April 27, 1994                                                           RESOURCE ESTIMATES COMMITTEE


Pursuant to Standing Order 87, Percy Barrett, M.H.A. (Bellevue) substitutes for Bud Hulan, M.H.A. (St. George's) and Lynn Verge, M.H.A. (Humber East) substitutes for Edward Byrne, M.H.A. (Kilbride).

The Committee met at 9:00 in the House of Assembly.

MR. CHAIRMAN (Penney): Order, please!

Welcome to our third meeting of the Resource Estimates Committee. This morning we will be reviewing the estimates of the Department of Mines and Energy with the minister the hon. Dr. Rex Gibbons.

I'd first like to introduce the members of our committee, my name is Melvin Penney, I'm the Member for Lewisporte and I'll be acting as Chairman for the meetings today. On my immediate left is Mr. Rick Woodford, the Member for Humber Valley who is the Vice-Chairman of the Resource Estimates Committee. On my left is Mr. Beaton Tulk, the Member for Fogo and Mr. Paul Shelley, the Member for Baie Verte - White Bay. Other members of the committee will be along shortly I'm sure.

I would like to welcome to the committee procedures this morning Mr. Mark Vaughan-Jackson representing The Evening Telegram. I don't know about the other sectors of the estimates committees but this is the first time we've had the media present at any of the estimates procedures of the resource committee and I'm glad to see a representative of The Evening Telegram here today.

For those of you who are not absolutely familiar with proceedings, this committee is an extension of the House of Assembly. The rules that apply to the House of Assembly apply here today, except that it's a somewhat relaxed procedure. The dress code is not enforced, coffee may be brought into the Chamber if you wish, the Pages would accommodate you and of course as we're familiar with members being addressed by the names of the district that they represent, that does not apply today. Members may be referred to by their names and if you wish, even by first names.

The procedure that we have agreed to follow with the Resource Estimates Committee and a procedure that's been quite effective for us, is that we will allow the minister twenty minutes to make his opening comments and then we'll allow the Vice-Chairman or his designate twenty minutes in which to reply. That will be followed by ten minutes per member for questions. Rather than giving him ten minutes to ask a series of questions - and expecting the minister to remember the questions and to give appropriate replies - we've asked that it be done in a procedure very similar to what we use in Question Period in the House of Assembly. That there be an ongoing dialogue between both the questioner and the minister, the questions be brief and the answers be likewise. That has worked quite well for us.

I would remind members of the committee that they are not permitted to ask questions of the ministers officials but any official that's here can, on the request of the minister, answer the questions but the answers are then restricted to fact and they are not at all to answer relating to policy.

Having said that, Mr. Minister, if you would now introduce your officials and once you have done that if you would immediately proceed then to give your opening statement. Mr. Minister.

DR. GIBBONS: Thank you, Mr. Chairman and committee members. I have four officials with me today, on my immediate right is my Deputy Minister Clyde Granter; on his right is the Assistant Deputy for petroleum resources, Martin Sheppard; on his right is the Director of Administration and Budgets for the department, Kevin Whelan; on my immediate left is the Assistant Deputy Minister for Mines and Energy, Paul Dean. These officials will help me to answer any of the detailed questions today that you may put to us.

I do have a statement to make. I'd like to run through that first to tell you all a little about what we do in the department and would hope that this statement may help stimulate some questions relative to the money that we spend in the department and we'll justify our expenditures of it.

I am pleased today to present to this committee the budget estimates of the Department of Mines and Energy for the fiscal year, 1994-95. The net expenditures in this coming year is projected at $12.6 million which is approximately the same as the revised budget figure of the last fiscal year. The Department of Mines and Energy is responsible for managing the Provinces' mineral resources and energy resources in a manner that will ensure that their contributions to the economic well-being of the people of the Province is maximized and the department is responsible for increasing and improving the body of knowledge on the Province's mineral and energy resources; and encouraging the orderly exploration and development of these resources.

The department is also responsible for formulating mineral and energy policy and providing advice to government on associated matters, including matters involving onshore and offshore oil and gas, energy efficiency, conservation and the development of alternative energy resources, and to ensure the achievement of these goals, the department operates under four main program areas. We have a geological survey, we have a mineral resource management branch, a petroleum and energy resources branch and a petroleum and energy economic branch. The provincial portion of the budget of the Canada-Newfoundland Offshore Petroleum Board is also included in my department's estimates, and for this coming year it is $2,071,900, part of that $12,600,000.

Mr. Chairman, I will turn to the Geological Survey and tell you a little bit about what that survey does and has done in the past and plans to do in the future.

One of the main activities of the department again this year will be geo-scientific survey work with the objective of providing basic geological data for the mineral exploration industry. Geological mapping has been completed for about 50 per cent of the Province; other elements of the data base are at roughly similar stages of completion with more completion on the Island part of the Province than the larger, geographic area of Labrador. Such information is a major factor in attracting explorationists to the Province and in the discovery of new mineral deposits.

The program this year will consist of about thirty-eight projects, that's our present number, most of which are now in the report preparation and the map preparation phase following four years of field work over the last four years under the Canada-Newfoundland Mineral Development Agreement primarily. Only seven projects this year will have a field component. Last year, as an example, with numerous field surveys, we had over thirty summer students working. This year, as I understand it, we only have two summer students working in the geological survey because our Canada-Newfoundland Mineral Development Agreement has come to an end.

One of the projects this summer that will continue to be in the field is in Northern Labrador where, in the last year or so there has been some potential to scout for diamonds so we are continuing an exploration program in Northern Labrador for diamonds this summer. The total cost for the geoscience program is reduced to $3.4 million due to the reduced field program and due to the end of that mineral agreement. However, I am happy to report that negotiations with the federal government are currently underway toward a new MDA or more correctly, an extension of the current MDA, and this has already been announced publicly by the federal minister for Newfoundland, Mr. Tobin, and we are working out the details now at the officials level and hope to be bringing something to the provincial Cabinet in the next few weeks that will, maybe, get us back into field work again this summer to some degree, but we haven't concluded that yet.

We turn to the Mineral Resource Management Branch. This branch is responsible for administering the Province's mineral land tenure system and for regulating all mining developments and operations. This includes the administration of the mineral land tenure legislation, for example, the Mineral Act, and Raw Materials Act and jointly with the Department of Finance; the branch administers mineral holdings impost Act. The branch is also responsible for implementation of the regulatory framework and required to control the development, operation and termination of mining operations. This includes systematic monitoring of ongoing operations and developmental activities and a pursuit of related opportunities in the mineral sector.

This branch is allocated $2,280,900 this year of which $471,900 form part of mineral development agreement programs that are a carry over from last year and, $500,000 in this branch are allocated for the Mineral Exploration Assistance Program which we launched about a year ago in June of '93, to cost share some advanced prospects to encourage developments of some projects.

I would like to say a few words about the mineral industry and what's happening in the mineral industry in the Province right now. We have gone through a rather low time in the last few years, and we did hit rock bottom in 1992. Last year, 1993, we came back from that. We were below $700 million in 1992 in value. Last year we came back to $732 million. We increased by about 3 per cent in value. For this year, 1994, we are estimating a value of $790 million, a further increase above 1993 of about 8 per cent, so we're seeing considerable increase and improvement in the mineral sector.

The mineral sector produces about a dozen commodities, including iron ore, gold - these are the two major ones - some copper, asbestos, gypsum, pyrophyllite, slate, limestone, dolomite, stone, sand, gravel, cement, and peat.

Shipment of non-metals such as asbestos and gypsum, and structural materials such as cement and stone, accounted for $35 million, approximately, last year, and metals, primarily iron ore and gold, accounted for the rest.

The value of iron ore shipments decreased slightly in 1993 because of lower prices, but only slightly; however, we still produce approximately 55 per cent of Canada's iron ore products, and estimate that this year, 1994, we will see shipments of about 20 million tons, an increase of about 2 million over last year.

The Hope Brook gold mine, which was very successfully reactivated by Royal Oak Mines in 1992, about a year-and-a-half ago, expects to produce 120,000 ounces of gold in 1994, making it one of the largest gold mines in Canada. Last year, 1993, it produced a little over 96,000 ounces, so again this reflects some of the increasing value this year. The price of gold has also increased over last year.

The mining industry is a major contributor to the Province's economy. It accounts for over $500 million in export sales annually, and contributes about $100 million to the treasury of the Province in various taxes. It is also an important market for business opportunities in various goods and services and, as an employer, the mining industry contributed a payroll of about $180 million last year. If you consider that only about 3,000 - or slightly over 3,000 - people work directly in the industry, the payroll is in the $55,000 to $60,000 range on average per permanent employee in the mining industry, which is quite substantial compared to some other sectors in the Province.

The outlook for 1994, I've already given some indications of it, we are now forecasting up to about an 8 per cent increase in value chiefly because of an extra 2 million tons of iron ore, but also about 20,000 ounces more of gold. Also, mineral exploration is expected to improve. In 1993 the value - the final number that we got in - was about $8.5 million to $9 million, and we're presently forecasting about $15 million for 1994, and there is an upside potential to that. It could even go a little bit higher than that.

There are a number of important events in the mining sector to watch for this year as we move through the year. This year, I believe, we should get the final decision on Nova Gold in Baie Verte. As I look across at Mr. Shelley, I say we both hope so. We've been waiting for a year or so, and I believe this is the year that we will get that decision.

There are also two additional gold deposits in that region, one called Nugget Pond, over in the Snooks Arm area, and one called Hammer Down in the Springdale area, and both of these are proposing to go underground this year, with underground exploration and development. If this work is successful, both of these, I believe, will becomes mines within the next couple of years.

Also this year there will be no summer shutdown in the iron ore sector. Last year IOC had, I believe, five weeks, the year before last, eight weeks. This year they are having zero weeks, they are having no shutdown. Not only that, in the last month or so they have started to recall staff who have been laid off for a number of years. I think they're recalling 100 or so people this year.

In the second half of the year there will also be further developments in the emerging dimension stone industry, and increased production from operations that got started in 1992 and 1993.

Unfortunately, everything's not good. The Flat Bay gypsum mine will close. Currently it's operated by Domtar, but that company has told us that they are scheduling close down by about October of 1994. They will produce some more this year, primarily for shipment to Corner Brook for gyproc production but they have obtained a market in another Province and are going to get out of the mining business themselves. However, we believe that in the longer term we can find some other operators that may be interested in looking at the gypsum resources of that region, the Flat Bay region, and we're going to vigorously market these resources.

I'll now switch to the petroleum side. The petroleum and energy resources branch is allocated $3.9 million in this years budget. The branch is responsible for formulating policy and providing advice to government on all matters arising out of the Canada-Newfoundland Atlantic Accord Implementation Act for Newfoundland, also the Petroleum and Natural Gas Act and the development of subordinate legislation and regulations related to these acts. This branch liaises significantly with the federal government and with the offshore board as well as with the oil and gas industry. It monitors and interprets industry activity and provides assessment of decisions taken by the board for government. The branch also provides a wide range of technical expertise with a focus on petroleum, energy efficiencies, alternative energy, social impact and community relations. The branch also is responsible for policies and programs promoting the efficient use of energy in all sectors of the economy.

Relative to the petroleum section, I want to say a few things about what's happening in that sector, particularly in the onshore sector because we've had some exciting things go on in the last year or two in Western Newfoundland. Onshore petroleum exploration in Western Newfoundland has continued to gain momentum during the last year. We started with an initial request for bids a couple of years ago. We had a second one that closed last May, less than a year ago, which resulted in an extra six licenses issued for about 190,000 hectares and exploration commitments of about $5.7 million and that money is getting spent.

Labrador Mining and Exploration Company, which took two licenses in the Parsons Pond area last year, continued to do seismic surveys in that area, adding to the work they had done on earlier licenses. Vinland Petroleum required two permits in the Deer Lake basin and has spent some time doing some work on the potential in the Deer Lake basin. They made an interesting report to me a couple of months ago on their activities. They're very enthused and they're promoting potential internationally and attended an international oil and gas show in the United States a few months ago promoting that.

Canadian Roxanna Resources; a new player, they haven't been in Western Newfoundland before or in Newfoundland before to my knowledge, acquired a permit in the Flat Bay area, south of Stephenville. They haven't even started their exploration program and I'm hoping to see some action from them this year. Most encouragingly though, Hunt Oil last year bid $5.1 million to get the on land permit to the Port au Port Peninsula. Since then they have done an extensive seismic survey, they completed the survey around the end of March - I'm not sure of the exact date but around the end of March - 87 kilometres last fall through the winter. They have identified targets and they are seriously considering a possible well later this summer. They indicated in a public meeting in the Port au Port area a few weeks ago that there was a 70 per cent chance that they would drill a well that would be about 12,000 - 15,000 feet deep, a conventional vertical well on a structure, on the Port au Port. I'm hoping that they will carry through with that and I'm looking forward to it.

Marathon Petroleum has an offshore permit in Bay St. George. They've also completed seismic work in the bay, as well as air-magnetic surveys in the bay in cooperation with onshore. They've identified structures and have proposed to directionally drill a well from the onshore near the draw into a structure in the near offshore. This particular well that they've suggested would be about a mile deep. I think they said 5,550 feet directionally drilled. They are presently trying to find a drilling rig that they could bring to the Province to do that work. They have an application before the offshore board for a permit to drill as well as an application to us because they are drilling from on land.

It is very encouraging to have these companies actively exploring in the Province and we can only wish them well. This is the first time we have had this type of activity proposed based on seismically discovered geological structures. In the past, most of the drilling that was done was based on surficial geology and oil seeps and you could call it rank wildcats and most of that was very shallow drilling. This time you have a little more to go on, they are still wildcats but at least they have well-identified structural, geological targets. I will switch now to a little bit that the petroleum side does on the regulatory aspects of petroleum.

Global competition for petroleum investment capital coupled with low, crude oil prices over the last few months has led to a dramatic swing in activity and not just the last few months but the last few years the prices have tended downwards but particularly in the last year, the prices have been the lowest they have been in many, many years, and companies are looking for, I guess the most prosperous place to put their money in terms of where they are likely to have discoveries and where they can get quick return they are looking all over the world, so we have to compete with the world in our frontier areas.

We are trying to enhance our competitiveness in this regard so that companies will come to this Province. Increasing competitiveness is also a priority of other provincial and federal authorities and we are working with the federal government and with Nova Scotia in particular, for the Atlantic region in reviewing all regulations regarding oil and gas legislation and the rights issuance process. We are also comparing our situation with the situation for example in the North Sea; around the North Sea, Norway, the United Kingdom and elsewhere. I expect to receive some recommendations within the next few months from the work that is being done by the joint federal/provincial committee. A number of things have been done in the past, for example removing the 50 per cent Canadian ownership federally, a year or so ago and we think that helps. We have also extended licences from seven to nine years and we think that helps but we have to look at everything else as well.

On the energy efficiency and alternative energy side, back in 1991, I put an advisory committee in place to look at all aspects of energy use in the Province and that committee which is made up of people from the producer sector, the user sector, the utility and distributor sector, as well as the federal government, looked at it and put together what they call the: 10-Year strategic plan for energy efficiency and alternative energy. In 1992, that plan was approved by the provincial government and included in the Province's Strategic Economic Plan, with the objectives primarily of a 20 per cent improvement in efficiency and energy use and a 50 per cent increase in the use of alternative energy sources.

These measures contained in the plan are designed to meet these objectives by stimulating economically, viable energy options. A recent progress report on the first two years of the plan shows that twenty-three measures have been implemented by the government, by the utilities and by other participants since we started, so we are making progress. Actual expenditures have totalled $3.7 million, with the main provincial contribution being the staff of one particular division in the department. The resulting investment as a result of this money has totalled $10.8 million. Of particular interest is a reduction of energy costs in government-funded institutions. There have been a number of energy performance contracts for example, where, the private sector paid the bills and are getting paid out of the energy savings so it is not costing us anything, and several other such projects are underway right now.

Also, jointly with the federal government and a company called Superior Propane, a pilot project is underway to sponsor a transfer to the use of propane fuel as a transportation fuel. Our participation here was to reduce the tax on propane from 15.7 cents per litre to 7 cents a litre and we are having some effect; about 120 vehicles are now converted and we are aiming for 2,000 vehicles in Newfoundland within the next four to five years. On Monday, April 25th, two days ago, I informed this House about the signing of a four-year Letter of Co-operation on energy efficiency and alternative energy with Canada, with my federal counterpart, Miss McLellan.

This agreement provides for an orderly planning and control of co-operative initiatives to boost energy efficiency and the use of local alternative energy resources and it follows from Action 95 of the Strategic Economic Plan.

In addition this year, and in this Budget, we have funding for an integrated energy resource plan for the Province. This plan is to be prepared in co-operation with the energy industry and the Public Utilities Board with advice from that advisory committee, and it is a recommendation of the advisory committee coming out of its planning over the last two years. The intent of the plan is to establish a process that would lead in this Province to the least cost-mix for future supply and demand options.

I want to say a few words about the Offshore Development Fund. The Canada Offshore Development Fund, a $300 million fund that was put in place when this Province started towards the development of the offshore. To date twenty-five projects have been approved and the total commitment to now is $279.4 million and the balance in the fund is only about $20 million which is very little. I do not know if there are any new projects coming forward but certainly we need to keep a few dollars in the fund in case something particularly important comes forward.

On the offshore I probably should say a few words about what is happening with Hibernia. I know it has been in the news quite a lot but I want to emphasize some of the positives of what has been happening in this Province relative to Hibernia. I want to say a little bit about expenditures. Up to March 31, the end of last month, expenditures on the project have totalled $2.17 billion with 70 per cent of that money in Canada and 39 per cent of that money in Newfoundland, so $390 million out of every billion in the last few years has been spent in Newfoundland.

As we look forward for the next three years we are looking at at least $1 billion a year until Hibernia floats out to sea, three years at $1 billion a year, and again assuming the same amount we are looking at again about $400 million per year being spent in this Province on Hibernia.

One of the positive things about this is the number of people directly employed. At the end of March there were 4,017 people working in this Province and 3306 working at Bull Arm, 519 in St. John's, and 192 in Marystown and some others internationally, but over 4000 in this Province. A year ago the number was less than half that. We are reaching towards the peak and this summer we expect to reach the peak, but when you look at Marystown there are now around 200 and looking down the road a year, by this time next year I believe Marystown should be pushing 400 to 500, maybe close to 500 people on the Hibernia project. At Bull Arm 3300 should be become 3500 this summer, and I expect it to go higher than 3500. I do not know what the top will be but it will continue to grow.

On March 31 an office in Montreal that had 183 people working in it closed and these people, most of them, transferred to this Province, so approximately 200 people came down from Montreal and started working here the first week of April. We are at least 4200 right now in this Province and still growing, a lot of direct dollars going into our economy.

The super module being built at Bull Arm has passed the 50 per cent mark. They had a ceremony a few weeks ago when the passed the 50 per cent mark. They have done great work and the people working on it have received great praise because not only is the quality good but the productivity is good and they are ahead of the Koreans who are building two super modules and they are ahead of the Italians who are building two super modules.

MR. CHAIRMAN: Order, please!

I remind the minister that he has gone over his allocated time of twenty minutes, but if the committee is prepared to give him leave we will allow him to continue.

DR. GIBBONS: If you could give me two minutes then we can wrap it up? I will not go to the end of the notes I have here.

MR. CHAIRMAN: Mr. Minister, proceed.

DR. GIBBONS: The other thing I want to mention about Hibernia concerns Marystown. Even though we were disappointed earlier on in the year and did not get one of the contracts we were working hard to get we did finally get contracts for drilling derricks, and the driller's pipe rack, modules 71, 72, and 73, and we also got contracts to build two supply boats, so in total right now we believe the amount of work at Marystown is about equal to what we expected to get with the earlier contract we bid on and did not get.

Another thing we have worked on considerably in the last year is in the royalty area, the economic section. We spent a considerable amount of time on royalties and recently, a few weeks ago we approved a royalty regime for the onshore sector of the Province and are presently continuing some work to get one for the offshore sector, a generic royalty system, and we hope to finish that in the next few weeks.

I will stop there, Mr. Chairman, and let the vice-chair have it.

MR. CHAIRMAN: Thank you, Mr. Minister.

Before we proceed any further, I would ask if I could have a motion to adopt the minutes as distributed, the minutes of the previous two estimate committee meetings, April 19 and April 20, dealing with the estimates of the Department of Industry, Trade and Technology, and the Department of Tourism and Culture.

On motion, minutes adopted as circulated.

MR. CHAIRMAN: I would like to take advantage of the opportunity now to welcome another couple of members of our committee, Mr. Don Whelan, the Member for Harbour Main, and Mr. Percy Barrett, the Member for Bellevue, who will be filling in this morning for Dr. Bud Hulan, the Member for St. George's. I would also like to recognize this morning Mr. Glenn Tobin, the Member for Burin - Placentia West.

One point that I omitted when I was going through my opening remarks is to remind officials that if they speak in reply to questions we would ask them to first of all introduce themselves, and secondly to lean into the microphones. In the Legislative Chamber here we're used to standing to speak, and the microphones are placed accordingly. Today you will be speaking from a sitting position, so we will ask you to lean into the microphone, and for the benefit of the people doing the recording that you would introduce yourself so that it can be properly noted in Hansard.

Having said that, I will now turn it over to Mr. Woodford.

MR. WOODFORD: Thank you, Mr. Chairman.

The minister, in his remarks in his opening statement, one of the statements he made, and one of the comments he made, was pertaining to the onshore oil exploration and activity on the West Coast of the Province.

You mentioned Hunt Oil in the Port au Port area, and you mentioned Parson's Pond, I think, Labrador Petroleum, is it?

AN HON. MEMBER: Labrador Mining and Exploration.

MR. WOODFORD: Labrador Mining and Exploration.

AN HON. MEMBER: A subsidiary of Norcen Energy.

MR. WOODFORD: In the Parson's Pond area. He also mentioned in the Deer Lake area there was some activity especially as it pertains to Vinland Petroleum.

Could the minister elaborate on that particular area and tell me what has been done in the past year there, and what are the plans for the upcoming year?

DR. GIBBONS: Yes, Mr. Chairman, Vice-Chairman, Vinland is a local, Newfoundland based company that has obtained I believe it's three permits in total - two in that area and one in the Northern Peninsula area, I believe it is - and they did a survey of all the available literature as well as some field work this summer, and they looked at the possibility that they might try to do a seismic line across the basin this year. They have not done any seismic to date. It would start to get into significant dollars to do seismic, but the geological model that they showed me was very interesting looking, and they seemed to be very enthused about it, and they were hoping to be able to do a seismic profile across the basin as their next step.

I think they are working on the possibility of trying to arrange that in the future. I haven't heard anything from them now in about two months, I believe, but they made a presentation to me in my office and showed us what they had done, and they put together a nice picture of the geology of the basin and what they consider to be the potential of the basin.

The rocks are of the right age that there is potential for oil and gas, but we have no known sources, although I think there might have been some gas puffs in the past - are you aware of that - from some of the drillings, from the shell drillings from gas pumps, but there is potential there with the rocks of this particular age that they could have some gas and oil. It doesn't have the same historical work that we know about in Parson's Pond or Shoal Point on the Port au Port, but it has some potential and they're promoting it.

MR. WOODFORD: You also mentioned that you have agreed, and came up with a royalty scheme for the onshore development, because I think that one of the concerns that Hunt Oil had in the Port au Port area for a few months was the royalty scheme, and whether they - I don't know whether they - maybe it was just rumour, whether they are going to keep on drilling or make a decision to drill a well this summer. So you've mentioned that you got a royalty scheme, is that scheme favourable to the companies and have they agreed so far with it?

DR. GIBBONS: We've reviewed it with the companies and it's approximately like a scheme that's in place for Canada Lands by the federal government but a little less onerous then that particular scheme because we are, in a sense, a virgin area where there's no production going on. We have reviewed it with the companies and it appears that it's acceptable to Hunt Oil. It's very comparable actually to a proposal that they made to us when they were looking at what the potential number should be. There's some variations in structure but in terms of the take by the industry, by the government from the industry is about the same as what they saw as appropriate.

MR. WOODFORD: I understand that there's an environmental assessment being done now that pertains to the Tiara Marble Company on the Goose Arm Road, the dimensional stone whichever, could the minister give me a run down or his officials on the status of that particular development now?

DR. GIBBONS: Yes, well I know that we helped sponsor some drilling on that particular development last fall under our mineral exploration incentive program. As a matter of fact we contributed $38,125 towards a joint project where we go up 50/50 on the drilling, up to $80,000. So they did a project that was twice that I guess and I know that they had to get approval from environment to even get that drilling to go ahead. Now I'm not sure exactly what the status is of the other environmental work there but they've got a huge marble deposit that has a variety of colours in a number of spots. What I should do is ask Paul Dean, the Assistant Deputy, who is most familiar with that and maybe Paul can give a more detailed report.

MR. DEAN: The drilling that was done last fall by Tiara identified the best type of marble and the marble that would be most acceptable in the marketplace, the colour and texture. There's a variety of marble types there, as we know. So the next stage is to remove some commercial blocks. In order to do that on a commercial basis the Department of Environment and Lands has asked for an environmental preview report. My understanding is that the terms of reference for that report have been finalized or near to being finalized - the terms of reference included public hearings at the Legion in Deer Lake. I don't think the preview report, as such, is very far along and until that report is completed and the public hearings are taking place then the quarrying cannot proceed. Hopefully that will happen in 1994.

MR. WOODFORD: Could the minister or his officials give me a so called status report on the Glover Island activity as it pertains to the exploration for gold?

DR. GIBBONS: Yes, Mr. Vice-Chairman, there was drilling on Glover Island as well last year. As a matter of fact there were two different drilling projects on the island, two different zones. We again cost-shared one up to $80,000, the maximum under our exploration incentive program with the company, again a Newfoundland based company, and that was the Lunch Pond zone on Glover Island and we cost-shared Kettle Pond drilling as well for a total of $16,317 for us. I don't know exactly where it sits today and what they plan to do in 1994 but again I would ask Mr. Dean if he could give us some more details on what he knows about their plans for 1994.

MR. DEAN: Thank you, Minister. Some of the drilling that took place in 1993 was successful. There's a lot of gold on the southern end of Glover Island but to date, I guess I could say in summary that a large enough body of sufficient grade hasn't been outlined by exploration. So it's our view in the department that more exploration is required. Most of the exploration that's been done there to date has been encouraging but the grades have been relatively low versus some of the deposits on the Baie Verte Peninsula for instance

MR. WOODFORD: Minister, I can't help but take notice that this morning there are no officials available or present from Newfoundland Hydro. Every other year that I have been involved in the estimates there have been officials available from Newfoundland Hydro to either assist the minister or whatever, for informational purposes, whichever. In any case, the report from Newfoundland Hydro from last year, is there any indication when that will be available?

DR. GIBBONS: Yes, I know that. Mr. Vice-Chair, I have to tell you that in my memory I don't think there was anyone with us from Newfoundland Hydro last year. I know in some earlier years they were with us because there were line items in the budget related to Hydro in terms of subsidies that the government was paying to Hydro, but last year there was no one from Hydro with us, and this year there is no line item in my budget dealing with Hydro. We no longer pay any subsidies to Hydro. They're not present in the budget, but the annual report from Hydro is a different matter. The statutory requirement of Hydro is that that report be available to me, that I receive it by April 30, so I shall receive a copy. They have never failed yet to deliver the annual report, provided to me by the statutory date, April 30, which day is what, Friday of this week?

AN HON. MEMBER: Saturday.

DR. GIBBONS: Within fifteen days after that, I believe, I am required to table it in the House of Assembly, so in the next couple of weeks I would expect that the published report will be available.

I have been told that the report is at the printer right now being printed, and we're waiting on completion of the printer. As soon as it comes back from the printer then the one for tabling in the House will be available, but I will receive the statutory copy no later than April 30. The law requires that they give it to me by that day.

MR. WOODFORD: Minister, approximately a year ago - and you can clarify that for me; I don't know the exact date, but I think it was approximately a year ago - you said, I think it was in last spring's session, before we ended in June month, that the privatization of Hydro was not viable at that time. Correct me if I'm wrong. Why would there be a difference in the privatization of Hydro not being viable last spring and would be in the fall, a few months after? Can the minister explain that statement?

DR. GIBBONS: Mr. Vice-Chair, I don't remember ever saying that privatization was not viable. I don't remember ever saying the privatization of Hydro was not viable. I don't know where that comment is...

What has changed, we had not made any decision on the privatization of Hydro a year ago, and I think we have been over and over that in the last few months, but we've been assessing it and we made the decision two months ago that we were going to proceed with it, but only after a lot of analysis and finally a decision by the government.

A year ago I would not have known whether it was viable or not in terms of an analysis that was done, because at that time we had not completed any analysis. This is April. It was January a year ago that we started the second assessment of the proposal from Light and Power to buy some components of Hydro, in particular the 15 per cent of distribution assets now owned by Hydro, including the rural diesel areas, and some transmission related to it. We started that analysis in January, the second time around. We had done it, as everybody knows, back in 1989 relevant to a report from Fortis to buy some components, but we had not done a great detailed analysis of Hydro for privatization. We have done that in the last twelve months or so.

MR. WOODFORD: Can the minister tell me whether - I heard early last fall there were some rumours, nothing official, just some talk around, that Newfoundland Hydro was thinking about - there was a possibility of them going for a rate increase. Now I haven't heard anything since and, like I said, there might not have been anything to it, but would there be anything the minister could tell me that would indicate, whether they are privatized or not, that Newfoundland Hydro would have to go for a rate increase in any case, in the past year?

DR. GIBBONS: Mr. Vice-Chairman, the last time that Hydro was in, again I don't know the exact dates but it was in 1992 I believe that Hydro was in to the Public Utilities Board for a rate hearing and at that time the Public Utilities Board ruled and gave a report, effectively gave them no increase, effectively left them with fixed rates. It was at that time that we, as a government, made a decision that we were not going to allow even a recommendation of the PUB to carry forward relative to some recommended increases in rural diesel areas and said that we were going to have a policy hearing on rural diesel rates. That one did get called last year although it did not get held because it got tangled up in a sense with the timing of the Hydro privatization assessment. Hydro said a year ago that they were not going to look for any increases for 1994, I think I said that in the House and they did not look for any increases for 1994. What we are now saying is that Hydro would expect to go to the Public Utilities Board in the fall of 1994 for new rates for 1995 subject to privatization. It would be a rate hearing in the fall of 1994 for next year but they decided they did not need to go in in 1993 for a rate increase for 1994.

MR. WOODFORD: So what the minister is saying, whether Newfoundland Hydro is privatized or not, that they would be going to the PUB in 1994 for a rate increase?

DR. GIBBONS: No, I am not really saying that. I am saying subject to privatization - they certainly said since we have been dealing with privatization in the last few months - they certainly said that they would be going to the Public Utilities Board in the fall of 1994 for a review of rates for 1995 for a privatized Hydro and I don't think we have made any comment on what they would or would not do if it were not privatized, I have not discussed that. I have not said anything publicly on it either.

MR. WOODFORD: Wouldn't it be obvious that if you went for a rate increase for a privatized Hydro based on what the minister and the government has made available now, that surely god they would be going for one, if they are not -

DR. GIBBONS: They probably would as well, again that would be subject to the company making that decision. Then the PUB ruling, they could rule like they did in 1992 saying: sorry you get nothing or they could give them something depending on what is being asked for but the last time they went in in 1992 they did not get an increase. They were allowed to keep - I believe, if I understand it right - the same base rates.

MR. WOODFORD: Has the minister or his officials, been approached or know whether Newfoundland Light are planning to go for an increase this year?

DR. GIBBONS: I have not heard anything on it. Again, last year they decided not to go in for a rate increase for 1994 and I have not heard any comments from that company as to whether or not they would be going in 1994 for 1995 but normally these companies have been going in about every couple of years. That has been the normal practice, every few years they would be going into the board and getting a review of rates and review of costs.

MR. WOODFORD: A few years ago - I just forget what Budget it was now, I believe it was Budget 1991 - there was a statement on mini-hydro sites in the Province, up to 15 megawatts and so on and there was a lot of activity over the last couple of years by small companies around the Province and outside the Province as it pertains to mini-hydro sites and hydro developments in areas of the Province. In fact, there were a number of submissions given to Newfoundland Hydro at the time and I think they called for a total megawattage of some fifty. I think there was a total of 50 megawatts called in small hydro sites, so there were a number submitted to Newfoundland Hydro, I know that and there were some adjustments made as it pertains to the tender at that time because of the local preference policy, that had to be recalled and I think that deadline was last August. Has there been any activity or, why hasn't there been any activity since that? Would that have anything to do with this proposal to privatize or what, because there has been absolutely nothing on it since last August?

DR. GIBBONS: No. I can bring the hon. member up to date on that. Vice-Chair, you and I, both recall when the amendment was put through this Legislature to allow up to fifty megawatts to be done by private developers and Hydro put out the proposal call looking for, in a sense, the first time around looking for expressions of interest and they received expressions of interest on over thirty sites; and then, the second time around which was last year, they said: okay, now let's get serious and let's get the detailed, specific proposals in with the quality of power that could be produced, and proposed rate at which that company could develop that quality of power.

Initially, that was supposed to be decided on, as you said, mid-summer last year, last July-August, but things had been changing in the last two years in terms of our energy demand on the Island; our growth in demand had decreased because, primarily of our recession so instead of needing these sites to be available by 1996-'97, which was what we thought two years ago, the date kept getting pushed later, and now, the sites don't need to be on stream until 1998-1999, because our energy demand has flattened considerably, and has not grown so steeply as it was growing when the initial proposal call went out.

The initial proposal call said up to fifty megawatts. The final response that came in last year had, I think, eleven projects totalling something over 100 megawatts. Hydro reviewed these proposals and they selected four, that totalled thirty-eight megawatts. They didn't select fifty because the call only said up to fifty and if they had selected one more it would have put it over fifty and the next one in line I think would have driven it to about fifty-three or so, but they took the four projects that bid the lowest four prices and were all technically acceptable.

The companies that did not win were informed in December. There were seven companies that bid, were informed in December: we are sorry, you are off the short list, we have done our evaluation, we have short-listed four, the rest of you are gone. The four that were short-listed are then reflected in the privatization legislation. They are reflected in that legislation saying that Hydro could purchase up to thirty-eight megawatts of small hydro from these sources without requiring PUB approval to buy these thirty-eight megawatts of power.

Because they are part way through the process, it is a legitimate process done through public proposal call, following the rules of the Province, and what Hydro was told, the four that are on the short-list is that, we will tell you by June, whether we need your power in 1998-'99 or not. We are presently reviewing our demand forecast - and they do this every six months approximately - our demand forecast, right now we are thinking we will be needing in 1998-'99 and we are going to tell you by June, so within the next month or so, these companies will be informed and if it is yes, then we will see them start to get on with their field work and get into the construction in the next year or so to have power available by 1998. If that power is then developed and available by 1998, that power would take us through to at least the year 2000, maybe 2001, depending on our growth rate at the time, maybe 2002 even.

MR. WOODFORD: Could the minister tell me the names of the four companies that were short-listed?

DR. GIBBONS: Abitibi-Price and Star Lake is one of them; a company in your district -

MR. WOODFORD: Algonquin?

DR. GIBBONS: - Rattling Brook is it?

MR. WOODFORD: Rattling Brook, Algonquin Power out of -

DR. GIBBONS: Rattling Brook, I can't remember the name of the company but it is about a four to seven megawatt project and there is one on North West Brook, another on South West Brook in the Trinity Bay area, so these are the four that are on the short-list. I don't remember the exact names of the companies but these are the four areas and one of them is your area.

MR. WOODFORD: So the Abitibi-Price one must be a fairly big one, is it?

DR. GIBBONS: No, it is a fifteen megawatt. Nothing is bigger than fifteen and I think we have two fifteens in this total plus a seven and a four, but the total is thirty-eight, and they will get their decision by June but they are on the short-list as the winners, subject to getting a decision in June that the power should be available by 1998.

If the demand shows the power is not needed by 1998, they may have to be told: We're sorry; we don't need your power until another year later, because they should not put the cost of any new power into the grid, because the rate payers will have to pay, until it's needed, so this is why the company is being cautious about it and saying: We only start buying when we need.

MR. WOODFORD: One final short question, Mr. Minister. What would be the excess megawattage in the Province now?

DR. GIBBONS: There isn't a big excess as such.

MR. WOODFORD: It's just the demand is not there.

DR. GIBBONS: That's right; the growth is not there. What Hydro tries to do is have enough to meet the demand plus a cushion, so they always try to maintain that cushion, and I don't remember exactly what the number is, but they try to maintain that cushion.

Even in 1998-'99 you wouldn't be down to the two things meeting. There's still that cushion there, but they always have to keep the cushion because when you hit the cold periods in January, February and March you reach certain peak levels and you have to be able to handle those peak levels. So they have energy demands and power demands differently.

MR. CHAIRMAN: Thank you, Mr. Minister. Mr. Tulk.

MR. TULK: I have a couple of questions for the minister on the peat industry in the Province. The minister will recall that last year there was an international conference in Corner Brook on this very industry. I think it's safe to say that the peat industry in Newfoundland right now is in its infancy; at least it's not in an embryo stage or something. That conference was a very good conference. It is one of the best that I have attended in the forty years that I have been alive, but I am not aware that there is -

AN HON. MEMBER: (Inaudible).

MR. TULK: Forty years, that's right.

AN HON. MEMBER: (Inaudible).

MR. TULK: My grey is premature.

I am not aware that that much has happened in the Province since, or what has been the follow-up. I would like for the minister to elaborate on that somewhat, and perhaps outline to us in what particular areas of the Province that the economic possibilities are, and just what he foresees happening in the very near future for that kind of thing.

DR. GIBBONS: Thank you, Mr. Tulk.

There is no question that this Province has some huge peat resources and, as a geologist myself, my familiarity with that resource goes back to when I was a student geologist. The first year that I was a student geologist thirty years ago, out on a field survey for this Newfoundland government, there was another field party out there doing a peat survey, and I remember the book they put out in 1968 on the peat resources of this Province. They are huge. They are still there, for the most part, and we haven't had a lot of development.

We, as a department, participated, and as a government, and some other agencies of government, participated in organizing that particular conference last fall. We have always tried to promote the growth of the industry.

I think what is unfortunate about the peat industry is it's a low value industry for the most part, but we have had some progress. For example, there is a high point peat company in central Newfoundland that has had some great success with peat as an oil absorbent, because that is a high value type end product, and they are manufacturing it and shipping it around the world. Most of their markets for peat are down around the Caribbean, primarily tied in with oil clean-up and some things like that, but they are exporting it to Texas, they are exporting into Argentina, Venezuela - I think Argentina - anyway, most of the product that is produced goes to export, and that is where they are getting the high value for this product.

The horticultural area of peat seems to be a low value, and we haven't made much progress in that, and we still want to promote it, and there is also some discussion, consideration still, of peat for energy. A lot has been in the news, of course, about the proposal at Stephenville to have a peat burning facility there, but at this stage it hasn't been approved. We have several permits out in our department on peat bogs for development; some are in the operating stage and some that are just there, I think, looking for an opportunity and I wish we could move faster.

MR. TULK: Mr. Chairman, I presume we have ten minutes to go back and forth?

MR. CHAIRMAN: (Inaudible).

MR. TULK: Mr. Chairman, the Stephenville project, I think it is the Stanton Group.

Those people were at that conference last year, and I wonder if the minister could elaborate on that and tell us just what the status is on that project without of course, endangering the project itself, and, if any comment he makes publicly, will endanger that project, then of course, I can understand he would not want to make it; but I wonder if he could fill us in on the status of that project, just where it is and what are the problems being encountered with it, because it seems to me that, that is a major project for that area.

It is highly labour intensive and will employ a great many people as well as add to our, I suppose, probably a surplus of electricity in the Province, but it will certainly add to the amount of electricity that we have in the Province and will probably lead to technological spin off in the peat industry. I wonder if he would like to comment on all those things about the Stanton project in Stephenville.

DR. GIBBONS: Well again, Mr. Chairman, I don't want to get into great details on it but it is a project to burn peat, that will be one of the fuel sources and a generator at the Abitibi mill in Stephenville. This type of generation was not included in the proposal call that Hydro made a couple of years ago; they were looking for small hydro as the sources, and the Stephenville proponents have been saying that they should be considered too and they are still talking about ways that that might be possible, but I am not sure if there are ways in the short time, but I guess the initial message is, as I said a few minutes ago to the Vice-Chairman, if Hydro takes the four small hydro projects totalling thirty-eight megawatts for '98-'99 supply, then, there is not going to be a need for any new supply to go into the grid until 2000, 2001 or whatever the year is depending on our demand growth, so I think Stanton and the Abitibi people at Stephenville are looking at other possible options to try to have their project considered earlier and I don't know what will happen to that.

MR. TULK: Yes. There is one other question, minister: Is this project with Stanton, are they requiring any public money, or are we just looking at private money? Has there been any public money put into that, or any assistance from government in other words I guess, is what I am saying, at either federal or provincial level and to what extent or, are we talking about private money and just how much are they prepared to invest in that project themselves?

DR. GIBBONS: I think for the most part, most of these small energy projects that I have talked about including Stanton and the small hydro, are presently using private money. Some of them may have had access to some money from, maybe ACOA, in doing their assessments initially, but certainly after selection of the project whichever it should be, it would be all private money, it would not be government's money, it would be outside money.

MR. TULK: Okay. It could turn to another aspect though. When we talk about what is happening with the peat industry in Stephenville, I think we are talking about the fuel side of things, however that fuel is converted, and in this case I think it will be converted into electricity, but we are talking about the fuel side of the peat industry. There is the other side as the minister mentioned and that is the horticultural industry, peat industry that is possible.

There was a great deal of interest in that conference last fall. There were people from Ireland, people from Germany, people from all over the world actually at that conference, who expressed some interest. Has there been any developments in those fields from, let's say, foreign countries, expressing any interest in coming here and getting into the horticultural peat industry at all or, are we still where we were before the conference, because I say to the minister, I think it is a shame if there is no follow-up to that conference. I think it's a shame, because I think there's great potential particularly, I might say to the minister, in my own area, in the Gander to, shall we say, Lumsden area, in the Bonavista North area where we were told, I think, at that conference, or led to believe, that of the inventories that have been done of horticultural peat, the peat in, shall we say, the Bonavista North and Gander area is probably the highest quality of horticultural peat that you could find in Newfoundland, and certainly has the greatest amount. I am not sure about the quality, but I think it has probably the greatest amount.

Could the minister comment on that whole area to say what is happening? Is anything happening, or is this another conference that was just held and that will be the final end of it? Because it was a great conference and it's a crime if somebody doesn't follow up and try to get those people interested in this thing.

DR. GIBBONS: Certainly, Mr. Chair, our intention is to continue to follow up wherever there is an economic possibility and, as Mr. Tulk said, we do have great resources on the peat side, but the problem seems to come down to the economics of taking this type of resource and getting it out for export, and a number of companies have looked at different options to do that so that it could be done in an economic way.

We unfortunately have a problem with the cost of transportation if we're trying to take low value product a long distance, and a lot of competition on it, unless you're dealing with a high value product like the stuff at High Point where they're dealing with advanced products, Oclinsorb (?). The value doesn't seem to be there unless you find some way to take it out in bulk, and that's still being looked at, so there are still those who want to do that, and we want to encourage it, and I want them to find a way to do it, but transportation costs seem to be our biggest negative factor. There's no problem with the resource. We are not bound by the quantity and quality of the resource; there's plenty.

MR. TULK: Thank you.

Just one other question, Minister: How big a problem - you might want to get one of your officials to answer; no, the minister is probably an expert in this as well - is the weather conditions in Newfoundland, because peat demands a fair amount of dry weather, I believe. I'm not an expert. How big a problem is weather itself in Newfoundland in terms of the drying of peat and turning it into either a fuel or a horticultural product?

DR. GIBBONS: Mr. Chairman, I'm not an expert in that either.

MR. TULK: Aren't you?

DR. GIBBONS: No, not on the weather.

MR. TULK: I thought you were.

DR. GIBBONS: I have been told -

MR. TULK: You're too modest.

DR. GIBBONS: I have been told that our weather is one of our problems, that we have so much rainy weather that we are limited in terms of the number of drying days - or drying hours, even - that are available to get peat available for energy or otherwise. That is one of our problems. I don't know if Paul Dean or Martin Sheppard might want to add to that.

MR. SHEPPARD: Just to confirm what the minister says in terms of the drainage problems we have, there has been some work done into a procedure for draining the bogs, called mole (inaudible) -

MR. TULK: I saw it last year, yes.

MR. SHEPPARD: - which is a specific technique that seems to get rid of the moisture better than conventional techniques but, as you say, the drying season is very limited in Newfoundland, and that is one of the severe constraints that we are faced with in terms of peat development, either for horticultural purposes or as a fuel.

MR. CHAIRMAN: Okay, we will go to Mr. Shelley.

MR. SHELLEY: Thank you, Mr. Chairman.

I have a few questions to start with relating to the mining, just one specifically to the estimates, on page 157, 2.1.06. That has to do with the MDAII, of course, the Canada-Newfoundland Cooperation Agreement. That is the whole reason for the increase from $682,300 in total, to $92,100?

DR. GIBBONS: Okay, page number is 157.

MR. SHELLEY: I realize that that has ended, the Canada-Newfoundland Corporation Agreement, the mineral development. That $92,100 that is there now for the estimates, is that the same amount that was there while the agreement was in place?

DR. GIBBONS: No.

MR. SHELLEY: For the provincial allocation?

DR. GIBBONS: No, this is some carry-over money to help with some reports and to get some maps done because anything that is approved by March 31 and not spent, can be carried over into this fiscal year. So that is some carry-over money under the agreement and you can imagine that people who have been working on reports and maps and doing field work for the last four years have a lot of reports to do, maps to complete, so there is some carry over this year for them to complete that work.

MR. SHELLEY: Okay, that is the carry-over - the question I guess basically is that there is no money from the provincial this year that has gone into that?

DR. GIBBONS: Yes, but if you look at a different page, on the next page you will see Mineral Resource Management - MDAII, here is where we have approved some carry-over money in that particular category. On the field survey side, Geological survey side, the field work was finished as of last year. So now it's just a matter of reports and maps that (inaudible) but if you look at that next page, you can see that we still have a fairly significant amount being carried over this year under the agreement and you see some big numbers there. For example, under Grants and Subsidies, under Mineral Resource Management, you see $175,500, that is for the prospectors grants and training programs. We have a course that is starting next month, May 28, for example where in the fourth year we do the prospectors training program at Stephenville. This year we are going to have forty prospectors grants, in previous years we had given out twenty-five a year, this year we had enough money to carry over, in the final carry-over year of the agreement, that we can give out forty grants. So we are still trying to stimulate that sector.

MR. SHELLEY: Okay, well that is a good answer because that was the question I was leading up to and that's the courses for this year and if it rolled into this particular part.

DR. GIBBONS: Yes, that is covered because we approved it and carried the money into the Budget.

MR. SHELLEY: Are you saying Stephenville, those courses -

DR. GIBBONS: We have held them every year in the Stephenville Community College because it has some excellent facilities. It is an excellent base because it is only a short distance from various types of geology and mining opportunities that people can study.

MR. SHELLEY: And of course to tie this all together with geological survey - I think I read in your book that there are something like 96 per cent, 96.5 per cent actually, have their provinces available for mineral exploration and of course exploration will take place - of course a big incentive is to have good work done in geological surveys and that is the whole reason behind all of this, right? That is what I was leading up to just then in the estimates.

Okay, some more specifics now and a lot of it happens to be in my district so I guess I have to ask them from that perspective. The first one I will mention - and it has not been talked about very much lately but I would just like to have an update on it - is C-Core and what they were doing at the bay there in Baie Verte? I think there was some scuba diving, some dragging going on there and some problems with the fishery for a little while but I think that is cleared up?

DR. GIBBONS: Paul will probably be able to give me an update on it but you are right, C-Core did some contract work for us in the Near Shore area because we wanted to work on the Near Shore where we know there are gold prospects. So we wanted to do a little bit of surveying and they found some interesting gold numbers in the Ming's Bight area, around Baie Verte. They wanted to do some dredging to see if it could be economically done but from the test sampling that they had done, they had some very interesting numbers. I don't recall the details, I have not talked to anyone recently, so maybe Paul Dean could -

MR. SHELLEY: That is what I was wondering, if it is to be continued.

MR. DEAN: Thank you, minister. Within the bay of Baie Verte itself, there are several small placer gold deposits. C-Core identified one at Deer Cove and they wanted to do a test marine mining project on that site. They consulted with local fishermen's committees in the region and the fishermen felt that there would be a conflict, there would be a potential disruption of fish habitant with this. So they said: no, we are not in favour of this.

There were a couple of other sites, one in Gander Bay and another site near Pine Cove within Baie Verte, which appeared to be more acceptable. So some test work was done at Gander Bay site by C-Core last year and my understanding is that C-Core is proposing to do some further work at the Pine Cove site in Baie Verte in 1994 and 1995.

MR. SHELLEY: There is no conflict with the fishermen at the Pine Cove site though, is there?

MR. DEAN: None that I am aware of.

MR. SHELLEY: I thought that when you consulted with the fishermen on the first site, wasn't that resolved after? Didn't they agree that it wouldn't disrupt the habitat?

MR. DEAN: If there was a resolution, Mr. Shelly, I am not aware of that.

MR. SHELLEY: Okay, because I haven't heard anything about this particular one since, and I don't know where it's been going. That is why I thought I would bring it up today. Is there any outlook for this summer of them continuing in the Pine Cove area?

MR. DEAN: Yes, there is a plan to do some further test work in the Pine Cove area, and then move forward somewhere in the Province, likely Baie Verte again, with a full scale test mining in 1995. That's the plan. C-Core, I don't think have the funding in hand yet to proceed with that. They're still applying to research organizations for funding for the test mining.

MR. SHELLEY: Thank you.

Just a quick update and, I guess, a few comments on Pine Cove. As the minister said earlier, we're all hopeful of that. Of course like everybody the media ask you every day, especially locally, my local people, what's happening with Pine Cove?

As far as I understand it, and I would see if the minister would elaborate on it, is basically they have some positive reports back from ACOA which they were looking for assistance to get started with the new system that they call the (inaudible) (?) of course, and environmentally I think everything is pretty sound. Is it basically that the problem lies with Pine Cove itself now, and its own cash flow? Is that where the problem lies right now, and that is why we are held up?

DR. GIBBONS: We have all been waiting for a final decision on financing. This particular project has been approved through the environmental assessment process, and there are no hold-ups on that side, and everything now is financing. They have been dealing with their banks. They have been dealing with ACOA relative to guarantees, and frankly I expected it all to get approved last year some time, and now I am hoping that it will all get approved before you and I are in Baie Verte at the mining conference on June 17. I certainly hope that this year when we go there we can say that it's done and it's under way.

We, in our department, have done a rather detailed assessment of this particular prospect as well, looking at all of the drill hole results, all of the numbers on the analysis, and we like this prospect, we feel comfortable with the tonnage and grade, and we would like to see it move forward.

MR. SHELLEY: The next one I will jump on is in the same area, of course, as the Nugget Pond. I would just like for you, if you could, from your professional view, or one of your officials, is the phases now that this is going through. Is this right in saying that basically what the Nugget Pond people are going to do this summer is sort of a combination of mining and exploration, because they're actually doing bulk samples; is that right? Then, if I am right there, what are the next phases before it actually turns into full-fledged mining?

DR. GIBBONS: You're right. Have they said publicly how many dollars?

MR. SHELLEY: Seven million, yes.

DR. GIBBONS: They have said publicly it's $7 million, yes. They would like to spend about $7 million in the next ten months on going underground and testing this prospect underground. They have to build an access road to the site. They have received approval from environment for that access road, and I assume they are getting ready to build it. They are waiting for approval from environment on the underground development work, and it's going to be some time this week, if not today.

MR. SHELLEY: I think it was the 25th, wasn't it, of this month, that they were supposed to give the final.

DR. GIBBONS: It's pending any day. I don't think it happened yesterday, but it's pending this week as to what will be required by the environment department. If nothing significant is required, they should get their release some time this week and then they can move on towards planning the underground development work, and by going underground they are going to, as you said, do some bulk sampling underground. They have been testing the quality of the ore, and again the soundness of the rock for underground mining, and if all of this turns out to be positive then I think very quickly in the next year or so it can become a mine. I am not sure. Maybe Paul Dean can speak more specifically on that, because he has been dealing with them very closely. I will ask Paul to speak on it.

PAUL DEAN: If the exploration project as proposed at Nugget Pond proceeds this year then by, say, February of 1995 when it should be complete there should be extensive underground development done on the deposit. The ramp, for instance, should be basically to the bottom of the ore pond, so mining could proceed relatively rapidly after that.

It will require further environmental assessment. In other words, the mining project itself is a separate registration under the Environmental Assessment Act, and that registration would have to describe in fair detail the nature of the mining and the milling, and I think that's an important point there, that the company has to decide what size mill, what format of mill, and what final product is going to be produced on the site. So there will have to be a further environmental assessment on the production phase itself, and the timing of a production decision will rest on, I guess, the timing of that environmental assessment process and how fast the company can get through.

MR. SHELLEY: I guess it's fair to say, too, that just on those two sites, Pine Cove and Nugget Pond, that the surrounding areas also have some major findings and that actually these mines, if they get started, could be the catalyst to start some other sites to be developed. Is that right?

DR. GIBBONS: There are a number of prospects on that peninsula, and I think annually for several years about 25 per cent of the mineral claims held in this whole Province have been on the Baie Verte Peninsula. It is one of the most prospective areas you have geologically in the Province.

As you say, with one development proceeding it would stimulate more exploration activity in that area and you could get more, especially if you get that gold milling complex centred in the middle of that.

MR. SHELLEY: You lead right into the next question, I guess, because we're all on the same wavelength here, but the next one leading up to that, of course -

MR. CHAIRMAN: Order, please!

Mr. Shelley, as you are asking this, I remind you that this will be your last question of this section of your time.

MR. SHELLEY: Okay, I will get time to come back hopefully, but the central milling aspect that has been mentioned out there, and with relation to the Rambler properties, can you just elaborate on what the potential is for that, and how you see that working?

DR. GIBBONS: I don't know what might happen to that.

MR. SHELLEY: Is that the best alternative?

DR. GIBBONS: The group that has ownership of that particular property right now, the best stimulation for an operating gold mill is an operating gold mine, so if you have a mine operating with a modern mill in place, then that's the best option, I think, for a central complex, rather than going out and developing a complex totally separately.

At the Rambler site we do have the tailings which have significant gold in them, and if there were some appropriate rehabilitation of the mill there you could put the tailings back through and then you could bring other things to that site as well, but first you need someone to move forward, and the one that's closest to moving forward is Pine Cove, and Nugget Pond second.

MR. SHELLEY: Thank you very much.

MR. CHAIRMAN: Mr. Whelan.

MR. WHELAN: Thank you, Mr. Chairman.

Mr. Minister, I have a special interest in the head of Conception Bay. There are some sites in there - some old excavation sites - and I noticed in the estimates here that you have regional mapping which provides geological maps and reports on all areas of the Province. I believe the old sites, however, inspectors at that time were interested in copper and zinc. Has there been any recent exploration or any recent study done into that particular area?

DR. GIBBONS: As you said, Mr. Whelan, we do have maps of most of the Province. We have a huge one of this particular part of the Avalon that was put out a couple of years ago, and we have some maps for your area, but I don't think we put out one specifically in the top of Conception Bay, the head of Conception Bay. There has been interesting gold in that region from what we call the Holyrood granite and the Holyrood belt that goes right down through the Avalon. There have been mineral claims staked in search of gold, associated with the pyrophyllite mine that's out there at Manuels, that same geological belt.

Since I am not on top of the details of that, maybe I will ask Paul to tell us a little bit more about what he knows about what is going on there.

MR. DEAN: Yes, Mr. Whelan, there are regional geological maps available for basically the entire Avalon Peninsula. It's fairly well known geologically. The department doesn't get into doing really detailed geological maps and geological assessments. In most cases we leave that to the private sector, to mineral exploration.

In the case of the Conception Bay area there is renewed interest primarily for gold at the present time, and some of the old prospects, for instance around Turks Gut, have been staked by local prospectors, and they are evaluating and sampling some of these old prospects for gold at the present time, and we have been encouraging them and providing them with geological support information in that assessment.

MR. WHELAN: Thank you.

Mr. Minister, several years ago there were officials from government, I believe, and officials from some oil companies, who approached one or two municipalities in the head of Conception Bay, had meetings, and the meetings concerned the possible construction of an offshore supply base some time in the not too distant future. Has there been anything ongoing? Has that been called off, or is there something still in the works on that? I haven't heard anything about it for a year or two, so it's sort of -

DR. GIBBONS: Mr. Whelan, there certainly hasn't been much discussion of the offshore supply base. One of the decisions that the Hibernia management company will have to make, I guess in the next few years, is what port they will use as a supply base for Hibernia, whether they will use St. John's or some other site. Whether there's a need to develop a new port I don't know; I doubt it, but I certainly agree there was a lot of action on the possibility of a number of big port developments a few years ago. Right now there is a small amount of activity in the offshore. I am not sure that anyone needs to move vigorously on that.

Hibernia, for example, is talking about three supply boats. It's not a lot of port activity with three supply boats. They will have to have a lay down area as well, and I don't know if it will be St. John's, Bay Bulls or some other site around, but they have to make a decision. Maybe my deputy minister will have more on that.

MR. WHELAN: I think this may have been in anticipation of some development other than Hibernia.

MR. GRANTER: I think it may have been connected with the concept that was being promoted by one company for the construction of a concrete floating production rig. They did look at one particular site in the head of Conception Bay. That was about three or four years ago at least, as I recall it, but to my knowledge there has been no further activity on that. They were promoting a concrete floater as a possible production system for Terra Nova and other oil fields offshore.

On the supply base side, quite a long time ago there were a large number of areas identified as having the potential for development for that purpose. You may be aware that there were land freezes and so on put in place at that time.

MR. WHELAN: I believe they are still in effect.

MR. GRANTER: Yes, if not all of them, certainly some of them are still in effect. That was premised, I think, on the expectation that there would be a lot more exploration activity offshore than has actually materialized.

MR. WHELAN: Thank you.

You have a section here dealing with alternate energy sources. I was wondering if you could probably elaborate on the number of alternate sources that you were talking about there. I was wondering if there was any consideration given to wind energy, considering the fact that I believe most of Hawaii is powered by wind energy. I know in California there are actually farms of wind generators. When you compare the two places, I would assume that we get at least as much wind as Hawaii or California, and I was wondering if there has been any consideration given to that type of energy, or is there anyone in the Province now who may be involved with research into that type of resource?

DR. GIBBONS: Mr. Whelan, in the past Newfoundland Light and Power has been involved with wind energy research. They have had wind turbines tested. I think they had one on Bell Island for a number of years. As you said, there are places in the world where there are some wind turbines and this could be an answer for some of our remote sites if the technology can evolve and could be put in a place where you never expect to get on the grid but do have high wind regime. It deserves continued research is my view on it.

MR. CHAIRMAN: Is it the wish of the committee that we recess for five or ten minutes? Normally that is what we would do at this stage of the proceedings. In view of the fact that the government caucus room is being occupied with a caucus meeting right now we do not really have the luxury of being able to invite the minister and his officials back there for a cup of coffee, but if it is the wish of the committee that we take a five or ten minute break just to stretch our legs the chair will accommodate that.

MR. TULK: Mr. Chairman, it is usual, as you say, for the committee to break and I have a couple of things that I intended to take care of in this break as it is the normal thing to do.

MR. CHAIRMAN: Yes, the chair recognizes it is the normal thing to do.

MR. TULK: The government caucus room is not free but there are other places in the building where people can go if they want to pick up a cup of coffee. I am sure the Opposition might invite somebody if they wanted a cup of coffee. Mr. Chairman, I would like to see the committee take a break because there are a couple of things I have to take care of.

AN HON. MEMBER: It is the general practice.

MR. CHAIRMAN: We will let the committee decide that.

Carried.

We will resume at 10.48 a.m.

 

Recess

 

MR. CHAIRMAN: Order, please!

It is now 10:50 a.m. and we will resume deliberations of the Resource Estimates Committee.

The Chair would like to officially recognize Ms. Lynn Verge the Member for Humber East as replacing Mr. Ed. Byrne the Member for Kilbride for the purpose of this meeting this morning. I will now turn the questioning to Ms. Verge.

MS. VERGE: Thank you, Chair.

I would like to ask the minister questions about Hydro. Earlier this morning in answering questions put by the Vice-Chair of the Committee, the Member for Humber Valley, the minister said that a year ago when the estimates committee last met government had not completed an analysis of Hydro privatization, but in the past twelve months or so `we have done that'. I would like to ask several questions about the analysis that government has done.

First of all, what were the terms of reference for the analysis? What exactly was analyzed? Secondly, who did the analysis? Did the firms or people carrying out the analysis stand to profit from Hydro privatization, or was there any party which analyzed Hydro in a truly arms length position, in a truly objective position? Number four, what assumptions were made in the analysis? For example, what assumptions were made about interest rates? Interest rates have been changing lately and that may be a significant alteration from assumptions made when an analysis was done sometime within the past twelve months. What assumptions were made about a change in the debt equity ratio? Currently the Crown owned Hydro quite properly has a very high debt equity ratio since the interest requirement on debt is always considerably lower than that on equity. What assumptions were made about tax breaks, federal or provincial, that would be provided for a privatized Hydro? What assumptions were made about subsidies that would be provided to a privatized Hydro, what assumptions were made about arrangements for a privatized Hydro having water rights? The next question: was the analysis or analyses in written form, is there a written document setting out an analysis and, what does that document contain, and will the minister make it public? I will pause here to allow the minister to answer those questions about the analysis of Hydro privatization.

DR. GIBBONS: Chair, Vice-Chair, I would first like to make the comment that I know this can be a wide-ranging debate and it generally is a wide-ranging debate, but we came here this morning to debate the estimates before us and there is no line item in the estimates of the Department of Mines and Energy that either gives money to Hydro or receives money from Hydro, and I think anyone can look at the book and see that; and as I said in the very early response to the Vice-Chair of the committee when he noted that no one from Hydro was with me today, and that he thought they were with me last year and we corrected him. They were not with me last year for the same reason that they are not with me this year because they are not part of these estimates, and we would just as soon debate the estimates of the Department of Mines and Energy, where we spend our money and how we justify spending our money, but I would not mind making some comments on some of the questions.

MR. TULK: On a point of order, Mr. Chairman.

MR. CHAIRMAN: Mr. Tulk, on a point of order.

MR. TULK: Before we move to do that, it is one thing for the minister to want to make comments but it is another thing for him to be in order to make comments. I would like to know if it is in order to discuss Hydro in this estimates committee; I would also like to know if the minister is going to make those comments and is he making them by leave of the committee.

MS. VERGE: To that point of order, Chair.

MR. CHAIRMAN: Ms. Verge, to that point of order.

MS. VERGE: There are many precedents for this particular estimates committee asking the Minister of Mines and Energy about Hydro. It happened earlier this morning but more importantly, all our budget estimates committees typically have wide-ranging discussion about general policy, as well as the specifics of estimates figures. I am Vice-Chair of the Social Services Estimates Committee and so far, this year, we have examined the estimates of three departments and in all our hearings, we ask wide-ranging questions to the applicable ministers and they were the Ministers of Health, Justice and Environment and Lands about general policy, so it is clear, according to the precedence of this committee and the other committees that questions about Hydro are perfectly in order for the Minister of Mines and Energy.

MR. CHAIRMAN: Mr. Tulk.

MR. TULK: To that point of order, I would just say to the hon. Member for Humber East, that while she may allow in her committees, things to be wide-ranging - and we can do it here by leave - that does not necessarily make it right that you debate anything that you want. How wide-ranging will you get, will you debate the state of the fishery, with the Minister of Mines and Energy? Will you debate the state of forestry here with the Minister of Mines and Energy or, do we do those things by leave?

These committees are not designed to be a free-for-all, they are not designed to be wide-open affairs, they are governed by the rules that govern the Legislature and anything that we do, other than that, is done only because the committee, and I say the committee, wants to do it, not because the chairman of a particular committee, the social services committee believes that if she is doing it in her committee, therefore it should be done here, that is not a good point of order, a good point for the lady to make.

I don't know. If we are going to operate these committees and operate them right, then we operate them according to rules, and what I have asked the Chairman to do, is to establish for us, if indeed we should discuss Hydro under this, and as the minister says, it is not in the estimates, we are in an Estimates committee. There is no mention of Hydro in those Estimates committees. I'm not trying to block the hon. lady. She will get lots of time to debate. She has had lots of time to debate in the Legislature. But is it - just how wide-ranging can the debate be? I would ask the Chairman to make a ruling on it. Then if the minister wants to make some comments by leave, well the Committee - I might, I might not, as a member of this Committee, be willing to give that leave. That is how this Legislature operates. It doesn't operate according to the whims of the Member for Humber East or my whims or anybody else's. It operates according to set rules.

MR. CHAIRMAN: Are there any other submissions on that point of order?

MR. WOODFORD: To that point of order, Mr. Chairman.

MR. CHAIRMAN: Mr. Woodford.

MR. WOODFORD: The fact that the minister is responsible for mines and energy - "energy" is the broad word here. What does energy encompass? The first page of the Estimates on energy says: "The Department of Mines and Energy is responsible for the management of the Province's mineral and energy resources...." It goes on to say: "The Department is responsible for formulating policy and providing advice to Government on all matters associated with onshore and offshore oil and gas,..." and so on, and get down to the other one, "...conversion from conventional energy resources to specific alternate energy resources. The Newfoundland and Labrador Hydro Corporation supplies and distributes electrical energy in the Province."

The Newfoundland and Labrador Hydro Corporation is even mentioned in the first page of the Mines and Energy Estimates, and furthermore, part of the minister's salary which encompasses 1.1.01 of Executive and Support Services, the minister is getting paid for having the right, the responsibility, of looking after the Crown corporation Newfoundland Hydro. Is the Minister of Finance not able to answer for the Newfoundland Liquor Corporation? Is the Minister of Municipal and Provincial Affairs not able to answer for the Newfoundland and Labrador Housing Corporation?

I would say, Mr. Chairman, there is no point of order. The minister has already said that he would answer some of the questions. Then why not get on with it?

MR. TULK: There is a point of order. I'm asking the Chair for a ruling so that we have something established. I don't particularly care which way you rule.

MR. CHAIRMAN: In the five years that this member has been a member of the House of Assembly and has sat on estimates committees precedent has suggested and has dictated that questions are permitted from the Committee on policy. That is the reason we have not permitted Committee members to question any of the officials who are here today. Only the minister is permitted to be questioned on policy. I would also suggest that the minister is under no obligation to answer any of the questions that are asked of him.

If members are not satisfied with the response that they get from the minister then it can be brought to the House of Assembly. Our Standing Orders state quite clearly that any disorder in this Committee can be censured by the House upon receipt of the report. Any member who is not satisfied with the way that the proceedings are carried out here can in fact report back to the House of Assembly.

I would ask members though if they could to restrict themselves to the items that are here in the Estimates, but members are permitted to ask questions on policy as we always have done. I would remind the minister that he can answer as thoroughly as he wishes. If his answer is not acceptable to the Committee members then they can take the issue up in the House of Assembly.

Ms. Verge.

MS. VERGE: Chair, I asked several questions and I would like the minister to answer them.

MR. TULK: Mr. Chairman, on a further point of order. Is the Member for Humber East a voting member of this Committee?

MR. CHAIRMAN: Yes, the Member for Humber East is a duly acknowledged voting member of this Committee.

MR. TULK: What has changed since 9:00 this morning, sir? I have in my possession here a note that I wrote to you, Mr. Chairman: who are voting members this morning? It says: Tulk, Whelan, Barrett, Shelley and Byrne if he comes. That is signed by you.

AN HON. MEMBER: (Inaudible).

MR. CHAIRMAN: Order, please!

Since that time there has been a notice duly signed by the Government House Leader and filed with the Clerk stating that the Member for Humber East, Lynn Verge, will replace the Member for Kilbride, Ed Byrne, at the meeting of the Resource Committee to be held on April 27 at 9:00 a.m. in the Confederation Building. That one is dated April 27 and filed with the Clerk.

MR. TULK: When was that filed, Mr. Chairman?

MR. CHAIRMAN: That was filed since the proceedings began.

MR. TULK: I would ask, if there is not some precedent in this House - and I would ask if you do not find somewhere in Hansard when those committees were established, I believe it was in 1982 - I am wrong on that I guess, but when they were established - I am not wrong I don't think on this, when they were established, I think you might find somewhere in Hansard, that twenty-four hours notice was required. You will certainly find in Beauchesne, that unless there is a list of substitutes given by the party whips that there is twenty-four hours notice required to change the membership of a committee. I think, as I said again, you will find - and I ask you, why wouldn't you let the Member for Humber East go ahead this morning? I ask you, for future clarification, if we could have the Clerk check that out, if she doesn't know already and see if there is not indeed some period of time that you have to give notice because otherwise, willy-nilly, we could walk out, the four of us here now and have four more people sitting here five minutes time.

AN HON. MEMBER: (Inaudible).

MR. CHAIRMAN: Order, please!

MR. TULK: I don't care what my colleague did. I'm just asking that this Committee be kept in some order of decorum. Decorum is not only shouting back and forth across the House, it is to how you operate your business as well.

MR. CHAIRMAN: The Chair is prepared to rule on that point of order but are there any other submissions prior to the Chairs ruling?

MR. TULK: Is there a period of time required?

MR. CHAIRMAN: The Chair has reviewed the Standing Orders of the House of Assembly and it states: any member of the House who is not a member of a standing committee may, unless the House or the committee concerned otherwise orders, take part in the public proceedings of the committee but they may not vote or move any motion nor shall they be part of any quorum. It also goes as far as to say: changes in the membership of any committee may be affected by a notice, signed by the Government House Leader to that effect being filed with the Clerk. It is my ruling that the notice to which I have referred, meets the requirements of Order 87 of the Standing Orders. If any hon. member is not satisfied with that, I remind him again that he has the option of taking it to the House of Assembly.

MR. TULK: I am not talking about taking it to the House, I am asking the Chairman if he would check and see when those committees were set up, if it was not indeed said, at that point in time, that we should give twenty-four hours notice to the Clerk. I am asking you to check that.

MR. CHAIRMAN: Very well, I will ask the Clerk if she would check on that and report back to the Chairman of the Committee. Until such time as we have been notified of some precedent otherwise, I will have to rule in accordance to the way the Standing Orders read.

MR. TULK: I understand that.

MR. CHAIRMAN: Ms Verge.

MS. VERGE: Mr. Chairman, I am waiting for answers from the minister. I have asked several questions about the analyses he claims the government did within the past twelve months about Hydro privatization.

MR. CHAIRMAN: I will remind the minister that the ruling of the Chair is that the minister may or may not answer any of the questions addressed to him and it is up to the members of the Committee, if they are dissatisfied, to take it to the floor of the House.

AN HON. MEMBER: (Inaudible).

MR. CHAIRMAN: Well that question, I will give the minister time to respond.

DR. GIBBONS: Mr. Chair, I will make the comment that I made earlier, that we have a lot of good things that we can talk about in the budget estimates in the Department of Mines and Energy that have not been addressed. We would like to continue to discuss these things that we are doing, to spend the government's money and the people's money.

There is a line item in the budget of the Executive Council which would provide the hon. member opposite with an opportunity to ask questions about expenditures that we are making on that and I think she is well familiar with that particular item. The Minister of Finance, who is responsible for Executive Council, deposited a document a few days ago detailing some expenditures that had been made. Maybe she should put it to the minister who is responsible for that line item but there are a number of things that she has raised here, a number of things that she keeps raising in the House of Assembly and elsewhere and - on water rights for example, we have had debate on water rights, ad nauseam since March 3 -

MS. VERGE: I asked about the analysis -

DR. GIBBONS: - and I started at the bottom -

MS. VERGE: - the terms of reference, who did the analysis -

MR. CHAIRMAN: Order, please!

MS. VERGE: - whether they were in a conflict of interest position, what assumption did -

MR. CHAIRMAN: Order, please!

MS. VERGE: - they make about interest rates, debt equity ratio, tax breaks, subsidies, water -

MR. CHAIRMAN: Order, please!

The Member for Humber East has asked the questions, I will now allow the minister the time to respond.

MS. VERGE: (Inaudible).

DR. GIBBONS: Mr. Chairman, I wrote down a number of the subjects that the hon. member mentioned and I started at the bottom and was going to work upwards and probably cover some of them in the time available.

MS. VERGE: I asked if the minister would table the analysis. If it exists.

DR. GIBBONS: I'm not going to table an analysis for the hon. member. No, not at this time, but there may be an appropriate time to table anything that we would consider appropriate to table. I'm not tabling anything today.

MS. VERGE: Is there an analysis -

MR. CHAIRMAN: Order, please!

DR. GIBBONS: And -

MR. CHAIRMAN: Order, please!

The Member for Humber East has had her allocation of time. I am going to go to another member of the Committee who has not yet asked any questions of the minister if the minister is finished with his reply.

DR. GIBBONS: I will stop there instead of having this continuous debate on Hydro which we can have at any time.

MR. CHAIRMAN: Mr. Barrett.

MR. WOODFORD: Point of order, Mr. Chairman.

MR. CHAIRMAN: Point of order.

MR. WOODFORD: The Member for Humber East started asking her questions at 10:51 a.m. She concluded at 10:53 a.m. There was a point of order then. It wasn't finished till 11:05 a.m. Now the minister had two minutes to answer the question. There is absolutely no opportunity for the minister to answer. He didn't say yes and he didn't say no. He started to answer some of the questions, but now because of the time being taken up in points of order her time is gone. As far as I'm concerned, Mr. Chairman, it is intentional, furthermore.

MR. CHAIRMAN: Mr. Tulk.

MR. TULK: Mr. Chairman, to that point of order.

MR. CHAIRMAN: (Inaudible) point of order.

MR. TULK: There obviously is no point of order. The Member for Humber Valley, the vice-chair, knows better. Or he shouldn't be sitting where he is.

MR. WOODFORD: But I don't know that.

MR. TULK: The truth of the matter is that he has no right to question the ruling of the Chairman any more than anybody else here. He is now questioning your ruling that indeed the time was up. Secondly, he knows full well, just as well as I do, that if the minister chooses to he could say to the Member for Humber East: I will take the question under advisement, and that is it.

MR. WOODFORD: He didn't do that.

MR. TULK: He didn't do that, but he answered it. He stopped his answer where he felt he should stop it. There is no point of order, Mr. Chairman. He is only using his own member's time, or somebody else's.

MR. CHAIRMAN: Order, please!

It is the well-established procedure of the House -

MR. WOODFORD: (Inaudible) bullying tactics, that's all.

MR. CHAIRMAN: Order, please!

It is the well-established practice of the House of Assembly that any time used in points of order and debating points of order comes out of the time that the member has for debate or for questioning. It is the ruling of the Chair that that is the same procedure that we will use here today. Once we have finished with Mr. Barret's time and we go to some other member, then we will go back to Ms. Verge as often as she wishes. We will continue to go back to Ms. Verge and give her the time to ask the questions she wishes. At this time the Chair recognizes Mr. Barrett.

MR. BARRETT: Thank you, Mr. Chairman. I want to make a few comments and I want to ask the minister a few questions. Of course, representing a district I guess that is considered by some to be the golden isthmus or the oil capital of Newfoundland and Labrador I guess most of my questions will be directed in the area of the oil refinery and the Hibernia or the Bull Arm development.

I've been aware for some time that there is a group that has been interested in the purchasing of the oil refinery in Come By Chance, Vitol. I don't know that the minister can make public how close are we to that deal being finalized. As we all know, the oil refinery is very important to the economy of the area. It employs roughly about 400, over 400, permanent employees. Next week I guess there will be another 300 to 400 people called in for seasonal work in terms of the shutdown. Actually, the whole oil refinery there has more impact on the local area than the billion dollar development of Bull Arm - in terms of the actual economic spin-off from the oil refinery it is more important than the Bull Arm activity. Because of the collective agreements it doesn't have very much impact on the local area, so I would like to ask the minister: How close is Vitol to actual purchasing of the refinery?

DR. GIBBONS: Mr. Chairman, they are continuing to make progress towards that. They have been negotiating with the current owners now for over a year, and the last time we talked to them they were still seriously interested and making progress. They could not put an exact time on it, but I think they expect to do it in 1994, and I hope that is correct. I hope it happens in 1994. We continuously stay in contact with those companies.

MR. BARRETT: I guess the other question is: Is everything that needed to be done by government being done in terms of facilitating the sale and the process being done in terms of the environmental conditions and all these sorts of things?

DR. GIBBONS: I can't remember the exact word that was used on it now, but we reached an agreement on an environmental document on the operation of the refinery, and that is satisfactory to all sides, so there is no hang-up there.

There are some issues that they have not yet resolved that are not - I don't think any of them are provincially based - not associated with us, between the companies and elsewhere. They are still working on those issues, so let's hope it gets done in 1994 because Vitol is a major multi-national company that trades oil and petroleum products around the world, and I think will guarantee a long future for Come By Chance oil refinery.

MR. BARRETT: Okay. I guess about a year or so ago there was a company that was interested in using the burn-off from the stack of the refinery to generate electricity. I know that I had some discussions with the company at the time and they seemed to be very enthusiastic about starting that. Can the minister tell me, or is he aware, what has been happening with that company?

DR. GIBBONS: Mr. Chairman, they have registered the project with environment, but I don't believe they have taken any action on the project. It's a co-generation project. They were talking about approximately sixty megawatts time, but that number is variable. It seems like a good project because you are using a product through the refinery to produce fuel. The problem right now, though, is that it would have to be new electricity going into the grid and there is no demand.

The proposal call that is in process is the one we talked about earlier today. That would be the small hydro proposal. I don't know where this one would sit. It's behind the small hydro proposal, like we talked about the Stanton proposal for Abitibi earlier. It's one of the proposals that would compete with the Stanton proposal or others for the next source of supply.

I did say earlier that we are not constrained provincially in terms of sources of supply for electricity in the near term. This is one type of project, Stanton is another type, small hydro is another type, and there are others that are possible.

MR. BARRETT: How much time do I have left, Mr. Chairman?

MR. CHAIRMAN: You have five minutes, Mr. Barrett.

MR. BARRETT: Recently I heard that with regard to the Bull Arm development, with the increase in the work force during the summer - I think it's going up to 3,500 - that accommodations are not available to accommodate the increased work force, that there are not enough accommodations at the site. I wonder if the minister is aware of this. Is there any backup arrangements being made to accommodate the extra work force?

DR. GIBBONS: I am aware that they only have about 3,000 beds at the site. They used to have 2,995. I am not sure if that is the exact number right now. As the number grows there could be a little bit of a problem on site in terms of the number of beds.

I have been told that the company is looking at how the beds can be used most efficiently. They are evaluating that, and whether or not they might have to get some more bed facilities on the site temporarily or otherwise. I don't believe any final decision has been made. Some have talked about the possibility that they might have to consider sort of like a hotel; you are there for your shift but then you are gone. When you look at the profile of how the beds are used on a daily basis, there are times of the week when it is not as crowded, depending on how the shift work operates. They are looking at all the various options for that and I believe they will have no problem addressing it because we are getting close to the peak even though we are not there, and they should not have any problem.

MR. BARRETT: Right now for example, there are people on the site who are being accommodated who are from other areas of Newfoundland and are in the catering and housekeeping units which is very unskilled labour, and to alleviate that they could look more at hiring local people in terms of the increase in their catering and housekeeping.

DR. GIBBONS: Well hiring on the site as you know is regulated through the union contract, and anything that would happen on that would have to be done with the full co-operation of the unions involved.

MR. BARRETT: But since there are no people in that particular union they could concentrate and alleviate the problem rather than - we all know that the - or at least from the reports - that the whole project itself has gone over budget and if we have to bring in extra emergency facilities and accommodations, which means that it is going to add more to the cost in terms of a management plan, it makes more sense to hire local people to do some of this, sort of, not very skilled labour.

DR. GIBBONS: You may well be right but as I said, I am aware that the company is looking at its options for when it may have a problem, looking at the various options - to see what they do. We are not too far from what we would say to be peak employment in terms of numbers.

MR. BARRETT: Okay. Those are all the questions I have, Mr. Chairman.

MR. CHAIRMAN: Thank you, Mr. Barrett. Mr. Shelley.

MR. SHELLEY: Thank you, Mr. Chairman. I will at this time defer my time to my colleague for Humber East. She may continue with her questions.

MS. VERGE: Chair, I have questions for the minister. The minister is accompanied here this morning by the senior officials of his department, the Department of Mines and Energy, and I would like to ask the minister whether any of those officials or any of the other-

MR. CHAIRMAN: Order, please!

Mr. Tulk, on a point of order.

MR. TULK: They will use all the cute tricks that they like, to try to get the Member for Humber East to get on her pet peeve, Newfoundland Hydro.

Now, Mr. Chairman, when did you ever see somebody in this House, recognized by the Chair, and without the consent of the Chair, defer to another member? I mean, the truth of the matter is, once you are recognized and you sit down you have lost your turn, unless by leave you are allowed to defer to someone else. Mr. Chairman, if you want to go ahead and do that, fine, but I say to you, that nobody stands in any place and defers to somebody else. If we do, then we will have three or four members and I could defer to the member for -

AN HON. MEMBER: Pre-arranged.

MR. TULK: Pre-arranged, Mr. Chairman, totally pre-arranged. It is an abuse of this committee. She is not satisfied to wait her turn.

MR. CHAIRMAN: Mr. Shelley, to that point of order?

MR. SHELLEY: Mr. Chairman, I find it so hypocritical. I don't know which way to describe it. They are talking about the abuse of this, I mean very simply, what I have seen here - and I have not been here years as the hon. member here - but I can tell you that, we usually had a chance, we usually co-operate pretty good in these committees and we have done so so far, even with the hon. member present, but it was quite obvious that the hon. Member for Humber East had some questions; she asked the questions and as a matter of fact the minister was co-operative and said he was going to make some comments on it but since then we have seen the abuse of points of order to cut into that time and not give that opportunity, and because I thought she was mistreated by the member on his points of order, and took advantage of them in his tactics to delay those answers, I felt that the only thing that I could do was yield my time to the Member for Humber East so that she could ask the questions and the minister could continue to be co-operative in saying that he was going to make some comments.

MR. TULK: Mr. Chairman, to that point of order, let me say to the hon. gentleman -

MR. CHAIRMAN: Mr. Tulk, to that point of order.

MR. TULK: - that I would not mistreat the hon. Member for Humber East in any way, shape or form. She has every privilege as every other member of this House, of this committee.

AN HON. MEMBER: But no more.

MR. TULK: But no more and, Mr. Chairman, we cannot have a situation where somebody is going to use the recognition that is given to a member of this House by the Chair to say: I defer to somebody else. You cannot pass on your time to somebody else. Either you use it yourself or you do not use it and then the Chair recognizes somebody else.

Mr. Chairman, those are straightforward rules that we've observed since the first House in this Province was built, before we were a province, I say to the hon. gentleman. He hasn't been here as long as I have. But when he has he will perhaps have a far better appreciation of the rules of this Legislature. You can't go passing on your time.

MR. CHAIRMAN: Are there any other submissions to that point of order? Because the Chair has heard sufficient submissions to rule.

MR. WOODFORD: To that point of order, Mr. Chairman.

MR. CHAIRMAN: Mr. Woodford.

MR. WOODFORD: The Committee is I suppose in charge of its own destiny and its own affairs. Precedence has been set in the past, and as recently as we met last week or so in the Estimates this year, deferring to another member for different reasons. You can defer, give them five or ten minutes, then they have to go on at other things. We've done that, and we've done that in this particular Committee this year. If it is not in Standing Orders, Mr. Chairman, precedence would dictate that there is nothing wrong with what we are doing this morning. I would just like for the Chairman to take this into consideration before he makes his....

AN HON. MEMBER: (Inaudible).

MR. CHAIRMAN: The Chair has heard sufficient submissions. Do you feel under an obligation to provide another?

MR. TULK: Mr. Chairman, the Member for Baie Verte - White Bay just says that: I did this last week in Committee. Sure. He is able to do it as long as the Committee provides the leave and says: Yes, fine, you go ahead and do it. Unless that is the case then it can be stopped at any point in time. When you see an abuse come up, which this obviously is, get the Member for Humber East in front of the podium and on her soapbox, then that is an abuse! That has to be stopped!

MR. CHAIRMAN: Very well, Mr. Tulk. The Chair is prepared to rule.

As the Chair of this particular Committee for the past three years there has been sufficient precedent to establish that this is an accepted procedure within this Committee, and as has been stated, and as is confirmed by the Standing Orders, this Committee is the master of its own affairs.

When Mr. Shelley said that he deferred then the Chair did in fact recognize Ms. Verge and will now turn the questioning over to Ms. Verge.

MS. VERGE: Thank you, Chairperson. It is perfectly obvious that the Minister of Mines and Energy is uncomfortable having me question him about Hydro and it is obvious that he has arranged for his colleague, the Member for Fogo, to run interference for him. I am going to continue to ask questions about Hydro because this is the minister responsible for Hydro. Whether or not the Premier lets him have any say in Hydro is questionable, but nevertheless the minister has nominal responsibility for Hydro. The government has before the Legislature and the people of the Province an extremely critical proposal to privatize Hydro which would be an irreversible divestiture which would lead to great harm to our economy.

The minister earlier this morning told the Member for Humber Valley that within the past twelve months the government had a detailed analysis done of Hydro privatization, and I would like to ask the minister again: What were the terms of reference for the analysis or analyses that were done?

DR. GIBBONS: Mr. Chair?

MR. CHAIRMAN: Mr. Minister.

DR. GIBBONS: I think government has addressed that particular question numerous times over the last months. I will go back and give some history and some dates and (inaudible) -

MS. VERGE: Chairperson, I only have a few minutes and I -

DR. GIBBONS: Last January -

MR. CHAIRMAN: Order, please!

MS. VERGE: - asked a precise question and I would like a precise answer.

DR. GIBBONS: (Inaudible).

MR. CHAIRMAN: Order, please! Order, please!

MS. VERGE: I would like to know what are the terms of reference.

MR. CHAIRMAN: Order, please! Order, please!

When the Chair calls order I would appreciate it if the members would be silent.

We will now give time for the minister to reply.

DR. GIBBONS: Last January -

MR. TULK: Point of order, please.

MR. CHAIRMAN: Point of order, Mr. Tulk.

MR. TULK: The hon. Member for Humber East asked a question of the minister. Then halfway through the answer, because she doesn't like what he is saying, because he is not confessing to her, she wants to interrupt him and interject again. I would ask the Chair to protect the minister from the savage onslaught of the Member for Humber East and see that order is maintained in this committee, otherwise she will take it on her back and do whatever she wants to do with it. It is bad enough that she is allowed to usurp the rules of this House and speak out of turn, let alone Mr. Chairman, have her interrupting people and have her badgering the minister and any other witnesses that might be around. I ask the Chair to protect the Minister.

MR. CHAIRMAN: The Chair has already asked -

MR. TULK: Name her.

MR. CHAIRMAN: Well, in this particular case everybody is being named in those committee proceedings, Mr. Tulk. I ask Ms. Verge to give the minister sufficient time to respond to her question before she asks another.

Mr. Minister.

DR. GIBBONS: The hon. member asked about our analysis for Hydro, and I tried to start by saying that we did start some analysis about a year ago, a year or so ago. I think I have said it publicly, and others have said it publicly, that after we started to discuss privatization potential we did have a proposal from the Fortis Corporation, from Newfoundland Light and Power, Fortis Corporation, to buy part of Hydro and we referred that report to Hydro.

I think it was in January of last year that the Hydro board got ScotiaMcLeod and RBC Dominion Securities to do an analysis of that proposal that came to us from Fortis, and it was suggested at that time that in addition to just analyzing that proposal to buy parts of the Hydro Corporation that they should look a little wider than that, and that they should ask them to analyze Hydro as it is today, the status quo, and that they should ask those companies to analyze Hydro's other electrical options, other structures for the electrical industry in this Province.

It was agreed that they would analyze the possibility of a merger and the possibility of a stand alone privatization, and that work was done. ScotiaMcLeod and RBC Dominion Securities were the ones that did it. They did it in great detail and over last summer government looked at the results of the analysis in consultation with the people who had done the work and we made a decision in August, I think it was August 5, Cabinet made a decision that we would talk to Fortis about the possibility of a merger if they were interested, and if they were interest in the privatization of the merged company.

The recommendation from the people who did the analysis was that we should not sell bits and pieces as Fortis was trying to buy, as such, but that it would be interesting to look at other prospects, particularly the merger and stand alone privatization, and that is why they looked at that. ScotiaMcLeod and RBC Dominion Securities are the ones that Hydro obtained and asked to do the detailed assessment, and do it thoroughly.

The member is well aware that in the spring, I think it was in June, I cannot remember the exact date, we referred that report that came from these analysts to the five person committee that reviewed the information and also reported to Cabinet on their views of the report from ScotiaMcLeod and RBC Dominion Securities, and it was based on information from everybody, and advice from everybody, that Cabinet finally made the decision, on August 5, that we would consider privatization of a merged industry, but it was not until after going through negotiations throughout the fall, after October 1 with Fortis, and after that failed in December, and then having continued analysis of the stand alone option this winter, that on February 24 Cabinet made the decision to proceed with the stand alone privatization.

I think the hon. member is well aware, and has been well aware for some time that we have had ScotiaMcLeod and RBC Dominion Securities doing this work for us.

MR. CHAIRMAN: A final supplementary on this time allocation.

MS. VERGE: What assumptions did the investment dealers, who by the way stand to make mega-billions of dollars of profit on Hydro privatization and therefore are in a blatant conflict of interest position, what assumptions did ScotiaMcLeod and RBC Dominion Securities make when they analyzed the privatization of Hydro? What assumptions in particular did they make about interest rates?

DR. GIBBONS: Mr. Chairman, without having the report in front of me - I don't have it all in my head about the various assumptions that were made on interest rates. I know that in the earlier questioning the hon. member talked about debt-equity ratios and things like that, and tax breaks and subsidies. I'm more familiar with these numbers because I know that it was made clear that if we are to privatize Hydro we have to take it to a debt-equity ratio that is more like a private company.

Presently Hydro is 82 per cent debt, only 18 per cent equity, and private companies - particularly Light and Power I believe is 57:43, so we would have to change the debt-equity ratio. I don't know the exact number that they use but it would have to be something in that range so that it would be private sector-like.

Tax breaks? We are not talking about giving any company tax breaks. I think we've made that clear. We are, and have made the decision, that we would refund through the companies to keep rates down the 85 per cent of the federal taxes that are refunded to us through the PUITTA arrangement. That is not a tax break for the company, not a tax break at all for Hydro or for Fortis for the 10 per cent that would go their way. We are not giving any subsidy -

MS. VERGE: Ten million dollars, you mean.

DR. GIBBONS: Pardon?

MS. VERGE: Ten million dollars.

MR. CHAIRMAN: Order, please!

DR. GIBBONS: It is not - we have said, based on the analysis that has been given to us, that we can stay approximately tax neutral in this by keeping the provincial corporate taxes and giving back the share of the federal corporate taxes. Approximately tax neutral.

MS. VERGE: When the minister just answered he referred to the report -

MR. CHAIRMAN: Order, please!

The hon. member's time is up. I will allow the minister sufficient time to continue with his answer.

DR. GIBBONS: The subsidy part that the member asked about earlier, and it deserves a response, because we are not giving any subsidies. Because as part of this process we are saying to our industrial customers: We are going to relieve you of the responsibility for the part that you pay now towards the rural subsidization of the diesel areas, the $5 million approximately that they now pay, we are proposing to put in place a rate adjustment fund so that when that subsidy is phased out from the industrials then the rate adjustment fund allows it to be phased in to the other payers of electricity in the Province.

It is not a subsidy to the company and the rate adjustment fund is not given to the company. It is managed by the Public Utilities Board. I will stop there.

MR. CHAIRMAN: Mr. Tulk.

MR. TULK: Mr. Chairman, let me ask the minister a very few simple questions about the... first of all, let me ask him about the Province - if we are on Hydro let's ask some questions about the Province's credit rating. It was a contention of the Opposition some time ago that the Province's credit rating would not - as I recall correctly, I think I remember hearing the Leader of the Opposition and/or the Member for Humber East standing in her place in the Legislature and saying that the Province's credit rating would not be affected by the sale of Newfoundland Hydro, that there would be no effect on it at all.

I believe we've recently had the Dominion Bond Rating Service in Canada I believe it was -

DR. GIBBONS: Canadian.

MR. TULK: Pardon me?

DR. GIBBONS: Canadian Bond Rating Service.

MR. TULK: Canadian Bond Rating Service in Canada make a comment to the contrary. I would like for the minister to - and I notice that the Member for Humber East obviously is trying to avoid that (inaudible). That is one of things she will squirm about for (inaudible). Would the minister care to make a comment on that?

While he is speaking, Mr. Chairman, perhaps he might also like to make a comment on the overruns that we are hearing in the Telegram recently about Bull Arm, Hibernia. I know that we've been told by some people that the project is not in danger because of those overruns, but I would like for the minister to comment on that. Is the project on target? Just what is going to happen? Would he also comment perhaps on just what is going to happen offshore in regards to the other fields? I think he will know all about these - Ben Nevis, Terra Nova, and I don't know, some of the other ones out there. What is the order of development, perhaps, that we are going to see in that area? And since the debate is allowed to be so wide ranging, perhaps as a fourth thing, if the minister gets time he might like to comment on fisheries.

Thank you, Mr. Chairman.

MR. CHAIRMAN: Mr. Minister.

DR. GIBBONS: Thank you, Mr. Chairman.

On the credit rating implications, again Mr. Chairman, in this House of Assembly and publicly there has been lots of debate on that in the last few weeks, and particularly in the last few days since CBRS came out with its opinion, and I have made it clear that by our not having to borrow at all in the coming fiscal year, and having significantly reduced borrowings in the next fiscal year, that would be a significant positive for us in terms of our credit worthiness. It's clear to anyone right now, I think, that the privatization of Hydro, getting rid of the billion dollars in debt, being relieved of subsequent borrowings for at least a year and probably the most part of the second year, that is a positive implication for our credit rating and for what we need to borrow in the future and the rates at which we will have to borrow.

On Bull Arm and the overruns that have been in the news, yes, Mr. Chair, the engineering designers have run behind and they have, at times, had difficulty keeping up with the construction at the GBS site, particularly the gravity base at Bull Arm, and as a result it is taking longer - and this is the way I would prefer to say it - it is taking longer to fabricate the gravity base than had been projected, than had been estimated. I don't call it delays in construction, but it took longer to get the design work done than had been anticipated because of the uniqueness of this design, and therefore it is taking longer to do the construction than had been anticipated, so now instead of having tow out from the dry dock to the deep water site in Bull Arm about this time of the year when it was originally expected, in the spring or early summer, now they are saying that the tow out is probably going to occur in October, so we are losing a few months, and by losing this few months we are going to miss the weather window in 1996. At that time I think we are going to miss the weather window by a couple of months, and as a result -

MR. TULK: Can you explain that?

DR. GIBBONS: The weather window for tow out is over, naturally, the summer season, to leave Bull Arm and go out to the Grand Banks.

MR. TULK: So you would have to wait until next summer?

DR. GIBBONS: So you are not going to take it out in the late fall or winter, so you wait until the next spring, so it would be towed out in the early spring - as soon as it is feasible in the early spring - instead of going out in the late fall, or in the late part of the weather window. You have an early part of the weather window or a late part of the weather window, depending on spring, summer or fall, and they are missing the 1996 weather window by a couple of months by the look of it, and as a result of that they will have to stay in the Bull Arm site for that extra winter. The present plan is to get it out in that following spring of 1997 and have it on site by June or July and then have first oil in 1997 in December. That is their present projection.

The original projection was to get it out in 1996 and have first oil in July of 1997. Right now they are estimating that they will be missing first oil by about five or six months, and December 1997, that could be January, 1998. It could take a little longer, but there are some advantages as well to what has happened. A lot of the work that would have been done offshore will now be done in Bull Arm, and it's cheaper to do it in at Bull Arm than to do some of the topside commissioning work offshore at the site, so there are some balances, but overall there will be some extra cost because of having to over-winter that extra year, but they are missing about five or six months on production of oil. We still are hoping for first oil in December, 1997.

Other offshore fields, we all have heard about Terra Nova and Ben Nevis, Hebron and White Rose. These are the big ones. There are about fifteen other smaller ones, but these are all prospective developments that could, we believe, stand alone, and the expectation now is that Terra Nova, as second largest, would be next. Hibernia has a little over 600 million barrels; Terra Nova 300-400 million; Whiterose, Ben Nevis, Hebron complex, are about 200 million each. So they will get developed subsequently and once Hibernia is out there, then I believe the others will move.

MR. TULK: Are we using gravity-based or floating, Mr. Minister?

DR. GIBBONS: There hasn't been any final decision made on the others, but a field has to be of sufficient size to economically justify the mode of development. What is being said now by the company at Terra Nova - and they have made presentations on this for the last two or three years - is that in their view Terra Nova is not big enough for a gravity base. We have not made any decision as a government where we have a right to have some say on mode of development.

MR. TULK: What right do you have?

DR. GIBBONS: In the Atlantic Accord Act we have a right to make comments on the mode of development, basically to decide on the mode of development. We have to agree with the mode of development. We've said: We are not going to agree with the mode of development until we've seen enough analysis of the field to be convinced that it has to be this way or that way or some other way. In the Hibernia case it was big enough that they had the choice between a gravity base and the GBS and the company said GBS. It is in the interest of Newfoundland of course with GBS because of all the direct construction work. We would like to maximize what is done here in this Province regardless of how we do it. We will wait before we make a decision. We will wait and see more details from the company.

MR. TULK: You didn't comment on the fishery.

DR. GIBBONS: I'm not going to comment on it.

MR. TULK: I didn't expect the minister to comment on that, Mr. Chairman. Let me ask him a question, a supplementary question, that is to come back to the credit rating and the amount of money that we will save as a result of the sale of Hydro: Has the minister done any estimation how much we will save in interest as a result of being able to get clear of some of that debt, and as a result not having to borrow over, say, a twenty-five year span or thirty span. Most of the bonds are thirty year bonds that we borrow, are they?

DR. GIBBONS: Different years, different terms.

MR. TULK: And different currencies.

DR. GIBBONS: Yes.

MR. TULK: As we found out - we inherited some Japanese, I believe, from the former government. I would like for the minister to comment on just how much he sees that we can save.

The other thing is, with regards to Hibernia, there have been some reports that there have been engineering problems. I guess we all believe, we all know, that in a project of that size there has to be engineering problems, design problems, and so on. That is inevitable, I take it. They can be minor or they can be serious. I would ask the minister how serious - if they are there, and I think they are there, and they have to be - they are.

Could I ask the minister while he is at it, Mr. Chairman, might he also like to comment on mining activity in the Province as the Minister of Mines and Energy. Does he expect to see mining activity in the Province go up? What is that a result of? Is it a result of a new policy that the government has put in place? Just how is this government and this Province regarded by the rest of Canada as a place to get involved in mining exploration and mining?

Those are the three questions. I suppose the minister got them. If he wants to I can repeat them one by one, but I would think he is smart enough - he went to school here so he has to be - to have all three of them down pat.

DR. GIBBONS: I would like to clarify - you were talking about engineering problems at Hibernia. I would rather talk about the Hibernia situation as engineering challenges.

MR. TULK: Okay. Same thing.

DR. GIBBONS: The reason is, I would rather look at the positives of all this. We are looking at a unique design with the gravity base at Hibernia. Since Day 1 when the first engineer sat down at the (inaudible) machine they've been having evolution of design for this unique structure that is the first one ever built in the world with an ice wall. They've had lots of engineering challenges, and as a result of these challenges it has taken longer to get the designs to the construction site and therefore longer to get the construction project along to the point where they can tow it out of the dry-dock and get on with it. That is why as I said earlier we are missing, or expecting now to miss, the weather window in 1996. Engineering challenges.

To come back to Hydro and the savings on interest, there have been estimates put out there about what it would be saving us per year in the interest on deferred borrowing of about $25 million a year. Interest that we would never have. That is an expense we would never have because of deferred borrowings in this year and next year. We can't specifically state we expect to make a certain amount on Hydro. There are limitations on us by the Securities Commission. We have to be careful about how much we say in terms of all the details on that, but I would agree that the estimate has been put out at about $25 million a year in savings on borrowing that would never have to be, and that is a relief on our budget and our credit rating. (Inaudible) borrow any interest on that, that we never have to pay in the future and I will leave it at that.

I won't talk about mining. I talked about mining a lot in the earlier stages but I think Newfoundland and Labrador are two areas of this continent that have a lot of unexplored potential and a lot of potential for new mineral deposits to be found, and we are doing everything we can to encourage companies to come to this Province to explore.

MR. TULK: Would you tell us what policies you have in place?

DR. GIBBONS: Yes. We have made significant changes in the last couple of years as well. Right now, in the mining tax side for example, for an average mine, in terms of mining taxes alone, corporate taxes related to mining, we rate second to Nevada in North America, so we are very competitive with places like Chile and Mexico where companies are going because the potential is great, but we are very competitive and people across Canada, with whom the Premier talked to at the prospectors convention in March, are getting the message and my officials are out there regularly promoting it and we have put together this new brochure that we started distributing a couple of months ago as well saying: Come to Newfoundland and Labrador. We are trying to be open for business and we are going to do everything we can to help you find something new and get it developed.

MR. TULK: Mr. Chairman?

MR. CHAIRMAN: Mr. Tulk, you have used all your time actually. We will get back to you later. Thank you, Mr. Minister. Mr. Woodford.

MR. WOODFORD: Thank you, Mr. Chairman.

Would the minister be able to tell me, before the subject of privatization came up in the past year, was his department and the government in general, contemplating going to Newfoundland Hydro looking for more money, and I am referring to what happened after the Budget of 1989-'90, when the government charged Newfoundland Hydro 1 per cent to float the bonds and the charge on the bonds I think was $9 million, and the dropping of the PDD system where they collected I think, a subsidy of $10 million each year, were they contemplating in the last year, going back to Newfoundland Hydro and asking for further increases?

DR. GIBBONS: Mr. Chairman, back in '89, the subsidy that government used to pay to cover the rural deficit was around $30 million. We phased that out starting in '89-'90, and in 1990, we started the guarantee fee and we have collected the 1 per cent guarantee fee for three years which totals approximately $30 million over the last three years that we have collected it, and before we talked about privatization, we had no discussions of going back to Hydro to increase that guarantee fee.

That is a guarantee fee that is of general application in the Province, it does not apply just to Hydro, it applies to all loans that are guaranteed by the government no matter what the agency, and we were not considering going back and asking for an increase in that guarantee figure.

MR. WOODFORD: But the minister would agree that they could have, just as easily, gone back and asked for, whether it was 1.5 or 2 per cent or whichever, if they wanted to raise any monies for the treasury, they could have just as easily gone back and asked for more. Is that not right?

DR. GIBBONS: There is no question, Mr. Chairman, that we had the option of going back to Hydro and saying: your guarantee fee is going to be higher or give us a dividend or use some other mechanism, but historically in this Province we have always left Hydro's profits with Hydro and we applied this guarantee fee of general application to Hydro like we apply it to everybody else and we get the $10 million from Hydro, but you are right, if we wished, I guess we could go back to Hydro and say: we are going to charge you a bigger guarantee fee or we could go back and say we want you to pay us a dividend. That is always an option for a government, we are the owner of the corporation, but we have not given any consideration to doing that of which I am aware, certainly not through my department.

MR. WOODFORD: Would the minister be able to tell me or tell the committee, if, at first when the privatization issue was talked about, anywhere in those discussions, were they told by the credit rating agencies that there would be some problems in the upcoming year?

DR. GIBBONS: Not that I am aware of.

MR. WOODFORD: Were you told by the credit rating agencies, for instance, the Canadian bond and Dominion bond, in the past year or so, that if, for instance, Newfoundland Hydro was privatized that your credit rating would improve?

DR. GIBBONS: I do not have any knowledge of anything like that, not from these particular agencies themselves.

MR. WOODFORD: It is only what is coming out lately with regards to comments made by the Canadian bond rating agency?

DR. GIBBONS: Well, they have said there would be positive effects by not having to borrow, that privatization would have these positive effects. That is just one aspect of the privatization, that there would be positive effects in getting rid of the $1 billion in debt and from not having to borrow for a year or two, and not having to pay interest on what we do not borrow, because we are keeping our debt down.

MR. WOODFORD: There have been some comments lately that have been brought to my attention, some news reports this morning, and I think the Premier said it in the House, or maybe it was the Minister of Justice, someone anyway, that with the interest rates moving up there is a possibility that government would have to reconsider the privatization of Hydro. Would the minister elaborate on that somewhat, especially because of statements made this morning? My colleague for Baie Verte heard this morning on CBC radio that the Premier said he might have to reconsider the privatization of Hydro. Would the minister elaborate?

DR. GIBBONS: I did not hear that particular comment from the Premier or anybody, but a number of us have made comments, and a number of people have made comments that if interest rates are increasing then, as the hon. Member for Fogo said a minute ago, the yield goes down on a share sale, so the best time to privatize is certainly at a time when the interest rates are lowest. You would prefer to go forward with a privatization when it is most opportune and when it is going to give you the maximum value for your asset, and if the rates are up and climbing obviously we would not rush out into the market but we would sit back, wait, and watch to see what would happen to the interest rates. Clearly we would not be in a rush to do that.

MR. WOODFORD: Was this one of the considerations or one of the reasons when government made their decision to do that, looking at the interest rates at this particular time, or in the past few months, is this one of the reasons why they went for privatization?

DR. GIBBONS: Our advisors were telling us last fall that the timing was opportune to get maximum value because of the low interest rates. It was an opportune time to get the market value at its peak when the interest rates were lowest and no one questions that, but even with the increases we have seen over the last couple of months the rates are still comparable, if not lower than they were two years ago when Nova Scotia power went private and got good value and got a good return. There is still room except that you would want to go when the interest rates are lowest to get the maximum.

MR. WOODFORD: In that piece of legislation it also states that one company cannot gain any more than 20 per cent total amount of shares in the New Hydro. Does the minister have any concerns, unless they went to the PUB board, with this particular clause because it does leave open the possibility of someone going for more than 20 per cent because like everything else they can go to the PUB board and the possibility for that are, as far as I am concerned at this particular time, should be a real concern because of the amount of people who can buy shares in this Province, and I suppose they can be bought outside, especially if something happened after the privatization of New Hydro when they would be going for new monies or offering new shares?

I think this is an area whereby there is a danger that someone could gain more than 20 per cent control of that particular utility. Does the minister have any concerns with that particular clause?

DR. GIBBONS: No, Mr. Chair, I think the legislation is quite clear on that. Nobody can get greater than a 20 per cent share without the approval of the government in power in Newfoundland at the time.

There are conditions in there as well so that the board of directors can look at associates not being able to act in collusion, but you are right; if somebody wants 20 per cent they can go to the Public Utilities Board, but the condition is that if it is in the best interest of the people of Newfoundland and Labrador, the PUB can consider it. If the PUB considers it and says: Yes, this is in the best interest of the people to let someone have more than 20 per cent, then the PUB must report to the cabinet of the day, the government of the day, and the government of the day has final say. The government of the day can look at the PUB report and say: We're sorry; we're not going to do it.

Government is the final regulator on that, not just the Public Utilities Board, so I am quite satisfied that the regulation and the legislation is quite clear.

MR. WOODFORD: Minister, I think it was only last week or the week before there was a so-called, what I used to call, cave-ins out there around St. Patrick's, I believe, Little Bay area, that particular old mining site. Is there any other danger of something like that happening in that particular area and other sites around the Island such as the Buchans, especially around the Lucky Stripe area, the Buchans area, and some other areas of the Province?

I never thought it could happen in the area, to tell you the truth, because I was familiar with Little Bay mines and the Buchans operation but never thought something like that could really happen, but that looked pretty scary at the time. What has the department done about that particular site?

DR. GIBBONS: I appreciate that particular question, actually, because that was quite a dramatic event.

We have been monitoring all of the closed down mine sites. We have a small mining engineering section that does this and takes care of safety at these sites, and the old Whales Back mine collapsed. It's really something the way it collapsed there. Our people have looked at the underground plans. It looks like just about everything that could collapse at the Whales Back has now collapsed, so we are going to be doing some fencing in the spring, and appropriate warning to people to stay away from the edge because it's a very sharp cliff. It's just like coming up on a cliff and then it's straight down into the water. It's filled with water. We have created a light there because it's all collapsed down, but it is quite dramatic and we are looking at other sites. I am not aware personally of any other site that has such near surface cavities that you could have similar collapse. I don't know if Paul Dean might have something further to add to that.

MR. DEAN: Thank you, Minister.

We have looked at all the other sites around central Newfoundland, underground mining sites, and the Whales Back situation appears to have been a bit unique in that the way that that ore body was mined was with large open stopes, and none of the other copper deposits, or the deposits in Buchans for that matter, were mined in that same way, so you don't have large underground openings. The openings are much smaller in the case of all the other mines. We don't anticipate this sort of major collapse in any of the other operations, but we are re-evaluating the old mine plans to see if any potential is there.

MR. WOODFORD: So what you are saying is that Whales Back was mined in a stope fashion -

MR. DEAN: That's right.

MR. WOODFORD: No pillars?

MR. DEAN: With large open stopes, with minimum amount of pillars.

MR. WOODFORD: And no backfill?

MR. DEAN: And no backfill, whereas the Buchans deposits were all backfilled, so -

MR. WOODFORD: Buchans deposits were all backfilled with sand.

MR. DEAN: That is right, so we think the danger in Buchans is minimal of all of those closed down mines in central Newfoundland, but there was no backfill.

MR. WOODFORD: I never thought that there was ever a mine on this Island, or anywhere in the world, really, that was never backfilled, especially when you come to what is called a stope operation, and a pillar. Well, a pillar is fenced and cribbed, but in a stope operation there is a complete cavity in the ground and usually they are fenced and filled, but that is scary in that particular situation, I can see that.

Thank you, Mr. Chairman.

DR. GIBBONS: It is quite a dramatic cavity that has been created by the collapse there. It is really something to see. People should avoid it and stay away from it.

MR. CHAIRMAN: Mr. Whelan.

MR. WHELAN: Mr. Chairman, I move that we adjourn the debate. Usually we go for about three hours.

MR. CHAIRMAN: That we adjourn the debate? Without calling the subheads?

MR. WHELAN: Pardon me?

MR. CHAIRMAN: Is the motion that we adjourn the debate without calling the subheads?

SOME HON. MEMBERS: (Inaudible).

AN HON. MEMBER: Second the motion.

On motion, debate adjourned.

MR. CHAIRMAN: We will set another time to conclude the Estimates of this department. I don't know when we will be able to do that. The minister I understand is -

DR. GIBBONS: (Inaudible) schedule. I guess we can get someone else.

MR. CHAIRMAN: I recognize that we have officially moved and seconded and have officially adjourned, but -

AN HON. MEMBER: (Inaudible).

MR. CHAIRMAN: Well, we could meet again right now if it is the wish of the Committee and the minister and his officials, at this moment, if it is the wish of the Committee to meet and call the subheads.

MR. WOODFORD: The motion was put for adjournment and the motion is passed, so....

MR. CHAIRMAN: We will try to find a convenient time at which to reconvene to conclude the Estimates of this Committee.

I would like at this time to thank the minister and his officials, to thank Mr. Woodford, the vice-chair, and the members of the Committee for their cooperation, including the Members for Fogo and Humber East for their cooperation with the Chair as well, and to thank our Table Officer, Elizabeth Murphy, and Mr. Oates, and our Page, Mr. Kelleher.

The Committee stands adjourned.