Proceedings of the Standing Senate Committee on
Issue 32 - Evidence - May 27, 2015
OTTAWA, Wednesday, May 27, 2015
The Standing Senate Committee on National Finance met this day at 6:45 p.m.,
to continue its study of the Supplementary Estimates (A) for the fiscal year
ending March 31, 2016.
Senator Joseph A. Day (Chair) in the chair.
The Chair: This evening, we will continue our study of the
Supplementary Estimates (A) for the fiscal year ending March 31, 2016.
In our first hour this evening, we are pleased to welcome Mr. Paul Griffin,
President and CEO of Marine Atlantic Inc.; and Mr. Alan Latourelle, Chief
Executive Officer, Parks Canada.
I understand each of you has opening remarks and then we will go into our
usual discussion period. We shall begin with Mr. Griffin and then proceed to Mr.
Paul Griffin, President and CEO, Marine Atlantic Inc.: Thank you very
much, Mr. Chair. You may recall that I was here in January talking about Budget
2014-15. It is amazing how fast time flies. It is my pleasure to be in front of
the committee again.
The Chair: Welcome back.
Mr. Griffin: I have four or five slides that I would like to walk the
committee through. It will take me about five minutes.
I will ask you to turn to slide 2, which provides an overview of Marine
Atlantic. As I mentioned to the committee in January, under the Terms of Union
between Newfoundland and Canada in 1949, the Government of Canada committed to
provide a year-round ferry service connecting Nova Scotia and Newfoundland.
Marine Atlantic Inc. exists to fulfill that mandate.
I have a small chart on slide number 2 which has basically an overview of our
service. We have a year-round, daily service between North Sydney, Nova Scotia
and Port aux Basques, Newfoundland on the southwest coast of the island. We also
run a seasonal service between North Sydney, Nova Scotia and Argentia,
Newfoundland. The shorter service is 100 nautical miles, or 200 kilometres; the
Argentia service is about 280 nautical miles.
As noted on the chart, we transport almost all of the non-air passenger
traffic in and out of the island. We carry about half of the consumer and
industrial goods, including about 90 per cent of perishable goods. That's
because we offer the only daily service into and out of the island. We also
carry most dangerous goods. Dangerous goods would be things like medical, gas,
industrial chemicals, dynamite and so on.
Our service essentially links the Trans-Canada Highway between Nova Scotia
and Newfoundland. We are essentially a link in the highway and we believe a key
economic enabler for the island.
If I can ask the committee to move on to slide 3, I have a picture of one of
our vessels. We have two vessels that look exactly like this. They are twins:
the Blue Puttees and the Highlanders. There's a bunch of technical
data there for your interest. I will draw your attention to a couple of
These ships are ice class because we do get ice in the Gulf of St. Lawrence,
particularly in the spring. They're about 200 metres in length. They carry about
a thousand people, passengers and crew. They have a large cargo capacity in the
vicinity of 450 cars or about 100 transport trucks. They're very large vessels.
The Blue Puttees and the Highlanders are the two largest vessels
comprising the heart of our fleet. I will talk about funding later, but we are
purchasing those vessels in 2015-16 under the proposed funding in Supplementary
I will ask the committee to move to slide number 4. I have a few statistics
there. We have four vessels in our fleet. The two I mentioned, a vessel we
charter called the Atlantic Vision and a fourth vessel we own called the
Leif Ericson. It is slightly smaller than the other vessels.
Next I have some statistics to demonstrate the journey we have been on in
terms of revitalization over the last number of years. I have statistics from
2005 compared to 2014. Our traffic over that period of time is up by about 4 per
cent. You will note that the number of trips we made is actually down by 17 per
cent. That's because in that period we actually brought the larger vessels into
An auto equivalent unit is about the same as a standard mid-sized automobile.
We translate transport trucks into AEUs for commonality. They have increased by
25 per cent per trip.
We are pleased with the last statistic on fuel burn. We have reduced our fuel
burn by 18 per cent — over 7 million litres — over the last nine years, which is
not only important from a financial perspective in keeping costs down for the
government and users, but it is great from an environmental perspective as well.
On slide 5 I have some statistics that again highlight the journey that we
have been on. The Government of Canada invested in Marine Atlantic in Budget
2010. We received five years of funding and undertook a revitalization strategy.
You can see some of the impacts here. Our cost recovery has increased
substantially over that period of time. That's the percentage of operating costs
we recover from our customers. It is up from about 54 per cent in 2009-10 to the
70 per cent range.
Our on-time performance because of the newest ships in the fleet has improved
dramatically. Excluding weather, it is over 90 per cent. Including weather — and
we get a lot of weather in the Gulf of St. Lawrence — it is actually about 85
per cent. Those numbers rival the top airlines in the world in terms of on-time
Our revenue per unit of traffic carried, which is in the lower left-hand
corner, has steadily risen. That's because we believe we're bringing better
value to our customer base. On the other hand, we have managed to reduce our
operating costs per unit carried — and that's on the bottom right — which has
allowed us to bring our cost recovery up a fair bit.
I will move to the last slide. The previous one really talks about the
momentum we have gained over the last five years. We have gained that momentum
for two reasons: We have the right asset base and the employees have really
stepped up to the plate and worked hard. We have gone through a lot of change
and transformation in the organization.
Momentum is difficult to gain. It is also difficult to maintain, so we are
very pleased this year that the government has proposed funding of $374 million
for Marine Atlantic. That will include approximately $132 million for operating
costs and about $242 million for capital.
About $200 million of the $242 million is for the purchase of the two
vessels, the Blue Puttees and the Highlanders. We had those under
charter in the organization since early 2011. They have been operating really
well. From a pure fiscal perspective, purchasing the vessels makes a lot more
economic sense than a continuation of the charter. We're very pleased with that.
At Marine Atlantic — and I'm talking for the board and management team — we
believe that the continued investment in Marine Atlantic is an indication of the
government's support and confidence in our revitalization strategy and our
strategic direction. We are very happy about that and we look forward to some
continuing improvement in 2015-16.
Mr. Chair, I'm going to stop there. I will be happy, sir, to take any
questions from yourself or the committee members.
The Chair: I know why you came back after only a four-month break —
such a good positive story to tell, you want to tell it. Thank you.
Alan Latourelle, Chief Executive Officer, Parks Canada: Mr. Chair,
thank you for this opportunity to meet with the committee to discuss the Parks
Canada 2015-16 Supplementary Estimates (A). Before responding to the committee's
questions on the details of the supplementary estimates, I would like to take
this opportunity to provide a brief overview of Parks Canada.
As the oldest national park organization in the world, Parks Canada is
responsible for 44 national parks, 168 national historic sites, four national
marine conservation areas and, more recently, the Rouge National Urban Park.
We are the largest provider of heritage tourism experiences in Canada.
Through our 22 million person visits, we contribute $3.3 billion to the Canadian
economy from coast to coast to coast. We operate the largest national park
system in the world, with a land mass of 320,000 square kilometres, and our
portfolio of heritage visitor facilities, dams and highways have a replacement
value of $16 billion.
I would now like to update the committee on some of the work that Parks
Canada is undertaking through the new federal infrastructure investments and the
Species at Risk Act.
Mr. Chairman, as you know, last November the Prime Minister called on Parks
Canada to play a central role in the federal government's major new federal
infrastructure investments, which total $5.8 billion across the federal
government. Through these federal infrastructure investments, the Government of
Canada is investing $2.6 billion in Parks Canada's infrastructure over the next
five years. This infrastructure investment is a bold commitment toward
responsible stewardship of Parks Canada's protected places. It will enable our
team to restore the majority of the agency's assets that are at or near the end
of their lifecycle and bring them up to a level that meets Canadians'
expectations of their national parks and national historic sites.
These investments represent the most significant federal investment in the
104 years of Parks Canada, ensuring these cherished places are protected and
secured for the future, while mitigating health and safety risks and halting the
loss of significant built heritage.
The other major theme I wanted to briefly touch on is the Species at Risk
Act. Parks Canada is a global leader in national park management and ecological
restoration. Parks Canada's conservation and restoration program directly
supports the Species at Risk Act and is the most diverse and progressive program
in the agency's history for undertaking key restoration actions that contribute
to the ecological integrity of national parks and the recovery of species at
Parks Canada is taking concrete action in the three priority areas:
conserving Canada's lands and waters, restoring Canada's ecosystems, and
connecting Canadians to nature. In addition, the ongoing work of Parks Canada
significantly contributes to the national conservation plan's stated goals of
encouraging local initiatives and partnerships that lead to tangible results.
In support of these initiatives previously mentioned, the agency is seeking
adjustments to Parks Canada's 2015-16 Main Estimates totalling $354.1 million.
These funds will be invested in items such as: $350.4 million for improvements
to Parks Canada's heritage, tourism, highway and waterway assets; and $3.8
million for the renewal of the Species at Risk Act program.
Mr. Chairman, these are significant investments. I want to assure committee
members that the Parks Canada team will deliver on these obligations with
probity, professionalism and passion.
Thank you very much, and I would be pleased to answer any questions.
The Chair: Thank you, Mr. Latourelle. We will now have questions from
Senator Eaton: Mr. Latourelle, when you talk about key restoration
actions that contribute to the ecological integrity of the national parks, can
you give us some examples?
Mr. Latourelle: Yes. As an example, under the Species at Risk Act
program, there are several initiatives on the recovery of southern mountain
caribou in the mountain parks. Another is the restoration of the endangered
Atlantic salmon population at Fundy National Park. We have a program in which we
work with the private sector and the local community. A further example is the
savannah restoration and the recovery of three species at risk, for example, at
Point Pelee National Park of Canada, and so on.
Senator Eaton: Tell me what you're doing right now. The Senate just
passed the Rouge Park bill. Are there any monies going to the Rouge Park? Has
that already started?
Mr. Latourelle: Yes, the federal government has made a substantive
investment, close to $145 million over a 10-year period, which is already in our
Main Estimates, and then an ongoing commitment for the operations of the park of
about $7.8 million a year. Currently, we have the land from Transport Canada,
farmlands that have been transferred to us. We are owners of that land now, and
we have already started working with the farmers and the local community on
major restoration work in that park.
Senator Eaton: Have there been any surprises since you took it over
Mr. Latourelle: Not yet. I think there will be. I think we have been
operating there and working with the Toronto and Region Conservation Authority
for about three years now, so we've spent a lot of time getting to know the park
and creating an ambassador program, for example, for visitors in the park.
Senator Eaton: That's good to hear.
Before I ask Mr. Griffin a question, you told me before — and I think it
would be interesting for the other senators to hear — that Parks Canada has
received an award. Could you tell us about that award?
Mr. Latourelle: Yes, I'm a bit humble.
In November, we participated in the World Parks Congress. It's every 10
years, 160 countries, and I was fortunate to be recognized for the international
leadership of Canada. So I personally received an award.
Senator Eaton: Bravo! That's very nice to hear.
May I ask one question?
The Chair: Please. Ask another one like that.
Senator Eaton: The Senate Agriculture Committee went to Newfoundland
last year. They are trying to grow forage for animals because everything is so
expensive, we understand, to bring onto the island. You talked about 90 per cent
of all perishable goods being brought to the island by Marine Atlantic. Is
anything subsidized, or do they pay what it costs to bring it to the island?
Mr. Griffin: In terms of our service, senator, basically we have
tariffed rates for commercial carriers. In terms of Marine Atlantic, they would
pay the standard tariff rate for transport.
We are a heavily subsidized service. The Government of Canada this year will
subsidize us to the tune of $132 million on our operating costs. I guess any
industrial group or commercial group has the advantage of the subsidized rate,
but it is a consistent rate across all the user groups.
Senator Eaton: In other words, if I were Sobeys, bringing groceries
in, I'm subsidized because you're subsidized.
Mr. Griffin: Yes, that's correct.
Senator Eaton: You seem to be very well organized, very well planned.
Have you thought about when and how long it will take you to replace those
boats? How long will the boats you have in service now last?
Mr. Griffin: We have some of the larger ferries that operate in the
world. There are about 24 ice class super-ferries in the world. There are others
that are non-ice class.
The normal lifespan is 20 to 25 years. So the two vessels that we're
purchasing, the Blue Puttees and the Highlanders, replace two
other vessels that we had in service. One was in for 22 years and the other one
24. So those two vessels were built in 2006 and 2007, and they should be in the
fleet for another 15 years, I would think, minimum.
Of our other vessels, one we charter, and we have that vessel chartered until
November of 2017. It will be our intention to look for a replacement vessel that
would be more efficient and more like the two vessels we just purchased.
The fourth vessel that we own is in the 25-, 26-year-old range, so we'll be
looking to replace her over the next several years.
Senator Eaton: Have you start your financial planning to replace — I
guess it's because we hear a lot about military procurement at this table, and
it seems to take so long to get everything designed, built and in the water.
Mr. Griffin: It does, senator. As a matter of fact, if we were to
start a design and build program from scratch, it would probably take five to
We have one advantage that doesn't exist in the military sphere for the most
part. There are a number of operators who operate in Northern Europe, in the
Baltics specifically, where they have similar traffic requirements, and they
also have the presence of ice. So those companies tend to build fleets of
vessels. The two vessels that we have, the Blue Puttees and the
Highlanders, we are actually leasing from a large ferry operator called
Stena that operates in the Baltic.
If we were to do it ourselves completely from scratch, it would take a long
time. We are experts at operating ferries, not at designing them.
Senator Eaton: But your financial planning is —
Mr. Griffin: Fleet planning for us is a constant preoccupation and a
constant discussion with the shareholders, with the government, because the
assets are costly to procure and very costly to maintain. You have to have the
right mix of vessels to carry the mix of traffic. We've seen substantial growth
of commercial traffic into the island in the last few years as the economy has
grown, driven particularly by oil and gas and other natural resources. We've
seen some decline in passenger traffic as more and more tourists actually choose
air as opposed to driving. That's the other thing. We always have to manage the
change in traffic pattern.
Senator Hervieux-Payette: I have a question about the text: $5.8
million has been set aside for the entire country for federal infrastructure
investments. Over how many years? Is this for 2015-16, or is the $5.8 million
over a certain number of years?
Mr. Latourelle: For Parks Canada, it is $2.6 billion over five years.
Senator Hervieux-Payette: $2.6 billion?
Mr. Latourelle: Over five years. So for this year, in 2015-16, the
amount is $350 million, and the amount will increase over the next four years.
In the last budget, we received an additional $120 million for this year. That
makes about $470 million more for this year.
Senator Hervieux-Payette: I don't think that $5.8 million was enough.
I did not see $2.6 billion in the text.
Something else that interests me is the number of visitors: 22 million
visitors, who contribute $3.3 billion to Canada's gross domestic product. Does
that $3.3 billion go directly to Parks Canada for its operations, or is that the
economic impact generated by tourists who visit national parks? For example,
people who probably landed in Calgary went to Banff, rented a car and spent the
night in Calgary? Is that part of the $3.3 billion?
The Chair: It is $2.6 billion.
Mr. Latourelle: No, $3.3 billion.
Senator Hervieux-Payette: Of Canada's gross domestic product.
Mr. Latourelle: In the delivery of its program, Parks Canada generates
$118 million to $120 million. The $3.3 billion represents the economic impact on
local communities and nation-wide.
Senator Hervieux-Payette: Is there an advertising budget to attract
people who enjoy ecotourism? Because it's certainly the best destination in the
What is your approach for increasing the number of visitors — you say that
your goal is to double this number in five years? I know that you do not want to
crowd the parks for ecological reasons. But you said that, in terms of size, the
space is still quite big.
Mr. Latourelle: Yes.
Senator Hervieux-Payette: I don't think visitors will ruin our parks
if the number of visitors is doubled.
Mr. Latourelle: You are absolutely right.
Senator Hervieux-Payette: How much money are you investing in it?
Mr. Latourelle: We have a multi-faceted approach for our advertising
and promotion model. Parks Canada invests about $30.2 million a year in
purchased advertising. Across the country, we obtain free advertising in
newspapers by announcing new products, for example. We are working with the
Canadian Tourism Commission, which is responsible for international marketing.
The provinces, such as Newfoundland, invest in marketing and promotion. However,
they use our products and our sites in their advertising. We benefit from
provincial advertising and also from advertising by the Canadian tourism
industry. We also benefit from the fruits of our investments.
Senator Hervieux-Payette: As a Quebecer, I have noticed two places in
particular that post interesting advertising on sites, as you said, that use
your images. Newfoundland has extraordinary advertising. I do not know who
produces it. If they are listening, I congratulate them on their achievement
because it's magnificent. The Îles de la Madeleine also have an absolutely
wonderful advertising program.
However, I do not see any advertising from the west. In Quebec, we do not see
any promotion of what is interesting in the west. People have long joked — for
about 40 years in my case — saying that the Rockies belong to us and that we
want to go and see them. Still, people need to know more about the activities
there. We can think about Banff, Whistler and other regions, but we do not know
what activities there are in Saskatchewan or Manitoba.
So it seems that there is a gap in Canadians' knowledge of the marvels of
Parks Canada and its organization. Canadians do not know about it. For me at
least, as a Quebecer, I am not aware of those projects.
Mr. Latourelle: We are working with various columnists who cover
tourism in different newspapers, like La Presse. We have them visit
different places, including Banff, so they can write articles. In Alberta, we
work with an organization called Travel Alberta to promote national parks. This
year, there was a five per cent increase in the number of visits to the entire
Parks Canada system, including 10 per cent in Banff and Jasper. The average
increase is usually about one per cent. So the rate is five times higher this
Senator Hervieux-Payette: May I recommend that in your next main or
supplementary estimates you set aside much more money? I think you will
recuperate that investment several times over. You are currently sitting on a
treasure, and you are winning awards. But Canadians need to know about this
I congratulate you on the quality of your work. I was absolutely delighted
this year to see the new construction in Banff. It's extraordinary — aside from
the fact that all the staff came from China, which I found a bit strange. It
seems to me that young Quebecers could have worked there.
Mr. Latourelle: Rest assured that the opportunities are open to
Senator L. Smith: Mr. Griffin and Mr. Latourelle, great to see you
again. Mr. Griffin, you showed us a lot of information last time and again this
As I look at our fleet and the key indicators, I see that trips are down 17.2
per cent. You had last time, I think, a capacity utilization graph that you
showed us. Is it important to have more trips, or is it important to have your
capacity utilization up? If your trips are down, is your capacity utilization
Mr. Griffin: If I remember correctly, last time you asked me a very
good question about utilization. We aim for utilization in the 70 per cent to 75
per cent range. The old fleet utilization, and we really didn't have enough
capacity, was very high, which may sound on the surface to be a good thing. If
your fleet capacity is 85 per cent, it sounds good. But of course traffic comes
down the highway and ebbs and flows. The problem with that is we end up leaving
a lot of traffic on the dock where they have to wait, and so on.
With the current fleet, we've done a good job of matching capacity and demand
in the schedule. We're hitting the capacity utilization in the sweet spot of 70
per cent to 75 per cent.
I mentioned to Senator Eaton about the European operators. They have a
similar operating model, and that's where they aim — the 65 per cent to 75 per
cent range. We find that if we aim higher, we end up leaving traffic behind.
Senator L. Smith: You irritate your customers.
Mr. Griffin: We do indeed, sir. There is a cost. With perishable goods
there is a risk to the carrier if that type of traffic is left behind.
Senator L. Smith: Do you have refrigerated storage or coolers on your
ships? Is there a balance in terms of the equipment on the ships so that you can
handle different types of perishable goods?
Mr. Griffin: The actual trailers themselves have refrigeration units.
They come fully equipped.
Senator L. Smith: The carriers have their own equipment.
Mr. Griffin: Yes, they do.
Senator L. Smith: Is the fuel burn a result of lower fuel prices as
the cost per barrel of oil has gone down?
Mr. Griffin: These numbers are actually litres of fuel. We have
achieved the reduction in fuel burn by reducing the number of trips we make back
and forth across the Gulf.
We have also undertaken a couple of other initiatives, and I will speak to
one. We implemented the Sure Power Program. Typically, when ships are at port,
they run their auxiliary engines to power the onboard services. We installed
shore-based power in both North Sydney and Port aux Basques. When our vessels
are in lay-by mode, we turn off all the engines and plug them into shore power.
That has saved about 1.7 million litres of fuel per year.
Senator L. Smith: You talked about having the right asset base in
terms of purchasing vessels and the employee performance. What have you done to
stimulate employee performance to improve the actual operation?
Mr. Griffin: We've done three or four things, senator. We've made our
strategic objectives very clear to all of our employees. Those are quite simply:
safety, first, foremost and always; and a relentless pursuit of customer
experience and customer service. We've driven that through the organization by
means of an immense amount of communications, involving me and the whole
management team, with internal newsletters, town halls, et cetera. There's been
a fair amount of training as well from a customer experience perspective. We've
also done a fair bit of customer experience research to help us to understand
our customer base and their needs. We've done some automation of some of our
processes that provide good information for the customers as well.
It's really a case of looking at our entire operation through the customers'
eyes. We don't have a customer service department, but we have a customer
experience and we focus on the experience when they travel.
Senator L. Smith: Number of employees?
Mr. Griffin: We have about 1,300 at peak. We peak in the summer when
we have tourism traffic. We have a little over 1,000 full-time equivalent
Senator L. Smith: What is the percentage of unionized employees versus
Mr. Griffin: Unionized is well over 90 per cent.
Senator L. Smith: What is your relationship like now with the union?
Mr. Griffin: I would characterize our relationship as very good. One
thing I initiated a few years ago was a union executive management forum.
We have five unions and six collective agreements. We get together. We being
myself and the executive management and senior leadership team, with the heads
of all of the unions, their national reps, three times per year. We talk about
common issues, common concerns. It's really a communications forum. Our agenda
in terms of safety and customer experience is very open and transparent, and we
have those discussions.
In the day-to-day business of operations, we have grievances and issues and
complaints, but we believe it's very important that we communicate our overall
strategic directive to our unions, who are partners in the journey.
Senator L. Smith: Biggest challenge and biggest opportunity?
Mr. Griffin: I think the biggest opportunity is around better
utilization of technology, whether that's improving the way the customers
interact with us on their mobile devices when they book a crossing with Marine
Atlantic or providing a web-based portal so our commercial customers can track
drop trailers in terms of where they are at any time in our system. I believe
that's the greatest opportunity.
I think the biggest challenge going forward is to meet the ever-changing
customer needs. They're really inter-connected. Travellers, residents and
tourists have evolving expectations, and we need to keep evolving as well in
order to step up and meet those.
Senator Wallace: Mr. Griffin, as you've indicated, Marine Atlantic has
requirements for operations and capital.
Mr. Griffin: Yes, sir.
Senator Wallace: Is any portion of that provided by the Provinces of
Newfoundland or Nova Scotia?
Mr. Griffin: No, sir. The operation is subsidized solely by the
Government of Canada.
Senator Wallace: With the revenues that you've created, and I see from
the chart you've provided us that you've shown steady progress over the last six
years, is any portion of your revenue directed towards your capital needs, or is
it all towards operations?
Mr. Griffin: It's all towards operation. We don't have a capital fund,
per se. Whenever we have a capital requirement, we discuss that requirement with
the Government of Canada.
Senator Wallace: As you mentioned, your current capital from the
funding allocation of some $374 million, $242 million of it is for capital, of
which $200 million I thought you said was for the purchase of two new vessels —
or two vessels, I guess. They're not new.
Mr. Griffin: Yes.
Senator Wallace: They're two vessels I think you said you're currently
leasing, and the idea would be to acquire those. I'm sure you must do this, but
just take us through the process of deciding whether you would purchase a
vessel, lease a vessel, time charter vessels, all of which have different
Mr. Griffin: Yes.
Senator Wallace: I guess the question I would have following that is
whether you are satisfied that acquiring the vessels is the most economical way
of meeting your vessel needs.
Mr. Griffin: Yes. That's a really good question, senator, and we do
look at all those options.
There are two options for chartering. You can time charter, which is a vessel
that comes with a crew, or you can bare-boat charter, which is basically just
the vessel. We have our own crews, so we always chose the latter option.
Leasing or chartering a vessel is a little like leasing a car. If you keep
your car for seven or eight years and do the economics, it's always more
economic to actually purchase as opposed to lease. One of the advantages with
leasing is you try the vehicle and you have the opportunity to return it after
three years or four years, whatever your lease period is.
For us, it was advantageous in that we could bring the vessels into the
fleet, get the operating experience and build the confidence that they would be
the vessels and the technology that could carry us through the next 12, 15, 18
years. That model tends to work very well for us.
Once we made the decision that the vessels would be appropriate to carry us
into the future — we could have continued to charter the vessels, but if you do
a comparison of chartering versus purchasing, either building something for the
value of money or just a straight economic comparison, the purchase option is by
far more economical.
Senator Wallace: You used the term "leasing," but it really is a
bare-boat charter that you've had.
Mr. Griffin: Yes. I use those terms interchangeably, but it is a
bare-boat charter, sir.
Senator Wallace: Does Marine Atlantic have a separate marketing team,
a marketing strategy to encourage and increase utilization of the vessels for
goods and passengers?
Mr. Griffin: We have a very small marketing program around the
commercial side of our business, basically the trucking companies. Where we tend
to spend our energy is on direct contact. We spend a fair bit of time with the
executive management of the various trucking companies to better understand
their evolving needs and the evolving needs of their customers, whether they're
retail, industrial and the like.
On the passenger side, it's interesting. Alan and I had a conversation about
it earlier. Marine Atlantic is a way to get a passenger from A to B. We actually
get involved with the province, and we do some advertising ourselves of the
destination. We have an advertising campaign now that actually involves Gros
Morne National Park on the west coast of Newfoundland. We're actually running
that campaign in Ontario and in Quebec. I was mentioning it to Alan, and the
senator mentioned the advertising campaign in which the parks figure quite
prominently, and the parks are certainly a key cornerstone of tourism in our
Senator Wallace: As you pointed out on your fifth graph, it shows the
revenue increase you had over the last five or six years. At the beginning of
each year, do you have targeted revenue increases that you operate to attain?
Mr. Griffin: That's a good question. We make price adjustments every
year. Generally we announce them in January. They're effective at the beginning
of the fiscal year, on April 1.
What we do when we determine price adjustments is we look at our cost base
and at our changing costs year over year. We've obviously been working very hard
to try and keep the costs down, but there are certain things that are out of our
control, like fuel costs and exchange rates. We try and hedge exchange rates
when we can because we purchase a fair bit of materials outside Canada. So we do
things like that.
We look at our operating costs, fuel costs, cost recovery targets and our
funding available from government. Based on that, we adjust our rates
accordingly. This year we adjusted our base rates on April 1 by 2.6 per cent.
Because of the large fluctuations in fuel prices, we actually have a fuel
surcharge, which varies with the cost of fuel. Recently, we've lowered our fuel
surcharge because the cost of fuel has gone down. It was at 21 per cent. We held
it there for I think about three years, and we just recently dropped it to 15.
Senator Wallace: Do you have competition for the water-borne traffic
Mr. Griffin: The other alternatives for end-customers, by which I mean
retailers like Loblaws and Sobeys, are basically two choices to move freight
into the province, and of course there are the same options out. They can choose
to move by road or by container. There is a container service that runs from the
Port of Montreal to the Port of St. John's, and from the Port of Halifax to the
Port of St. John's. We don't have any involvement with end customers or that
decision-making process. We just move people and freight across the Gulf. So
those decisions are made back with those end customers who would look at factors
such as cost, delivery frequency and so on to determine which alternative would
be best. If they choose road, then we carry that traffic across the Gulf.
Senator Wallace: So indirectly you would have some container traffic,
but it would be by truck. It would be on flatbeds as opposed to —
Mr. Griffin: That's correct. It would be on flatbeds.
Senator Wallace: The quantities would be quite limited compared to
what a ship would carry?
Mr. Griffin: A container ship, absolutely.
In terms of volumes, we do about 95,000 commercial units per year. About half
of that volume would be tractor-trailers, so a trailer with a tractor and a
driver. The other half would be what's referred to as drop trailers, where the
transportation company brings the trailer to us and leaves it. We put it on our
vessel, take it off on the other end and then they would pick it up. We charge,
of course, for that service of putting the trailer on the vessel and taking it
Senator Chaput: My first few questions are for Mr. Latourelle.
The agency is requesting an increase of $345.7 million in the supplementary
estimates to improve heritage properties and tourism properties related to roads
and waterways. How will this envelope be divided in relation to your four
Mr. Latourelle: I will give you some approximate numbers for the $345
million envelope: about $143 million is for heritage canals and roadways, about
$143 million is for the visitor experience, such as campgrounds and
infrastructure services for Canadians, and about $30 million is for the
buildings of national historic sites, such as for repair work that will be done
in the first year.
Senator Chaput: So, an envelope of $30 million to improve heritage
Mr. Latourelle: Yes.
Senator Chaput: How will you break down that amount?
Mr. Latourelle: It will be spread out across the country, but I can
give you some concrete examples. The government announced an envelope of $30
million that includes repair to the walls of Old Quebec. That amount is invested
over a period of three years. About $10 million will be set aside for that this
year. That is one concrete example.
As for the $143 million planned for the roads and historic canals, including
the Rideau Canal in Ottawa, and the Lachine Canal in Montreal, are examples of
investments. These are heritage assets because they are historic canals.
Senator Chaput: Do you have any examples for Western Canada?
The Chair: Particularly Manitoba.
Senator Chaput: I am thinking of the west. I am thinking big.
Mr. Latourelle: We are finalizing our list of investments for the $2.6
billion envelope based on assets that were deemed critical, where we have made
short-term investments to develop our program over five years.
Senator Chaput: Are the provincial and territorial governments
contributing as well, or is it just the federal government?
Mr. Latourelle: It's just the federal government. For example, for the
168 national historic sites that Parks Canada manages and the 40 national parks,
the investments are solely federal.
Senator Chaput: So no investments from the provinces or the private
sector. Just the federal government?
Mr. Latourelle: There is a contribution from the private sector. An
example is the parks of the Rocky Mountains. There are many private sector
organizations in Banff and Jasper, including hotels and restaurants, that pay
rent to Parks Canada. The revenue is reinvested in the park, and part of it is
used to restore assets.
Senator Chaput: You fielded some questions about your advertising
programs. You said that you buy advertising worth $1.2 million. Who do you buy
that advertising from? How is it done? Where is it sent? Is it in both official
Mr. Latourelle: Yes. I would say that about 60 per cent of this
advertising is done locally. We work with local partners, the communities and
the tourism industries. We might contribute about $50,000 and the local
organizations might contribute about $150,000, which gives us advertising of
$200,000 for that tourism region. We recently had advertising in all movie
theatres in French and in English.
Senator Chaput: Is there advertising in the newspapers and on
Mr. Latourelle: Yes, but very little on television. It's the
provincial government for Newfoundland and Labrador. We have the tourism
product, and they do the promotion. It costs us nothing, but we are establishing
a partnership with them; we receive the visitors, and we assume the costs
related to the tourism experience.
Senator Bellemare: Many of my questions have already been addressed.
However, I would like to come back to your own-source revenue. It will be the
same question for both of you.
Mr. Griffin, your tables indicate significant cost recovery. I do not know if
it represents the percentage of own-source revenue on operating costs. I would
like to know whether, in your operations, particularly the operating costs, the
own-source revenue represents a major part. Is it increasing or decreasing?
Mr. Latourelle: In our case, for the 2014-15 fiscal year, our revenues
increased by $10 million. We had about $115 million last year, an increase of
about 10 per cent. Although we had a five per cent increase in visits, we are
trying to make sure that visitors remain on our sites for more than one day. If
they come and spend the day in a park, they will spend a certain amount there
for the entry fee, so we would like to encourage them to camp on the site. We
have new programs, including the learn to camp experience that will take place
in a few weeks in partnership with Mountain Equipment Co-op. The purpose of the
program is to teach new Canadians how to camp. We provide all the services, and
Mountain Equipment Co-op provides the tents. We are encouraging this kind of
approach to increase our revenues in order to cover our operating costs and
visitor services, which represents more than 50 per cent. We also have
conservation operating costs for species at risk, and we do not recover those
Mr. Griffin: For Marine Atlantic, this year we will generate about
$105 million in revenue. We will spend $374 million this year, but it is a bit
of an anomaly because of the purchase of the two vessels for $200 million.
We have two categories of cost. We have what we call recoverable costs, and
the cost recovery numbers that you see here reflect that. This year we will have
about $155 million of recoverable cost. We will have $105 million in revenue, so
we will be in the 66 per cent or 67 per cent range for cost recovery.
There are other costs, such as vessel charter costs, capital costs and so on,
which we don't recover. If I were to use an average over a period of time, we
probably recover, in total, in the 40, 45 per cent range. But I have to take an
average because capital costs are up and down depending on our activity.
Senator Bellemare: Mr. Griffin, the landscapes in the Maritimes are
beautiful. Have you thought about getting into tourism cruises?
Mr. Griffin: Yes and no, senator. We are governed by the Marine
Atlantic Inc. Acquisition Authorization Act, which limits our activity to
carrying basically passengers and freight. We have in the past, though, promoted
our service to customers who might want to have a cruise experience; in other
words, get on in a port, do a crossing, and perhaps come back.
But our experience has been that there's very limited demand, likely because
the ports from which we sail are small towns. If we were sailing perhaps from
St. John's, Halifax or Montreal, I think there would be more interest, but it is
the remoteness of the ports, I think.
Mr. Latourelle: In our case, it really is the growth market for Parks
Canada. In the Pacific and Atlantic oceans, we are working a lot with the
international cruise industry. We are working with Destination Gaspé in Forillon
National Park, where we receive about 50 cruises a year. The incentive is to get
people to make a stopover, take the bus, spend money in the community and have
wonderful experiences. The Aboriginal experience is the attraction that Parks
Canada promotes the most. It is unique to Canada. The people who come and visit
Kluane National Park in British Columbia live the park's Aboriginal experience.
That is one of the growth strategies for our markets.
Senator Bellemare: It is very interesting.
The Chair: This evening we are pleased to welcome a guest appearance
from the Chair of Social Affairs, Science and Technology, Senator Ogilvie, a
senator from Nova Scotia.
You have the floor, sir.
Senator Ogilvie: Thank you.
Mr. Latourelle, what's the amount of money in your main operating budget in
the Main Estimates for 2015-16?
Mr. Latourelle: It's approximately $650 million.
Senator Ogilvie: Thank you. I just wanted that for context.
Of your $350.4 million, what amount of that will go to employee salaries?
Mr. Latourelle: Of the $350 million, about $40 million.
Senator Ogilvie: What's your percentage of employee benefits?
Mr. Latourelle: That would be included in that. It's 20 per cent.
Senator Ogilvie: Twenty per cent is the round figure?
Mr. Latourelle: Yes.
Senator Ogilvie: Thank you.
Senator L. Smith: Mr. Latourelle, we met a couple of years ago. I have
two questions. How do you manage such a large réseau? What's your
management structure? Could you explain a little bit about that?
That leads me to my second question. What key measurements do you use — I'm
not saying to maximize your revenue or profit, but what measurements assist you
in running the business? Give us some examples of that, if you wouldn't mind.
Mr. Latourelle: The structure of Parks Canada is really a flat
structure of an organization, where the vast majority of the decision making is
at the very local level, inside the park, because that's closest to the client.
If I look at the overall operation, we have approximately 39 regions, such as
Banff National Park or it may be southwest Nova Scotia. In each geographic area
there's a superintendent, and each of those 39 report to only two operational
Senator L. Smith: Your structure is yourself as the CEO?
Mr. Latourelle: Yes, and two vice-presidents of operations. Then we
have four other vice-presidents. One is for national park policy and
international obligations. We have one vice-president for heritage conservation,
where we have a huge federal role across Canada, including provincial
partnerships on conservation for built heritage. We have one vice-president for
visitor experience and all of our marketing, promotion and national partnerships
with the Tourism Industry Association of Canada. And we have one vice-president
Senator L. Smith: Two VPs of operations and then you have two other
Mr. Latourelle: Four other VPs. That's the structure.
I would say that our key is to be clear. The only way we can succeed — and we
have consistently shown that we can — is to have clear direction in terms of the
strategic direction of the agency.
Now with the infrastructure investment, we have four key objectives, but we
have traditionally had three. One is to significantly increase the number of
visitors, to get more Canadians to experience these great national treasures. We
have put specific targets in our corporate plans for that, and we put them in
the performance assessments of all of our executives.
Secondly, we want to bring our parks and sites to major urban centres. For
example, for visitors not coming now, how do we get them to experience Parks
Canada? Learn-to-camp programs in major urban areas are an example.
Thirdly, we want to demonstrate international conservation leadership. That's
where a lot of our investment in restorations — we have the restoration program.
I will take two practical examples. In terms of the Trans-Canada Highway in
Banff, it has been twinned. That is the infrastructure aside. We built
overpasses and underpasses, and that has reduced wildlife collisions by 95 per
cent. That model is now being replicated in other countries like in Alaska, for
example, in the U.S.
Senator L. Smith: How many employees do you have?
Mr. Latourelle: We have 4,719, which is the proposal for this year. Of
those, 40 per cent would be seasonal employees, and that is supplemented by
1,200 students that work with us during the summer months. Ninety per cent of
our team members are outside of the national office, so they are in operations.
Senator L. Smith: Are there any unionized people?
Mr. Latourelle: Yes, the 4,700 would be unionized. We used to have
seven or eight unions when we were created as an agency. We now have one union.
In fact, today we were at collective bargaining with them.
Senator L. Smith: The capital that's being invested by the government
within Parks Canada, you have had to fight a bit for money, have you not, if I
Mr. Latourelle: Yes. Fortunately, I have been the head of Parks Canada
for 13 years now. In my first year, the capital budget of Parks Canada was $40
million per year for $16 billion of assets. This year, our budget is going to be
roughly $600 million in capital.
What we're doing now is really catching up on infrastructure that is at the
end of its useful life. We are looking at all of our bridges. We have done all
of the studies. We had an independent third party. We have done an assessment
ourselves. We have engineers and maintenance professionals. We have done third
party validation of our analysis, and based on that, we have been successful.
Senator L. Smith: Is it right to assume that your key operational
people are your superintendents of each of your —
Mr. Latourelle: Oh, yes. For example, under the Canada National Parks
Act, a lot of the decision rests with them because in regulation, the
authorities are given to them.
Senator L. Smith: You talked about 22 million person visits. If you
look at the last five years, how would that graph look in terms of your person
It would be great if you were able to give us a two- or three-page summary
that shows the visits and some of the marketing you have done in terms of
expanding your network so that we could become better educated and be proponents
of making sure when we talk to people that Parks Canada is top of mind.
Mr. Latourelle: It would be a pleasure. In fact, I have a two-page
summary that I can probably send tomorrow for each park and site, the trend for
the last five years. I will talk about Banff as a practical example.
After 9/11, all of Alberta and Canada saw a huge decrease in visitation, by
about 15 per cent. This year only we have increased by 10 per cent just in
Banff. In fact, this year's visitation in Banff is higher than pre-9/11. It's a
Senator L. Smith: Five years ago, what would your total have been if
it was 22 million last year, ballpark?
Mr. Latourelle: Roughly about 18 million. It went down quite a bit.
The Chair: Any other information you could send to us would be very
much appreciated. Because these are Supplementary Estimates (A), we anticipate
doing our report fairly soon, so if you could act on that quickly, it would be
very much appreciated.
Unfortunately, we have run out of time, but Mr. Griffin and Mr. Latourelle,
thank you for helping us. We will see you again undoubtedly in due course, but
in the meantime, thank you for your leadership in both Marine Atlantic and Parks
In our second hour this evening, we will hear from our final group of
witnesses in our study of the 2015-16 Supplementary Estimates (A). This will
mark the end of the testimony on these estimates. Our analysts will then prepare
a report that they will submit to us before the appropriation bills arrive from
That indicates that we are under some time constraints to get reports done
and be ready when the supply bill arrives. I know all of our witnesses this
evening know that they won't have funds to do all the things they would like to
do if we don't get the supply bill passed for them, so that's why you are all
cooperating so well, and we appreciate that.
From Natural Resources Canada, we are pleased to welcome Kami Ramcharan,
Assistant Deputy Minister, Corporate Management Services Sector and Chief
Financial Officer; Niall O'Dea, Director General, Electricity Resources Branch,
Energy Sector; and Daniel Lebel, Director General, Atlantic and Western Canada
Branch, Geological Survey of Canada, Earth Sciences Sector.
From Atomic Energy of Canada Limited, we are pleased to welcome Jonathan
Lundy, Chief Transition Officer; and David Smith, Vice President of Operations.
From Fisheries and Oceans Canada, we welcome Marty Muldoon, Assistant Deputy
Minister and Chief Financial Officer; Kevin Stringer, Senior Assistant Deputy
Minister, Ecosystems and Fisheries Management; and Michel Vermette, Deputy
Commissioner, Vessel Procurement.
I understand each of the agencies have brief opening remarks. We have an hour
set aside for this session, so I would ask honourable senators to try to keep
their questions as succinct as possible.
Perhaps we could begin in the order in which I have introduced you: Natural
Resources Canada, AECL and Fisheries and Oceans.
Kami Ramcharan, Assistant Deputy Minister, Corporate Management Services
Sector and Chief Financial Officer, Natural Resources Canada: Thank you, Mr.
Chair. It is a pleasure to meet with the committee today to discuss Natural
Resources Canada's 2015-16 supplementary estimates.
I am the Assistant Deputy Minister of the Corporate Management Services
Sector, as well as the Chief Financial Officer for Natural Resources Canada. I
am accompanied by my colleagues Niall O'Dea and Daniel Lebel. As well, we have
Jean-Frédéric Lafaille in the gallery as well, who is Director General, Atomic
Energy of Canada Limited Restructuring, all officials of NRCan.
Let me discuss my department's Supplementary Estimates (A) for 2015-16. They
reflect the changes since the planned budgetary spending since the mains. The
supplementary estimates showed current budgetary spending at $2.49 billion,
which is an increase of $277.8 million from the originally approved amounts of
$2.21 billion as outlined in our Main Estimates. This increase is due to a
number of factors across our operating vote, capital vote and statutory
Within our operating and capital vote, there is a $231.3 million commitment
to extend the Nuclear Legacy Liabilities Program for 2015-16. Launched in 2006,
this program has made significant progress in addressing long-standing
Government of Canada liabilities, including radioactive waste, retired research
facilities and related infrastructure, and contaminated lands at the Atomic
Energy of Canada Limited research sites.
There is also a commitment of $5.3 million in operating funding and $38.6
million in capital funding for the Federal Infrastructure Initiative to support
rehabilitation, repair and modernization of many Natural Resources Canada's
research facilities across Canada. These investments will not only help Natural
Resources Canada continue to conduct leading-edge research but will also
encourage job creation, economic growth and long-term prosperity across the
Finally, there is $1.3 million in operating funds and $1 million in capital
funds for the Targeted Geoscience Initiative, a collaborative federal geoscience
program to provide industry with the next generation of geoscience knowledge and
innovative techniques to better detect deeply buried mineral deposits. This
initiative will continue to promote and support exploration and investment in
Canada's mining sector.
In terms of statutory authorities, there's an increase of about $300,000,
which is related to the statutory payments for our employee benefits plan. This
includes the costs to the government for employer's matching contributions.
In conclusion, Mr. Chair, Natural Resources Canada's 2015-16 Supplementary
Estimates (A) clearly demonstrates how this department is committed to
delivering on the Government of Canada's policy program and service delivery
priorities and doing so in a fiscally responsible manner.
Thank you again for the opportunity to appear before the committee. I would
be pleased to take any questions you may have.
Jonathan Lundy, Chief Transition Officer, Atomic Energy of Canada Limited:
Mr. Chair, honourable senators, I am pleased to be here with you this evening. I
am accompanied by David Smith, AECL's Vice President of Operations.
This is a momentous year for AECL. We are on track to implement the
government's direction to have a private sector contractor take over the
management and operation of Canadian Nuclear Laboratories later this year.
This new management approach is called a "government-owned,
contractor-operated model," or GoCo, a well-proven nuclear lab management model
in the United States and the United Kingdom. A competitive government
procurement process is currently under way to select the private sector
contractor. Let me touch on some important recent developments.
Canadian Nuclear Laboratories, or CNL, was restructured last year. CNL
employees and operations now constitute a wholly-owned subsidiary of AECL. CNL
comprises the nuclear science and technology facilities at Chalk River, Ontario,
Whiteshell, Manitoba, and other smaller locations.
AECL's new mandate will be to provide oversight of the contractor as it
implements a long-term contract to deliver the three missions of CNL: federal
nuclear legacy waste management and decommissioning; federal nuclear science and
technology; and technology and engineering support to the Canadian nuclear
AECL will retain ownership of CNL facilities, assets, property and
intellectual property, as well as responsibility for nuclear liabilities, at the
point of share transfer to the contractor.
For our part, we at AECL have been building a small, first-rate organization
to oversee management of the contractor. AECL is responsible to the Government
of Canada as the expert authority in overseeing the contractor's performance.
The contractor will hold the nuclear site licences of CNL and be responsible
to the Canadian Nuclear Safety Commission for the high standards of nuclear
safety expected in our industry.
The private sector contractor will be expected to drive innovation and
efficiencies at the nuclear labs, leveraging Canada's historic nuclear science
investments in order to enhance value for all Canadians.
In terms of the Supplementary Estimates (A), this funding supports the
ongoing operations of CNL's large Chalk River nuclear research site, including
the production of medical isotopes.
Honourable senators, we will begin a new era in the management of Canada's
nuclear science, technology and innovation later this year as we harness the
power and reach of a world-class consortium to manage Canada's nuclear labs.
With the GoCo management model in place, the three important mandates of CNL
will be more effectively delivered, building on Canada's storied nuclear past
and accelerating the process of transforming science into jobs.
Thank you, Mr. Chair. We will be happy to take questions.
The Chair: Thank you, Mr. Lundy.
Mr. Muldoon, will you be the spokesperson for Fisheries and Oceans?
Marty Muldoon, Assistant Deputy Minister and Chief Financial Officer,
Fisheries and Oceans Canada: I am indeed. Thank you very much, Mr. Chair.
I will move to slide 2 in the presentation that was passed out earlier. The
Supplementary Estimates (A) for the Department of Fisheries and Oceans and its
special operating agency, the Canadian Coast Guard, are primarily made up of
funding that will be brought in for the Federal Infrastructure Initiative. On
slide 2, we see the distribution of that funding across operating capital in
grants and operations. I will explain further on the next slide.
Main Estimates this year started the organization off with $1.889 billion in
funding. These supplementary estimates will bring in an addition the $204
million for the organization and move us to a total of $2.1 billion in operating
authority. The table included for you on slide 2 is the identical table that
appears on page 2-14 on the actual supplementary estimates.
Slide 3 is where the heart of the story is. It gives you a bit of
identification. There really are six primary items that the supplementary
Yesterday when the Treasury Board secretary was here before you, giving you
the grand overview of the government's supplementary estimates, I believe they
would have informed you that Fisheries and Oceans is one the largest recipients
of federal infrastructure funding this year. These supplementary estimates will
be the first instalment, bringing in a total of $189.3 million, which will be
divided into three of our main program areas for the Canadian Coast Guard:
small-craft procurement, vessel refits, and life extensions. We'll also work on
our real property program and our Small Craft Harbours Program. Let me just
enlighten you quickly as to what that means for us.
Under the Small Craft Harbours Program, we do this work very routinely. We
work on all of the fishing harbours and recreational harbours that we have an
interest in across the country. There are over 1,000 of them. This will allow us
to greatly accelerate the work that we undertake in construction and remediation
of things like wharves and breakwaters, as well as dredging out so they can be
used more safely by Canadian fishermen and recreational users. That's one of the
The second area I mentioned is our real property program. In that situation,
we are spreading the investment across a large range of small projects:
departmental buildings that require investment for site repairs and furtherance
to allow for them to be used in their useful life; fish way infrastructure; as
well as moving on some much-needed science facility investments.
Finally, I mentioned the Coast Guard. In our Coast Guard program, this
committee would well know that we have a major fleet renewal program underway.
These monies will allow us to continue to invest in the continued use of our
existing fleet so that while we wait for those new vessels to come into service,
we can better the vessels we have in service and continue with much-needed
repair and maintenance. In some of our programs like conservation and
protection, as well as our search and rescue, we can acquire new vessels that
would not have been affordable in this time frame.
With regard to the second item on this page, $7.6 million will allow us to
renew a program announced in Budget 2015 for three years at $24.6 million. We're
bringing in the first year — $7.6 million — for the Species at Risk and Habitat
The third is $6.5 million. We sold one of our Coast Guard facilities that we
had decommissioned. It was a waterfront property in Dartmouth, Nova Scotia.
Those monies were deposited to the CRF. We are now bringing that money in to
allow it to be reinvested in our real property program across the organization.
The final group, which is three more, rounding out the six items I said that
these supplementary estimates include for us, is all internal. I call them net
neutral. Basically, at the start of every year, our Main Estimates funding for
these programs is in either our operating vote or our capital vote. With each of
the supplementary estimates, depending on uptake, we will transfer money from
those votes into our vote 10 in order to allow us to undertake the initiatives
laid out on this page, which are grants and contributions for the various
To give an example: Under the Small Craft Harbours Program — this is
different than what I was talking about earlier, which is infrastructure
investment. Here the instance is a small craft harbours grant where we help
prepare a small craft harbour for which a local body will take over the
ownership and administration. We will help them by creating the final repairs
and readiness for that harbour to be in an operational state for them to take
ownership, and we are therefore able to divest. That's an example of how that
program would work.
That, in a nutshell, is what is in our supplementary estimates.
On slide 4, the concluding slide, I wanted to point out something. In the
green box in the centre, this is year one. The supplementary estimates that
we're bringing in today are $190.45 million. That number is slightly more than
the $183 million on the previous page, because this includes the statutory
funding appended to those programs.
I just wanted to give full transparency to the committee to see what the year
two implication of the infrastructure program is for us. You will see we will be
following on next year with an additional $290 million against the same items
for your consideration today.
With that, I'll leave the remainder of our time for the committee to ask
questions. We're here at your disposal.
The Chair: Thanks to each of you.
You described sort of asking for a transfer funds from one vote to another
vote. That seemed a little peculiar to me, as you were describing it. We don't
see that with other departments. Why is it that you're involved in doing that?
Mr. Muldoon: Rather than actually ask for our grants and contributions
requirements as a voted appropriation to set it up from the start and not know
how much we'll need — because these programs are all based on demand during the
year and not a set plan of expenditures — we start with where the money is in
our operating or capital. Then, depending on what form of grant or contribution
we work up through our programs to be able to contribute towards, we then
request the money to be put into the vote 10, our grants and contribution vote,
so we can then disperse it.
The Chair: Why would you move from votes 1 to 5 to 10? Why wouldn't
you go directly on supplementary estimates for vote 10 grants and contributions?
Mr. Muldoon: At the time we did the Main Estimates months ago, we
didn't know exactly which programs would need what amount of money under the
vote 10 authorities. So we start the year with most of our vote 10 authorities
at zero, and we actually move the money in to be able to administer them.
The Chair: It's safer to get it in there and then move it than to wait
and ask for it later on?
Mr. Muldoon: Good question. We only move that which we require for the
planned disbursement once the disbursement has been decided upon. That way, at
the end of the year, you would see zero carry-forward provision for our vote 10.
We're not allowed to carry it forward unless under exception, and we've manage
those numbers down to almost zero every year by this mechanism. We just take
what we need and put it in when we need it. For each supplementary estimate, if
I were here with you, we would have something like this under vote transfer or
The Chair: We'll keep an eye out for that. Thank you.
Senator Gerstein: Thank you, panel, for being with us tonight.
Mr. Lundy, you described — I think I'm using your words — the "new era" and
the "new model" at AECL. Perhaps to put that into perspective for the committee,
we might go back to the old era.
In the old era, in the good old days, what percentage of medical isotopes did
AECL provide? What was the number of deliverable units? And asking the same
question, what will it be in the new era?
Mr. Lundy: I'm not sure what era you're referring to —
Senator Gerstein: I'm talking about before a few years ago.
Mr. Lundy: — but let's talk about now.
Senator Gerstein: It's easier to understand what "now" is if you
understood what was.
Mr. Lundy: We had a worldwide shortage in the 2008-09 time frame. At
that point in time, the NRU was producing substantially more of a percentage
Senator Gerstein: What would the percentage be, roughly?
Mr. Lundy: I don't have the figure with me.
Senator Gerstein: Somewhere in the neighbourhood of 80 per cent?
Mr. Lundy: I think much lower than that. But let's fast-forward to
today and let's fast-forward to 2010, where the government came forward with its
goal to cease molybdenum-99 production in 2016, and a commitment by the
government to make lots of investment into alternative diversification,
alternative technologies to diversify supply, and looking at the worldwide
reactors coming online in the 2017-18 timeline, where the NRU really won't be
needed anymore past that time period.
I want to focus more on now because that is the accurate situation. The
reliance of NRU on providing Canadians and worldwide supply will not be needed
Senator Gerstein: Where are the majority of medical isotopes being
Mr. Lundy: Different reactors around the world, and also in Canada and
the United States and around the world. Because of the shortage in 2008, the
world rallied together and created forums and has worked hard to globally work
on making sure that there's a global supply of isotopes. Canada has done a
heroic share of that up to today and continues to do its share tomorrow as well.
Senator Gerstein: Are you confident with the supply that Canada will
produce moving into the future? And what percentage of Canada's needs are
supplied by Canada today, what you will be producing?
Mr. Lundy: I'm confident that Canada will have a supply of isotopes
that it needs in the future without NRU producing isotopes in 2018.
Senator Gerstein: And we will produce no isotopes in 2018?
Mr. Lundy: No, we will, but we'll have an alternative source of supply
through investments that this government has been making since 2010.
Senator Gerstein: Thank you.
Senator Chaput: My question goes to Ms. Ramcharan from Natural
Resources Canada. You are asking for an additional $231.3 million to support
activities to manage the accumulated waste, the contaminated sites and
infrastructure, and so on.
Atomic Energy of Canada has left us with a real disaster, Madam. First, how
many sites and how much infrastructure do we have to clean up? When did it all
start? And why did it not end in 2014-15, as the departmental performance report
Ms. Ramcharan: Because it's more about the program itself, I'm going
to turn it over to my colleague Niall to give you a better response than I would
be able to do.
Niall O'Dea, Director General, Electricity Resources Branch, Energy
Sector, Natural Resources Canada: Let me describe the program and its
objective a little more. It began in 2006-07; since then, we have spent $1.159
Senator Chaput: How much?
Mr. O'Dea: $1.159 billion.
Senator Chaput: Thank you.
Mr. O'Dea: That covers a number of sites in Canada. First, there is
the Chalk River site, and there are other facilities that belonged to AECL, such
as the laboratory in Whiteshell, Manitoba and a nuclear facility very close to
Deep River, in Ontario.
Senator Chaput: There are three of them?
Mr. O'Dea: There was an AECL site in Nova Scotia as well.
As for what the program has accomplished, a number of sites have been
decontaminated. The site I mentioned in Nova Scotia has been completely
demolished. We also have a number of sites at Chalk River and Whiteshell that
have been completely demolished and decontaminated.
Senator Chaput: How many of the sites have been decontaminated and how
many are left?
Mr. O'Dea: In all, the program is going to last 70 years.
Senator Chaput: Seventy years?
Senator Eaton: None of us will still be here.
Mr. O'Dea: There is the initial decontamination and then there is the
management involved in closing the sites in the long term.
Senator Chaput: Why is Natural Resources Canada paying for this
decontamination and not Atomic Energy of Canada Limited?
Mr. O'Dea: In 2006, we made the decision to help manage this challenge
and to channel funds from Natural Resources Canada in order to make sure that
the central government had better oversight over the activities. Because of the
restructuring of AECL, we are developing a model that will let us turn the
responsibilities of managing contracts and ongoing activities back to AECL
Senator Chaput: When you talk about moving things around, will any
costs be paid by that entity, or still by you?
Mr. O'Dea: The responsibilities remain with the central government.
Senator Chaput: The financial responsibilities?
Mr. O'Dea: Yes, but the idea of the new model is to provide incentives
for new, private-sector organizations to do the work themselves. That model
would give us a better system, allowing the value for money to be maximized by
eliminating the responsibility of the government.
Senator Chaput: In these new agreements, if I may describe them that
way, will there be a provision to the effect that the people responsible will
also be responsible for the decontamination, instead of the responsibility for
that always reverting to the government, which also has to pay the bill?
Mr. O'Dea: For the specificities of the contracts, it would be better
for me to turn to my colleague Jonathan Lundy.
Mr. Lundy: I'm not sure I understand the question completely. You're
talking about the GoCo contract that we would put in place with the private
Senator Chaput: I am talking about decontaminating the sites. It is
one thing to come to an agreement with an association or an organization, but it
is something else when they close their doors and leave us having to deal with
In the future, when you have to negotiate with other groups, organizations or
companies — I do not know what to call them — will we have the assurance that
they will not leave us with buildings and rooms to be decontaminated, and will
they take some financial responsibility in the matter?
Mr. Lundy: I think I have a partial — I'm not sure I'm going to be
able to satisfy you completely, but let me try to help you out.
What Canada is having to do now is something that the United States has had
to do. Any nuclear nation around the world has had to deal with the legacy waste
of their programs, which are 50, 60 years in the making. What Canada is putting
in place with this new GoCo relationship is really trying to fast-forward
dealing with this massive legacy liability that's taken place over the 50, 60
years of our nuclear history. There's a lot of good, but the legacy liability is
there. We have to deal with it.
The Government of Canada has looked around the world, a very thorough review,
and has found that other nations have started to deal with the waste more
quickly, more effectively, and they've done it by getting private sector people
with experience and rigour, and under incentivized GoCo contracts to come in and
do the work. It typically, not always, results in getting at the decommissioning
quicker, faster, sooner and cheaper, so better risk transfer for the Government
of Canada. This is about reducing the risk and cost to Canadian taxpayers.
Yes, there's a big liability on the books of Canada that has to be somehow
worked through and take that liability down to zero, but it does require funding
So under the contract — this is really what you're interested in, I wanted to
give that context — a separate fund will be set aside for any new waste being
developed so that we won't have to come back to the government. Now it will be
self-funded. We're going to try and self-fund it starting under the new
contract. That would mean that for waste generated next year, dollars would be
put into a fund at the same time that waste is being generated so that we will
not have to, in the future, come back. But there is a massive liability still
that will require funding going forward.
Senator Chaput: That answers my questions, sir. Thank you very much.
Senator Bellemare: My question goes to Fisheries and Oceans Canada.
You are asking for $7.6 million for the conservation of endangered or at-risk
species. As I understand it, that is part of a horizontal initiative started in
the previous budget. A number of you are funding the initiative, which comes to
almost $24.5 million in total.
Could you tell us about that initiative and how effective it is? Do you think
that, with time, it will allow the commercial fishery to flourish in the future?
I would like to know more about this initiative because a $7.6-million envelope
can be a lot of money or not enough money, depending on the problem. I would
like to know what effect you anticipate this program will have.
Kevin Stringer, Senior Assistant Deputy Minister, Ecosystems and Fisheries
Management, Fisheries and Oceans Canada: I'll say a few words about the
Species at Risk Program. It is indeed a program that, as was pointed out, is not
just Fisheries and Oceans but shared with two other departments. I think you
just had Parks Canada in here. Parks Canada receives funding under this, as does
Environment Canada is the lead department, but Fisheries and Oceans and our
minister is the formal, competent minister for aquatic species. Environment
Canada is the lead for terrestrial species, we are the lead for aquatic species,
and where they appear in national parks it's Parks Canada. We work together on
As Marty pointed out in his presentation, this is a renewal of B-based
funding. So this is a fund that sunset last year. It's the exact same amount
that has been renewed going forward. So it's not additional funds compared to
what we had last year, but it is a recommitment to the program. So $7.6 million
is what our department gets. That's on top of about $16 million or $17 million
that we already have in A-base. That's our total amount, around $24 million or
With those funds, we now have over 100 aquatic species on the species-at-risk
list. That's everything from the leatherback turtle, to slugs, to frogs, to all
kinds of aquatic animals, and it also includes aquatic plants.
We have really three sets of responsibilities. Number one, we get the
assessment from the independent science group called COSEWIC.
Michel Vermette, Deputy Commissioner, Vessel Procurement, Fisheries and
Oceans Canada: Committee on the Status of Endangered Wildlife in Canada.
Mr. Stringer: They provide us their advice about what species should
be listed. They provide us the list of species. They'll usually give us about 10
or 15 that they assess and say that they think this species has decreased by a
certain percentage. If it's a certain percentage of decrease over three
generations of its life, three generations of that species, then they'll suggest
that they think that it should be a species of special concern, a threatened
species, or an endangered species. Then we have a responsibility to determine
whether we will list that.
We do our own science. We do have a recovery-potential assessment. Can we
recover this species effectively? What is the best way to do it? We have
consultations with fishermen, environmental groups, Aboriginal groups and others
to determine the socio-economic impact of listing this and how best to manage
it, and then a decision is made by cabinet about whether to list it.
Following that, we do a recovery strategy. So the recovery strategy will
generally try to bring in different partners, sometimes with environmental
groups, sometimes with Aboriginal groups, with people who care about the
specific species, and we come up with a strategy for recovery. Following that we
do specific action plans and identify critical habitat and protect that critical
habitat. So there are a number of steps.
The Species at Risk Act came into effect I think in 2006, so it's still
fairly new. I think it's fair to say we are now moving more into the action plan
phase. We've got the list of species and they keep coming in. We have many
recovery strategies in place, and we are more clearly moving to the action
It's been a challenge, but extraordinarily interesting. As you've pointed
out, the objectives of the program are important, and we remain committed to
Senator Bellemare: Does that include salmon?
Mr. Stringer: Yes, Atlantic salmon on the East Coast. COSEWIC has
looked at all the different species and populations of Atlantic salmon on the
East Coast and they've made recommendations that some be listed as endangered,
some as threatened and some as special concern. We've had consultations with
stakeholders. We've been doing recovery-potential assessments. They are not yet
listed or no decisions have been made by cabinet as to whether to list them.
There have been similar processes on the West Coast, but not as extensive.
Senator Bellemare: Are you hopeful that it will help to protect the
Mr. Stringer: I would say that regardless of whether some of these
species get listed, what it does is bring stakeholders together. They do the
recovery strategies. They do the work to consider what best to do for these
species, and it actually does galvanize action.
Senator Bellemare: Are you saying that we cannot rely on the amounts
we see here and that it is a lever you will use to bring people together in a
Mr. Stringer: Yes, that is right. Thank you.
The Chair: Thank you, senator.
Senator Ogilvie: I love Atlantic salmon. They did all the
experimentation on the West Coast, and when they got it right, they built the
I wanted to ask a question with regard to Chalk River. If I understood the
answer to Senator Chaput, Chalk River is included in the $231.3 million this
year, but that's winding down. Chalk River is getting close to being complete in
terms of clean-up; is that correct?
Ms. Ramcharan: The reason we only have one year's worth of funding
identified in our Supplementary Estimates (A) is because we're in the midst of a
transition going to the new GoCo model. That's why we only have one.
In the future, all of the responsibility as well as the funding associated
with it would move into that new model for AECL to then manage it going forward.
It's not ending at the end of this year. Right now we're just in the midst of a
transition and we're giving ourselves some time to work through that transition.
Senator Ogilvie: In that case, what percentage of the $231 million
went to Chalk River this year or will go?
Ms. Ramcharan: It's identified to go to Chalk River this year. The
full amount is identified to go as part of the clean-up — not just Chalk River,
but a number of the different sites that are there. So specifically to Chalk
I don't know, Niall, if we understand what the specific amount would be with
for Chalk River.
Mr. O'Dea: We don't have a specific amount identified for Chalk River.
We can come back with that detail if you wish, but the funding goes to —
Senator Ogilvie: No, I'm very familiar with it. I was on the Atomic
Energy Control Board and I have examined the site. I know it is our true legacy
area in terms of a lot of problems that don't exist in other facilities in terms
of ultimate cleanup. I was interested in the amount here and over the time
period. Obviously I misunderstood you with regard to it being near the end. It
will now transfer to a private contract for the remaining cleanup of that sector
and the management of the radio isotopes over that period of time — the decay.
Mr. Lundy: Let me clarify. It will transfer to AECL.
Senator Ogilvie: Right.
Mr. Lundy: AECL will then direct the contract on what work it wants to
accomplish. Then the contractor will do the work and we will pay them. We will
incent them. So the responsibility is still with AECL and it will still manage
this on behalf of the Government of Canada to ensure value for money for
Canadians, but a private sector contractor will be doing the work.
Senator Ogilvie: It is actually the cleanup of the total site as
opposed to just the maintenance of the waste material that is decaying over
time, so it is the problems in the site as a whole?
Mr. Lundy: It is the problems in the site as a whole, including — but
don't forget Whiteshell and NPD. I'm thinking as a whole.
Senator Ogilvie: I am talking only about Chalk River because it is the
most unique of all of these. Twenty years ago it was already identified as a
The Chair: Senator Ogilvie, in the past we have had discussion here
about Port Hope and about abandoned radar establishments across the North. What
is the total identified contamination site value, the liability that Canada has
at the present time, including all of those various areas?
Ms. Ramcharan: I don't think I can talk for all of the Government of
Canada in terms of the overall sites, but maybe what we can do is to speak to
what we currently know as our overall liability, as it relates to Natural
Resources Canada and the sites that we're looking at in terms of doing that.
Correct me if I'm wrong, Niall, but we are roughly at $6.8 billion in terms
of a liability just for the cleanup of those sites. So Port Hope, all the stuff
we would do from Chalk River to Whiteshell, all of those would be included
within that number.
As it relates to abandoned sites, mines and those types of things across
Canada, those aren't things that we would cover within our liabilities at this
The Chair: Somebody must be sitting down and saying, "What's the
exposure here?" This is the Canadian taxpayers in the end. It doesn't make it
any better to divide it amongst a number of different departments.
Are you able to go away and then send us some information on top of Natural
Resources? I wouldn't think it would still be with DND, but maybe DND has got
those abandoned radar sites.
Ms. Ramcharan: What I can do is undertake to take a look into that to
find out and send that information back to the committee. It would be available
in terms of what would have been recognized as a liability in the Public
Accounts of Canada. It will be wrapped up in terms of that overall total. We can
look into that and provide that number.
The Chair: Thank you. I appreciate that.
Senator Hervieux-Payette: I have a small question. Why haven't you
come for money to get rid of the 70,000 grey seals that we should get rid of in
the next three years, which is 200,000? I have to tell my colleague that grey
seals are probably bigger than a cow. You just remove the legs and it is about
that size. Actually it is a big nuisance on the coast of New Brunswick. There
was a report done by the Senate, but if you don't undertake to find a solution
to that — I mean, year after year they're reproducing and having babies.
The Chair: And eating salmon.
Senator Hervieux-Payette: And eating the salmon.
Are you going to come up with a plan? Am I going to be very happy to approve
the expenditures that you will put aside to make sure that we address this
question? The private sector should be included in that. I don't know if our
report was put on ice, but I feel that this question is just pushed aside. I
think it is an emergency. I don't live in New Brunswick. The chair does, so I'm
taking care of his province.
The Chair: We need all the help we can get.
Mr. Stringer: I don't think I can answer if we're coming forward with
a proposal for funds, but it is nice to hear what the answer would be. That's
actually much appreciated.
What I can say is that the report done by the Senate is taken very seriously.
We responded to that. There have been other reports done as well.
I'm on the management side of the department, and we have asked questions of
our scientists: What is the impact of grey seals on cod recovery and on other
species? We have got at least one science report that came back that suggested
that grey seals are an important if not the most important aspect in terms of
cod recovery in the Southern Gulf. We haven't got that information for
elsewhere. It is a complex problem, particularly when you are talking to
scientists about the relationship between various species. It is one that we're
We talked about the Species at Risk Act before, and cod have been proposed to
be listed by COSEWIC. In our assessment of the impact, certainly grey seals are
one of the major factors. It is something we take seriously, but I can't tell
you if and when we would be back seeking specific funds to address it.
One more point: Working with the private sector. We work closely with the Fur
Institute. We work closely with other groups who are very interested in working
with us on this. There are some interesting pilot projects under way in the
Maggies. They're trying to test out the marketing for grey seals. So there is
action under way. But there's not a specific ask at this time.
Senator Hervieux-Payette: I cannot say that I'm very satisfied because
the more we drag our feet, the more we are, in fact, creating problems for other
species. As far as I'm concerned, I don't think anybody wants to have that on
Can I ask an information question about this year's seal hunt, for those who
are a small size operation and of course are in a declining business, but still
are alive? What did you do to increase the possibility for those kinds of
Mr. Stringer: A couple of points. These were not in the Supplementary
Estimates (A), but we do continue to have an active seal hunt. There continues
to be a good number of people who are involved. The seal hunt was opened for
grey seals earlier this year and for harp seals. There have been a number taken.
I don't know what the number is. So the seal hunt has been active, but certainly
not as active as it was before.
In Budget 2015 there was $5.7 million — I think that was the figure — to
support market access for seals. We continue to do our work in Europe, China,
Asia and elsewhere to promote this. It continues to be a challenge, but we
continue to be on it.
The Chair: We will try to keep our questions to Supplementary
Estimates (A) since we have a short time on this.
Senator Eaton has a question.
Senator Eaton: Senator Gerstein asked my question.
The Chair: Did he? It was the very first question.
On behalf of the Standing Senate Committee on National Finance, I would like
to thank each of you for being here and helping us understand your Supplementary
Estimates (A) requests, and thank you for your leadership. We appreciate it.