective clients and things like that. The actual innovative research is usually done on smaller plots of land, small acreages. A number of them could even come in under notifications, depending on the products. We don't think that the increase we're proposing will have any significant impact on innovation.

Senator Enverga: Are there times when other countries come to Canada just because of our lower fees to invest more in research and development? Can you see any decrease or increase in the research money coming from outside Canada with regard to this kind of work?

Mr. Aucoin: The amount of research that's conducted on pesticides in Canada is significant. I think we have done quite a lot of work to make sure that we understand that these fee increases will not create a disincentive for that research. As Jason was indicating, a lot of the research is done in small-plot facilities, federal or provincial laboratories, or even in some of the manufacturers' small facilities and labs.

A lot of research that is undertaken comes under this notification ability or perhaps is exempt from the need to pay these higher fees. We have done quite a bit of work to make sure that the increase in fees is not a disincentive and that those fees, when they're applied, like the $5,000, actually apply to a relatively small number of research permits.

Senator Enverga: How would you compare with other countries? Are you equal?

Mr. Aucoin: I believe we're similar to other countries in all our fees. We have made sure that our fees equate or are less than major comparators, such as the United States, so we're not a disincentive to either registration or research.

Depending on the nature of the research, sometimes companies will conduct certain studies as part of the research. Those are then used directly as part of a submission for approval to that country. Depending on the structure, you are getting this work done as part of your research, so there's an advantage to doing it up front and paying up front. We don't believe these are disincentives.

The Deputy Chair: I would like to get back to your comment, Mr. Aucoin, with regard to a question from Senator Moore on conditional registration. When the Commissioner of the Environment and Sustainable Development appeared before the committee during our bee study, she indicated that seven to eight products were on the conditional registration list according to her 2008 study. Since then, I believe one of those products has been definitely registered. That would leave about seven products, or so, on the conditional registration list.

You indicated that fewer conditional registrations are being given out. At the time, going back in some cases 10 to 20 years ago because some of those products are still on that list, conditional registrations were made because no scientific studies had been provided. That's quite a surprising statement. Why were those conditional registrations given if no scientific studies were provided?

Mr. Aucoin: To clarify, Madam Chair, a relatively small number of active ingredients have products associated with them that are conditionally registered. The number of conditionally registered products in that 10-year time frame is a very small number.

I need to clarify that in the case of the neonicotinoid pesticides, for example, which have become quite a focal point, if you will, we had scientific studies at the time to make our decision. We made a decision that the risks would be acceptable based on those studies, but we made those registrations conditional because we knew we needed some further information. We wanted some confirmatory information. There was still some level of scientific uncertainty, but not enough to make us overly concerned about registering neonic pesticides, which were replacing much more hazardous pesticides at the time. We felt that we had enough information to make a regulatory decision that the risks would not be unacceptable, provided that the manufacturers generated additional studies for us, particularly in this area of bee health and long-term impact on bees, which has been evolving quite substantially over the last 10 years.

For some of the information we knew we wanted to have specific scientific protocols that had not been developed yet. The vast majority of the protocols, for example those that involve generating data on pesticides for regulators around the world, are standardized through an OECD mechanism. This was one area that did not have good protocols already established. As these studies were being developed, we needed to agree with the companies on the protocol to get at some of those questions on long-term impact. So we worked closely with them. Some of the studies were provided quickly while other studies took longer.

Some of the studies where we need to understand long-term impacts can take more than a couple of years to generate, to be sure. We knew we had some uncertainties, but we were confident at the time that the risks were not unacceptable.

The Deputy Chair: Have the results of further studies come in so that these products can now be considered definitive registrations?

Mr. Aucoin: We have received a number of the studies at different points during this period. Sometimes the studies needed to be redone, for example, because the results didn't work out the way everybody had hoped, if you will. So we asked for some of those studies to be repeated.

There are still more data and information coming in on some of the conditionally registered chemicals. And we're working closely in a very aligned reassessment along with the United States Environmental Protection Agency to re- examine the science, including this new science coming in so that within the next year or two we can definitively understand whether there are any risks that we haven't accounted for.

The Deputy Chair: Thank you for that clarification.

Senator Moore: Further to the deputy chair's question, in terms of the process, is it up to the applicant to meet certain deadlines you have set or do you bring the file forward every so often?

Mr. Aucoin: We set the expectations. A condition is accompanied by a specific time period.

Senator Moore: If they don't read them, it doesn't get registered, but does it hurt them commercially?

Mr. Aucoin: Commercially the product remains in the marketplace unless we take regulatory action otherwise. As I say, in these cases, it wasn't a question that the risks were unacceptable. Rather, we wanted some additional information to confirm our original decision.

Senator Unger: With regard to what you were talking about, Mr. Aucoin, are there ever differences of opinion when you are discussing such a product that has taken a long time to go through the registration process? Within your organization, are there differing opinions on whether or not a product is safe?

Mr. Aucoin: Certainly differences of opinion occur among scientific staff. We have a large scientific community and, yes, there can be differences of opinion. But our goal is to manage the process. And we have a science management committee. We have senior level committees. We have peer review processes within the different scientific disciplines to make sure that when we do come out with a decision it represents a consensus amongst the different scientific disciplines.

That is integrated into our process of registration so that when we do go out and make a decision it represents a consensus within the agency.

Senator Unger: Does this happen very often or is it just once in a while when there is a product like neonics?

Mr. Aucoin: I think the neonic situation is unique in terms of the amount of time it has been conditionally registered and the nature of the studies. The whole bee health bee pollinator issue is something that has been growing for a number of years. But even 10 years ago it really wasn't on the radar. It is a new area of science that we and other regulators around the world are paying closer attention to.

Senator Unger: Thank you.

The Deputy Chair: As there are no more questions, on behalf of the committee, it is my pleasure to thank the witnesses who have appeared before us today.

Thank you, Mr. Aucoin and Mr. Flint, for a very informative and interesting presentation.

Senators, we will resume in camera.

(The committee continued in camera.)