June 10, 1993

?

An hon. member:

Mr. Speaker, I wished to speak on third reading.

Topic:   GOVERNMENT ORDERS
Subtopic:   SPEAKER'S RULING
Permalink
PC

Steve Eugene Paproski (Deputy Chair of Committees of the Whole)

Progressive Conservative

The Acting Speaker (Mr. Paproski):

I am sorry, I have already put it through, but I will revert with agreement of the House. Is it agreed?

Topic:   GOVERNMENT ORDERS
Subtopic:   SPEAKER'S RULING
Permalink
?

Some hon. members:

No.

Topic:   GOVERNMENT ORDERS
Subtopic:   SPEAKER'S RULING
Permalink
PC

Steve Eugene Paproski (Deputy Chair of Committees of the Whole)

Progressive Conservative

The Acting Speaker (Mr. Paproski):

There is not consent.

J(J Jtc

Topic:   GOVERNMENT ORDERS
Subtopic:   SPEAKER'S RULING
Permalink

CANADA PETROLEUM RESOURCES ACT


The House proceeded to the consideration of Bill C-106, an act to amend certain petroleum related acts in respect of Canadian ownership requirements and to confirm the validity of a certain regulation, as reported (without amendment) from a legislative committee.


SPEAKER'S RULING

PC

Steve Eugene Paproski (Deputy Chair of Committees of the Whole)

Progressive Conservative

The Acting Speaker (Mr. Paproski):

There are two motions in amendment standing in the name of the hon. member for Edmonton East on the Notice Paper for the report stage of Bill C-106, an act to amend certain petroleum-related acts in respect of Canadian ownership requirements and to confirm the validity of a certain regulation.

Both motions go beyond the scope of the bill. They are introducing new concepts not contemplated in the bill as approved in principle at second reading. Therefore according to citation 698(1) of Beauchesne's sixth edition, these motions are out of order and will not be selected by the Chair.

There being no further amendments, I shall now propose to the House the motion for the concurrence of the bill at report stage.

Government Orders MEASURE TO AMEND

Topic:   GOVERNMENT ORDERS
Subtopic:   SPEAKER'S RULING
Permalink
PC

Shirley Martin (Minister of State (Transport))

Progressive Conservative

Hon. Shirley Martin (for the Minister of Energy, Mines and Resources) moved

that the bill be concurred in.

Topic:   GOVERNMENT ORDERS
Subtopic:   SPEAKER'S RULING
Permalink
PC

Steve Eugene Paproski (Deputy Chair of Committees of the Whole)

Progressive Conservative

The Acting Speaker (Mr. Paproski):

Is it the pleasure of the House to adopt the motion?

Topic:   GOVERNMENT ORDERS
Subtopic:   SPEAKER'S RULING
Permalink
?

Some hon. members:

Agreed.

Topic:   GOVERNMENT ORDERS
Subtopic:   SPEAKER'S RULING
Permalink
NDP

Motion agreed to.


PC

Steve Eugene Paproski (Deputy Chair of Committees of the Whole)

Progressive Conservative

The Acting Speaker (Mr. Paproski):

When shall the bill be read the third time? By leave, now?

Topic:   GOVERNMENT ORDERS
Subtopic:   SPEAKER'S RULING
Permalink
?

Some hon. members:

Agreed.

Topic:   GOVERNMENT ORDERS
Subtopic:   SPEAKER'S RULING
Permalink
PC

Shirley Martin (Minister of State (Transport))

Progressive Conservative

Mrs. Martin (for the Minister of Energy, Mines and Resources) moved

that the bill be read the third time and passed.

Topic:   GOVERNMENT ORDERS
Subtopic:   SPEAKER'S RULING
Permalink
NDP

Ross Harvey

New Democratic Party

Mr. Ross Harvey (Edmonton East):

Mr. Speaker, I am indeed sorry that the amendments I proposed at report stage on this bill were deemed to be out of order because I think considering each in turn would have helped to focus the mind of the House on the actual import and impact of Bill C-106. The House having been denied that opportunity, I will see what I can do to rectify it at this third reading.

To start I would like to quote at length from the North American free trade agreement. I refer your attention to article 1102 in chapter eleven of the North American free trade agreement titled national treatment. It reads in section 1:

Each Party shall accord to investors of another Party treatment no less favourable than it accords, in like circumstances, to its own investors with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments.

Section 4 of article 1102 reads:

For greater certainty, no Party may

(a) impose on an investor of another party a requirement that a minimum level of equity in an enterprise in the territory of the Party be held by its nationals, other than nominal qualifying shares for directors or incorporators of corporations;

This means that the Canadian ownership rule we have had in place since 1982, which has served by virtue of the previous government policy for Canada outside the lands administered under federal jurisdiction, and the act that we are repealing here today for those areas within federal jurisdiction, which is the Canada lands in the north and the offshore areas off Newfoundland and Nova Scotia, has been a requirement since 1982 that any

June 10, 1993

Government Orders

person receiving a production licence for oil or gas would have to be a Canadian citizen, a permanent resident or a corporation the shares of which are 50 per cent held by Canadians.

We should be very clear on this. What the bill before us this afternoon proposes to do is delete that Canadian ownership requirement. It means that henceforth in the areas where previously you had to have 50 per cent Canadian ownership at least to undertake production of oil and gas you will now have no minimum Canadian ownership requirement.

You could be 100 per cent Fijian or Mercurian and it would not matter. You could still go ahead. The other restrictions of course would apply but the Canadian ownership requirement would not. This brings our statute and regulations into full accord with the North American free trade agreement in articles 1102 and sections 1 and 4.

There is as well in this North American free trade agreement article 1108, reservations and exceptions. I should like now to turn to that. It reads:

Articles 1102, 1103, 1106 and 1107 do not apply to:

(a) any existing non-conforming measure that is maintained by

(i) a Party at the federal level as set out in its Schedule to Annex I or III

Even though we have maintained in statute and policy what we can call in the language of the North American free trade agreement a non-conforming measure we can do that now only if we set out in Canada's schedule to annex I basically a statement that we are maintaining this non-conforming measure.

Lo and behold that is precisely what the government did. You will find it on page I-C-23 of the North American free trade agreement. It reads in part on this annex page which deals with the sector on energy and the subsection of oil and gas:

Industry classification: SIC 071 Crude Petroleum and Natural

Gas Industries

Type of Reservation: National Treatment (Article 1102)

Level of Government: Federal

Among the measures included in the reservation are those arising out of the Canada Petroleum Resources Act, the Territorial Lands Act, the Public Lands Grants Act, the Canada-Newfoundland Atlantic Accord Implementation Act, the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act and the Canada Oil and Gas Land Regulations.

The description of the reservation governing investment includes:

Persons who hold oil and gas production licenses or shares therein for discoveries made after March 5, 1982 must be Canadian citizens ordinarily resident in Canada, permanent residents or corporations incorporated in Canada. No production license may be issued for discoveries made after March 5,1982 unless the Minister of Energy, Mines and Resources is satisfied that the Canadian ownership rate of the interest-owner in relation to the production license on the date of issuance would not be less than 50 per cent.

That is the golden umbrella beneath which we sheltered our Canadian ownership requirement from the North American free trade agreement. However there is a catch. I will read article 1108 again: "Articles 1102, 1103, 1106 and 1107 do not apply to a) any existing non-conforming measure that is maintained".

"Any existing non-conforming measure". With the anticipated passage of Bill C-106 we are removing, deleting, and eradicating our existing non-conforming measure. This having been done, we will not hereafter, for so long as the North American free trade agreement is in effect, be allowed to return to a regime of Canadian ownership requirements.

What we are proposing to do today is delete in perpetuity the ability of the Canadian people through their Parliament to determine that some minimum percentage of the strategic petroleum industry must be undertaken and maintained by Canadian nationals. Henceforth, that ability of the Canadian people to determine this element in their economic fate will be gone. That is the import of Bill C-106.

Some people will say that is okay, it does not matter, who cares? They will say that we are getting globalized, capital is moving back and forth and borders are meaningless. Unfortunately that thesis is simply incorrect and the experience of Canada in this regard is decisively instructive.

For better than a decade now the Petroleum Monitoring Agency has been keeping records about the inflow and outflow of capital into and out of Canada within the petroleum industry. It has been keeping these records in a series of different accounts. The record is abundantly clear.

June 10, 1993

Topic:   GOVERNMENT ORDERS
Subtopic:   SPEAKER'S RULING
Permalink
?

An hon. member:

Abundantly clear?

Topic:   GOVERNMENT ORDERS
Subtopic:   SPEAKER'S RULING
Permalink
NDP

Ross Harvey

New Democratic Party

Mr. Harvey (Edmonton East):

It is abundantly clear. It is inescapably clear. It could not be clearer if it came up to him with a sledge-hammer and beaned him.

What it shows is that for the period from 1980 to 1990-and this is not a particularly odd decade in these regards; we could choose any other decade and find the same thing-while Canadian controlled companies in the petroleum industry generated a net inflow of $1.5 billion into Canada foreign controlled companies in the Canadian petroleum industry generated a net outflow of $25.3 billion.

That can only be described as a terrible drain on the Canadian economy. It unquestionably cost us millions of jobs. It unquestionably dampened whatever economic activity we might otherwise have obtained and it unquestionably continues to harm our economy. That is the price of foreign control in the petroleum industry. It is clear and it is plain. It should come as a surprise to no one.

In Bill C-106 we are proposing to replicate on the Canada lands precisely those conditions which led to this grotesque outflow of capital from Canada in consequence of foreign control and ownership from the western sedimentary basin in the decade of the 1980s.

These facts are so plain, so clear and so compelling that one stands in amazement, grasping for some reason that any government with the Canadian national interest in mind would propose such an absurd bill.

I must say, short of what borders on conspiracy theory on the one hand or actions of rank stupidity on the other, I find it difficult to come up with a reasonable explanation. The explanation that has been fronted by the industry touts-for example the Canadian Association of Petroleum Producers which masquerades as a Canadian association but which is principally, not exclusively, a front for the American controlled companies that operate in Canada-submitted a letter to the committee that allegedly studied the bill which said: "Capital migrates to countries where the opportunities offer attractive terms and demonstrate competitive yields. The Canadian own-

Govemment Orders

ership restrictions discourage needed capital inflows". Is that not ironic?

It continued: "The Canadian ownership restrictions discourage needed capital inflows by suggesting to foreign investors that their capital is neither needed nor welcome. This is a negative signal, the end result of which is that opportunities for Canadian companies are undermined since they are reliant on capital inflow for development".

Clearly this is a captious argument and it is so precisely because it is saying this legislation will have benefit for Canadian companies when the whole point is to allow the greater activity in the Canada lands of non-Canadian companies. Without wishing to sound too derisive I think we can safely say that the argument advanced by the CAPP and others in this regard is at best self-serving.

This brings me to the final mystery I wish to contemplate this afternoon. Why in the name of sweet reason does the Official Opposition find itself supporting this bill? On a recorded division at second reading, every Liberal present in the House rose in support of this bill. I suspect if we were to undertake a recorded division at third reading we would find the same thing. This is a mystery to me.

Over the years I have disagreed with the liberal Party of Canada on many things but I always thought that at least it was a quasi-nationalist party. It amazes me that a quasi-nationalist party could bring itself to support this odious little piece of comprador selling out. I do not understand it.

I rather look forward to any of the Liberal members here this afternoon getting up to say how the party of Pearson, Trudeau, St. Laurent, Mackenzie King or any of the reasonable Liberal Prime Ministers we have experienced in this nation's history can support this unfortunate, costly, shameful, and comprador piece of legislation. I look forward to it but I do not anticipate it.

I have no doubt that this bill will pass. The government's majority will ensure that. However no argument has been adduced at second reading, in committee or thus far this afternoon which can possibly support the passage of this bill in the face of the certain negative consequences.

June 10, 1993

Government Orders

In summary, what is proposed this afternoon is that we strip from the Canadian people forever, or least for as long as the North American free trade agreement remains in effect, their ability to reserve petroleum development in the Canada lands for Canadians by Canadians and in the Canadian interest. We are stripping that away and we do so knowing full well that over the long term the principal consequence of that will be the massive export of needed capital from our country.

I would welcome anyone rising in this House this afternoon to make a compelling and logical argument as to why in the face of these certainties this House should support this bill. In fact I defy any member present to attempt it.

Topic:   GOVERNMENT ORDERS
Subtopic:   SPEAKER'S RULING
Permalink
LIB

Fred J. Mifflin

Liberal

Mr. Fred J. Mifflin (Bonavista-IVinity-Conception):

Mr. Speaker, I was interested to hear my friend from Edmonton East.

I want to talk to this bill on third reading because I think it is a very important bill. It is a bill that perhaps does need a fair amount of examination, but we have been through that. Examination has been done and we are at the final stages of this Parliament and I find it very interesting that some of the old arguments have started all over again.

As I understand this bill its purpose is to relax the foreign investment rules on March 25, 1992, which essentially were meant in respect to all. It was meant not only to apply to the conventional areas but also to the frontier lands, those north of 60 degrees, and the offshore which is controlled by the federal government.

It was very clear that my friend was not in favour of the relaxation of the foreign investment rules. For this reason he was very much against Bill C-106 on the grounds that it was essentially a sell-out. I am not sure if he used the term but he indicated that he was concerned about the energy sell-out.

That is one point of view but there are a number of things we had to consider in the third reading of this bill. To begin with I think there may be general agreement that the federal government in the last few years has done very little to assist the Canadian oil and gas sector during this period of great difficulty for it, one of our

major resources. It is in difficulty essentially because of low profitability.

In the general sense the idea is that the relaxation of the foreign investment rules would likely do very little to address the economic problems but by the same token, and I do appreciate what the hon. member had to say, we are caught in a crossfire between trying to do something to develop the resource and at the same time trying to restrict foreign investment and the present rules on foreign investment with respect to the oil industry as they exist. It is a very delicate balance. We tend to come down on the other side of the balance than do the NDP. In the moments ahead I may be able to explain why.

I should also point out that it is my understanding that Bill C-106 will also have the effect of amending the following legislation: the Canadian Petroleum Resources Act, the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act, and the Canada-Newfoundland Atlantic Accord Implementation Act.

I took a personal interest in this because of the existence of the megaproject, Hibernia, smack in the centre of my riding. In the case of Hibernia it was exempt from the foreign investment ownership rule because it was discovered before 1982 and the 50 per cent Canadian requirement did not really apply. However foreign investment restrictions apply to the other oil fields in the Grand Banks of Newfoundland. This is significant because more than 50 per cent of the reserves in the Terra Nova field are for sale and an open investment policy may speed up its sale. That is one concern there.

As I said earlier, the oil and gas sector in Canada is in great difficulty. I am sure the hon. member who just spoke knows this, and in fact anybody from western Canada involved in the energy and oil natural resources sector would be aware of it. It is in a financial crisis with poor profit prospects.

I have sat in on some of the committee meetings and these poor prospects are not only for now and next year in line with the economic slump we are in. The projections are that it will be in difficulty for the next couple of years. I hope this situation will not last until the turn of the century but certainly the indication from all the oil economists is that the energy industry and the oil and gas sector will be in difficulty until at least 1995. Mass

June 10, 1993

lay-offs are still anticipated in the upstream and downstream sectors.

As an individual I have a great affinity and a great feel for a major industry that involves lay-offs and for any remedial measures that may be considered in order to alleviate the situation.

If I could be permitted to give a comparison it perhaps would help the hon. member see the motivation behind at least where I am coming from and I am sure the party. In Newfoundland we have the northern cod moratorium. Fishing is a major industry for that region of Canada. The northern cod stocks have all but disappeared from Newfoundland. Essentially 22,000 people have been laid off. They are on a cod moratorium. That could be called, in anybody's definition and particularly in a country with a labour force as low as 13 million people, 22,000 in a province with roughly 300,000 workers, a massive lay-off.

I would also say parenthetically that in response to the moratorium, which is only a piecemeal measure and should be expected from a government that essentially has mismanaged the fishery, the compensation will go on for as long as the moratorium exists as far as I am concerned and as far as my party is concerned.

In this case the government has two parallel actions which are going in different directions. While the government is paying compensation to 22,000 northern cod workers and other thousands with the most recent package on the one hand, on the other hand we have 103 foreign vessels off the Grand Banks of Newfoundland illegally fishing and the government will not do anything to stop them.

The government is saying: "It is too bad about the fishery. We are going to compensate you, but by the same token we are going to let foreigners catch fish illegally. However if you catch fish in Newfoundland, in your own waters, we will make sure that you go to court, your boat and belongings are seized and that you will be prosecuted and probably sent to jail". In that case we have two policies going in the opposite direction from the same government.

In this case it would seem the government does realize that because of the potential of massive lay-offs on the west coast of Canada and on the prairies in the Calgary

Government Orders

area and in the oil field area of Canada, there should be a more parallel action on the part of the government. This bill is the impetus behind it.

It is possible, in relation to the oil and gas industry, that opening it up to foreign investment would mean an important source of technology, knowledge, and more important, investment capital. As I say, it is a balance and we have to draw the line somewhere.

It was interesting that we were criticized by the present government for allowing foreign investment and for looking at foreign investment in a certain way. Now the government is opening up the doors a little bit to foreign investment in order to help an industry that is in difficulty. In this particular case I personally have no difficulty with that.

The line is drawn, irrespective of the policies of the predecessors or the leaders and Prime Ministers of my party in the last 100 years. Times are changing and we have to look at the circumstances as they are now and apply remedial and legislative action to ensure that we get the best bang for the buck in the industries that we have. If that involves some measures with respect to foreign investment and legislation then so be it. We have to go along with that.

The oil and gas industry in the last few years is giving a return of 4 per cent to 5 per cent. That is not a very attractive rate. I want to quantify the difficulty it is in. That does not even keep up essentially with the interest rates that are paid on blue chip investment. There is no question about it, we have some great difficulty here.

The total oil and gas revenue and cash flow was reduced by $130 million for every 1 per cent increase in the exchange rate. On top of the low productivity and the low return, we are being very adversely affected by the change in the exchange rate. Given that the industry reinvests a large portion of its cash flow into new exploration and development, the high Canadian dollar until recent reductions had been at least partly responsible for the low rate of exploration and development in Canada. Investment capital is desperately needed in the industry and one way to get it would be precisely through what this bill is doing, relaxing the foreign ownership rules. However, it is recognized by all that this would be a short-term benefit. The industry would have to live or die on its own, depending on what happens after the combination of the economic downturn which has not

June 10, 1993

Government Orders

really turned around yet despite what the government may suggest in the various budgets, and the increased, we hope, impetus due to this legislation which hopefully will be passed today.

It is in the nation's best interest to take this step. Clearly I would because I would not be here speaking about it otherwise. What implication would selling a stake in the industry have?

Topic:   GOVERNMENT ORDERS
Subtopic:   SPEAKER'S RULING
Permalink

June 10, 1993