May 4, 1992                            RESOURCE ESTIMATES COMMITTEE (MINES AND ENERGY)


 

The Committee met at 7:00 p.m. in the Legislative Chamber of the Colonial Building.

On motion of Mr. Murphy, seconded by Mr. Dumaresque, Mr. Langdon was elected Chair.

On motion of Mr. Hewlett, seconded by Mr. Snow, Mr. Woodford was elected Vice-Chair.

MR. CHAIRMAN (Langdon): Order, please!

Good evening. We are here this evening to consider the Estimates of the Department of Mines and Energy.

First, I would like to introduce the members of the Committee. We already know the Chairman and the Vice-Chairman. We have Mr. Alec Snow, the Member for Menihek; Mr. Alvin Hewlett, the Member for Green Bay; Mr. Harold Small, the Member for Baie Verte - White Bay; Mr. Danny Dumaresque, the Member for Menihek; and Mr. Tom Murphy, the Member for St. John's South.

MR. DUMARESQUE: I have the responsibility for two ridings now, I don't want Menihek.

MR. CHAIRMAN: I am sorry - Eagle River. I am sorry about that, Danny, my apologies to you.

MR. A. SNOW: Anyhow, the people of Menihek, they don't want him.

MR. CHAIRMAN: That's right.

SOME HON. MEMBERS: Hear, hear!

MR. CHAIRMAN: Before we ask the minister to introduce the Estimates of the Committee, I guess it is generally agreed that the minister would introduce the Minutes and give us the prepared statement that he has. After that has been finished, then we ask the Vice-Chair to lead off in the debate. I guess it is probably the same length of time, fifteen minutes, that he has at his disposal to question the minister and his officials. I would hope, after that has been done, that each member would then be given ten minutes to question the minister.

Probably we should keep the questions short and not have them compounded so that we can ask one question at a time and get through the Estimates without any difficulty.

I am looking forward to a co-operative evening with all the groups concerned, and probably, at the end of the evening we might be able to conclude by having the Estimates approved.

Without further ado, the hon. the minister, Dr. Gibbons.

DR. GIBBONS: Thank you, Mr. Chairman.

I would like to introduce the staff I have with me this evening: Starting on my right is the Deputy Minister of Mines and Energy, Mr. Gordon Gosse. On my immediate right and to his right, is the Assistant Deputy Minister for Mines, Mr. Paul Dean. Starting on my immediate left is the President and Chief Executive Officer of Hydro, Mr. David Mercer. Next to Mr. Mercer is Mr. Charles Lester, a director in the Energy Branch of the Department of Mines and Energy. Next to Mr. Lester is Mr. Kevin Whelan, Director of Administration in the department - I guess, the prime person responsible for making sure the Budget is all in one document, so he has all the answers. Next to Mr. Whelan is Mr. David Collett, Vice-President of Operations for Newfoundland and Labrador Hydro.

That is the staff I have with me. As we get to the question period, if there is anything I don't have an answer for, I am sure they have lots of answers.

AN HON. MEMBER: (Inaudible).

DR. GIBBONS: Yes, I noticed.

Before I get into my presentation this evening, Alvin and other members, it looks as if we don't have any media interest in this today, unless they are hiding.

MR. DUMARESQUE: The Page will have to take notes for The Telegram and The Express, I guess.

DR. GIBBONS: Mr. Chairman, I will first run through a statement I have here with a few words about each sector of my department that is covered by this Budget, and I will say a few words then about the agencies also reporting through my department.

One of the main activities of my department deals with the geological survey, which is the first item on the Budget list. I think the number on the Budget Estimates is $5,465,700, so it is the biggest single item on the Budget within the department.

Geoscientific survey work by the survey has been under way in a fairly planned and extensive way since 1972, so this is the twentieth year since we started federal/provincial agreements and doing planned survey activity. The long-term objective of this activity is to provide a basic geological data base for mineral exploration industry and for the Province.

Geological mapping has now been completed for about half of the Province, so we are halfway there in twenty years. Other elements of the data base are at roughly similar stages of completion. Data provided so far have been a major factor in attracting mineral exploration activity to the Province, and these data played a role in all of the important new discoveries that we have witnessed over the last several years.

It is critically important for the continued success of our mineral exploration sector and the mining sector, that these surveys continue, and this year's program is no exception. This year, there will be forty-seven projects; twenty-eight of these projects have a field component, the others are office-based and lab-based projects. The total net cost of the program this year, 1992, is $4.4 million. Results of the work will be communicated to the mineral exploration industry and other interested parties, including the public, through various publications and information services and maps.

Much of the program this year will be funded under the Canada/Newfoundland Co-operation Agreement on Mineral Development which was signed in October of 1990, so we are now going into basically the third season. The agreement continues for two more years to March 31, 1994. The total provincial expenditures on geoscience, under this agreement in 1992, will be $1.9 million; $1 million in federal revenue is also associated with this.

The federal government, through the Geological Survey of Canada, also proposes to spend an additional $1.6 million on surveys in the Province under the agreement this fiscal year, so the federal survey is also very much involved this summer. I will not go down through the two pages of detailed survey projects I have listed in my briefing notes, but I will just indicate, in passing through them, some of the areas.

For example, in Newfoundland, on the Island part of the Province, there are the cambro-ordovician carbonate rocks of the West Coast, mostly up and down the Northern Peninsula on the west side, the north central granitic rocks within the central core of the Province - this year, more in the centre of the Island, whereas in earlier years it went down to Fortune Bay - and sedimentology in the Notre Dame Bay areas, three projects on the Island out of about eight.

In Labrador, there are going to be various types of mapping carried out. In the northernmost part of Labrador there is a project centered in the Saglek area, there is another in the Nain area, another in what we call the Eastern Grenville which comes over south of Lake Melville towards Eagle River, and in Western Grenville, there is a project which is, basically, west and south of Churchill towards Labrador City-Wabush, in that area, and also, in Western Labrador in what we call the superior and western Churchill province which tends to be north of Labrador City-Wabush up towards Schefferville and west.

Another type of project is called Geochemistry and Geophysics, and there are various surveys of both types again this year. In the mineral deposits sector, there are a number of projects; one is called the Dunnage Zone Metalogeny, and dunnage just happens to be a geological name for an area which comes up and takes in a lot of Central Newfoundland, including the Buchans Belt.

Rare Metalogeny, by one of our project geologists, is in Northern Labrador. This is an area that includes the Strange Lake deposit in Northern Labrador but also includes Flowers River. A number of other projects in mineral deposits: industrial minerals in Labrador includes the Nain Labradorite, from which we are hoping to have real production this year for dimension stone and similar projects around the Island of Newfoundland including some of the granites and marbles in the Island part of the Province.

There are a number of other projects. I won't go into the details on them but, in total, as I said earlier, there are forty-seven projects altogether by the survey, plus a number of projects by the federal survey this year - a lot of action. On Friday of last week I approved, I think, about thirty of the summer staff who are coming to work on some of these projects this year, so we have started to hire summer assistance now for the field season.

We move now to the second part of the mineral branch that is budgeted in the Estimates, the Mineral Resource Management Section is budgeted here for $2,422,900, and this branch is responsible for basically administering the law relative to all types of mineral development - mineral land tenure, regulation of mining operations and related matters.

The branch has a number of divisions: one is the Mineral Lands Division, another the Mines Division, and another called the Project Analysis Division. The Mineral Lands Division is responsible for all land tenure legislation, including mineral claims legislation and quarry materials legislation - so, everything relative to all types of licenses by that division.

The division also includes responsibility for the Core Storage program, where we have six regional core storage libraries, in St. John's, Pasadena, Buchans, Springdale, Baie Verte, and Goose Bay.

The Mines Division is the technical division and this one is responsible for delivery of programs and policies related to operating mines or proposed mines. It conducts technical monitoring and engineering analysis of all mines that are now operating, or all that are proposed, and any that are inactive and closed.

Today, I talked to a couple of the engineers involved with this particular division and they are now, today, this week, doing a detailed analysis of the proposed Pine Cove gold mine on the Baie Verte Peninsula.

The third part of this branch, the Project Analysis Division is primarily responsible for the financial analysis, the economic analysis and related research, plus the collection of all statistics relative to the mining and mineral industry. It also includes in its responsibility the Prospectors Grant and the Prospectors Training Program for the Province. That is the mining side.

I would like now to switch to the petroleum side and there our department is broken down primarily into two main divisions. Petroleum and Energy Resources is one, more on the technical aspect of it. It is responsible for formulating policy and providing advice to government on offshore matters arising out of the Atlantic Accord Implementation Act, and the Petroleum and Natural Gas Act, as well as the development of subordinate legislation under both of these Acts.

This branch liaises with the federal government, with the Canada/Newfoundland Offshore Petroleum Board, and with the oil and gas industry. It monitors industry activity, it provides assessment of anything that is going on, and particularly, assessment of any decision taken by the offshore board whereby I, as the minister responsible, may have to give approval. It also carries out a range of geological, geophysical, engineering and land rights matters related to petroleum on land, as was indicated today by the announcement of the West Coast land sale.

Another part of this branch is responsible for the efficient use of energy in all sectors of the economy, and encouraged use of local alternate energy resources like small hydro or wood waste or peat.

Funding of this branch is provided in the branch budget under five activities: policy, planning and co-ordination, petroleum resource development, community information and offshore fund, energy efficiency and alternative energy, and the Canada/Newfoundland Offshore Petroleum Board. The total amount there under this particular aspect is $3.5 million. I don't believe that $3.5 million includes the Offshore Board, does it, Gordon?

MR. GOSSE: Three point five.

DR. GIBBONS: Three point five? Maybe it does include the Offshore Board.

MR. GOSSE: Yes, it should.

DR. GIBBONS: It should. Okay, $3.5 million.

I won't go into the details of policy and planning. That is self-evident. I have already covered some of the aspects of what is done in Petroleum Resources Development relative to land sales. I mentioned the land sale that was announced today with particular interest in the Parson's Pond area, and we expect there will be some seismic, probably, this year. But there was enough in that $1.6 million to $1.7 million bid that there could even be a little bit of onshore drilling in the next five years in that amount, I would think.

The community information part of this branch is looking at money that is contributed towards the Bull Arm Area Co-ordinating Committee, $375,000 that is included in this budget, and it also includes money for a book on Hibernia and the law through the Public Legal Information Association of Newfoundland.

A few extra words on the Energy Efficiency and Alternative Energy part. This part of the branch has a major responsibility for the development and implementation of policies, programs and activities related to energy efficiency and alternative energy for all sectors of the provincial economy. Specific services include energy management studies for public sector buildings like schools and hospitals, the provision of technical assistance with respect to alternative energy development such as small hydro, wood waste utilization, automobile propane, and the development of peat lands for energy purposes. For example, very recently, we finalized an agreement relative to auto propane and we have changed the tax level. I think we are reducing it by about six cents per litre on auto belt propane to encourage some fleet conversions over the next five years. This is a joint project between ourselves, the federal government, and Superior Propane.

This division, over the past year, has also developed, in consultation with both Newfoundland and Labrador Hydro and Newfoundland Power, a ten-year Strategic Plan for Energy Efficiency and Alternative Energy development. This document, encompassing all sectors of the economy, proposes that we should, between now and the year 2000, achieve maybe a 20 per cent reduction in energy usage and a 50 per cent increase in the use of alternative energy sources. Right now, 8 per cent of our provincial electricity is provided by alternate sources. We believe that can be raised to 12 per cent by the year 2000.

The Offshore Petroleum Board I mentioned, reporting to me basically through this particular branch, administers the relevant provisions of the Canada Newfoundland Atlantic Accord Implementation Act on behalf of the Province and on behalf of the federal government. This year, our share of its budget is $2,337,700 of a total of $4,675,400. The number in the detailed Estimates is a little bit incorrect. It said $2,425,500 but that figure was put in before the federal minister and I had done our assessment and given our final approval.

The other part of the energy branch is called Petroleum and Energy Economics and this is the branch on the energy side that really takes care of all financial analysis and economic analysis. It also monitors the retail sector, the petroleum product sector. You may recall that last December we put some amendments through to the Department of Mines and Energy Act relative to petroleum product prices and marketing to allow us to collect more detailed information but also to allow us to set regulations requiring the posting of prices on petroleum products. We are proceeding with that. This particular branch, relative to petroleum product prices, also does a weekly survey of the cost of product at twenty-eight retail outlets and five furnace oil distributors in the metro area, as well as a quarterly update by census division for the Province - province-wide by census division.

This part of my department also monitors Hibernia from the economic and financial aspect of it. I will not go into any detail on Hibernia; I am sure there will be questions on that. It also monitors activities at the Come By Chance refinery, and that has been in the news today. I won't go into any further detail on that. That covers the departmental part.

Apart from that, we have Newfoundland and Labrador Hydro, which reports through me as the minister. I will say a few words about Newfoundland and Labrador Hydro before I finish my statement. As we are all well aware, government discontinued its subsidization of Hydro's rural distribution service effective March 31, 1991, a year ago, therefore, no funds appeared this year in the Budget for that subsidy. There are some funds in the Budget, however, for some subsidies under the Electrical Power Control Act for some industrial users. These are Kruger, Albright and Wilson, and Abitibi-Price, Grand Falls. The total for these three, which are contractually continuing for a few years yet, is $1,673,000 this year. That is our estimate of it. The final figure will not be known until the end of the year when all costs get audited.

Another little bit of information on Hydro: For 1992 Hydro is forecasting electricity sales of approximately $300 million. Hydro will receive, we expect, in 1992, about $16.4 million from CF(L)Co, which is a return on equity plus royalties and it will have a total net income of about $32 million. The money from CF(L)Co is used by Hydro to pay the long-term debt associated with CF(L)Co and the takeover in the mid-1970s. By the end of this year, 1992, this debt will have been reduced to $47 million, so basically all of the money from CF(L)Co goes towards paying down that debt. There aren't many more years to go before it is paid out completely.

A point on rates: in 1992, the industrial rates have not changed. They have been confirmed by the Hydro Board. On retail sales, as we are all well aware from the news of the last week, there was an application by Hydro to the PUB with recommendations that were ruled on last week by Cabinet.

One other point of interest relative to Hydro is on capital expenditures. This year we estimate $34.7 million, mostly for a multitude of small projects scattered throughout the Province, with no big single project under way. This is about one-third of what the capital would have been about three, four years ago, when there were some big projects under way.

Mr. Chairman, that is all I want to say in my statement. I will turn it back to you for any follow-up and any questions. I say, in concluding also, that budget for my department, program estimates, totals $16,461,100.

MR. CHAIRMAN: Thank you, Mr. Minister, for a very thorough and comprehensive report. It certainly covers thoroughly all aspects of the department. We would like to thank you for presenting us with that full report on the estimates for your department. I am sure there are going to be questions and comments on what you presented, but again, thank you for delivering that to us.

At this time, I ask the Vice-Chair, Mr. Woodford, if he would begin the discussion.

MR. WOODFORD: Thank you, Mr. Chairman. I just want to make a few comments, at first, on the actual Estimates. The minister has a copy of the Estimates. I refer firstly to 3.1.01.05, Professional Services, under Mineral Resource Management. Why would there be such a large figure here?

DR. GIBBONS: That's related to projects under the Mineral Development agreement. Paul, you can probably speak to the specifics of that. It's your section.

MR. PAUL DEAN: Paul Dean. There is an increase in Professional Services just because of increased activity under the Mineral Development agreement this year. That includes such things as contracts. For instance, we are doing some drilling at Baie Verte to better define the remaining ore body. That is part of that estimate. There are some contracts related to Professional Services with respect to the iron ore industry. There are a number of feasibility studies included in there.

MR. WOODFORD: Are those all tendered projects?

MR. DEAN: Generally, yes, they are tendered projects.

MR. WOODFORD: Let's move on to 3.1.02, Engineering Analysis. Same thing - Purchased Services, $166,000.

DR. GIBBONS: (Inaudible).

MR. DEAN: That increase relates to the maintenance of the fluorspar mine at St. Lawrence. During the past year, the government made a commitment to cost-share the mothballing and maintenance of the facility for a two-year period. Of that $166,000, $150,000 relates to the maintenance of the St. Lawrence fluorspar mine.

DR. GIBBONS: We signed a two-year agreement with the receiver - it is effective January 1 for two years - to keep that facility mothballed in anticipation that within two years maybe the economy will recover and maybe there will be an interest in someone else taking over that operation.

MR. WOODFORD: Mineral Economics Analysis, 3.1.03. That one was down. How would that tie in with the rest being up?

MR. DEAN: I think it is down under Professional Services. There are a number of professional services not there this year that were there last year.

DR. GIBBONS: But not significantly though, from $41,000 to (Inaudible).

MR. WOODFORD: No, it is not a big lot. But with the other activity and that one down -

Moving on to another one - the same thing, under Petroleum and Energy Resources, 4.1.02.05, Professional Services.

DR. GIBBONS: Yes, we have an increase there of about $54,000. Gordon, do you want to speak to that one?

MR. GOSSE: This is for a number of studies, some related to the Terra Nova field, and more, I think, related to Hibernia and other oil-related studies that we will have to do this year.

AN HON. MEMBER: (Inaudible).

MR. GOSSE: Some of them will be consultants, you know, really, specialists in some areas that we do not have the expertise in-house to handle.

DR. GIBBONS: Basically, it is all outside (inaudible).

MR. GOSSE: Oh yes, outside.

MR. WOODFORD: Let's get off the Estimates there, the actual Estimates, for a few minutes. Mini-hydro sites - that one is a little bit dear to my heart because of the fact there is some activity in my particular area.

A question I would like to ask the minister - I guess Mr. Mercer or someone else may answer it if the minister is not sure of the answer. Why would they call for proposals and wait until 1996 before they accept any power?

DR. GIBBONS: Well, right now, when we look at the available supply that we have plus the projected load growth that we are anticipating for the next few years, these two lines intersect in 1996. So there is no need for any extra capacity until 1996. In the meantime, there is a lead time required for any company that is going to construct, propose and take it through the environment and then construct a site that, for the most part, could well take until 1996 before any significant site would be available. There may be some small ones that could be done faster than that.

The call was put out by Newfoundland and Labrador Hydro on the Wednesday before last for 50 megawatts with a closing in August. So companies have four months to study their possibilities and bid, and I think there was a maximum price included in that call for proposals or Hydro would be taking the best 50. (Inaudible) I guess, the best 50 out of whatever is bid.

Now, you may want to follow on with your question and I may want to refer to the others later.

MR. WOODFORD: Yes, because you were saying that some of the companies - now, I know it depends on the project. If it is a larger project, naturally, they would need more time to do some preliminary work on it before you get into what you call the project selection phase alone.

DR. GIBBONS: Yes.

MR. WOODFORD: But that, in this case, is nineteen months, and I would think that a lot of those projects aren't going to be much over 4, 6, 10 megawatts. To add up that, I would say 4 to 6 or something like that. A lot of those would be small projects.

DR. GIBBONS: Well, that is what we anticipate. I think they would be in that range. There may be one or two that are over 10, but they are going to be in that range of 4 to 10 and a number of projects. We will see what comes in from the call, but up to now there seems to be a lot of interest in it. I just noticed that today in the news release I received from the Minister of Environment, the Great Cat Arm River has been registered as one possibility.

MR. WOODFORD: Yes, that is Paris Associates.

DR. GIBBONS: Paris Associates just registered a 4.2 megawatt project. And just being registered now, and depending on how much it has to do under the Environmental Assessment Act to see when it will be available - I don't know, Mr. Mercer or Mr. Collett might want to speak to that.

MR. MERCER: I will just make one observation. I think we are trying very hard to give as accurate a signal as we can to the private developers. I will ask Dave Collett, who I believe has the proposal call and the schedule with him, just to reference the critical time for each phase. But we are trying to provide basic information up front as to the amount we can pay, then we are giving an opportunity for preliminary proposals to come in before firms spend a lot of money on engineering. At that stage, we will be able to tell them what it is going to cost to interconnect to our system because, in some cases, the individual contractor will have very good information on the site on which he has received a waiver from us, but he may not have good information on the distance from that site to the best point to interconnect to our grid and the transformers that will be needed to put the power in. We can provide him with information that we would generate internally once we see his scheme as to what the costs of that will be for him to factor back in his economics and see if he wants to keep going forward. He may, at that stage, say, 'This doesn't look like it is financially feasible, profitable enough for me to carry on.' We want to give the private sector the chance to do that evaluation before they spend hundreds of thousands of dollars on either engineering or environmental work. So it is a phased interactive process, as we see it. Dave Collett, could you just comment on the timing for each of these phases?

MR. COLLETT: Yes. As Mr. Mercer had indicated, the proposal call is a two-stepped approach. This is really so that we can provide as much guidance as possible to the various proponents. They do not spend a lot of money on projects that probably are not viable or feasible. That is why we have indicated, certainly, to repeat what the minister said, in the RFP, an indication - or not an indication, the actual price that Hydro is willing to pay for delivery of power in 1996-1997.

Specifically, with respect to the timing for the acceptance of proposals, the first step which we call a preliminary submission, is due in August of this year. We gave them four months. At that particular point the proponent does not have to spend a lot of money in getting data or getting information to complete the proposal. He basically has to indicate the site, the location, approximate distance from the grid, and the general nature of the project he is talking about. Then we do an evaluation to give him an indication of the interconnection costs that he will be subjected to to tie that particular project into the existing island grid.

With that information he can then go and complete the full and final proposal. To do that he will have to spend a considerable amount of money, depending on the size of the project. But for an eight to ten megawatt project you could be talking $100,000 to $200,000 of engineering work to complete the proposal. That is due in July of 1993. That is not an unreasonable amount of time that an engineering firm will require to do the study so they can complete the proposal in the proper form.

Then selection is done, in November of 1993, and then the awards are made at the end of 1993. They have 1994, 1995 and 1996, three years to build the project.

MR. WOODFORD: Based on information that I have from at least five different companies those rights were waived some time ago - at least their rights were waived. They went on and did the work on many hydro sites in the Province. In fact we have cases where the environmental assessment was waived on certain projects. I know of one that is ready to go tomorrow morning.

MR. COLLETT: With respect to the waiver of rights, all Hydro did when people came to Hydro looking for Hydro to waive their right, that's all we did, we just literally waived the rights and signed an agreement with them to that effect. It was not an agreement to purchase power. That could not happen until - in response to this document, and that information or that fact was made clear - we took particular caution to make that very clear, that this was not an agreement to purchase, It was Hydro waiving its first right to develop this site. Nothing more than that.

MR. WOODFORD: So why then, if there is a company ready to go, with everything ready to go, with its homework done, environmental assessment waived, willing to spend $12 million to $14 million of their own money, not one penny of government money, why then would they have to go through such a process? They are not the only one. I know of three or four others that are ready. Now, based on this information and based on the proposal call, it is quite possible that those people won't even be considered - they'll be considered, but it is not necessarily saying that they are going to be accepted.

DR. GIBBONS: They're not necessarily going to win the proposal.

MR. WOODFORD: No, that's right.

DR. GIBBONS: Hydro is looking for least cost.

MR. WOODFORD: That's right. You are basing your thing on avoided cost. One of the -

DR. GIBBONS: Avoided cost in 1996 when they anticipate having to have a new generation available.

MR. WOODFORD: Yes.

DR. GIBBONS: Between now and 1996 their avoided cost is the cost of a barrel of Bunker C at Holyrood, which is much cheaper than the price that is in that proposal.

MR. WOODFORD: That's right. But after nineteen months, after the projection selection phase, then you would agree on a price. That's when the price will be agreed on. That's approximately nineteen months from now. When that is done, and like I say, with companies with everything in place now, I just can't see it. Because from inception to commissioning on some of those many Hydro sites, those people can do it in probably eighteen months. They can be ready to go in eighteen months.

MR. COLLETT: But I guess you have to appreciate from Hydro's point of view, it can only buy the power and energy when it needs it. Our best indication at the time of release of this document is no earlier than the fall of 1996. We have indicated in the document the maximum price that we can pay as correctly as you say, based on our avoided cost that we project to be at that time.

MR. WOODFORD: In your proposal call under the pricing structure and power contract, and given the explanation for your avoided cost, I suppose the question would have to be asked: what is the cost to generate power in Holyrood? Would it not be cheaper, for instance, to come off a mini-hydro site than it would from Holyrood?

MR. COLLETT: No. You see the price we have quoted in this document, in the request for the proposal you are referring to, is based on hydro having to install additional new capacity and energy. Prior to 1996 we did not have to add additional capacity to generate a kilowatt hour. For example, today from Holyrood $12.00 a barrel oil is about sixteen mils. We are quoting (inaudible) price here in the sixty-five to seventy mil range which is new capacity. If we were to buy energy from a small hydro producer prior to 1996 we would just be able to buy it to displace Holyrood and it would have to beat the price of energy from Holyrood which today is a fairly low cost.

MR. WOODFORD: You are talking about your mil rate. How would that relate with regards to kilowatt hours regarding your 3.5 cents per kilowatt hour or something like that?

MR. COLLETT: The rate shown in there, the total rate, is about seven cents, 6.8 cents or something like that.

MR. WOODFORD: Plus your demand component and all that.

MR. COLLETT: Well, that is the total. The demand component and the energy component together equate to about seven cents per kilowatt hour or seventy mills and that is referring to Holyrood. The energy from Holyrood today at our current fuel costs, just the energy component alone, is about 1.5 or l.6 cents.

MR. WOODFORD: You are saying you do not need any power but if you do need any power before any of these particular projects are accepted would you consider putting in another generator in Holyrood before that, or what? What you are saying is it is cheaper but at the same time would you consider that before you would accept any proposals for mini-hydro sites?

DR. GIBBONS: What we are saying, Mr. Vice-Chairman, is that using the present three generators at Holyrood without new capital investment in number four your cost at Holyrood is 1.5 cents per kilowatt hour because you are only talking about the cost of the fuel, the $12.00 cost per barrel for the Bunker C. That is today's price and that is going to fluctuate somewhat probably but when the new generation capacity is required that is when you have these new sites coming on in 1996. That is when you can pay the higher cost of seven cents approximately per kilowatt hour because you are paying therefore the new generation, the new capital in addition to the cost of the fuel. That is when your small hydro sites are competitive, when you compare the small hydro site then to a unit number four at Holyrood. For example last year when the National Energy Board assessed the cost of Holyrood they estimated Holyrood at 12.8 cents per kilowatt hour. That is unit number four, because of the cost of the capital. Now, I do not know what Hydro is presently assessing it to be because it is going to vary a little bit but if you look at future sources including new generation, new capital, that is when the small hydro sites can become competitive.

MR. COLLETT: (Inaudible) new additional capital and additional energy.

MR. WOODFORD: There is some suggestion from companies I have been talking to these last few days that if you would only move up the selection process to the end of the year there could be substantial dollars spent. As you know I think it works out to $3000 or $4000 per kilowatt and $3 million per megawatt, or something like that, in expenditure on those sites so it was suggested to me if they meet and moved up the selection process until the end of this year they would be able to do survey work and engineering work for road construction and get that started right away, say by next Spring. I do not know if you have it or not, but I am getting it from other companies, the nineteenth month selection process seems to be a real stumbling block. They are ready to go, they have money ready to go provided they are selected.

MR. COLLETT: We have had communication with most of the people that we have waived rights to and have picked up the document. As a matter of fact they have been into our office quite frequently in the last ten days and I'm not aware that that has been of paramount concern to them, with the schedule. I believe there was one developer who had expressed an interest in accelerating the schedule, but that schedule is very much tied to the whole evaluation process and the time that we require to evaluate these proposals and get the information back to the proponents.

DR. GIBBONS: Nobody has brought any concerns to my office either. Nobody.

MR. WOODFORD: None of the companies.

DR. GIBBONS: No, not one company has come to my office with a concern about that, not at all, since that announcement was put up.

MR. WOODFORD: So are you aware of any companies that are ready to go?

MR. COLLETT: No, not personally, as I say. I believe I am aware of one company that had expressed an interest in accelerating the schedule, but it was not a big issue. It was brought to my attention anyway.

MR. WOODFORD: Okay.

MR. CHAIRMAN: Thank you, Mr. Woodford. Mr. Murphy.

MR. MURPHY: Yes, thank you, Mr. Chairman. (Inaudible) to the minister and/or through the minister to his -

MR. CHAIRMAN: Please state your name.

MR. MURPHY: Yes, excuse me. Tom Murphy, St. John's South. If and when these private companies were able to generate electricity, how does the public utilities - how do they fit into the scheme, or how would they fit into the scheme of obviously recovering their capital investment? Would Hydro go into a fixed contract, a rate contract, with these people over a period of time? Would you pay them PUB rate, or how does that come together?

DR. GIBBONS: We made an exemption in the legislation recently to allow fifteen megawatt and lower not to have to go to the Public Utilities Board. So it basically would be a contract with Hydro, and either Mr. Mercer or Mr. Collett could speak of the details -

MR. MURPHY: So they'd get a hard dollar price is what you're saying, Mr. Minister.

DR. GIBBONS: Yes.

MR. MURPHY: Yes.

MR. MERCER: We think that they need a long-term purchase agreement with us to help them finance and not have the expense of the formality of justifying their project to the Public Utility Board and the return on their investment. So we think the government action in exempting them will be helpful to them.

MR. MURPHY: Yes. The reason that I raise that question is because I spent a little time in the construction of Churchill Falls and I remember two dollars a barrel, which is no longer reality. Looking over your shoulder, hindsight of course is twenty-twenty vision. We seem to forget that today, especially if we are sitting on - depending on what side of the table we sit on off course. It is obviously 1992. In 1996 you'll see these folks coming on. I pick up on what you said about the cost of generation at Holyrood now, and we are looking at approximately, what is it? Twelve, thirteen dollars, US crude? Somewhere in that vicinity right now. Conceivably in 1996, who knows? It could be twice that amount for crude which would make the small generation, the small rivers and what have you, that are existing on the island now, certainly a lot more attractive.

Because when you look at anywhere from four to ten megawatts, there's really not a great sense of viability. If you live on the southern shore and you listen to Newfoundland Light and Power jargon like I did for fifty years, when the power that was generated up the southern shore was totally able to handle St. John's, and now I don't know if it could handle the Avalon Mall. Times have changed.

Again, we're into hypothetical things, I think. But just to get a feel for it I think that anybody who - and I go along with the Vice-Chair. That it would be nice to get these things moving. If there was ever a time we needed folks building roads and doing survey road work and what have you, it's right now. But of course, I suppose, there is an element of caution.

How would these private companies fit into the grid? Would they be responsible to bring it to their own transformers and tie in with us? Is that something that has been looked at?

DR. GIBBONS: Mr. Mercer (Inaudible).

MR. MERCER: They are responsible for all of the costs of getting it intertied to our grid. We can provide them with certain information on that cost, particularly as it relates to the standards that have to be there for safety and reliability. We have to be sure that the transmission line that they are going to build is of an appropriate standard and that they can provide the reliable service. If they put up something that is too shaky and too insecure there is going to be a lot of cost in maintaining it. It would be their responsibility to do that maintenance, unless they ask us to do it on their behalf.

MR. MURPHY: I think after the past few months, Mr. Mercer, we'll wait and (Inaudible) question our own shakability (Inaudible). No, I just wondered how that was going to come together. Of course, anything that they had the capability to generate you would obviously take. It would not be feasible for them to be on for a week and off for a week. So once they come into the system, they would be there and you would take everything they would generate.

AN HON. MEMBER: (Inaudible).

MR. MURPHY: Yes, okay, thank you. Thank you, Mr. Chairman.

MR. WOODFORD: (Inaudible) on the subject for the Member for St. John's South. I think the non-utility generator is hooked into Newfoundland Light and Power rather than Hydro or -

MR. MERCER: It would depend on where they are, you know. They could hook into Light and Power's grid or Hydro's grid, but you must remember that Light and Power buys from Hydro at the average system cost which is going to be a lot less than seventy cents, so theoretically, in our discussions with Light and Power, what we have agreed is that, if there is anybody out there who should interconnect to the Light and Power system, we will have a back to back agreement where, we will buy it at seventy mils and we will sell it back at exactly the same spot to Light and Power at the blended rate, which might only be forty-five or fifty mils. Do you understand me?

DR. GIBBONS: (Inaudible) today at 45.31.

MR. MERCER: Yes. We want to make sure they tie into the most economical place.

MR. WOODFORD: In his first question pertaining to the contract itself, he says in the proposal that the contract would be signed by month twenty-two and it would be a twenty to thirty year duration.

MR. MERCER: Yes, we have been (inaudible) Newfoundland and Labrador Hydro, even though they may be delivering to the Light and Power grid.

MR. CHAIRMAN: Okay, Mr. Snow or Mr. Hewlett probably.

MR. DUMARESQUE: I had a question in the same area -

MR. CHAIRMAN: Okay.

MR. DUMARESQUE: I just wanted to get an update I suppose, if you have it, on the Robertson Lake on the Quebec North Shore, any idea where that is?

MR. COLLETT: I guess a fair answer is to say I am not really sure where we are on this thing, but this is a project in North-eastern Quebec I think is what you are talking about; it is about twenty-five megawatts total capacity, Hydro-Quebec had planned to develop that and supply hydro power to Blanc Sablon and probably into St. Augustine as well. I believe more recently they have indicated that they are going to waive the rights on those rivers, Lake Robertson and turn it over to a private developer in the area of Blanc Sablon, and that has been seesawing back and forth between Hydro-Quebec and that private developer for about the last couple of years and I do not have anything more recent on this; Mr. Mercer, do you have anything more recent on that, it is about two years ago?

MR. MERCER: I have spoken to Hydro-Quebec about it within the last three months and again, there seems to be uncertainty. The private developer has called us on occasion, speaking as if he had the authority and had the waiver and was going to do it; at the same time, Hydro-Quebec had not been able to confirm that, that is the case and quite frankly I am not sure what is happening there between the private individual and Hydro-Quebec.

DR. GIBBONS: We will certainly hope, up to two years ago, we approved Hydro negotiating with them to give them an agreement to supply Coastal Labrador and that area, we will certainly hope that one would move forward but not much has happened in the last two years.

MR. DUMARESQUE: I have been getting a lot of the same signals I guess but was hoping that something would have been nailed down. I wish they would have had diesel generator stations, it would be a lot better for us if we could tie in.

DR. GIBBONS: It certainly would give you probably a lower rate and more stable power in all of that area.

MR. DUMARESQUE: Okay, thank you.

MR. CHAIRMAN: Mr. Hewlett.

MR. HEWLETT: (Inaudible) 1.01.06, Purchase Services, which the minister's office's euphemism usually for the entertainment account -

DR. GIBBONS: That is maybe why it has been reduced from $5,000 last year to (inaudible). I have not been doing much entertaining.

MR. HEWLETT: No. I was just wondering, the revised figure for last year was five grand and I know the Premier himself closed the private dining room when Premier Peckford retired and the chef retired and so on and so forth, he took an entertainment allowance for his own home, which in his estimates last year, we found out had to do with more of the upkeep of his lawns than entertaining, so my question to you is, did the Premier stick you with the bill, because I gathered everything is being farmed out to various departments; some major entertainment function or delegation from somewhere far away in the energy related field and the word on the hill is that, if such were to occur it would not be done at the Premier's home but would be done at a hotel, and the minister concerned would be stuck with the bill.

DR. GIBBONS: I was never paid for a bill like that in the three years I have been minister.

MR. HEWLETT: Thank you.

DR. GIBBONS: - A very minimal amount, and I am not sure what my purchase services got used for last year in terms of the detail, but I think I had people out to about five lunches - no more than a couple of people each time, and no more than seventy-five dollars each time - so very little entertaining in my vote.

MR. HEWLETT: When we talk about bringing in these mini hydro sites in ninety-six, what size of a unit are you talking about bringing on vis-à-vis Holyrood, if you have to add more capacity there? You are talking about you put out a proposal for fifty megawatts total out of the various sites.

DR. GIBBONS: Holyrood numbers one, two, and three are averaging 150/175 megawatts now, so Holyrood number four would be in the same order of magnitude.

MR. HEWLETT: And these new minisites then would bring requirements on stream in the 200 range, you are saying, come ninety-six?

DR. GIBBONS: No, we are looking for fifty megawatts from the (inaudible) sites.

MR. HEWLETT: No, but both combined?

DR. GIBBONS: Well right now we do not know. Depending on what happens with the Lower Churchill and other options we do not know whether or not we will be doing number four for sure. The decision on that issue was deferred last Fall by Hydro. We are going to see what the response is to the small hydro proposals and have them address that decision this coming Fall.

MR. HEWLETT: So this Fall you will - because sooner or later, given lead time on these construction projects and what not, you are going to have to make some decision as to whether you go local or you have a potential deal with Quebec. You are saying this Fall is the decision point?

DR. GIBBONS: Yes, every Fall basically is a decision point to look at the next source that you are going to need, say four years down the road, and right now we are saying fifty megawatts. If we can get fifty from the small hydro sites this Fall, maybe we can defer that decision by another year.

MR. HEWLETT: Okay.

With regard to the negotiations with Quebec, being formerly a political employee of the Crown I was witness to fifteen years of productive discussions with the government and Hydro Corporation of Quebec. Could you give us an update on the - I guess it is now eighteen years of productive discussions with Quebec.

DR. GIBBONS: That is probably a good way of putting it. In the last three years, though, we have had thirty meetings. The most recent one was March 3, so there has been a lot of attention paid to it by both sides and a lot of progress has been made.

Right now the ball is in their court. They have our counterproposal to the latest proposal they left with the Newfoundland and Labrador Hydro negotiating team on November 21. The counterproposal was tabled on March 3, so that is two months. We are anticipating, some time in the not too distant future, that we may get a call saying: Let's have another meeting to review what you left with us to talk about.

MR. HEWLETT: So you have not established a firm or even loose date yet for a follow-up meeting?

DR. GIBBONS: For the next meeting, no.

Well it took us from November until March to do our assessment and get back to them, and it is now two months; but it is at that stage, I think, where you have documents that thick, where you have made a lot of progress on the details. It takes a little more time to turn it around.

MR. HEWLETT: One thing I found, from watching the process over the years from within government, to make progress on the technical details, etc., financial, construction, engineering and all the rest of it, it is another to make progress at the political level. Sooner or later Hydro Quebec, being a creature of the Province of Quebec, would need the go-ahead, the nod, from the Government of Quebec.

What signals are you getting from the Government of Quebec with regard to their willingness to take the technical discussions onwards? You have stated it is commercial dealings between two hydro corporations. Surely you must admit that sooner or later any Government of Quebec would have to weigh the political fallout of a deal with this administration from their own political perspective. What readings are you getting at that level?

DR. GIBBONS: Well we are not getting anything negative. The discussions that we had at the political level were some time ago. We have not had any recent political discussions on the issue.

MR. HEWLETT: You have not gotten anything super-positive at the political level either, have you?

DR. GIBBONS: Well we have not had any recent discussions. The political meetings were at the early stage of our discussions two years ago. At that time everything was said to be full speed ahead: Let's go, let's get our negotiating teams active and working on it. Since that time that is what has been happening. We have had no need to have discussions at the political level. At some time, as you are saying yourself, it has to reach the political level in both governments. At the appropriate time.

MR. HEWLETT: Quebecers are great talkers. I've watched them talk for eighteen years now. But there have been political developments in this nation that have the capacity I suppose to sour the political will or, put it this way, it might be politically suicidal for a government in Quebec to sign any kind of a hydro deal with the current administration in this Province. I am surprised that you discount somewhat the political angle on this at this stage of the game.

Why are we in our eighteenth year of technical negotiations when any premier of Quebec would be taken out back and shot if he was caught doing a deal with the Government of Newfoundland under the current administration? Or is that an opinion on my part?

DR. GIBBONS: That's an opinion.

MR. MURPHY: I thought we were here, Mr. Chairman, to deal with the estimates (Inaudible) I think we're starting to get into political rhetoric.

MR. HEWLETT: What we've generally done, I've found in these committees, is that we've discussed things, sometimes in detail, sometimes political principles and philosophical points of view. At the end of the evening the usual practise in the Resource Estimates has been to pass all headings from one to whatever in one lump.

MR. MURPHY: (Inaudible) leniency of the Member for Green Bay -

MR. HEWLETT: By all means.

MR. MURPHY: - ask the minister and/or his staff what impact would the Great Whale project and the fact that New York has said to Quebec Hydro: look, we're not interested in buying your power now, what impact would that have on Lower Churchill? There would be a much more economic question for my thoughts rather than trying to bring Meech into it.

MR. HEWLETT: Well, no. I don't disagree that that is an impact. But as well, surely the minister would have to agree, that a member of the Innu nation lying down in front of a bulldozer would also have repercussions vis-à-vis the development of Lower Churchill. So there are technical discussions here that can go on till the cows come home for the next fifty years. But if there is no political will, my point being simply that technical discussions keep certain officials busy and serve a public relations function. To what extent they would generate electricity is another matter altogether. Obviously the minister does not share my particular view on that matter.

DR. GIBBONS: (Inaudible) I referred earlier to a report by the National Energy Board. It's dated January 1991. It looked at all the major energy projects in North America. I think it was a total of forty-five or so projects. Gull Island was rated as number one. The Gull Island project. Muskrat Falls rated two levels down. Great Whale was about two levels below Muskrat. So economically, Gull - I can't remember what was in between Gull and Muskrat - and then a couple of points farther down, Great Whale. Economically, both these frankly have to be developed I believe for Canada and for eastern North America. If they do not go soon they will go eventually. Because economics will dictate that they go.

Environmentally - when you look at the environmental, apart from the economics - also they are benign compared to most of the others. Really benign.

MR. HEWLETT: It's a run of the river project (Inaudible), I understand that.

DR. GIBBONS: Run of the river, total flooding, about 100 square kilometres. Great Whale alone is about 4,000 square kilometres, displacing all sorts of people, animals and so on.

MR. HEWLETT: But the other political factor, if I might, Minister, involved is the whole issue of native land claims and so on and so forth. The thing that has basically put Great Whale on hold. Are there any discussions ongoing with the Innu nation vis-à-vis Lower Churchill? Because I can see even if the political will, and the premier of Quebec was willing to commit suicide and cut a deal with you people, one person lying down in front of a bulldozer would make New York again very nervous. Because you have to realise you are dealing with urbanites here who think that steak doesn't come from cows, it comes from supermarkets. So -

MR. SMALL: Mr. Chairman, I think we're a bit off the track now. There is no more questions (Inaudible) the estimates. I do not see why we're conducting the House of Assembly here.

MR. CHAIRMAN: I advise the Member for Green Bay he has another 30 seconds before the ten minutes are up.

MR. HEWLETT: I will throw that over to the minister. I will leave it for now, and let other members of the Committee get into the gory details of the numbers if they wish.

MR. MURPHY: Mr. Chairman, I really find it difficult to sit here and be classified as an urbanite and to listen to the Member for Green Bay who thinks the people who live in urban Newfoundland think that -

MR. HEWLETT: I didn't say urban Newfoundland. I said New York.

MR. MURPHY: It doesn't really matter, you know, it is the psychology of all this. I just want to say to the hon. member - again I pick up on the Member for Baie Verte - White Bay (Mr. Small) - we are here, basically, to discuss the Estimates. And I don't mind the hon. member having dialogue about the politics associated with Muskrat Falls and any other Hydro project, but -

MR. HEWLETT: Yes, because Hydro is not here in detail before us, therefore, in terms of Newfoundland and Labrador Hydro and its reporting relationship to the minister, I mean, I don't have any detailed numbers. I asked about one particular detailed number if the Premier had stuck the hon. minister with an entertainment bill on energy matters, as the word on the hill has it he does with various departments so that he can keep his $20,000 for other reasons. Therefore, with regard to Hydro, I must probe in a most general manner because I have no numbers.

MR. MURPHY: I say to the hon. member, he hasn't probed, he has made a lot of personal observations. If you were probing the minister and probing the staff, then I would understand it, but you have made a lot of personal observations about Hydro Quebec, about the Inuit lying down in front of bulldozers. I mean, I worked in Come by Chance when I saw fifteen people lying down in the middle of the road. You know, the hon. member must realize that no industry in Newfoundland progressed without some problems. He needs to know that, then maybe he can shorten his rhetoric.

MR. HEWLETT: Well, I will stop for now, Mr. Chairman. I believe the minister is quite capable of defending himself - we have locked horns before - but if the Member for St. John's South wishes to come to his rescue that is quite all right with me.

MR. MURPHY: I am not coming to anybody's rescue, I am just making the same comments that the hon. member is.

MR. CHAIRMAN: Mr. Dumaresque.

MR. DUMARESQUE: (Inaudible).

MR. CHAIRMAN: Mr. Small.

MR. SMALL: I'm a great listener.

MR. CHAIRMAN: Mr. Snow.

MR. A. SNOW: Just a few short questions. With regard to the geological surveys you mentioned about - How will I approach this, about two or three - Alec Snow, Menihek. Will I just give one question? We can go that way rather than -

MR. CHAIRMAN: Whatever you like.

MR. A. SNOW: I probably won't remember all the questions so then you will confuse me with the answers.

In your opening statement you talked about the geological survey encompassing about half the Province.

DR. GIBBONS: (Inaudible) geological mapping at about the same stage as some of the other programs like geochemistry and geophysics.

MR. A. SNOW: How does that rate? Does that include offshore?

DR. GIBBONS: No.

MR. A. SNOW: Just the land mass.

DR. GIBBONS: The land mass, that's all.

MR. A. SNOW: How does it split between islands and Labrador?

DR. GIBBONS: I don't have that figure with me, but there is certainly a large part of Labrador that has not been mapped at the same detail as a large part of the Island, and most of the mapping in Labrador has been on a slightly different scale because of the geography, in order to try to get it done for one cut.

MR. A. SNOW: Wouldn't it be logical then, if we are not exploring more, that we have some special program to do a geological survey in Labrador.

DR. GIBBONS: We have done 100 per cent of Labrador with geochemical surveys, and we have done part of Labrador, besides the lake sediment, some water surveys of parts of Labrador. So we have been paying a fair bit of attention to Labrador and we are going to continue to do that, but there is no question that there is more of Labrador that has not been done to the same scale as the Island part of the Province.

MR. A. SNOW: You mean percentage-wise?

DR. GIBBONS: Percentage-wise, yes. We are doing it at a slightly different scale. A lot of the mapping there because of the large scale is a somewhat different map scale because we want to complete it once. We want to get a first run on it. I think we are getting fairly close now to having an updated geological map. We published a general geological map back in 1973, and we have been trying to do some more detailed mapping. We are making a lot of good progress on it. I don't remember the details, but Paul Dean might be able to speak to exactly where we sit now in terms of the geological map coverage of Labrador. We are, I think, getting close to having another new map ready to publish, say, twenty years after the one of 1973. Do you want to speak to that, Paul?

MR. DEAN: Yes. I think we are about 60 per cent in Labrador at the 1 - 100,000 scale, which is what the minister refers to. I would just like to comment that in terms of the expenditures of the geological survey, the majority of the expenditures, the dollars, if you like, are spent in Labrador on an annual basis. Because they are expensive programs to run. They are helicopter-supported programs and so on.

MR. A. SNOW: Because of geography.

MR. DEAN: Because of the geography, and because of the cost of running mapping programs in Labrador.

DR. GIBBONS: I mentioned two of our projects. One is in Nain this year and the other is in the Saglek area. You can imagine that they are very expensive, always with both plane and helicopter support.

MR. A. SNOW: One of the other things - with regard to mining, you didn't touch very largely on the operation of, I guess, two of the larger mines anyway, we'll call them.

DR. GIBBONS: I didn't go into the detail on the operation of any mine other than to say that we monitor all of them.

MR. A. SNOW: If you'd just let me finish, and I'll get to my question.

DR. GIBBONS: Yes.

MR. A. SNOW: I wonder if you could give us a little rundown on what is the prospectus, if you will, of the two operating mines in Western Labrador, what that is for this coming year, as you know them today. Also, if you could give us a little rundown on the labradorite operation that is presently being - my understanding is that there is some stone, the dimension stone?

DR. GIBBONS: Yes.

MR. A. SNOW: It is going to be exported this year. If you could give us just a few minutes with a little précis of what that operation is going to encompass this year.

DR. GIBBONS: Last year, with regard to the dimension stone first, at Nain, a number of blocks of rock got cut out of the face. A quarry face did get started. I think it is about 150 feet long right now. I haven't seen these blocks myself, but generally they try to get blocks that are eight by eight by eight, about an eight foot cube. They weigh about twenty to twenty-five tons. The shipping season closed up last year before they could start getting them out. They are hoping to get a lot of blocks out this year. Paul, you can speak to the details of that.

MR. DEAN: The project in Nain is a joint venture between the Labrador Inuit Development Corporation, the native development corporation, and an Italian company, whereby the LIDC, the native development corporation, is operating the quarry, will operate the quarry. Then they will jointly market the stone with this Italian company. The joint venture is currently being finalized and we hope to see the first stone shipped out of Nain this year. It is a very unique stone. It is being well accepted in trial marketing and we believe it will be the first modern dimension stone project in the Province.

DR. GIBBONS: We, ourselves shipped two big blocks, two years ago, to Italy so they could cut them and have samples to use. These are the samples that Mr. Dean referred to as having been widely accepted in the international dimension stone market. So the company that did that sample cutting now is saying, 'Hey, come on, we want to get on with this.' It is a very popular stone.

MR. A. SNOW: What would be the mineral value of that?

DR. GIBBONS: What is the price on a block of that?

MR. DEAN: The price varies, because the uniqueness of the stone can command a unique price in the marketplace. We estimate that the stone is worth at least $1,000 per cubic metre, at the quarry in Nain.

MR. A. SNOW: Can you tell me what the value-added value would be?

MR. DEAN: Again, this will depend on the market. Of course, the value-added involves cutting, polishing and processing, and depending on the product, whether you're buying a bathroom sink of this material or a square foot of tile, is considerably variable. This is the sort of product that could sell for $15 - $20 per square foot in the tile.

MR. A. SNOW: Of course, this value-added is done somewhere down south of Labrador, I guess, is it?

MR. DEAN: It can be done anywhere in the world.

MR. A. SNOW: Where is it being done now?

MR. DEAN: No stone is being shipped, so there is no processing being done.

MR. A. SNOW: Where is it proposed to be done?

MR. DEAN: It could be sold to any processing plant anywhere in the world.

DR. GIBBONS: Right now it will come out as raw blocks and be available to any processor who would want to take them, whether that is in the United States, Italy, or wherever. Right now, there is no processing plant in Newfoundland. We are hoping there will be a plant set up sometime in Newfoundland and Labrador.

MR. A. SNOW: But it isn't being done now.

DR. GIBBONS: At this time there is no plant. There is no company that has a plant. That type of plant would require an investment of many millions, maybe $100 million plus. It is a big industry. If you want to switch back to the iron ore -

MR. A. SNOW: Well, if it is a really big industry it probably is a big employer.

DR. GIBBONS: Yes. Do you want to switch to iron ore now?

MR. A. SNOW: Surely, go ahead.

DR. GIBBONS: The two mines, as you referred to them, the two biggest mines in the Province, presently producing about 60 per cent of Canada's iron ore, went through a very tough time last year with a lot of layoffs. We are anticipating, of course, the summer shutdown for Iron Ore Company of Canada this summer. Wabush Mines is not anticipating a summer shutdown but is running at reduced staff. I think there will be about - is it about a million tons less, Paul, in the total production this year from last year?

MR. DEAN: Yes, it would probably be greater than a million in total production.

DR. GIBBONS: A decrease from last year.

MR. DEAN: A decrease.

DR. GIBBONS: So the total now would be about fifteen million tons?

MR. DEAN: More like nineteen.

DR. GIBBONS: The total production would be nineteen million, a combination of concentrated and pellets. This is reflecting what is happening in the international steel markets and moreso locally in what is happening in the Canadian and United States steel markets where there has been a real softening in the demand. We are hoping that things will improve in Labrador West. We believe that the new partner, Mitsubishi, brings a new view to that and a window on the Asian market. In the longer term, we have to hope for an improved market for steel.

MR. A. SNOW: You mentioned, Mr. Dean, that Wabush mines are going to be down but I didn't quite catch the figure. The minister said a million. Is it a million?

DR. GIBBONS: IOC is what is down. Wabush is going to produce about the same this year as last year but they are doing it with a reduced staff operating full year. The Iron Ore Company is down about a million or a little better.

MR. A. SNOW: In a five-week shutdown?

DR. GIBBONS: Yes.

MR. A. SNOW: And that is the only anticipated shutdown?

DR. GIBBONS: That is all.

MR. A. SNOW: Will they continue at the present rate of production? Are you aware of any change in production schedules after the start-up?

DR. GIBBONS: I am not aware of any.

MR. A. SNOW: There are no production changes whatsoever after the start-up, that you are aware of?

DR. GIBBONS: I am not aware of any.

MR. A. SNOW: There was some discussion earlier about the Churchill negotiations. Could you give us a little rundown on the economics of the Lower Churchill? You talked about its being listed by the National Energy Board as the number one energy project left in North America environmentally, and I thought you said economically.

DR. GIBBONS: They rated it economically, not environmentally. Environmentally was my own comment, that it is a run of the river development that really is going to flood a very marginal amount of new area so it is environmentally very benign and economically rated by the National Energy Board as the best megaproject left in North America. I don't have that report with me tonight. I could have brought it, because I have it in my desk.

MR. A. SNOW: Could we get a copy of that?

DR. GIBBONS: I have a copy.

MR. A. SNOW: Will we be able to get a copy?

DR. GIBBONS: I will have to check on that because I don't know whether or not it is a public document. I have a copy of it and it shows the various relative prices.

MR. A. SNOW: Can you break down the cost in site development preparation and transmission costs - how much power would be consumed provincially and also where it is going to be consumed close to the source?

DR. GIBBONS: It depends on where the need is. We are anticipating with the Lower Churchill that we would have a DC line from the Lower Churchill site to the Holyrood area, the Soldiers Pond area, and it would basically dump power into the grid, the Island grid near Holyrood, so that Holyrood, as a thermofired plant, could be closed down and be used just as backup and we would be using the clean hydro power. In the meantime, we are saying we would be holding 800 megawatts for ourselves, for Newfoundland and Labrador, and we believe that is adequate to handle any growth and industrial development needs in the Island part of the Province or in the Labrador part of the Province.

MR. A. SNOW: What would be the cost of that power here on the Island portion of the Province after being delivered to Holyrood?

DR. GIBBONS: Well, I don't want to get into the details of those figures at this time, because that is obviously related to negotiations and so on, but that particular National Energy Board report referred to a figure at the site as a very good figure.

MR. A. SNOW: Of what site are you speaking?

DR. GIBBONS: At the hydro site.

MR. A. SNOW: At the hydro site, itself, the generating point.

DR. GIBBONS: It is a very good figure and that is where they are rating it as being basically the best.

MR. A. SNOW: But what would it be? I mean, Hydro officials must have some idea of what the cost would be of transmission. I can understand your wanting to keep that one separate, we call that classified information, but surely to goodness -

DR. GIBBONS: There is a cost of transmission, yes. You could generally say transmission costs are about ten mils per 1000 kilometres, per 1000 megawatts or something like that. It is a figure I have seen somewhere.

MR. A. SNOW: From Labrador to the Island?

DR. GIBBONS: I don't know if we want to get into the specifics of the rates.

MR. A. SNOW: It is ten mils?

DR. GIBBONS: Overland transmission, I think I have seen a figure showing wherever that is it would be around ten mils per 1000 megawatts or 1,000 kilometres or something like that. Maybe I'm confused.

MR. DEAN: Well, it depends on the -

DR. GIBBONS: Type of transmission.

MR. DEAN: - type of transmission and where the transmission facilities are.

MR. A. SNOW: Well, I am not attempting to be snotty or anything, but I am discussing the Lower Churchill Development. We know where that is, and we know where the Holyrood generating station is, and that is where we are going to bring it. So assuming that we are going to transmit it from one to the other, what would be the cost?

DR. GIBBONS: Well, I don't want to get into that debate right now, Mr. Snow. What I would rather say is that we are negotiating an agreement whereby we believe that would be the most economic long-term answer for power for the Province compared to any other source of power for the Province, and we are satisfied with where that figure would be. But I don't think we should be getting into it tonight.

MR. A. SNOW: Okay. I would appreciate that copy of the National Energy Board report if it is possible to get it.

DR. GIBBONS: I will look into that.

MR. A. SNOW: Thank you. Again, to continue along the lines of my hon. friend from St. John's South. He talked about the Great Whale project and the economics of that, I believe, and the environmental problems associated with it. Are there any other problems associated with the export of energy sources to the United States market that this so-called Lower Churchill project would also export to them? Are there any other energy sources?

DR. GIBBONS: We are not negotiating the sale of the Lower Churchill power to the United States. We are negotiating the sale of the Lower Churchill power that is surplus to our needs to Hydro Quebec at the border between Labrador and Quebec. It is up to them what they do with it once it goes into their grid.

MR. A. SNOW: Let's assume for once that the Member for St. John's is correct and that there is -

MR. MURPHY: (Inaudible).

MR. A. SNOW: Well, we should assume at least once. But let's assume that he is correct, that there is an environmental problem or some other problems associated with the Great Whale project.

DR. GIBBONS: I don't think any environmental problems associated with Great Whale cannot be overcome in time. Personally, I believe that the Great Whale will be developed in time. I don't know when that time might be. Certainly, the Energy minister in Quebec believes that it will be developed in due course.

MR. A. SNOW: What is the cost? Are you familiar with what the cost of power would be to, let's say, deliver to New York for the Great Whale Project? Are you familiar with that?

DR. GIBBONS: We may have some figures for what New York is paying for power. Do you have any figures, Mr. Mercer?

MR. MERCER: I don't have them from memory, but it is in excess of 100 mils, as I recall the projections.

MR. A. SNOW: In excess of 100 mils.

MR. MERCER: Yes.

DR. GIBBONS: And the rate that we approved last week is the rate that Newfoundland Light and Power pays to Hydro's 45.31 mils, so plus the perspective -

MR. A. SNOW: This is 100 mils to whom?

MR. MERCER: That is what the U.S. utilities would be paying to Hydro Quebec to purchase energy into the U.S. grids.

MR. A. SNOW: My understanding is that if natural gas were used to create electrical energy, they would be able to sell it for about 7.5. Is that correct?

DR. GIBBONS: I don't know.

MR. MERCER: I have no idea.

DR. GIBBONS: Certainly, natural gas is becoming very competitive. That is what some of the reports have been saying lately. But I believe the only people who are going to pay more for power as a result of what happened recently with regard to Great Whale in New York power contract are the people from New York. Because, when their economy improves and they come back crying for power, they are going to have to negotiate a new deal. They would pay more five years later than they would pay today.

MR. A. SNOW: Continuing with energy questions, if you will. Have we done much research into alternate sources of energy other than those you mentioned, wood burning, automobile propane, I think, but specifically, electrical generation through wind?

DR. GIBBONS: Some research has been done on that and there is a good wind regime in Newfoundland, but nothing has been proven economic at this stage.

MR. A. SNOW: There was some reference - I forget who made it now -about the provincial blended rate. Would you elaborate on that?

DR. GIBBONS: Maybe I could ask Mr. Mercer to speak about the provincial blended rate.

MR. A. SNOW: Sure.

MR. MERCER: What I was referring to, Mr. Snow, was that when we sell off the grid to a company like Newfoundland Power or Abitibi -and I am referring to sales on the Island - we blend the total cost of older plants and more economical plants like Bay d'Espoir that were built many years ago with more recently constructed plants like Cat Arm, and naturally, when you look at all the resources that you have available, you build the cheapest plants first, so they are the most economical ones, then, as you exploit these cheap ones you are forced to go to more difficult ones to provide power and energy and they are more costly. And then, of course, the units at Holyrood vary in cost depending upon the price of oil, and we put all of these sources together, blend all their costs and come out with average prices off the grid to each of our customers.

MR. A. SNOW: You call it provincial blended rate; that is only pertaining to Island. It is one of the few times I appreciate your leaving out Labrador, by the way.

DR. GIBBONS: Yes, you're right, Labrador is still much cheaper than that blended rate.

MR. A. SNOW: Am I correct in assuming that?

MR. MERCER: Yes, Mr. Snow.

MR. CHAIRMAN: Presently we will break for a few minutes for coffee. We can get in another question before that.

MR. A. SNOW: My understanding, in some discussion, I guess, probably in the House of Assembly here, is that we have a right of recall to some of the power being generated in the so-called Upper Churchill, presently being sold to Hydro-Quebec. We had recall rights in the contract to about 300 megawatts, and we presently are recalling, I think, about 150 or 160 of that, so we still have 140. How much are we being paid for this power and have we given any consideration to recalling it?

DR. GIBBONS: We have nothing to recall it for right now and if we had a reason to recall it, then we have to give three years notice for any particular industry that would need any part of that, and I assume it is at the Churchill Falls rate.

AN HON. MEMBER: Yes.

DR. GIBBONS: It is at the Churchill Falls contract rate because it is coming out of Churchill Falls.

MR. A. SNOW: My understanding is that that block of power is presently being sold, the 300 megawatts, well, 140 is; you are saying it is at the present rate which is, what, commonly referred to as 3 mil power or something like that?

MR. MERCER: Yes, that is correct.

MR. A. SNOW: My understanding is that that 140 megawatts of power is being sold for 1 mil.

DR. GIBBONS: You raised that in the House one day but I have had no reason to -

MR. MERCER: I think there may be some misunderstanding about that. I think, in the event that Newfoundland recalls the electricity but has no use for it, and therefore has to sell it back to Quebec again, unused, then Hydro-Quebec does not have to pay the 3-mil price for it, they can, in fact, take it back at a lower price. Dave Collett, who was the operator at Churchill Falls may have further comment on that.

MR. COLLETT: That is correct. Once we recall a block of energy and all of that energy is not used within the Province in the month that we have indicated, it goes back over the border at one-third of the price. That is part of the Churchill Falls-Hydro-Quebec Contract.

MR. HEWLETT: That would be a political recall, I think, presumably for political reasons. We decided, for whatever reasons, if the government of the Province, in any given year, were to take that power from Quebec and we had no particular practical use for it, then we would pay cash dollars for that and we would have to give it back to them at one-third of the going rate.

DR. GIBBONS: Yes, temporary recall, but we wouldn't recall the power unless we had a real use for it.

MR. HEWLETT: Or, if you had to make a political point.

DR. GIBBONS: I don't know why we would do that.

MR. HEWLETT: Well, it is called 'cutting off your nose to spite your face', but then, there are people who would rather fight than eat, I mean, so that is life.

MR. CHAIRMAN: Okay, we will take a break for coffee and then come back. It is 8:35, so we have an hour-and-a-half. We will take ten minutes and come back at 8:45.

Recess

MR. CHAIRMAN: Order, please!

We will reconvene now.

When we left off, the Member for Menihek was in the process of asking some questions, so we will let him continue for a few minutes and then go to another speaker.

MR. A. SNOW: I have one more question with regard to Mines. Earlier, you mentioned prospecting. Can you outline just a little what type of subsidy program your department has to encourage more prospecting which is, I suppose, a fairly basic type of exploration work that is probably the most basic exploration, I guess, next to aerial, is it?

DR. GIBBONS: The most basic, that's for sure, Mr. Chairman.

We have had a prospector's training program and a prospector's grant program over the last couple of years. We implemented this as part of our latest mineral development agreement. Last year, I believe we gave out twenty $5,000 prospectors' grants and we also trained -

AN HON. MEMBER: (Inaudible).

DR. GIBBONS: Was it twenty prospectors last year in their first course? This year we have a full slate of prospectors again registered for a course to be given in the first two weeks of June in Stephenville, in the college there.

I have been signing prospectors' grants for the last month or so for the twenty prospectors' grants again this year. They are just $5,000 grants. I don't think we have assigned twenty yet but we must be getting well up towards twenty again this year.

I will ask Paul Dean to speak on both of these issues because it falls under his section in the department.

MR. DEAN: There is not much extra to say other than what the minister has said already. In our view, this program has been very, very successful. The prospectors give very good value to the Province for the $5,000. A lot of people prospect for four or five months with this money.

We have a number of self-trained prospectors in addition to those who have taken the training course, and they have been very successful in delineating new areas of potential mineralization and new discoveries themselves, particularly on the West Coast and on the Avalon Peninsula, as well as in Labrador.

One of the good things about prospectors is that they are not biased by geological thinking the way we are. They look anywhere and everywhere they think there is a prospect of finding something. I must say that, in our view, this is a small but important investment in the future.

MR. A. SNOW: Was there not one of our prospectors last year who staked some claims on some property that resulted in close to half a million dollars in exploration expenditures by companies on that property?

MR. DEAN: Yes, that is correct - not over a one-year period but over a three-year period that amount of expenditure was made.

The way that most of these prospectors work is that they find a property and stake it, and then have an option agreement with a major company. The option agreement often results in a cash payment by that company, so that gives them extra cash to go and prospect further areas. It works very well for all concerned.

MR. A. SNOW: How long have we had this program in place in this Province?

DR. GIBBONS: Most recently, with the $5,000 grants, is this the second year or third year?

MR. DEAN: This is the third year.

DR. GIBBONS: The third year.

MR. A. SNOW: Have you investigated any other methods of - if you have stimulated what, half a million dollars worth of exploration work that -

DR. GIBBONS: That was just from one prospector.

MR. A. SNOW: From a $5,000 investment and one prospector; you said a total of what was it, twenty $5,000?

DR. GIBBONS: We have twenty prospectors per year.

MR. A. SNOW: So - $100,000?

DR. GIBBONS: It has been a very successful program.

MR. A. SNOW: Have you looked at any other programs?

DR. GIBBONS: None that are targeted at the prospector, as far as I know. Maybe Mr. Dean can speak to it a little more.

MR. DEAN: I think we, in the department, realize, Mr. Snow, that with the declining levels of exploration by the mining companies, if you like, we really need to increase the level of exploration in the Province. We think the prospectors' grants is one way of doing it, but there are some other considerations that were made by the minister's Advisory Council on Mining and Mineral Exploration. Those recommendations have not yet been finalized for the minister's consideration, but we hope they will be in the next couple of months.

MR. A. SNOW: Can you enlighten us on what they are?

MR. DEAN: Paul Dean here.

DR. GIBBONS: He could tell me first.

SOME HON. MEMBERS: Hear, hear!

MR. DEAN: That was going to be my response.

AN HON. MEMBER: What?

DR. GIBBONS: He could have waited until he could tell me first.

MR. DEAN: (Inaudible).

DR. GIBBONS: I haven't spoken about that particular advisory council, but last year, in view of what has been happening to the levels of mineral exploration in the Province, I asked some people from various parts of the industry to come together to see if they could take a look at what is happening in the Province and make some recommendations to me, as the minister, on possible actions to further stimulate the industry. That committee has been meeting all winter about once a month. Since December, I think, they might have had their first meeting, and they are due to give me a report now in the very near future. I am looking forward to receiving that report.

MR. A. SNOW: Are you familiar with the program that the Province of Quebec has? They tried it I think about four or five years ago on the Gaspé Peninsula.

PAUL DEAN: Yes, I am familiar with that. We have looked at basically all the provincial programs across Canada to see what might best serve our needs here. We have looked at the Quebec and especially the Ontario program, both of which provide matching funds for mineral exploration in certain regions. In Ontario, in particular, all of northern Ontario, now has matching funds, fifty cent dollars with a contribution cap at about $300,000 per company.

MR. A. SNOW: Which includes incentives for drilling?

MR. DEAN: It would include matching funds for drilling, 50 per cent of them.

MR. A. SNOW: That was funded by a Hydro corporation, too, wasn't it?

MR. DEAN: It the case of Ontario it wasn't. I'm not certain in the case of Quebec.

MR. A. SNOW: I thought it was - yes, it was, in northern Ontario, by Ontario Hydro.

MR. DEAN: I don't think that is the case, Mr. Snow.

MR. A. SNOW: Well, I thought it was funded through the diversification fund in northern Ontario, by Ontario Hydro. Are you familiar with that?

MR. DEAN: No, my information is to the contrary, that it is funded directly by the Ontario government.

MR. A. SNOW: Well, are you familiar with the Ontario Hydro diversification fund in northern Ontario?

MR. DEAN: No, I'm not.

MR. A. SNOW: You should check it. It is there. It is a fund that Ontario Hydro did in conjunction with the provincial government and, I believe, the federal government to help offset the massive layoffs in the mining industry in northern Ontario because of the slowdown in the mining industry, particularly the uranium industry. And because of the change in government they decided that they would not be going ahead with the anticipated construction of more nuclear energy projects, so they didn't need uranium and miners were laid off. Ontario Hydro felt that they had an obligation to fund the project, or a project being a diversification fund -

there again, performing a public policy purpose of the government of the day, right? We would hope that our Crown corporation, our Hydro Corporation would do a policy purpose similar to that, of course.

DR. GIBBONS: (Inaudible) uranium mines closed down.

MR. A. SNOW: I thought you were going to say you had no policies.

SOME HON. MEMBERS: Hear, hear!

MR. A. SNOW: I have nothing more, thank you.

MR. CHAIRMAN: Mr. Woodford.

MR. WOODFORD: Just a couple of short questions pertaining to the mini Hydro sites again. How did you come up with the figure of 50 megawatts by 1996?

DR. GIBBONS: Looking basically, I think, at the approximate annual growth and demand, and what might be an amount to take for about a year or a little over a year.

MR. WOODFORD: So there is a possibility, if you see a demand there somewhere down the road that, after a year or two, you could be calling for more proposals?

DR. GIBBONS: Sure. Exactly.

MR. WOODFORD: Would Newfoundland Hydro be sort of leaning toward this rather than go - well, I suppose, to put it another way, are Newfoundland Hydro, themselves, now contemplating any projects over the fifteen megawatts?

DR. GIBBONS: Hydro has two sites that have already passed through the environmental assessment process in the Bay d'Espoir watershed and a third one that is partway through that process - Granite Canal, Round Pond and Island Pond. So there are three hydro projects in that watershed that total eighty-two megawatts.

MR. WOODFORD: Eighty-two megawatts.

DR. GIBBONS: Eighty-two megawatts, and there hasn't been any decision made at this time whether these will be carried through to development or just left there to sit. These three, basically, are available. Also, Holyrood number four is available as a possibility, depending on what is most economic. Small hydro sites are, we believe, available to a certain limit. We will see what the response is to that call for proposals. In Central Newfoundland, on the Exploits, of course, there is the Greenwood project by Abitibi that is possibly available for another forty megawatts or so. So there are a number of possibilities in the hydro area.

MR. WOODFORD: I've been told that Kruger is doing an assessment on the upper Humber. Is Newfoundland Hydro aware of that?

DR. GIBBONS: Yes. Kruger has water rights to some area over there in the Humber watershed and I think they've been looking at something over there. I don't know the details on it.

MR. WOODFORD: Because I've been told it is somewhere in the vicinity of fifty megawatts. Is that possible?

DR. GIBBONS: Fifty megawatts. Silver Mountain, I think it's called.

MR. WOODFORD: Fifty megawatts?

DR. GIBBONS: Fifty, fifty-five megawatts?

AN HON. MEMBER: It's in that order.

DR. GIBBONS: In that order.

AN HON. MEMBER: (Inaudible).

DR. GIBBONS: Yes. So there are a number of these possibilities around the Province.

MR. WOODFORD: Back to the dimensional stone subject. I have a fairly good deposit in my district in the Goose Arm area. I would like for the minister or his officials to give me an update of that. I've been told of possibly a change of management there, or a change of partners and so on, and that they want to take out some more samples now this spring and send them, probably to the same people, the Italians. I don't know, but that is what I've been told. Is there any truth to that?

DR. GIBBONS: You do have one of the best marble prospects in the Province at Goose Arm, the west side of Deer Lake. I understand that very recently there was an agreement signed between the person who had discovered that and a company. I am hoping it will be developed, because the marble has a number of different colours and characteristics that seem interesting. Mr. Dean is more familiar with the details of what is going on there right now and maybe he can speak a little further on that for you.

MR. DEAN: Just to add a little bit to what the minister said. In our view it is undoubtedly the best marble deposit, from a dimension stone perspective, in the Province, and possibly one of the best in North America. It was discovered by one of our prospectors who is receiving prospecting grants and is continuing to receive prospecting grants. He has very aggressively promoted the deposit, made its existence known around the world, including Italy. We've certainly helped him in doing the geological mapping of the deposit. I think Enterprise Newfoundland has helped him in drilling and having it evaluated by an Italian company. As the minister said, I think he is about to finalize a joint venture agreement for a feasibility study, trial quarry and then, hopefully, take it all the way through to production and processing.

MR. WOODFORD: I understand, in this particular area, that if it does go through they are looking at the possibility of doing the processing right there, as well. Is there anything to that?

MR. DEAN: I think it makes a lot of sense to do it in that particular case because of the variety of stone that is quarriable in that deposit. It is very suitable for having a processing plant adjacent to the deposit or somewhere in the Deer Lake area.

MR. WOODFORD: It is a good location there too, and pretty close to the waterway.

MR. DEAN: It is an excellent location.

MR. WOODFORD: I've been told also - I don't know, maybe you can confirm it - that this particular find is like eight kilometres long, five kilometres wide, and something like 300 kilometres deep, or thick.

MR. DEAN: It is certainly a large deposit. As the minister said, it contains a great variety of colours and textures of marble. We really won't know until we get into the quarrying and development of trial quarries how many varieties there are. But it is a very large deposit. The ridge of marble is about five kilometres long by at least two kilometres wide. It goes down to at least the level of the lake of Deer Lake.

MR. WOODFORD: Very good. Let's hope something does come of it. Could you give me an update on the Glover Island gold find, or some of the samples? I understand they are in the process of analyzing another couple of samples from there. Is there anything new on that?

DR. GIBBONS: There will be more drilling done on that project this summer. It is a very interesting prospect, some very good grades, but it needs some drilling to prove tonnage and we don't know really if they will prove tonnage. Again, I will ask Mr. Dean to talk about the details of it. It is a very interesting gold prospect.

MR. DEAN: Yes, the discovery was made last year. The original drill holes that intersected the gold were made last year by a Newfoundland-based company. They just completed some geophysical studies to develop further targets and are currently attempting to raise some funding to do a drilling program in the summer or fall of 1992 to, as the minister said, better define the tonnage and move forward from there.

MR. WOODFORD: How do the samples compare with other areas? I had some readings on the Cat Arm samples last year from a few companies. They were very promising but they say that this one is as much again. Is that true?

MR. DEAN: It is really too early to say, Mr. Woodford. I think there are only about a dozen holes that are drilled. It is going to take tens more of holes to define the nature of the deposit. I would say, on average and in general, the grades are better than the Cat Arm - Sops Arm area.

MR. WOODFORD: What about an update on the Tally Pond situation just outside of Buchans? That one last year seemed like it was going to fly. Is there anything new pertaining to that?

DR. GIBBONS: There isn't much happening on it right now. The company has about 4.5 million tons of reserve there and they talk about wishing they had twice that. In today's market, the prices of zinc and copper are just too low to see that one proceed with that amount of tonnage. So I don't think we are going to see any immediate development of it.

MR. WOODFORD: One other question - well, I can leave it to someone else now to put some questions.

MR. CHAIRMAN: It's okay. Go ahead.

MR. WOODFORD: The minister, I think, in his opening statement said that CF(L)Co paid $16.4 million, if I'm not mistaken, to Newfoundland Hydro last year, and that was, in turn, paid on debt.

DR. GIBBONS: Paid towards the outstanding debt. About $16.4 million is what we expect to receive in 1992. By the end of 1992 the debt should be down to $47 million.

MR. WOODFORD: What was the actual figure received from Hydro Quebec to CF(L)Co, last year, in the Churchill Falls agreement?

DR. GIBBONS: I don't know. Mr. Mercer?

MR. MERCER: Each year, it is in the order of $90 million to $100 million.

MR. WOODFORD: Ninety to a hundred.

MR. MERCER: And from that, there has to be the costs of the company, including servicing the debt and paying the employees, that kind of thing. Then, the dividends are paid out of the profits that remain. Two-thirds of these profits come to Newfoundland and Labrador Hydro, and one-third goes back to Quebec.

MR. WOODFORD: Would I be right in saying that last year Newfoundland Hydro, or maybe it was CF(L)Co, actually got $22 million, the final figure?

MR. MERCER: In total profit?

MR. WOODFORD: Yes.

MR. MERCER: Yes, it would be in that order.

MR. WOODFORD: After everything else was paid. I asked a question last year about the maintenance contract. Maybe you could clarify it for me. I have been going through the contract, the recapture program and transmission facilities and so on. It was stated last year, I think by officials from Newfoundland Hydro, that when the contract comes due in 1998 or 1999, I'm not sure of the date; you can confirm that - my understanding is that Newfoundland Hydro is responsible for the maintenance on the grid - if Newfoundland Hydro cannot come up with the funding for the maintenance contract, or whatever is needed at that time, Hydro Quebec has the right to fund that particular program. And, for every million dollars that they put into it, they can take one share of CF(L)Co, which is 66 per cent. Is that true?

DR. GIBBONS: I don't know anything about this maintenance contract but I know that if the occasion arises, Quebec has the right of paying money at some time. Maybe Mr. Mercer could speak to that.

MR. MERCER: I don't think it is related to a specific contract, such as a maintenance contract. But I believe that as long as the debt is outstanding to the bondholders of CF(L)Co, if, for any reason, the company gets into financial trouble and doesn't have the money available to service the outstanding debt, then Hydro Quebec has the right to step in if there is a default. If CF(L)Co doesn't make its interest or principal payments on time, then Hydro Quebec has a right and an obligation to step in and cure the default by paying money. And for each input of money they have a right to get shares, but that is not related to any particular contract, Mr. Woodford, that is the overall operation of CF(L)Co.

MR. WOODFORD: Yes, but it is broken down to certain referrals made to recapture transmission facilities and so on, through it, that would indicate that there is something of the same thing in place. But that's all - I don't want to belabour that point.

There is just one question that hasn't been brought up and we might as well bring it up: Hibernia. Is there any sort of an update on that?

DR. GIBBONS: There is nothing new to report on Hibernia. The companies have been searching the world, as I have repeated a number of times. They made presentations to various companies and I can give you the number of companies to whom they have made presentations. There have been follow-up discussions with the serious companies, and a number of these serious companies have gone into what is called the data room, one in Calgary and one in Asia, I think it is Tokyo. That type of data room activity is still going on this week. So that continues as long as there is a company or a number of companies interested, then they keep the data rooms operating and that is going on right now.

My most recent discussion on this subject was this afternoon. It was partway through Question Period when I received a message saying that Mr. Epp called, he was going to be in his office for forty-five minutes and give him a call. So I talked to him right after Question Period. We just had a chat about the general status, and that is basically it. The data room activity is continuing, and we just continue to hope that there will be a positive resolution in due course. I have no more to say at this time.

MR. WOODFORD: One other question from me. You mentioned in your opening statement the Electrical Power Control Act. It gives totals of $1.6 million. Kruger was mentioned. Could you give me a breakdown of the companies involved and the amounts?

DR. GIBBONS: Kruger, $603,000; Albright and Wilson, $432,000; Abitibi-Price, Grand Falls, $638,000 for a total of $1,673,000. That's what is estimated in this year.

MR. WOODFORD: Albright and Wilson was what?

DR. GIBBONS: Albright and Wilson, Long Harbour.

MR. WOODFORD: Yes. What is the total?

DR. GIBBONS: Four hundred and thirty-two thousand dollars. That is contractual. I think the Albright and Wilson one expires earliest, in another couple of years.

MR. WOODFORD: If that should be sold is that transferable?

MR. MERCER: It would depend on the way in which the sale takes place.

MR. WOODFORD: I have no other questions.

MR. CHAIRMAN: Mr. Murphy.

MR. MURPHY: Mr. Minister, I suppose your department, in some ways, is a little bit unique inasmuch as - and I would address this question to the Hydro end of your responsibilities - that you do receive revenues through royalties and licensing and what have you. Obviously, that is not in your estimates. Could we just have a ball park figure of what kind of funding your department -

DR. GIBBONS: (Inaudible) Do you have any idea? I don't know what that figure is, myself. Paul or Gordon?

MR. DEAN: Most of the royalties, if you like, with respect to mining operations, are collected by the Department of Finance. We collect the royalties on quarry materials, and we collect rentals, if you like, with respect to licences, exploration licences, mining leases and so on like that.

In terms of our revenue from quarry materials and rentals and things, it is about $1 million a year. In terms of the Department of Finance collection on royalties, mining tax, etc., it is about $25 million a year. Then, in terms of general revenues, other taxes flowing from the mining industry, it is about $100 million a year.

MR. MURPHY: That is over and above, and I am not including, of course, Hydro's balance sheet at all.

AN HON. MEMBER: Minus it.

MR. MURPHY: Yes. We were talking about some small Hydro projects. Moving away a little from the small Hydro projects, has anybody had a look at the flaring material at Come-by-Chance and how they might capture that and what it would do for generation? What would it be, five, six or seven megawatts?

DR. GIBBONS: We have looked at that relative to what I mentioned earlier about the auto propane. We are hoping that by reducing the tax on all propane by about 6 cents a litre, we will get a lot of conversion to auto propane, particularly in fleet vehicles, so we can start using some more of that and displace gasoline; so that is one way.

There has also been some discussion, over time, on the possibility of a cogeneration unit at the plant out there, that they may be able to use that; but there has not been any follow-up on it. It is not one of the priorities of the company out there at this time.

MR. MURPHY: An obvious question that I have from my district is looking at Sohilco and Mr. Kierans, What are his aggregate rights and how long do they extend? What is he up to?

DR. GIBBONS: Does he have any aggregate rights from us right now?

MR. DEAN: No, he does not have any aggregate rights from the department, but we have frozen the area so that no one has any rights, if you like, without a special permit. We have issued permits for say, the South Side Boat Basin Development and so on.

DR. GIBBONS: Prosser's Rock.

MR. DEAN: Prosser's Rock Development; but, in fact, it is exempted from issuance of mineral rights.

DR. GIBBONS: Nobody has them. We could have signed them, I guess, if there were development sometime.

MR. MURPHY: Okay, just one more small question.

You alluded, Mr. Dean, to exploration on the Avalon. I don't expect you to tell me where, but what types of metals would you be looking for, would they be exploring for on the Avalon?

MR. DEAN: I think the focus, the amount of exploration that is going on on the Avalon is mostly related to gold, and it is generally in the Salmonier Line area - Salmonier Line-Holyrood - and initiated by one or two of the local prospectors.

MR. MURPHY: Okay. Thank you, Mr. Chairman.

MR. CHAIRMAN: Mr. Hewlett.

MR. HEWLETT: Today, the minister mentioned a couple of companies that have taken up some exploration rights onshore in Western Newfoundland. There was a similar call some years ago when Mr. Justice Marshall was Minister of Energy, and there were no takers. Would the minister care to indicate, is it changing economic conditions or is there new information vis-à-vis the potential there that would cause people to take it up now versus not taking it up then, or is there a reason that the minister is aware of?

DR. GIBBONS: Mr. Chairman, I am not sure if it went all the way the last time. I know there was a call for indications of interest and some land was identified. I don't believe it ever went to a call for bids, because the regulations were never finalized, and it wasn't until a year ago February past that we finalized regulations for onshore exploration. But, certainly, in the last two years, offshore rights were given off the West Coast. There has been new seismic work done over there. There were at least three seismic surveys done last year off that coastline, and in doing that offshore work, a number of companies did work on land, tying the offshore to the on-land section. They were very interested in the Parson's Pond area and a number of bids were received on it. And to receive a bid of more than $1.6 million from one company, I was a little bit surprised and quite pleased to get that big a bid from Labrador Mining, a subsidiary of Norcen. It was a very interesting bid because they also have the offshore land in that area.

MR. HEWLETT: The other two small parcels, was it Vinland or whatever?

DR. GIBBONS: Yes.

MR. HEWLETT: Is that a local company?

DR. GIBBONS: Yes and no. It has some local partners and some Calgary partners. It is a small company that has been put together and they did bid on a number of parcels there. They were the only bidder, I guess, on those two little parcels that they got.

MR. HEWLETT: Come By Chance - I saw your article on the CBC television news this evening with regard to their actions in the United States, Cumberland Farms. You seemed to indicate that from the point of view of local operations and from the point of view of local creditors that it was business as usual at Come By Chance. Is that fair to say? I don't wish to be a panicmonger, so to speak, but if I were a businessman selling widgets or whatever to that refinery, should I be asking for C.O.D or what?

DR. GIBBONS: Mr. Chairman, I wouldn't want to put it in those terms, but I have been assured by a representative of the company - I talked to him today; I talked to him last week before this action happened - that there was really no direct connection between what was happening in the United States with Cumberland Farms Incorporated and the Come By Chance refinery, that there is no direct association between these two companies. Come By Chance does not receive money from Cumberland Farms Incorporated. It is a different company that pays a processing fee to Come By Chance. The nature of the arrangement there is that a foreign company provides crude oil to another company and that other company pays a processing fee to Come By Chance to get that crude turned into various types of refined product. The company that pays that fee is not Cumberland Farms.

MR. HEWLETT: Very good.

DR. GIBBONS: It may sound a bit confusing but that's the way it is.

MR. HEWLETT: Some of these arrangements, I gather, are due to American anti-trust laws and vertical integration, and so on, as I understand it.

Touching on mineral exploration, the mineral exploration sector - and my district is basically the capital of that sector in the Province - has been really down ever since the federal government cancelled their flow through shares program, which I presume, came under criticism for being overly generous or whatever, as was the Trudeau administration's offshore drilling program some years ago. Has the government pursued the notion of some sort of federal-provincial agreement with Ottawa to - you know, you have a prospectors thing, but I am talking about something that could generate activity in the tens of millions per year, to bring that industry back to where it used to be.

If the feds are not willing to go it alone, has there been any approach to the feds from the point of view of a federal-provincial co-operative agreement, some sort of stimulation program for the diamond drilling industry, that sort of thing? I'm talking about in tens of millions rather than just the thousands kind of thing.

DR. GIBBONS: We've certainly talked a lot about that particular program that was cancelled. We lobbied vigorously to maintain that program. I think we and all the other provinces lobbied vigorously, as did the mineral industry nationally through various organizations. In the end it was killed, it did not come back, and I don't believe it will come back. We haven't really had any discussions about anything that we might be able to do - Newfoundland and Labrador plus Ottawa - in any particular program. Because if Ottawa is not prepared to come in there is not much we can afford to do.

MR. HEWLETT: No, okay. But you haven't asked Ottawa?

DR. GIBBONS: No, not specifically, not outside the bounds of our mineral development agreement, where there is a little bit of money.

MR. HEWLETT: I was talking about probably a special agreement for a major stimulation of the diamond drilling industry.

DR. GIBBONS: No, we have not.

MR. HEWLETT: One final point, Mr. Chairman, and I'm finished. It is with regard to Hibernia. The minister indicated he had a call from Mr. Epp. I guess I am going to ask an opinion of the minister and I have a fairly good idea what his answer is going to be. And please don't jump on me, Mr. St. John's South.

By way of preamble: the federal government, if Hibernia falls apart, saves a bundle; companies are going to do whatever companies do from the point of view of what's best for their bottom line. Companies don't usually operate under the social conscience kind of thing. Is the provincial government pro-active enough in this particular process? How come you're not in Hong Kong dragging people out to the Canadian Embassy, saying: Sign on the dotted line. I want your cheque for $100 million, sign here. Here's your Canadian passport, get nine of your buddies and we have a billion bucks? How come the Premier is not doing that, or you are not doing that?

DR. GIBBONS: I don't think I have to. It is not my role, really, to do that. But I have to say to you, I was in Tokyo within a month after the Hibernia announcement came, and I met with four of the top financial agencies in Japan at that time and we talked Hibernia. I didn't come back and boast about it, but I was there and we talked about it. And I know that since that time, the consortium with its advisers has been in Japan and other parts of Asia and they've talked Hibernia. So I did, as far as I'm concerned, all that I needed to do. I didn't go deliberately on a Hibernia trip, but being there on financial matters for the Province, I met with the appropriate financial houses, I met with a couple of banks, and we talked on the appropriate subjects.

MR. HEWLETT: So, what you are saying, Mr. Minister, essentially, is that with regard to salvation of the Hibernia project, the provincial government, either through yourself or the First Minister, the Premier, does not have to play the role of co-captain and drag them out by the hair of the head.

DR. GIBBONS: No, we don't, Mr. Chairman. I say, we don't, neither does the federal government, and neither of us has done that. The companies have done an excellent job of going all around the world. They targeted all the appropriate companies, had meetings with all the appropriate companies that had any interest in Hibernia and with any of those that showed any serious interest, have had follow-up discussions. Those who were really serious have been prepared to pay the money required to get into the data rooms and that activity is still going on today and this week. I believe everything that could have been done, has been done, and I give credit to the companies and their financial advisers for doing the job right. Now, I am hoping, as a result of all that, that in the next little while there will be a successful conclusion but there are no guarantees.

MR. HEWLETT: Thank you, Mr. Chairman. I am finished for the evening.

MR. CHAIRMAN: Mr. Woodford.

MR. WOODFORD: Just a short comment on the minister's statement today pertaining to the bids for Onshore, the West Coast, mainly the Northern Peninsula. Reading the three bids, Vinland $10,000, Vinland $10,000 and then, all of a sudden, Labrador Mining and Exploration company, $1.6 million, since there are only 2,000 hectares in the difference with regard to the acreage involved, would I assume or would it be fair to say that their bid is based on - because they did some seismic work last year, offshore, if I am not mistaken, in the same area. Would it be fair to say they found something in the seismic work or that the bid is based on the past records of the Parsons Pond area?

DR. GIBBONS: Based on everything, knowing historically that there is oil in the Parsons Pond area, knowing the association with the offshore where they did do seismic work and the fact that they have done geological work onshore, they put in a good bid on the Parsons Pond area. Others put in good bids on the Parsons Pond area. Nobody put in any significant bids on the other areas and I am curious as to what is going on in the other two little areas myself. But there is one really interesting area there and I look forward to what that company does this year.

MR. WOODFORD: Yes. You stated that they would have to spend the amount of the bids over a five-year period.

DR. GIBBONS: A five-year period, yes. Now, in order to get the permits at all, they have to put in a $10,000 deposit within fifteen days. So we will see if the other company is really serious about these other two areas, because they only bid $10,000 and they have to put down ten right away. We will see if they are serious.

MR. WOODFORD: That was the other question. I mean, the amount they bid for the five-year period and their bond is up front within fifteen days, that is the total of the five-year period, so that will determine whether or not they are serious.

DR. GIBBONS: I really don't know what is in these other two areas.

MR. WOODFORD: That's it for me, Mr. Chairman.

MR. CHAIRMAN: Mr. Snow, do you have a question?

MR. A. SNOW: This question is for general information, I guess. We have seen a shakedown, a rationalization of the gasoline retail business in this country over the last six or eight months. I wonder if you could tell me how many closures or shutdowns of gasoline retail outlets we have seen in this Province, are they occurring in all the provinces, and are they just a Canadian phenomena or are they occurring throughout North America?

DR. GIBBONS: Mr. Chairman, that is occurring pretty well everywhere but, in all honesty, I don't think we have had any closures in Newfoundland and Labrador. If anything, we have seen growth, and even with what is happening or likely to happen now with some of the majors, I do not anticipate that Esso will be closing any of its stations in Newfoundland, nor do I anticipate Petro Canada would be closing its stations. If Petro Canada sells everything east of wherever, as they talked about as an option, I would anticipate somebody would take them. I don't see gas station closedowns, frankly, to be significant in Newfoundland and Labrador. We don't have the overabundance of gas stations that you would see in a place like Toronto.

MR. A. SNOW: Could you elaborate a bit more on Chapter 11, that Cumberland Farms is - what Chapter 11 means and what, exactly, they are doing?

DR. GIBBONS: Chapter 11 is a process under the United States bankruptcy code where companies can get protection from creditors. So they have not gone into receivership. They get protection from creditors, and during a specified period and under that protection, they will try to reorganize their operations and get an agreement with their creditors so that they will start paying on their bills. That's what is going on here with Cumberland Farms Incorporated. They are saying specifically that within ninety days they expect to have an agreement and that all creditors will be satisfied with the agreement.

MR. A. SNOW: I guess it is similar to what we have in this country under receivership, is it?

DR. GIBBONS: No, not receivership.

MR. A. SNOW: Well, trusteeship?

DR. GIBBONS: But in Newfoundland and Canada - no, no. In Canada we have something called the Creditors Co-operative Arrangements Act, I think the name is. You can also get protection from creditors while you take a look at your company and see if you can rationalize and get rid of the weak parts, and maybe end up with a part that can continue to operate.

In Newfoundland right now, for example, Newfoundland Armature Works is going through that; Ayre's is going through that, but registered in Ontario, I understand. So there is a similar process in Canada but it has a different name. In the United States it is called Chapter 11.

MR. A. SNOW: So that would be Ayre's and who else?

DR. GIBBONS: Newfoundland Armature Works is going through it here right now. There is a story in today's paper about that one, and Ayre's. Both of them are going through similar things.

MR. A. SNOW: How much of the product that comes out of Come By Chance is sold to Cumberland Farms?

DR. GIBBONS: The figure I looked at after today - I was talking to the media on that, the question, and I said I wasn't sure. Ninety-six per cent of the product that comes out of Come By Chance goes outside of Newfoundland, the other 4 per cent is distributed in the Province. That 96 per cent goes into the Cumberland organization somewhere, as far as I know.

MR. A. SNOW: If they are consuming 96 per cent of the product that we are producing and it is questionable what the financial viability of the consumers is going to be, doesn't that put the project, itself, in jeopardy?

DR. GIBBONS: I don't think so. I'll read something for you from -

MR. A. SNOW: Oh, come on now, let's -

DR. GIBBONS: I will read something for you from Cumberland Farms: 'Cumberland Farms believes the filing will not affect its ability to purchase products for its stores and gasoline operations and manufacturing facilities. Our core operations are sound and I am confident that CFI will emerge within a short period of time.' That's a comment from the president of the company. CFI, in fiscal 1991, had revenues of $2.3 billion and has approximately 8,000 employees, 973 convenience stores in twelve states, and it operates Gulf Oil in the northeast - the Gulf Oil division, all the Gulf Oil gas stations.

So they are still going to be providing product through these stations or somebody will.

MR. A. SNOW: But it's a common - I think everybody who operates a business recognizes that the financial ability of a customer to pay is probably the most important component of the business transaction. So, if the customer doesn't have any money, what the heck is - I mean, you can do what you want with the product. But you can't sell it, can you, or you won't get money back for it.

DR. GIBBONS: But you're assuming something there when you say, when the customer doesn't have any money.

MR. A. SNOW: I didn't refer to this particular customer not having any money. All I am saying is that the customer's ability to pay should always come into consideration when you're considering what is going to occur in business transactions, shouldn't it?

DR. GIBBONS: As your colleague said earlier, this is 'business as usual' for now and it is under the auspices, in a sense, of the Bankruptcy Act of the United States.

On motion, Department of Mines and Energy, total heads, carried.

MR. WOODFORD: Mr. Chairman, just a few short comments before we adjourn. I would like, on behalf of my Committee, to thank the minister and his staff for being so up front and forthcoming with their answers. I have found over the last couple of years that the minister has always been forthcoming with his answers and that makes our job that much easier. I didn't want to jump into the earlier debate with regard to what can and cannot be said. I always found this as an avenue and a forum for asking questions, especially pertaining to a Crown corporation such as Newfoundland Hydro.

Mr. Dean has always been available and up front with his answers, and very informative. It is something that I can't pick up every day in the House of Assembly. You can't ask questions, we'll say, for the full half-hour. This, I find to be a forum whereby you can get a particular question in and get a particular answer. So, on behalf of my Committee - if the other members want to say something they may - I want to thank the minister and his officials, as far as I'm concerned, for a very informative Estimates Committee with regard to Mines and Energy.

MR. CHAIRMAN: On behalf of the whole Committee, I would like to echo the words of the Member for Humber Valley on the way the minister and his officials have conducted the Estimates. It has been, I think, a pleasure, in a sense, to just chair. I would also like to thank the Committee members for the professional way that they have also asked questions and conducted themselves here. It makes my job quite easy when discussions have moved along in the way they have done.

I would like to thank Elizabeth for setting this up and providing all the arrangements for us. I would like to thank the Page for being here, and also the recorder. Again, on behalf of all the Committee, to you, Mr. Minister, and the officials, thank you very much and we appreciate everything you have done here.

DR. GIBBONS: Thank you, we appreciate that.

MR. CHAIRMAN: The Committee is now adjourned.