May 24, 1978

LIB

Gérald Laniel (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Liberal

Mr. Deputy Speaker:

Order, please. The hon. member for Saskatoon-Biggar (Mr. Hnatyshyn) is rising on a point of order.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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PC

Ramon John Hnatyshyn (Deputy House Leader of the Official Opposition; Progressive Conservative Party Deputy House Leader)

Progressive Conservative

Mr. Hnatyshyn:

Mr. Speaker, I am sorry to interrupt the proceedings. I know you have been listening to the debate, as we have been in this House, and we have been listening with some interest to the minister's comments. However, I submit to you with all deference that the comments of the minister, even with the widest latitude given by yourself on second reading in a debate on Bill C-56, bear absolutely no relevance to content of the bill. It is in fact an attempt on the part of the minister to comment on the financial critic of the opposition with respect to his capabilities to act in that capacity. With the greatest of deference, if the minister wants to get up and speak in support of the bill, we will be interested in hearing him. If he wants to get up and give the names of those on this side of the House he alleges were playing the market, we will be glad to listen to him on that.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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LIB

Gérald Laniel (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Liberal

Mr. Deputy Speaker:

Order, please. I think the hon. member for Saskatoon-Biggar has a point. I was following the minister's remarks closely. He did lay aside the subject matter of the bill for his own purpose. I am sure he was about to come back to the bill. I hope he will do that.

May 24, 1978

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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LIB

John (Jack) Henry Horner (Minister of Industry, Trade and Commerce)

Liberal

Mr. Horner:

I intend to deal with the bill at length, Mr. Speaker. I was quoting the speech of the hon. member for York-Simcoe. I had suggested earlier that the hon. member for Don Valley (Mr. Gillies) would have been a far better finance critic, and the hon. member for Edmonton West (Mr. Lambert) would have been a far more credible finance critic.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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PC

Ramon John Hnatyshyn (Deputy House Leader of the Official Opposition; Progressive Conservative Party Deputy House Leader)

Progressive Conservative

Mr. Hnatyshyn:

Even you could do a better job, I suppose!

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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LIB

John (Jack) Henry Horner (Minister of Industry, Trade and Commerce)

Liberal

Mr. Horner:

We again have Sir Arthur riding to the rescue. He looks beautiful on the white horse with the hon. member for York-Simcoe. The beauty of those two hon. members is that they can ride a horse, which is more than the Leader of the Opposition can do.

In his whole speech the hon. member attempted to build on the premise that the Minister of Finance knew not what he was doing and was incapable of being Minister of Finance. This has been his whole line of attack. I was, as Your Honour correctly stated, nearly at the end of my remarks about the Bank of Western Canada.

The hon. member tried to run $195,000 into a pyramid and control $13 million-not a bad stroke of business if you can do it overnight. However, he was not able to do it.

He had called it the Bank of Western Canada. He wanted the deposits of western Canada. The interest rates were coming off. Where was the control going to be? It was to be held by a consortium of basically his family and two other people in the city of Toronto. He would not put 53 per cent on the market for sale. It was not because the remainder was not gobbled up. The nearly six and a half was gobbled up quickly. He kept control in Toronto and tried to perpetrate the belief that he was some kind of a saviour to western Canada and that he cared about western Canada. He cared about his own pocket and not much else at that time.

I want to say how Alberta has benefited in recent years and will continue to benefit by the budget of April 10.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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PC

Sinclair McKnight Stevens

Progressive Conservative

Mr. Stevens:

I rise on a point of order, Mr. Speaker. I did not interrupt the minister when he was making certain comments concerning the formation of the Bank of Western Canada, but I hasten to add, in case anybody has inferred otherwise, there is not one tittle of truth in what he has said.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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LIB

John (Jack) Henry Horner (Minister of Industry, Trade and Commerce)

Liberal

Mr. Horner:

That is not a question of privilege. What I said is on the Finance Committee records. What I said was supported by the former governor of the Bank of Canada, Mr. James Coyne, when he blew the whistle on the hon. member and said, "produce your $4V4 million," and he could not. I am not saying any untruths. It all can be substantiated and, in fact, has been substantiated in the past.

I wanted to deal with how the energy development incentives announced on April 10 will benefit the province of Alberta. Most Canadians are aware of the energy picture in the world today. I will paint the picture as vividly as I can so that Canadians can clearly understand.

In the known conventional oil reserves there are about 6.4 billion barrels of oil in Canada. We in this country use about

Income Tax Act

600 million barrels a year, or 1.6 million barrels a day. If someone looks at this speech tomorrow, he can use a computer or check my mathematics and he will see that we have in conventional oil reserves, if our consumption does not increase, somewhere between ten and 12 years' of known supplies.

What about the tar sands and the heavy oil, the development of which this budget attempted to encourage? In the tar sands in Alberta there is estimated to be 900 billion barrels of oil, a fabulous amount when you equate that to our conventional reserves. Three hundred billion barrels of oil can readily be mined in the tar sands if we put the capital investment into that area. With regard to the other 600 billion, we may have to develop new technology. We may have to develop a better in situ method of recovery. Of the 300 billion barrels I spoke of in the tar sands, about 80 per cent is recoverable with today's technology. Of the remaining 600 billion, with today's technology we can probably recover something in the neighbourhood of 15 to 20 per cent.

Looking at those Figures one can see how fortunate this country is, if we develop the tar sands quickly enough and have it coming on stream when our conventional oil begins to slow up.

We have a lead time of 12 years, at best 15. Therefore it behooves the federal government to encourage tar sands development now. Did the Minister of Finance take that into consideration in his budget? Yes he did, in about three different ways, and I will deal with them.

Outside of the conventional oil wells and the tar sands, we have in northeastern Alberta what is commonly referred to as the heavy oils. They are in the ground. The present method of bringing them up is to pump steam down which forces up the oil. In the known estimate of reserves of heavy oils, there is about 30 billion barrels of oil. Roughly speaking, we have five times the amount of reserves in the heavy oils and 150 times the amount in the tar sands that we have in the conventional wells.

There is only one other industrial country in the world today that can say down the road, if proper care is taken now, that it will be self-sufficient. We can become a major exporter of oil. We have that much. Action must be taken.

I am often accused of comparing our country with other countries. Today I want to compare our country with the United States with regard to the question of oil. One year ago the United States were using approximately 14.7 million barrels a day. Today they are using 17.1 million barrels a day. They have had a tremendously rapid increase in their consumption of oil. What has their production been? One year ago production in the United States was 8.7 million barrels a day. Today it is 8.1 million barrels a day. Their consumption has risen rapidly and their production has gone down nearly as rapidly.

This is a very fortunate country. Our consumption has not gone up as fast, and our production and our capabilities of producing have increased substantially. If Canadians ever

May 24, 1978

Income Tax Act

looked around, they would see we are at the bottom of the rainbow. This country is very, very fortunate.

What is the federal government doing through this budget which is being attacked, by innocent people, I believe, because they know not why they speak? Some of them know not why they are here, even from the province of Alberta. 1 have heard Albertans stand up in this House and say that Alberta is not helped in any way by this budget. How foolish can they be! How unknowing of the truth can they be of the province of Alberta?

Previous ministers of finance introduced in budgets, and the present Minister of Finance reinstated it again last fall, drilling exploration funds that individuals can put together to invest in oil and gas exploration in the province of Alberta. Individuals can get together and invest in gas exploration in Alberta. Why do I say in Alberta? It so happens that in our great nation between 83 per cent and 85 per cent of the oil industry is in Alberta.

This tax provision, allowing individuals to invest in drilling and exploration, brought tremendous funds into the province from all over Canada. The president of Ranger Oil told me when I was speaking with him recently that, as far as his company was concerned, it was the largest investment put together in Canada for a Canadian firm. I asked him, out of curiosity, where the money came from, and he said that, by and large, most of it came from people in Montreal. More than 100 investment funds had been put together to back exploration and drilling. Dome Petroleum, which has done such tremendously good work for Canada in the Arctic exploring for oil and gas in the Beaufort Sea, has put a fund together using the tax provision brought forward in the budget and extended by the present Minister of Finance.

In his present budget the Minister of Finance has recognized the importance of heavy oil and of the tar sands. The federal government has put together a research fund under which $2 million a year will be devoted to extending our knowledge, particularly of the tar sands, in the next five years.

The Syncrude project alone involved an expenditure of some $2 billion, and the contribution made by the federal government was 15 per cent, or $300 million. Mr. Speaker, that is more than Quebec is getting under this sales tax proposal. That province is getting something in the neighbourhood of $215 million. But Ottawa put $300 million into Syncrude, bringing the consortium together after Atlantic Richfield backed out. The project is now coming on stream and will produce something like 125,000 barrels a day. I estimate that Syncrude cost $2 billion. A large proportion of that money was spent within the province of Alberta. Wages and salaries of workers accounted for half the cost. That money was spent within the province, and those people pay income tax into the provincial treasury. And I am not taking into consideration, now, the royalties which the provincial government will receive on the sale of this oil, oil developed through the encouragement of the federal government.

Look at page 10 of this document under Energy Development Incentives. The Minister of Finance clearly spells out:

Second, it will be important to extract as much oil as technologically possible from all deposits. It has already been established that enhanced recovery systems can greatly increase total production. After today, therefore, special machinery, equipment and other facilities acquired for enhanced recovery systems-specifically, so-called "tertiary" recovery-will be able to earn depletion at a rate of $1 for every $2 of expenditure as compared to the normal earning rate of $1 for $3.

This change means substantially more revenue for Alberta because it will continue for a lot longer than six months. The sales tax reduction is only for six months. Let us keep things in perspective.

The budget went on to say:

Finally, earned depletion may be applied at present only to reduce taxable resource profits, and only up to a ceiling of 25 per cent. This provision will be significantly improved. Effective immediately, corporations may deduct depletion earned through certain qualifying investment in non-conventional oil projects up to the extent of 50 per cent of total income.

These two measures will greatly encourage investment in the tar sands and in heavy oils. Further, the minister states, as set out on page 10 of the budgetary papers:

I want to make clear that the up-grading plants to process the heavy oil produced from wells into a type of oil similar to conventional crude will be treated as a manufacturing facility, eligible for fast write-offs and the reduced tax rate.

All this gives us an idea of the immense amount of money which will be invested in Alberta as a result of the encouragement given in the budget. I suppose the oil industry is still not clear as to the interpretation of these tax measures or as to what their full effect will be, but there is no question in my mind that there will be far more potential benefit from the assistance given to the development of oil deposits in Alberta than from the total of the tax reduction, which amounts to around $1.1 billion.

In other words, these measures will mean more by way of financial benefit and encourage more investment in Alberta than all the other benefits seen in the budget for all the other provinces put together.

If this is correct, one might say, "Surely, this is too much to give one province?" Mr. Speaker, it is not going out to one province. It is benefiting the whole nation. We know that sooner or later we must develop these resources. Indeed, we could become energy sufficient, and if we develop the proper technology we could even become a major exporter of oil after 1995, I estimate.

What has all this meant to the province of Alberta? I am told that many people are envious of that wealthy province. Many say it was Premier Manning, through his connection with the Lord above us all, who put the oil below the surface of Alberta. Today, many newcomers believe it was Premier Lougheed who put the oil below the surface of the province. There are some in this House who believe that the prosperity of Alberta is the result of the way in which the affairs of the province have been managed by its present government.

Mr. Speaker, I am well connected with the present government of Alberta, and you might say I even have good relations with that government. But I am fair enough to realize that the

May 24, 1978

tax measures to which I have referred were brought in by the former minister of finance and by the present Minister of Finance. The tax measures contained in the budget of April 10 have contributed and will continue to contribute to a dramatic growth in the part of Canada about which I have been talking.

Looking at the growth figures for the population generally I see a figure of 1.25 per cent. I look out to Alberta and find that the population there is growing at close to 4 per cent. The population of the city of Calgary is growing at the rate of 1,500 a month. The city of Edmonton is growing at a like rate. Fort McMurray-

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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?

An hon. Member:

How about Cessford?

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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LIB

John (Jack) Henry Horner (Minister of Industry, Trade and Commerce)

Liberal

Mr. Horner:

It is growing too. It is very near my home ranch and it is growing faster even than the rest of the province. I feel a little like Khrushchev when I say that, because when you start from nothing it is very easy to grow quickly.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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?

An hon. Member:

Not with this government.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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LIB

John (Jack) Henry Horner (Minister of Industry, Trade and Commerce)

Liberal

Mr. Horner:

Calgary is growing at the rate of 1,500 per month, and the same is true of Edmonton. In 1973 Fort McMurray had a population of about 8,000. Today it is

23,000. Citizens from all over Canada have gone to the province of Alberta. Rightly or wrongly they are now paying income tax to the province of Alberta. I think it is right that they should, but we have to recognize that it was the federal government, particularly since the oil dispute of 1973-74, which caused a great deal of rapid expansion of that province.

Alberta has benefited immensely. As I flew out of Calgary on Monday I looked at the skyline of that city and wondered what it was like ten years ago. It was nothing like it is today. I also thought of the gigantic roadways traversing the valley of the Saskatchewan River, and the gigantic hotels and apartment buildings built at the edge of the Saskatchewan River in the city of Edmonton. I thought to myself about how the skyline of that city has changed immensely in the last ten years.

One can say that the Minister of Finance neglected Alberta in his April 10 budget, but if one wanted to be parochial and to divide Canada into regions, he could do that too. 1 do not particularly like that. I got into federal politics because I am a federalist. One could even accuse me of being a centralist. I do not mind that, because I believe that in order to hold this nation together we have to accept the fact that there should be one government for the whole of the nation.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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?

Some hon. Members:

Hear, hear!

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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LIB

John (Jack) Henry Horner (Minister of Industry, Trade and Commerce)

Liberal

Mr. Horner:

When I was a member of the other party I once asked my leader what power he would decentralize, so that I could know what he would do to my country. He could not tell me what power he would decentralize. It is a nice sounding phrase, but I said to my leader that he could not go on forever saying it. I told him that someone would ask him

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what he would do, but he could not tell me. I hope he has thought up an answer by now. Perhaps the hon. member for York-Simcoe has given him an answer. The hon. member for York-Simcoe seems to have many answers and rumours ready.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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PC

Ramon John Hnatyshyn (Deputy House Leader of the Official Opposition; Progressive Conservative Party Deputy House Leader)

Progressive Conservative

Mr. Hnatyshyn:

We decentralized by giving you to the Liberals.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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LIB

John (Jack) Henry Horner (Minister of Industry, Trade and Commerce)

Liberal

Mr. Horner:

When the hon. member for York Simcoe was in Calgary he said on a radio phone-in program that he was very glad to see the hon. member for Crowfoot go because he could not get along with him. I explained in my speech today how he and I disagreed about what he was trying to do with the Bank of Western Canada. Anyone who reads my remarks will readily see why I could not get along with the hon. member.

We are changing the law regarding rape. The hon. member for York Simcoe was attempting to rape western Canada financially, and I will never forgive him for his intentions. Of course he was not a politician then. His true business ethics were coming through loud and clear, to me in any case.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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LIB

Denis Éthier (Assistant Deputy Chair of Committees of the Whole)

Liberal

The Acting Speaker (Mr. Ethier):

Order, please. I regret to interrupt the hon. minister, but his allotted time has expired. Nevertheless, he may continue if there is unanimous consent.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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?

Some hon. Members:

Agreed.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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PC

Arthur Jacob (Jake) Epp

Progressive Conservative

Mr. Epp:

No.

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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LIB

John (Jack) Henry Horner (Minister of Industry, Trade and Commerce)

Liberal

Mr. Horner:

Mr. Speaker-

Topic:   GOVERNMENT ORDERS
Subtopic:   INCOME TAX ACT
Sub-subtopic:   MEASURE TO AMEND
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May 24, 1978