Proceedings of the Standing Senate Committee on
National Finance

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. Latourelle.

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 statistics.

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 Estimates (A).

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 the fleet.

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 performance.

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 risk.

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 senators.


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 officially?

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 seven years.

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 world.

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 year.

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 treasure.

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 Canadians first.


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 time.

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 increasing significantly?

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 employees.

Senator L. Smith: What is the percentage of unionized employees versus non-unionized?

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 economics.

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 province.

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 to Newfoundland?

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 off.


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 initiatives?

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 assets?

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 languages?

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 television?

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 costs.


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 vice-presidents.

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 for administration.

Senator L. Smith: Two VPs of operations and then you have two other VPs?

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 remember correctly?

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 visits?

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 huge change.

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 Canada.


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 the Senate.


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 authorities.

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 country.

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 industry.

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 estimates address.

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 big areas.

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 Program.

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 programs.

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 internal transfer.

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 worldwide, globally.

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 past 2018.

Senator Gerstein: Where are the majority of medical isotopes being manufactured today?

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 indicates?


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 billion.

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 sector contractor?


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 the decontamination.

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 every year.

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.

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 these things.

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 $25 million.

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 phase.

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 achieving them.


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 species?


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 good strategy?

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 Atlantic salmon.

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 River.

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 major problem.

Thank you.

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 time.

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 aware of.

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 their beach.

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 activities?

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.

(The committee adjourned.)