The Committee met at 7:00 p.m. in the House of Assembly.

CHAIR (Mr. Perry Canning): This is the first meeting of the Resource Committee for this budget. First of all, my name is Perry Canning, from Labrador West. I would ask everybody to introduce themselves for the record.

You can start, Roger.

MR. FITZGERALD: My name is Roger Fitzgerald, M.H.A. for Bonavista South.

MR. SHELLEY: Paul Shelley, M.H.A for Baie Verte District.

MS THISTLE: Anna Thistle, M.H.A. for Grand Falls - Buchans.

MR. FRENCH: Bob Mercer, M.H.A. for Humber East.

MR. WOODFORD: Rick Woodford, M.H.A. for Humber Valley.

MR. OSBORNE: Tom Osborne, M.H.A. for St. John's South.

CHAIR: Thank you very much.

Perhaps the Minister can introduce his delegation.

DR. GIBBONS: Rex Gibbons, the Minister of Mines and Energy. With me on my right is Paul Dean, Assistant Deputy Minister of Mines; on my left, Martin Sheppard, Assistant Deputy Minister for Energy; and Leonard Clarke, Director of Financial Operations of the department.

CHAIR: Thank you very much, Minister.

Well, good evening and welcome to everybody. I would just like to say this is our first meeting and we have four new MHAs sitting here in this particular Committee and several veterans, including a veteran minister, so it should make for an interesting evening. I welcome the Minister and his delegation. We will get right into it and we have agreed, Minister, that there will be fifteen minutes of an opening statement by you and a fifteen-minute response by Mr. Shelley.

DR. GIBBONS: Okay, I am ready to go.

CHAIR: We are ready.

DR. GIBBONS: Thank you very much, Mr. Chairman.

I do have a statement because I would like to put on the record some of the good things that are happening in the sector of mines and energy in the Province. Before I get into my statement, I want to give out some goodies. I have a bunch of copies of this brochure on the rich mineral resources of the Province and it will probably be informative for people to have a copy of that. There is a copy of our latest Mineral Information Newsletter from the Department, more details. There is a copy of a mining magazine with the two Prospectors of the Year, Albert Chislett and Christopher Verbiski, with all sorts of other good information on the mining side. I have a written document, an update on the oil and gas sector. I probably could have brought some magazines on the oil and gas sector which are equally glossy and equally good to this one on the good things that are happening in Hibernia and Terra Nova, the West Coast etc. So these are documents with a lot of information on the industry.

At this time, I will proceed into the statement that I have to put what we are going to discuss this evening in context. Mr. Chairman and members of your Committee, the total budget of the new Department of Mines and Energy for 1996-1997 is $10,167,400 with a net expenditure of $9,110,600. This is a reduction of $1,763,100 from the net budget of the Mines and Energy branches of the former Department of Natural Resources last year.

The reduction in the estimates is a result of three principal factors, number one, the termination or the end of the Canada Newfoundland Agreement and Mineral Development. It ended on March 31; number two, the elimination of funding for the Newfoundland Exploration Assistance Program; and, number three, the general government restraint as a result of our current fiscal situation.

The department's estimates before you represent 0.3 per cent of government's total budget for the current fiscal year. So we are not a big percentage in terms of the expenditures of government. We are a very small percentage. And yet, we are talking about the mine sector and the energy sector which are economically the two sectors that are probably getting the most news in terms of the importance to the future of this Province from the resource sector. And some of these things have been outlined in speeches in the past, including the Throne Speech recently.

In the department, we deliver some very effective programs and policies which are efficient and flexible and meet the principal needs of our client groups, as well as provide for effective management of the Province's mineral and energy resources.

The department's programs in the mineral resource management sector are delivered through the Mines Branch with the Assistant Deputy, Paul Dean, who is with us tonight. The principal programs of the Mines branch are the geological survey, the Mineral Lands Division and the Mineral Development Division.

The geological survey is one of the main activities of the Mines branch, and again this year, geological survey work will continue to provide and to increase the basic geological data base to help promote mineral exploration and mineral development. The work of the survey is a major factor in attracting investment in mineral exploration to this Province and in assisting in the discovery of new mineral deposits.

The field program this year will focus on Labrador with several bedrock mapping and geo-chemistry projects in Northern Labrador, in the Nain and Hopedale regions. This year we will begin a new project to further evaluate a nickel potential of all the regions of Labrador with initial focus on the Nain region for obvious reasons. Other projects planned throughout the Province include bedrock mapping and mineral deposit assessment in Central Newfoundland, evaluation of the gold potential on the Avalon Peninsula, continued evaluations of limestone and marble deposits of Western Newfoundland and I mentioned stone projects in Coastal Labrador. We can get into more discussion of some of these later if you so desire.

The mineral lands division of the mines branch is responsible for administering the Province's mineral land tenure system and for regulating mining developments and operations in the best interest of the Province. This includes the administration of land tenure regulations, particularly the mineral act and the quarry materials act. The division also now administers the Mineral Holdings Impost Act which has been transferred recently from the Department of Finance. One of the highlights, of course, in 1995 was that the number of claims staked jumped from about 20,000, the year before -I believe the number was 22,000 - to 248,000 last year. So 250,000 last year and it created lots of excitement but for that division an awful lot of work.

Now, I will ad lib away from the written statement here and say that for about six months last year the staff in that division were so busy that we had a second shift that would come on about 4:00 p.m. to work until midnight to try to do the paperwork to take over from the shift that was going off at about 4:30 p.m. each day. They did manage and they did deal with the 250,000 claims.

The other division of the Mines branch, the Mineral Development Division, is responsible for implementation of the regulatory framework required to control the development, operation and termination of mining operations. This includes systematic monitoring of present operations and other developmental activities and the pursuit of developmental opportunities. It includes, for example, a Prospector's Assistance and Training Program as well as our regional office in Wabush. This is the division that analyses whether or not a deposit may contain an economic quantity that can warrant development.

The Mines branch is showing some significant reductions. We have allocated $5,221,300, which is a net reduction of $1,114,700 from last year. So that is a significant decrease from last year. The reductions are primarily, as I said earlier, the result of the end of the Newfoundland Exploration Program, the cancellation of it. Last year we put $500,000 into that. Secondly, the end of the agreement on mineral development, we had $800,000 in that last year of provincial funds. The department has provided funding of $350,000 to continue with some of the key programs previously funded under the Mineral Development Agreement and that will be reflected in our detailed estimates tonight. We are also continuing the Prospector's Assistance and Training Program and putting $180,000 into that, probably our best single investment.

The mineral industry: I want to say a few things about the mineral industry but the documents I gave you earlier show great detail on that and you can go through them at your leisure. The total value of mineral shipments increased by $102 million from 1994-1995, that is 12 per cent. The current forecast for 1996 is a further increase of $67 million or 7 per cent to $1.01 billion. The last time we broke a billion dollars in mineral production was 1981, fifteen years ago. We were expecting it to be higher than that this year but unfortunately, the strike in Labrador West has caused us to subtract maybe about $250,000 from our estimate.

This growth is a reflection of several important factors. No. 1, strong industrial growth in the United States and internationally, strong demand, accordingly, for iron ore. As a result, No. 2, an increase in price on iron ore concentrate and pellets; No. 3, an increase in production by both of our iron ore companies, Iron Ore Company of Canada and Wabush Mines; and No.4, a decreased value of the Canadian dollar which helps us on the foreign exchange. Right now, we expect these conditions to prevail through this year and into 1997; we are not forecasting, nor is the industry, beyond 1997 at this time but we look forward to a pretty healthy industry for the next couple of years.

Mineral exploration expenditures are forecast to rise by 57 per cent this year from $70.8 million last year to $111 million in 1996. Go back two further years and the total was only $8 million, back in 1993, Paul?

MR. DEAN: Ninety-two.

DR. GIBBONS: Ninety-two, it was $12.5 million; last year $70.8 million. This substantial increase, of course, reflects -

MR. DEAN: You were right.

DR. GIBBONS: I was right, in 1993 it was $8 million and in 1994 it was $12.5 million. This substantial increase reflects a dramatic rise in exploration activities in Labrador as a result of the Voisey's Bay discovery, the most significant mineral discovery in our history as a Province and probably one of the most significant in the history of Canada.

In late 1995, the Province saw the opening of another new mining operation on the Baie Verte Peninsula, Ming Minerals began shipping copper concentrate from the re-activated Rambler project on December 27, last year. Since then, they have made two or three additional shipments. Their re-opening has been quite successful and I wish them well in 1996. In April just past, Atlantic Minerals of Corner Brook started operating the Lower Cove quarry on the Port au Port Peninsula. Also, Raymo Processing Limited, with its new partner, Electra Mining has finished construction of a vat-leaching process to extract gold from the tailings of the former Rambler Mines on the Baie Verte Peninsula and production has started at the site, we are pleased to say.

I expect Richmont Mines, its Nugget Pond project, to proceed this summer, another gold mine, as well, as a slate quarry at Keels. If environmental approvals are granted this year, Roycefield resources antimony project, the Beaver Brook Antimony project south of Gander Lake could start construction this year. They are presently in the environmental review process. Production of magnetite as ballast for the Hibernia project has begun from a deposit near St. George's and a new gypsum operation in the same region will also see a start this summer, in this case, supplying gypsum to the wallboard plant at Corner Brook.

Several other mining projects such as Major General's gold project near Springdale; Burin Minerals Fluorspar project at St. Lawrence, Torngat Corporation's second, an anorthosite quarry near Nain in Labrador and Newfoundland Slate's second slate quarry near Long Harbour, Placentia Bay are all at different stages of development and all could proceed to production within the next twelve to eighteen months. Right now we expect they all should.

Now, I would like to switch to the petroleum side. Mr. Chairman, the allocation for the Petroleum And Energy Resources Management Program or the Energy Branch has been reduced to $2.98 million for this budget year, down from $3.63 million last year. About $2 million of this is provided to fund the provincial share of the Canada-Newfoundland Offshore Petroleum Board, as well as some capital projects under the Offshore Development Fund. The remainder, about $1 million, is used to fund four separate activities within the Energy branch of the department. I will briefly describe these.

The Petroleum Resource Management Division administers the petroleum land tenure system, provides petroleum resource policy recommendations and advice to government and provides geological, geophysical engineering and regulatory service in the oil and gas sector. Activities over the coming year will focus on management of onshore petroleum resources and assessment of petroleum potential, as well as promotion of the Province's onshore and offshore resources, provision of technical support to provincial negotiating teams, and review of offshore management decisions made by the Offshore Board, as well as ongoing development of the offshore and onshore regulatory regimes.

I would like to refer here to the recent land sale that we had on the West Coast. Twenty-eight of thirty-one packages were bid, and CNOPB, the Offshore Board, has a sale on dated September 30 1996: Four packages on the West Coast and four on the Grand Banks. We are looking forward to that one, particularly in light of drilling that is ongoing now in Western Newfoundland.

The Policy, Planning and Co-ordination Division of the Energy branch plans and provides policy, recommendations and advice on energy matters, co-ordinates and implements initiatives related to public and community relations - for example, the Bull Arm site committee - as well as energy and environmental initiatives, and on a limited basis, energy efficiency and alternate energy matters. Included in the division's activities for this year are the provision of administrative liaison between the Federal and Provincial Governments and the Offshore Board, the finalization of a Memorandum of Understanding on a joint environmental assessment of the Terra Nova project, and the establishment of the Terra Nova public review panel. From the energy perspective, the Department of Environment and Labour provincially is also involved in this. The division administers, as I said earlier, the Bull Arm area co-ordinating committee agreement, and is co-ordinating the preparation of the Provincial Government submission to the National Climate Change Voluntary Challenge and Registry, in association with the concerns about global warming. The division co-ordinates energy policy, planning, advertising, promotion and community relations.

We also have an energy economics division which provides energy economic policy recommendations and advice to government from the economic implications of energy activities. Activities of this division for this coming year will focus on negotiation of the energy chapter of the Internal Trade Agreement - this has not been concluded and I believe may be the only chapter not concluded - as well as participation in the development of generic and project-specific petroleum fiscal regimes and royalty systems. Ongoing activities include the monitoring of crude oil sales and reference prices, electricity prices, motor, gasoline and home heating oil prices and markets, and monitoring operations at the refinery in Come by Chance.

We have a new division called the Petroleum Projects Monitoring Division which will develop and administer petroleum project agreements and royalty systems and provide fiscal policy recommendations and advice to government. Key activities this year will centre on preparation and administration of royalty legislation and auditing of cost for the determination of royalties from Hibernia as the first project, and other petroleum projects as they evolve, with Terra Nova, of course, being close behind. The division will participate in the negotiation and preparation of petroleum agreements and develop and implement petroleum revenue strategies. This division will also develop and maintain industry information systems as needed to do the job relative to determination of royalties, et cetera.

The Hibernia monitoring division of government has also been transferred to the department with this Budget year. This program has a budget allocation of about $250,000. This particular unit has been monitoring activities associated with the construction of the Hibernia project which, of course, we know will be coming to an end within the next year.

Mr. Chairman, that concludes my overview of the activities of the department. I look forward to further discussion.

CHAIR: Thank you, Minister, it was quite enlightening. I must say, having come from a community of mines in Western Labrador, your department means quite a bit to me. It may be a small department but it is an exciting department with a big role to play in this Province.

CLERK: 1.1.01.

CHAIR: The Clerk has called 1.1.01. I recognize Paul, now, to respond to the minister.

MR. SHELLEY: Thank you very much, Mr. Chairman.

I am delighted to be here this evening, especially as the vice-chairman, but also as the mining critic for the Opposition, and along with my colleagues here. We do have some questions on the estimates, but I will make a few comments to start with.

First of all, to repeat again, I am delighted to be the shadow critic for the mining department because I am very interested in that particular industry. It is for obvious reasons, because in my district and surrounding area, mining is a very important part of the potential there. As a matter of fact, as you look around the Province these days, like the minister, I am very lucky to be in that portfolio, to be honest with you, because it is the bright spot on the horizon for Newfoundland. We do have great potential and, of course, that it is developed properly and that we get our full and fair share, as we always say, I guess is the goal of the government, and that is what we hope to hold them accountable to.

I will start off by saying the Province, as a whole, has great potential, but we will get into some general statements a little bit later on Voisey's Bay. Of course, that is the cream of the crop, I guess you could say, when talking about the mining industry and everybody has questions on those. I have many more questions for the House of Assembly for the minister but he knows thus far that I am going to have constructive straight forward questions on Voisey's Bay, in particular, because it is such a mammoth project. I have spoken to the minister about it. It is such a big project and it is hard to get a grasp on it. There are a lot of questions by Newfoundlanders in general and Labradorians about how it will be developed and certainly without drawing any partisan lines, I know the minister will agree with me when I say that Newfoundlanders don't feel very comfortable when we talk about developing our resources, for obvious reasons, that we have not gotten our full and fair share under all kinds of governments over the past years. I guess now Newfoundlanders are looking around and saying, well we have something here. I hope we have learned from our mistakes of the past and hopefully we will develop such a resource as Voisey's Bay offers the proper way and proceed so that we will get our full and fair share.

On the other side of it is the smaller industries. When we talk about bringing in amendments and legislation and so on, to make sure that we do get our fair share, we also at the same time keep in mind the smaller companies who, basically, lead us to the bigger Voisey's Bays and so on. Of course, without the smaller companies and the exploration that goes on in this Province, as anywhere in Canada, we will not find the Voisey's Bays of the world. So it is very important that we keep encouraging and we don't deter exploration from happening in the Province. I think we are all in agreement with that, in that whatever legislation this government or any government brings in is that we keep it in mind that small mining companies have to be interested and still excited about coming here. We have to do everything possible to encourage those companies to come and look for more.

I still think we are going to find - I don't know about Voisey's Bay but I still think if exploration continues in my area, on the Baie Verte Peninsula, we are certainly going to have a big find down in that area pretty soon. It is a very active area of the Province, the Baie Verte area and, as the minister mentioned already, Raymo is going to try a fairly new technology - I guess it is. I don't know if it is new to the world but it is new in Newfoundland, fairly new. It was tried in Murray Brook, that leach process, which was very interesting. I think they have started that now and I think it is going to prove successful. I think it is really a pilot project to lead into other projects in the Baie Verte area, and in any other area, for that matter.

Now, we also see - and I really want to throw a compliment out here to the group at Ming Mineral. I especially want to mention this evening, too, I think it is only fair to do it, Sam Blagdon who died tragically this past year. He had great foresight with respect to an old mine, so to speak, and did a lot of aggressive pursuit of how to start that mine up again, along with Clarence Martin, Peter Dimmel and those groups there. I think that is just an example of what the minister has been dealing with as far as people interested in mining in this Province is concerned and they have gotten good co-operation from the minister and his deputy ministers.

Also, before I go on, I don't want to miss this and say that I commend Paul Dean for the job he has done in keeping in touch with people in the industry especially. I have dealt with him and asked questions and he has been very good to me in answering questions and giving information. I have also heard it many times by people in my area who are involved with the mining industry out there that they have had great co-operation from the minister and his department. So I will say that. I think that, for one thing, we are all on the same line with that, that we all want to see development of mines in the Province wherever we can and we are going to need that co-operation at all levels of government, I guess you could say.

Those are some general comments and I say again that Voisey's Bay -there will be a lot of questions over the coming months; it is obvious, I know the minister expects that. I am sure there are lots of questions the minister himself has on Voisey's Bay, because it is such a big project. And as we see it unfold and develop we will continue to raise questions in the House of Assembly that are pertinent to it. I will try to remain constructive so that we have the right answers and we know where we are heading specifically.

Now, I am going to go into a few specific questions on the estimates for a few minutes and then I will pass it over to my colleagues and they will have a few more questions. I am sure everybody here will have a few questions. I just want to start with a couple of general comments in the Budget, just get you to comment back and forth on them. One comment was made that the Province will provide funding to continue some activities under the Mineral Development Agreement, in particular, the Prospector's Assistance Program despite the loss of Federal participation. Could you just elaborate on what you mean by some more activities?

DR. GIBBONS: Prospector's Assistance, I think, we have $180,000, Paul, in the Budget. We are continuing our Training Program at West Viking College in Stephenville. The next group which will be the sixth group of twenty prospectors will be there at the end of the month. There will be some money available for the regular Prospector's grants as we have had in the past. We have enjoyed lots of success with this program. We now have one hundred graduates of the West Viking College Program. We have some other people who have joined the Prospecting Fraternity because of interest in it in the last few years. And finally, I believe, we really have a good Prospecting Fraternity in the Province and we want to promote it. Without prospectors Al Chislett and Chris Verbiski we would not be talking today about Voisey's Bay. They found it. And as a citizen of Newfoundland and Labrador, I am proud that it was found by a couple of our prospectors and not by one of the big companies that had explored there for years, but had not found it. So it is great to see a successful prospector, a couple of prospectors in this case.

MR. SHELLEY: I am glad to hear that especially with the Prospector's grant. Like you said, it starts from the grassroots and our own people and that is where that developed.

Another statement that I would like for you to comment on - it is negative, but still I would like to see where you see it going. It said: No funding has been provided for the Newfoundland Exploration Assistance Program and the Dimension Stone Program.

DR. GIBBONS: No, we had a couple of years of success with that program. Was it two years, Paul, or was it longer than that? I cannot remember the exact number of years. But we initiated this particular program under The Strategic Economic Plan to cost share particular projects with industry. It worked very well. We were spending about $500,000 per year. But in view of the tight budget situation this year and in view of the fact that exploration in the Province has gone from $8 million in 1993 to $111 million this year, that we could stop it this year and see how things go. Industry seems to be raising lots of money on its own, so let us see how they do on their own right now with all this money being spent.

MR. SHELLEY: Hopefully they will. Of course, you know how important that was, too.

Another quick note is the increased claim recording fee from $5 to $10 now.

DR. GIBBONS: Well, we do not see that as a significant matter. Most of the provinces in the country charge more than we did. We were frankly at the bottom at $5. I think we are pretty well at the average right now at $10. A number of provinces and territories charge more than $10.

MR. SHELLEY: So that is the ball park figure.

DR. GIBBONS: So we are in the ball park with the rest of them.

MR. SHELLEY: So $5 is really low, then.

DR. GIBBONS: Five dollars was low. We were really at the bottom at $5. We pro-rated the registration fee by area of a claim. Nobody else was as low as we were.

CHAIR: Minister, could I interrupt for a second. For the purposes of Hansard, could we identify ourselves when we speak because they may have some difficulty at the end of the day trying to transcribe this.

DR. GIBBONS: I agree.

MR. SHELLEY: Thank you.

In projected revenues, I have a couple of questions there. First of all, on the mining tax and royalties it is up from $19,121,000 to $22,000,000.

DR. GIBBONS: Yes, I do not have that figure. Well, it would be expected to rise because the value of production is rising.

MR. SHELLEY: That is specifically why, is it?

DR. GIBBONS: Yes. The industry is having a better year.

MR. SHELLEY: Also in projected revenues - Mining Permits and Fees up from $1,900,000 to $5,000,000.

DR. GIBBONS: What -

MR. SHELLEY: Ninety-five, yes.

DR. GIBBONS: The security deposits. Each time you stake a claim with the map staking process you have to make a security deposit of $50 against your first year's work requirement. The first year you are required to do $200 worth of work and you have to deposit one-quarter of that. If you do your work you get your money back; if you don't do your work we keep your money. It is an incentive if you are going to stake claims in the Province to do the work, not speculate. We discourage speculation, is the message there. We want a true and honest effort by the people who are interested. We don't want everybody just to stake claims for the sake of the money they are going to make by selling the claims down the street, which was done last year by some people.

MR. SHELLEY: On page 175, in the Minister's Office, the minister expects to spend $14,000 more this year than last year?

DR. GIBBONS: I think if you look carefully at it, most of that seems to be in the line of Transportation and Communications.

MR. SHELLEY: Yes, that is why I am asking. Where do you mean by that, though?

DR. GIBBONS: I think that is more associated with the fact that we try to equalize the Transportation and Communications bill in all ministers' offices. You can see that I didn't spend a lot last year. If I can avoid going on an airplane I will avoid it. I like to keep my feet on the ground. I will only travel if I have to and need to.

MR. SHELLEY: So you expect that on transportation.

DR. GIBBONS: That is transportation cost if I need it. If I don't have to travel I will not.

MR. SHELLEY: Okay, that is fair enough. Executive Support. Salaries are budgeted to increase by $37,000.

DR. GIBBONS: I don't have the answer to that one. Does someone have the answer? Why is that?

WITNESS: (Inaudible).

MR. SHELLEY: (Inaudible).

DR. GIBBONS: I am being told by the man in charge of finances - because we did have a change in deputy minister, a new deputy minister, so some transitional stuff is going on there, I think.

MR. SHELLEY: That is where that has come from? Okay.

This is something that was brought up to me by some people who were doing some exploration in Labrador, but in regard to wildlife: maybe you have heard the complaint before and can elaborate on it anyway. They say in setting up for a drill site they are finding out that after they get set up they are getting all kinds of backlash about wildlife complaints, or that there was a pine marten in the area, or whatever, something to do with wildlife. Have you done anything to rectify that so that they don't go in and get set up, and then find they have to move, or there is something around them, and so on?

DR. GIBBONS: Yes, well, from the Mines department they get the mineral exploration permits and the mineral licences, but then you might find you are in a sensitive area for wildlife or archaeology or any number of reasons. Then you may require a permit from the Wildlife division or approval from the Wildlife division or some type of a clearance from the Wildlife division, or from, again, the Historic Resources division of the Department of Tourism, Culture and Recreation, to ensure that - again, we have to pay appropriate attention to matters that are sensitive, whether they are wildlife, or archaeological or some other reason. We just cannot have a free-for-all.

We had to make some amendments to our mineral exploration regulations last year because in some cases there seemed to be a free-for-all. There is a little more structure to it now, and that is causing some difficulty for some operators who were used to the freedom of the past. We are doing our best to work with them, and we are going to work with them, and sort of guide them through the process.

MR. SHELLEY: Could it not be a possible suggestion for a solution, then, that the whole areas that have potential for mining be mapped out with respect to wildlife? I'm sure that can be done. If Wildlife has its books in order it can tell you what, where, and wherever so that you know beforehand on permits and drilling. Or is that too far-fetched?

DR. GIBBONS: It is a bit of a stretch. Because you have to realize that in the last twelve months we have had about 30 per cent of Labrador staked. In the past we would get maybe 20,000 claims a year. Now, we have 250,000 claims per year. All of a sudden people are everywhere in a rather intensive exploration. We created problems for ourselves with the discovery of Voisey's Bay. It is a great problem to have and we think we can deal with it.

MR. SHELLEY: On page 176, Geological Survey, Salaries again have been increased by $95,000.

DR. GIBBONS: In that one, you have to turn the page again and look at the bottom of page 177 and you will see that Geological Survey there has gone from $470,000 to zero.

MR. SHELLEY: So that is where it was the transfer of the people from that -

DR. GIBBONS: So we made up a little bit, $300,000 is it, Paul?

MR. DEAN: One hundred and twenty thousand dollars in salaries.

DR. GIBBONS: One hundred and twenty thousand dollars in salaries but about $300,000 altogether shifted into the geological survey from what was previously done under the Mineral Development Agreement so that we can maintain at least, a good, sound field program. So you will see the numbers there.

MR. SHELLEY: That is a transfer, basically, then?

DR. GIBBONS: A transfer yes, but there is a big decrease on the next page.

MR. SHELLEY: Okay. Now, while we are on that, I heard some of your comments when you were saying them, and I am sorry but I didn't get it all when you talked about the geological survey, all of that being lost now. Could you comment on that as to why you think the -

DR. GIBBONS: Well, it is not all lost because most of our geological survey work previously was being done on what I would call a provincial A-base funding, most of our work and you can see it when you look at page 176, that was the provincial amount that was being done last year, the $2.4 million in salaries, and then, when you turn the page and see 2.1.04, Geological Survey - MDAII, the Mineral Agreement, we only had $470,000 in salaries, so only a small percentage of the work that we were doing in the field was associated with the federal-provincial agreement - just a small amount.

MR. SHELLEY: Yes, no big loss to that.

DR. GIBBONS: So we only lost a small amount and we managed to take some of it over into the regular A-base budget to still maintain a good, core program and we think it is essential to maintain a good, core program if we are going to find the Voisey's Bays of the future and the other mineral deposits of the future.

MR. SHELLEY: On page 177 again, savings of $140,000 from 1995 to 1996 are almost entirely due to the cut in Grants and Subsidies from $375,000 to $76,000. Could you -

DR. GIBBONS: What line are you on now? That is related to the Exploration Assistance Program that we talked about, a half-million dollar program where we cost-shared funds with industry. That one is gone and that is why you see that big difference.

MR. SHELLEY: Just clarification on that one, that's all.

Okay, we have a few more but what I will do now is stop and pass it over and it will come back to me.

CHAIR: Thank you, Mr. Shelley. Is there somebody else who would -

DR. GIBBONS: Before anyone else starts, I just want to make -

CHAIR: Sure, go ahead.

DR. GIBBONS: For my own part to the record following up on some of the things Mr. Shelley said, referring to Sam Blagdon; I, too, want to add my great regards to Sam Blagdon, in his memory. I knew him and his family well and, Sam Blagdon, the morning of the accident, was actually on his way to St. John's to meet with me on an important mining matter. So it was quite a shocking day for all of us in the department, knowing that Sam was on his way in to see us when that happened, and I hope that he is appropriately recognized when we have the mining conference in Baie Verte next month. I want to be there and to be part of it.

In talking about Voisey's Bay, I just want, for the record again, to note that at 5:22 a fax arrived in my office from Inco; the deal has been finalized. Inco has now become the owner of Diamond Fields in Voisey's Bay. The deal has been done as of today, so this is, in many ways, probably going to be a red-letter day in mining for the Province of Newfoundland and Labrador. That is all.

Thank you, Mr. Chairman.

CHAIR: Thank you, Mr. Minister.

Roger -

MR. FITZGERALD: Thank you, Mr. Chairman.

I have a few questions to ask the minister.

Minister, I have asked you a couple of questions before, I will repeat one right now and if you will be kind enough to give me a good tip on Voisey's Bay, I will disappear out of here pretty fast and you could be on you way and we could both save some time and make some money.

DR. GIBBONS: I would say most of the big dollars have already been made. My advice, Mr. Fitzgerald, would be: be careful of the juniors. Don't buy on anything that does not have an assay on the table. Be cautious.

MR. FITZGERALD: Mr. Minister, in the estimates, it shows a fair amount of money put forward for Transportation and Communications. In fact, I don't know if you have added up yours in your particular department but it adds up to $641,000 for Transportation and Communications. Would you consider that to be a normal figure compared - and I suppose, when I think of Transportation and Communications, I think of telephones and I think of travel. When you look at the total number of ninety-four employees, would you consider that being high compared to other departments?

DR. GIBBONS: My geological staff, Mr. Fitzgerald, would probably say that is low. Because actually that Transportation and Communications covers the cost of field programs, when you put field crews out in the bush. It is probably low, in their minds. They probably would like to have a bit more money for a bit more field activity. So that is what is included in that. That is why that number may be a little higher than other departments that do not have field surveys.

MR. SHELLEY: You will have to take me to Voisey's Bay to see.

DR. GIBBONS: These are the field crews out in the woods looking at rocks.

MR. FITZGERALD: You also mentioned in your opening statement there a few minutes ago, that one-quarter of a million claims went through your department, I think, last year. How do you go about filing a claim? Can you tell me the cost of a claim? And if there is a time limit on somebody coming and filing a claim as far as the length of time to activate such claim?

DR. GIBBONS: Yes, right now, it is quite easy to stake a claim. You come into the department, if you want to come in person. You do not have to come in person, you can send it in the mail, and I don't think we have started by fax yet, have we, Paul?

MR. DEAN: No.

DR. GIBBONS: But some jurisdictions do it by fax. But now it is done on a map. You don't have to go out in the woods and put in the pegs. So it is relatively easy to mark it on a map and each claim is a quarter of a kilometre on a side. So there are four claims in one square kilometre. The new fee is $10 for the registration and you must make a $50 deposit against a first year's work requirement. In that first twelve-month period, you are required to spend $200 working a claim, in the next year $250, in the next year $300. So we increase the requirements annually. And if you do not do the work in the first year, your claim reverts to the Crown, or if you do it for two years and then don't do it for the third, your claim will revert to the Crown. So there is a requirement and an onus upon the claim holder to do work every year and there is an increasing requirement every year after the first.

MR. FITZGERALD: You also mentioned slate mining. That is about the only mine, I think, that I have in my district, and then there is a small mine being active there in the summer months at Keels. I know of another one in Trinity North, I think it is Nut Cove, around Burgoynes Cove. The one in Keels, the particular operator there seems to have an awful time trying to arrange funding, and I know that he has put an honest effort into it himself and pretty well exhausted all of his life savings. All the appearances is that he is into a good find there. There is a good market for slate. What happens in a case like that? Is government not there to try to promote the industry and try to arrange for him and take him through ACOA and those other funding agencies, or do you people just stay out of it altogether and arrange that the particular individual go and look after funding himself?

DR. GIBBONS: Well, we and our agencies in the past have helped considerably to promote the slate business. I think ACOA was also a contributor in helping the slate business. Fortunately, the company at Nut Cove - Burgoynes Cove seems to be very productive now and producing about 5,000 tons per year. So they got to a stage where they have developed good international markets. They have good quality products. The Keels deposit has good quality rock, of a different colour, I believe, from Nut Cove, Paul?

MR. DEAN: Yes.

DR. GIBBONS: A different colour and in demand. I mentioned it earlier; it is one of the operations that is on our list. It is something that we would expect to be operating in the next twelve to eighteen months - I am not quite sure on what scale. But it is a good rock and the markets are available internationally, so we wish him well. I know the gentleman very well.

MR. FITZGERALD: Mr. Minister, is it up to the individual himself to find markets?

DR. GIBBONS: Yes.

MR. FITZGERALD: Does government - or government doesn't have anything to do with marketing, it is really a private matter?

DR. GIBBONS: No, it is really private.

FITZGERALD: It is really entirely up to himself.

The one thing, I suppose, that is probably first and foremost on most people's minds these last few months is the price of gasoline and the difference that you see in St. John's versus, I will speak for Bonavista, since it is the one I am most familiar with. It is not uncommon to find - I think the price of regular gasoline here is something like 63.8 cents at self-serve, and places like Bonavista, it is 70 cents or even higher. Is government looking at regulating this particular industry? Or is there any justification in some of those oil companies and vendors charging such a difference in prices in rural versus urban areas?

DR. GIBBONS: Number one, we are not looking at regulating. A few years ago when there was a similar price shock - I think it was at the time of the Kuwait incident - we did an extensive review as to whether or not we should regulate the price of gasoline in the Province. It took us several months, maybe about a year, and the conclusion was that we should not regulate. At that time, only two provinces in Canada were regulating, Nova Scotia and Prince Edward Island, and before our assessment was completed, Nova Scotia came out and said: Well, we have had enough of this regulation of gasoline, we are going to stop regulating gasoline. So then Prince Edward Island was the only one left, and today, Prince Edward Island is the only one left. No other jurisdiction in North America regulates the price of gasoline. It is left to market forces.

Unfortunately, in the last six months, we have had another price shock and the price of petroleum, crude oil in particular, went up by about six dollars over the winter. Now, most of that has gone back in the last little while; this morning it was eighteen dollars and something on channel 20, Business Report, so we are getting back to where it used to be six months ago. My expectation is that the price of gasoline should also start to drop back in the near future.

It is not Newfoundland only this time; it has happened all over the Western world. The United States has had a real debate about it. I was in Houston, Texas for the Oil Show not long ago and the price of gasoline in Houston was up by about 20 per cent in the last six months, and down there they consider that to be something quite shocking. But they understood it, that the price of crude was driving it. In the last few days there has been an agreement between the United Nations and Iraq, that Iraq can put $1 billion worth of crude into world markets every thirty days or ninety days, Martin?

MR. SHEPPARD: Ninety days.

DR. GIBBONS: Ninety days, is it? So with that Iraqui crude coming into the market now, it is going to help the demand/supply situation and I would think that the price of crude should go back to where it was before this price shock. So I think we are going to see the price of gasoline come back approximately to where it was. Now, back in February, we actually saw a decrease of two cents per litre and in March, it went up by two cents per litre and in April it went up by three cents per litre. So it does have that volatility, depending on the price, and it will go down, in my view. It will go down again now that the crude price has gone down pretty well to where it was or approaching where it was.

Now, the second part of your question is a different matter - why the difference between St. John's and Bonavista, or St. John's and Lumsden, where I was last week and paid about, it must have been close to ten cents difference on a litre. A lot of that was related to local marketing. That is not price being set by the big companies. The price was put in their product to their service stations and they will charge the cost of the product plus the cost of transporting it, and then you have the local mark-up. And a lot of the variability in the smaller towns is the local mark-up, as I understand it.

Compare, for example, a big station on Blackmarsh Road in St. John's and the cheapest price that I see in St. John's is Blackmarsh Esso, 63.4 cents, it is always a half-cent below the other self-serves. They probably put through more gasoline than any other station in the Province. They can afford to have a slightly smaller mark-up. But when you compare that to a small station in a little rural town where a local businessman is trying to survive, his mark-up is going to be probably a little higher because his flow-through is much, much smaller. These marginal-size operators have a slightly bigger mark-up, so that is what you are seeing. You are seeing the local business environment giving you the difference in the price. It is not a price fixing by anybody, it is a local business situation. We wish it were not the case, but that is normal, and I am hoping this summer we see some price wars that will help drive them down, even in the local areas.

MR. FITZGERALD: Yes. I don't know if you consider it as normal or not when you see a difference of forty cents in a gallon of gasoline which is approximately what it works out to, because, you know, I am not convinced that it costs that much more to ship gasoline from St. John's to Clarenville, for instance, or Bonavista.

DR. GIBBONS: No, no. I didn't say it was all, the shipping process is probably only a penny in Bonavista.

MR. FITZGERALD: They are buying the same oil, I mean, it is coming from the same storage tanks here, and sometimes I think that the oil companies are allowed to set those exorbitant prices and consumers have no other choice but to buy. And I think a lot of people feel the same way as I do, that there should be a limit on what gasoline vendors can charge, because it is not a luxury anymore, it is a necessity, and you have no other choice but to buy it.

DR. GIBBONS: I think you misunderstood what I said. I don't believe you are seeing that as a price being fixed by the company that is providing the product. They will have their cost of the product and they will have the cost of transporting that product to the station but I think you are seeing a local variation in local mark-ups and I think that is what is causing a lot of that; it is the local station, it is not owned by the big companies at all. Most of the stations that sell under a particular flag are not owned by the big companies, they are locally-owned stations.

MR. FITZGERALD: Don't they dictate the price charged at the gas tanks?

DR. GIBBONS: They dictate their own price.

MR. FITZGERALD: The only difference is what the vendor will take off his own profits.

DR. GIBBONS: Yes.

MR. FITZGERALD: That is all.

DR. GIBBONS: The big companies will only dictate what they want as the price of their product. I would think that they are pretty well consistent throughout the Province, except for the transportation fees around the Province. Any other difference, to me, is reflecting the local mark-up and not a dictate of the big company. It is the local business environment, I think, that you are seeing there. From our assessment that is primarily what you are seeing there, the local business environment.

MR. FITZGERALD: Some of the mark-ups, I think, are probably even much more than the profits they make on a gallon of gas, from what I've been seeing and what I've been told that the mark-ups are. Anyway, it is certainly unfair to the people who live in rural areas.

Offshore oil and gas. Do I understand correctly when I say that it is not an option for offshore oil and gas to be landed and refined at Come By Chance?

DR. GIBBONS: You are wrong. It could be. The petroleum that is produced in the offshore in Newfoundland, the Grand Banks of Newfoundland, will be commercially available. Now, I would expect that some of the companies, as owners of the product, will want to take a significant amount of what they own to their own refineries, but the product would be commercially available, just like product produced in the North Sea today, commercially available at the well head, can be bought by anybody. Come By Chance right now is buying crude oil from all over the world, pretty well, and likewise, they could bid to buy from Hibernia. The operator at Come By Chance, two or three years ago when I visited the site, was saying: Yes, Rex, we can refine Hibernia crude and we would be glad to bid on it and buy it. There is nothing to stop them from bidding to buy some of the product, and I would hope they would. Now, there is one technical matter. In cold weather, because of the wax content, you have to have your pipes heated and all that, and they would have to make sure they can accommodate (inaudible) -

MR. FITZGERALD: But the option of buying is there.

DR. GIBBONS: The option is there. The option is there for sure.

MR. FITZGERALD: Mr. Minister, anything new on the oil transhipment facility, which was a hot topic during the election?

DR. GIBBONS: Nothing new that I can say tonight, other than that it is down - you probably saw the bit in the news a few days ago that the companies involved, Chevron and Mobil, had an engineering company from St. John's, SNC-Lavalin(###), headquarters here in St. John's, analyzing a number of sites. They analyzed - I believe the total number was twelve - different sites on the South Coast of Newfoundland. Last week they short-listed that to three sites: Come By Chance, Whiffin Head, which is three kilometres from Come By Chance, near Arnold's Cove, and another site near Admiral's Beach. So it is down to three sites now. What I'm told is that within the next few weeks, within this quarter, by the end of June, we should have a decision. It is down to three and I would expect that one of those three will be the winner.

MR. FITZGERALD: On page 179, 3.1.01, there is a cut of $67,000 in that particular heading. I'm just wondering if that particular cut will have consequences in terms of planning for petroleum resource development. Why has it been cut by $67,000?

DR. GIBBONS: I'm not sure of the answer to that one. Martin Sheppard, do you have the answer to that?

MR. SHEPPARD: In the head 3.1.0 -

MR. FITZGERALD: 3.1.01, page 179.

MR. SHEPPARD: The majority of it is in Professional Services -

CHAIR: Mr. Sheppard, excuse me. Just introduce yourself to the mike for Hansard purposes.

MR. SHEPPARD: Martin Sheppard. The majority of the reduction is in the Professional Services category from $93,500 down to $3,500. That is the result of a carryover of Strategic Economic Planning money that was - it is not to be used now with the elimination previously of the Energy Efficiency and Alternative Energy Division of the branch. So the majority of the reduction is in that particular activity, alternative energy and energy conservation.

MR. FITZGERALD: Are you saying the .05 part of that one, Professional Services?

MR. SHEPPARD: Yes, that is where the -

MR. FITZGERALD: The $93,500 was budgeted but what was actually spent was $16,000 last year?

DR. GIBBONS: Correct, and we stopped that activity.

MR. FITZGERALD: Okay. Mr. Chairman, I will just pass it on to somebody else and I will come back later.

CHAIR: Mr. Woodford, would you -

DR. GIBBONS: Mr. Chairman, before we go on to the next speaker just one point back on the gasoline.

I want to put things in perspective as to what is happening with gasoline prices in North America and in Canada. Recently, I was reviewing a report that was done on this - not for us but it was done on this subject - comparing what has been happening in the petroleum sector and the gasoline sector downstream, compared to some of the other sectors. For example, in the electricity sector of a public utility, the rate of return by the regulated public utilities across Canada has been about 12 per cent to 13 per cent. In the gasoline sector - where it is not regulated - driven by market forces, the rate of return to the sector was about 4 per cent to 5 per cent, depending on the company. Some companies may have had a rate of return of 5 per cent, some less than 4 per cent. I think, overall, in a five-year period, the rate of return on gasoline in Canada was 3.8 per cent to the industry. So you are comparing a market driven industry with a regulated industry and the market driven industry is going to give the customer the better service every time, based on this study that was done, compared to a public utility board rate of return where you are going to be guaranteed your 12 per cent. So despite the fact that we get the spikes, they work themselves out in the end. So just a point of information on gasoline.

MR. FITZGERALD: We talked about the -

DR. GIBBONS: I am sorry - I will get back to it; go ahead.

MR. FITZGERALD: Okay. The thing that was concerning me, when we talked about the individual mark-ups of individual service stations - you can correct me if I am wrong - from what I understand, you get approximately a twenty cent per gallon mark-up. That is what an operator of a service station would expect to retrieve on the sale of gasoline. It is not uncommon for some of those service stations to be selling at a thirty cent and higher price per gallon than what you find in St. John's. That is why it leads me to believe - I think it is the larger companies which are driving up the price of gasoline and not the individual owners in the mark-up they want from that particular commodity.

DR. GIBBONS: No, it is right the opposite of that. It is actually being driven by the low volumes in the small markets. It is not by the big companies. The normal thing across the industry is about a five or six cent per litre mark-up at the retail station but you get the variations that you talk about when you get to a low volume station. And it is the low volume stations that have the bigger margins. Just to survive - you are selling gas, you are selling chips and drinks and a few other things, but they generally, from our assessment, have a bigger mark-up and that is why you are seeing those big jumps.

MR. FITZGERALD: I don't know if we gain anything from it or not because, as you know, most of our goods come into this Province by road transport. I think when those tractor-trailers roll off the boats they have lots of fuel to travel their distance here in Newfoundland and fuel up again when they get back on the other side of the straits.

DR. GIBBONS: In the case with them, we catch them in terms of our taxes on road fuels because they have to give us a prorated amount based on the amount of travelling they do in the Province, regardless of where they buy their gas. We certainly catch most of them.

MR. FITZGERALD: Do they have to buy a particular amount of fuel in Newfoundland in order to get their plates registered or whatever at the end of the year? How is that regulated?

DR. GIBBONS: My understanding is they have to pay us a prorated amount of road tax based on the transportation miles they travel in Newfoundland, regardless of where they buy that gas.

MR. FITZGERALD: Okay.

DR. GIBBONS: And they have to keep their road logs. So we get them through the tax department, regardless of their source.

MR. FITZGERALD: So it doesn't matter if they buy gasoline here or not?

DR. GIBBONS: No, it doesn't matter as far as the taxes -

MR. FITZGERALD: As far as government and taxation is concerned.

DR. GIBBONS: As far as we are concerned, we get them based on their road logs, how much they travel in the Province.

MR. FITZGERALD: The only thing is, the service station doesn't make the sale.

DR. GIBBONS: Exactly that.

CHAIR: Mr. Woodford.

MR. WOODFORD: Rick Woodford, Humber Valley. For the record, Mr. Minister, the West Coast drilling now by Hunt Oil just brought in the jack-up rig out there. Is there any indication of other companies which would be doing some drilling over there in the near future? Anywhere on the other claims?

DR. GIBBONS: Presently, we actually have two wells underway over there. Talisman, who is partnering with Vinland Petroleum, a local Newfoundland company, is drilling a well from Cape St. George under Bay St. George right now. It is an onshore to offshore well. This one has been underway since the latter part of February. So it is about three-quarters done maybe. Maybe another month or so and they should finish, I would think, Martin?

MR. SHEPPARD: Yes, pretty well.

DR. GIBBONS: Last week, I think it was on the 15th, Hunt and PanCanadian spudded the first ever offshore well off the West Coast of Newfoundland with the Rowan Gorilla IV. At this time, there is no indication of anybody else planning to drill over there, but this past winter we had a lot of seismic surveys done and we had a great land sale, of course, in March. Depending on what comes from the two wells that are now being drilled, I guess you will see whether or not there is going to be any other drilling in the near future. It will probably be with one or other of those two rigs.

MR. WOODFORD: Is the department aware of any other activity now with regard to the marble deposits, the stone deposits in on Goose Arm? You know what happened there with regard to Len Pye; something similar has happened to Mr. Blagdon, only in a different way.

DR. GIBBONS: Exactly, and since Len died, there has not been a lot of action on it. But I am going to ask Paul Dean, the Assistant Deputy to maybe bring us up to date on that because I am not fully up to date on what is happening. I know there is some interest in the marble over there, but not as much as I would like to see.

MR. DEAN: Yes, Mr. Woodford, there is still some interest in West Coast marble, in general, that includes everything from the north side of Deer Lake down through and south of Corner Brook. The deposit that has been best defined, if you like, is the one that you just referred to at Goose Arm Road. There has not been much activity since Mr. Pye's death. But there has been some activity in the adjacent areas by some of our former employees, believe it or not, from the Department of Mines and Energy who have gone from the good area of St. John's to live on the West Coast. So there is some activity there, and there is also some activity south of Corner Brook. There are some very nice marble breccias and pink marble south of Corner Brook. So some of that material, particularly south of Corner Brook, was taken to Buchans for cutting and processing in the plant in Buchans and I am informed that some of that turned out to be very good.

So there are some good resources there on the West Coast and perhaps it is a bit like Mr. Fitzgerald referring to the Keels slate deposit. The people involved really do not have a lot of financial resources and they need some good partnerships to bring these deposits into production. And we try to help them find those partnerships, but it takes some time.

MR. WOODFORD: What about Glover Island? What is new with regard to Glover Island now? I heard a few reports the other day on CBC. But is there any activity that the department is aware of there, anything new?

MR. DEAN: No, Mr. Woodford, there is not much new from last year. I think at this Committee meeting last year my expressed opinion was that there was a lot of gold on Glover Island, but it required a lot more exploration activity to find enough in one concentration to think of it as an economic ore body. I still hold that opinion that there is still a lot of exploration that should be done and needs to be done on Glover Island. But I think the potential there is just as good as it is in the Baie Verte region, as Mr. Shelley referred to earlier.

MR. WOODFORD: Along the lines of the questioning by the Member for Bonavista South with regard to gas prices. I have to agree with him, as far as I am concerned, it is something terrible what has gone on there in the last couple of months. Has the department been following what is happening with the House of Commons? I understand now there is a House of Commons Committee looking into this particular problem to see if there is some kind of price fixing or gouging or whatever there. Is the department in touch with what is going on on the national level with regard to this?

DR. GIBBONS: We are aware that the competition bureau has been asked to review this matter. It has done it before. Some future government will probably ask to do it again. This is just my frank opinion - I don't see them finding a different result. There has been a lot of debate on this in Canada, in the United States, in the last few months because of what has happened to the price of gas. I frankly don't expect they will find a different answer from what they found when they did it ten years ago. It is a new government saying: We want to take a new look. We are aware that they are doing it and we look forward to seeing what they get. I'm expressing my frank opinion, I don't expect to see a different answer.

MR. WOODFORD: Okay. Thanks, Mr. Chairman.

CHAIR: Ms Thistle.

MS THISTLE: Mr. Minister, I would like for you to bring us up to date on the activity that is happening now in Grand Falls - Buchans, in particular, Buchans - Millertown. I have heard that there is an investment, or some speculation, I suppose, on the part of one investor up there who is buying up some houses in the Buchans area. That has sparked a lot of excitement and activity in Buchans. I was wondering if you would bring us up to scratch on what is happening there.

DR. GIBBONS: Yes, Ms Thistle. Despite all the attention to Labrador and Voisey's Bay, et cetera, there is still a lot of exploration going on on the Island, in particular from the Baie Verte - Springdale region on the coast of Notre Dame Bay, all the way down through Central Newfoundland, the Buchans belt - we often call it the Buchans belt - right down through Glover Island as well, down to the South Coast. There is still a lot of claims in good standing and there is still a fair bit of exploration activity including drilling in Buchans, right in the town, in the last few months, right through the water supply, through the ice, with appropriate environmental precautions taken.

MR. WOODFORD: They are drilling through Sandy Lake?

DR. GIBBONS: Drilling in the water supply, wasn't it, Mr. Dean? Yes, I'm told.

MR. DEAN: I believe we issued a permit but there was never enough ice on the water supply.

DR. GIBBONS: Never enough ice. We issued the permit but never got enough ice to do it. It was an unusual winter. Usually there is enough ice to carry a tractor. They have been drilling right in downtown Buchans, I believe. There have been rumours. Again, I would caution people, don't spend your money on rumours. I know what happened last week to people who spent money on rumours until the assay results came in. Be careful.

The exploration activity is ongoing, and I would again wish them well. I know that in Buchans, during the life of the Buchans mine, they mined out about a dozen different deposits. That means they found about a dozen different deposits over time. The geology is great. You usually find ore deposits where you found them before. So I am hoping that this company that is doing the drilling there now will be successful. A major international company called Phelps Dodge is drilling in the Buchans area right now. I just hope they are successful.

MS THISTLE: So do I. What is happening in Millertown? There is some exploration going on in Millertown as well, isn't there?

DR. GIBBONS: I don't know the specifics in Millertown but I will ask Paul Dean if he can speak on it.

MS THISTLE: There is a survey line being cut there for some reason right now. You aren't aware of this, are you?

MR. DEAN: Ms Thistle, yes, within the Buchans - Millertown area there are, I would say, twelve or thirteen companies I can think of that hold mineral rights, that have claims in that area. That is a result of some of the old ASARCO holdings coming back to the Crown and the minister making them available for staking. So there is competitive activity, if you like, in the Millertown - Buchans area for the first time. Some of these companies, I know, are doing ground geophysical surveys, and to do these surveys that does involve cutting survey lines through the woods and laying out grids to use geophysical surveys to define a drill target. This is at the very preliminary stage. On a day-to-day basis we aren't always aware of what company is doing what until it gets to the drilling phase. It wouldn't surprise me at all that there are companies in the Millertown area that are doing ground geophysics and cutting survey lines.

MS THISTLE: Mr. Minister, I know your department must have a record of all activity that is going on in the Province at any given time. Is that information readily available to the general public?

DR. GIBBONS: The information as to where the claims are is public information, which means that the names of the companies is public information. We have reports on exploration that are required to be submitted to us annually. Within sixty days of the anniversary date of a claim, the company is required to give us a report; within a three-year time frame that becomes public information, but there is a three-year confidentiality period on information on a claim unless the company decides to make it public. So we have a lot of information that is open and available to the public right now; we have some that is in that intermediate category that is still confidential, and the general stuff like who owns the claim, where, which is public information so there is lots of information in the department for the public.

MS THISTLE: Mr. Minister, I am thinking along the lines of people anxious to apply for employment through some of these companies. Is there a list readily available where people can make applications?

DR. GIBBONS: Mr. Dean says that we do have a typed list of all the companies so I guess we can make it available to people. Very frequently, people will call our offices looking for a name or address of a particular company that is working somewhere so that they can make contact with them and apply, so we are pleased to accommodate where we can.

MS THISTLE: Very good. There is one other question I would like to ask you, Mr. Minister. It is along the lines of gas pricing and I can't resist that question.

A town councillor from my district of Grand Falls-Buchans, is actively pursuing information on gas pricing, and in some of the information that he has collected so far, from local operators throughout the Province, they are denying that they are actually inflating prices. They are saying that the prices are set by the major oil companies and so, we are hearing conflicting information, and we are at a loss now to really tell who is telling the truth in other words. But it is a major problem surfacing here now, across the Province, and you know, we would like to get to the bottom of it.

DR. GIBBONS: Well, I can only repeat what I have said before. From anything that we have done, the companies set a price on their product and a transportation-distribution price on their product and anything else, to my understanding, is left to the local agent. I know that the differences may become more striking because of the big prices in the last few months. I don't know if there is anything else you could add to this, Martin.

MR. SHEPPARD: The market at play in this Province is, in terms of gasoline prices, not at all very much different from what it is across the country generally, and in the United States.

The problem has been, as the minister said, with the price of crude oil eventually being translated into being refined and the product gasoline being created, and it is very much tied to the refinery rack prices that are in play at a particular moment which are in turn, related to the crude price. What has happened is that the market in North America has been driven to a large extent by very low inventories in the United States. This was as a result of the anticipation of the Iraqui oil coming into the market sooner than it actually has, and what the suppliers in the United States have done is, they have kept their inventories low and this has resulted in an escalation in the price instead of what was anticipated to be with the inclusion of the Iraqui oil, a decrease in the price of crude so, they anticipated the Iraqui oil coming on sooner than it actually has and because the inventories were low, the crude oil price rose.

Now, when the Iraqui oil comes on and the inventories build back up, then the price can be expected to go with the market and decrease, in terms of gasoline prices.

I think the market-driven aspect of it as opposed to regulating prices is much the better way to go. For example, on February 5, 1996 market forces dictated a two-cent per litre reduction in the price. So, as the minister said, the prices in gasoline in Newfoundland are not much different from what they are in any other area of the country, or in the United States, for that matter. They move up and down, related to the cost of crude oil.

MS THISTLE: Thank you. I understand the fluctuations of prices in all the rural markets, but I am more or less interested in provincial difference in prices throughout the Province. I think many studies have been done on this same matter in the past by Chambers of Commerce throughout the Province and different town councils and so on. But I think it always becomes a mystery, because we have oil storage tanks in Botwood for Grand Falls/Windsor, and the price of gas seems to be much higher in Grand Falls/Windsor than it is in St. John's, as we all know, and transportation should not be the reason.

DR. GIBBONS: It is not.

MS THISTLE: So we are still at a loss. Why is it higher?

DR. GIBBONS: As I said earlier, it is not transportation. Whatever the transportation cost is, it is built in there. It is your local market. You have stations that have small flow-through relative to the big stations like the one I mentioned earlier in St. John's, which is probably the biggest one in the Province, and you are going to have more local mark-up. So, in my view, regardless of what those local stations are telling the councillor from Grand Falls/Windsor, the mark-up is in the local stations. The international companies are not going to charge more plus the transportation component to Grand Falls than they are going to charge for St. John's plus the transportation component. They are going to have similar prices. So you are looking at local market variations. That is what it showed the last time we studied it.

MS THISTLE: It is interesting, isn't it. Because sometimes in the past, the prices have been lower in Botwood.

DR. GIBBONS: You will get price wars.

MS THISTLE: Yes.

DR. GIBBONS: You will get price wars. We have had them on the West Coast. I know, last year, the year before we had a big one in Corner Brook. The prices were very low. You will see them again. I expect we will see some gas wars this summer.

MS THISTLE: So government's finding has been that it is really attributed to the local market.

DR. GIBBONS: Yes, local markets. Everything is market-driven.

MS THISTLE: Very good. Thank you for your explanation.

CHAIR: Thank you, Ms Thistle.

I propose that we have a ten-minute break now. I don't know if there is anybody here who smokes or otherwise, but maybe just ten minutes to loosen up a little bit. There is coffee outside. We will come back at twenty-five to.

DR. GIBBONS: Oh, coffee. I am finished now.

CHAIR: I think Mr. Osborne would like to direct some questions to the minister now.

MR. OSBORNE: Yes, sure. On page 180: Energy Economic Policy.

DR. GIBBONS: I can tell (inaudible). Okay.

MR. OSBORNE: I have all of the respect in the world for you, Mr. Gibbons, I am sure you can handle it.

The Salaries in 1995 are $45,000 more than estimated. This budget projects a further increase of $57,000. Why the increases? And why are the Professional Services down by $27,000 over last year?

DR. GIBBONS: If you look at that one on the bottom of page 180, that is article 3.1.05, Economic Policy, and 3.1.06 on the top of the next page, you will notice significant increases in Salaries in both cases. We are starting to do more now in preparation for the production phase of Hibernia where we have, frankly, offices filled with agreements and things that we are going to have to monitor and audit, etcetera to get ready for the production phase. We are bringing on more staff this year to be ready for production which is due to start next year, in December of 1997. So you are seeing a bit of an increase in the salaries in the Economic Policy group and a more significant increase in the Petroleum Products Monitoring group.

We are showing some real growth in that section because the construction phase of Hibernia is just about over or about to go into production and we have to do an audit now on every cent that has been spent. In order to calculate royalties we have to know what everything has been spent on in the past. So we are gearing up in this particular sector now of economics and monitoring of Hibernia. That is why you are seeing the changes there.

Now, I don't know why the Professional Services dropped in Economic Policy - can Martin Sheppard help me with that, maybe?

MR. SHEPPARD: There are certain priorities that we were unable to accomplish during the year in terms of professional studies. I would like to note that in the 1995/'96 budget column for Energy Economic Policy, you will see numbers that start with $141,900 and end with $282,200 on the bottom line. We had an appropriation for the Petroleum Projects Monitoring Division - which is the next activity on page 181 - which should be included in those numbers. Therefore, what appears to be a substantial increase in Salaries from 1995/'96 within the Energy Economic Policy Division is much less substantial. So the $76,000 that is showing in Petroleum Projects Monitoring really needs to be added to that 1995/'96 budget number under Energy Economic Policy.

DR. GIBBONS: As I was saying, you are seeing a combination of those two where we are now gearing up the unit that is going to be monitoring Hibernia production rather than construction. So we are seeing some extra people that are going to be hired in that area; chartered accountants, auditors and those kinds of people, in that particular area.

MR. OSBORNE: Professional Services: What types of services would these be? Where exactly is this money spent?

DR. GIBBONS: Generally, some type of economic consultant. For example, we had an economic consultant do some work for us on types of royalty systems world-wide. So that is where that money would be spent, on that type of activity, as one example. In the past year that was one of the specific examples we had, where we had one particular consultant go and look at the royalty systems in Australia, Norway and other sectors and say, now what are we going to do in Newfoundland, as we were finalizing our own royalty system. So that is where that type of expenditure is made.

MR. OSBORNE: Okay, just a couple of other questions. Under the Development of Infrastructure-Offshore Fund, last year's budget estimated $3 million for Grants and Subsidies. None of this allocation was spent. This year you have $1 million. Basically my question is, why last year did the $3 million not get touched and what is the $1 million allocated for this year?

DR. GIBBONS: In the Canada-Newfoundland Offshore Development Fund, we started with $300 million about ten years ago. Presently, we have $279 million spent, I think it is, or committed. We have about $20 million left to spend and this $1 million is a million of that amount that is not unspent - projects not completed, so expenditure is not finalized; but within the next two years, all of this money has to be spent or committed. It must all be committed by the time Hibernia production starts. So the $3 million and the $1 million reflect amounts from that $20 million of unspent money. It may or may not get spent this year as companies, primarily, or departments of government might submit projects to us for consideration for expenditure under the offshore fund. That is what that category is, offshore fund money.

MR. OSBORNE: Okay.

DR. GIBBONS: It may or may not be spent. It depends on whether projects come forward.

MR. OSBORNE: One question which is not outlined, I guess, in the book: Once production of Hibernia oil begins, what is the - I know, under the transfer payments with Canada that so much of the money has to go back into the federal pocket. What percentage of the money coming to Newfoundland has to go back to Canada?

DR. GIBBONS: For royalties collected, taxes collected related to offshore production, there is an equalization offset. In the initial stages there was going to be a loss of about dollar for dollar. About $0.97 on the dollar would come off equalization for every dollar that we collected in extra royalties. A couple of years ago, the former Minister of Finance, Mr. Baker, got an agreement from the Federal Government to change that to about $0.70 on the dollar, so we would be keeping about $0.30 on the dollar.

There is a formula, as well, relative to Hibernia production that we are now reviewing whereby we may even get a further modification of that. We are looking at it further to see if we can get an improvement beyond the $0.70. It has gone from $0.97 approximately down to about $0.70, and we are looking at it even further. At this time we can say we are going to get about $0.30 on the dollar for royalties.

MR. OSBORNE: That is basically the same deal we have with Voisey's Bay. It is 30 per cent on the dollar, is it?

DR. GIBBONS: In a sense. We don't know yet what it is going to be for Voisey's Bay, but it varies across Canada. It isn't unique to Newfoundland or Labrador. It varies across Canada and it varies according to commodity. So you may lose a certain amount on equalization for a particular mineral commodity or a particular other resource commodity, and we haven't finalized exactly how Voisey's Bay will be treated. In the nickel case, for example, we do have nickel from Manitoba and Sudbury, Ontario, that is already factored into the formula. We are looking at whether the Voisey's Bay nickel should go into the formula and be treated just like nickel from Manitoba and Ontario, or whether it should be treated differently. We know how it is treated in those provinces. We are continuing to work on how it should be treated for Newfoundland and Labrador. From our perspective, we want to try to maximize the amount that we keep. We haven't finalized yet on exactly what it will be, but I have said and others have said, $0.70 or better. We are still working on it. As I said, we do have the models from Manitoba and Ontario.

MR. OSBORNE: One final question. This has probably been raised in the House over the last year or so, I'm not sure. I am new to the House. Are there any talks of producing other hydro projects in the Province? I know, over the past six or seven years we have heard on a couple of occasions rumour that they are looking at production of the Lower Churchill and that type of thing. Is there anything in the works provincially?

DR. GIBBONS: What is happening right now is that the growth in demand on the Island is fairly flat. You might recall that I tabled the Hydro annual report yesterday - was it yesterday? - and said that we did actually have a 2.3 per cent growth in demand and production of last year over the previous year. But it has been pretty flat the last few years, so we haven't had a big reason to develop new sites on the Island. But Hydro projected that they would need new power by about 1998, and they called tenders a few years ago to get some small hydro developed by the private sector. They selected four projects totalling 38 megawatts.

These are presently going through the environmental review process. One is through in White Bay, the other three are partly through. Neither of the other three is through fully yet. They total 38 megawatts. If these get brought on stream, the time schedule is to have them on stream by the fall of 1998. Then there would be no longer any need on the Island until at least 2001, depending on what other things might happen. I will get to that in a second.

In Labrador and the Lower Churchill, we negotiated with Hydro Quebec to develop the Lower Churchill and sell the surplus power south. And at the same time, Hydro Quebec was looking at developing the Great Whale. And the Great Whale was supposed to be constructed and on stream by 1998, the Lower Churchill constructed and on stream by about 2000 -2001. And back about three years ago, because of changing economic circumstances in North America, it all basically died. The Great Whale got put on hold, the Lower Churchill got put on hold, and neither of these is proceeding at this time because there is no demand at this time in the United States market for power from these mega developments. Presently - and I reflect on this from a meeting that I attended in Boston, the Energy Conference Meeting last November, where I was a speaker. At that time, some of the other speakers were saying that energy can now be produced in Boston, or anywhere in the northeast states, from natural gas piped in from the West, for about four cents per kilowatt hour, about forty mils. And there is no way you can do a mega development in Northern Canada and transport the power south and compete with that. So the cheaper source now is combined cycle gas generators using natural gas.

So I do not see any immediate future in mega developments in Northern Quebec or Northern Labrador. On the other hand, we are seeing the prospects of what is going to happen with Voisey's Bay, and how much power might be needed; depending on where you are going to have your mill, your smelter, and your refinery, you are going to need power development. If it is in Labrador, we believe we have enough in the present recall rights to cover all of the demand. I think that is pretty well the situation, Paul -

MR. DEAN: (Inaudible).

DR. GIBBONS: - in the present recall rights to cover all of the demand if it is in Labrador. If it should happen that a component might be built somewhere in insular Newfoundland, then we would probably have to move quickly through Hydro to get some other development on the Island, in which case, there are a number of options available. Some of them are Hydro. The Greenwood Project near Grand Falls is an option. There are three options in the Bay d'Espoir watershed totalling about eighty megawatts. And there are a number of other small Hydro sites in the fifteen to thirty megawatt size that companies would love to put forward. There is a cogeneration possibility at the paper mill at Stephenville. There is a cogeneration possibility at Come By Chance refinery where we regularly see the fire in the stack, and you could put a cogeneration unit in there.

So there are a number of options available on the Island if there is a demand for the power. At this time, there is no demand.

MR. OSBORNE: No. The reason for my question was, you know, with a smelter or the Voisey's Bay project in mind, as well as other mining projects, I was not aware that we had such a reserve, I guess, off Churchill Falls. You mentioned there was plenty of reserve there that we could -

DR. GIBBONS: There is sufficient. Presently, under the Churchill contract, we have a recall right of 300 megawatts. Presently, we have about 127 megawatts not being recalled, not being used. So we just have to serve notice and call that at any time. That would be more than adequate, we believe, for the smelter refinery complex based on the technology that is presently being talked about to us. If it is not done in Labrador, and it is on the Island, we believe there are a number of options available that could be quickly developed, in the time frame again to have the power available when needed. So there are options.

MR. OSBORNE: Thank you.

CHAIR: Mr. Shelley.

MR. SHELLEY: Actually, Tom was starting to ask a few of the questions I was going to ask, especially with respect to Voisey's Bay - I will get to that. But in the economy book, in the projects, with Terra Nova it said that they should be submitting an application plan, a DPA, to the Petroleum Board this year. Do you have any idea when that plan will be submitted?

DR. GIBBONS: It is getting close to completion, I understand. They made the announcement back in the fall of 1995 that they were going to proceed and develop a Development Plan Application to submit to the offshore board. They have made great progress on it and I believe they are getting close. So I believe they will meet their projection and have it submitted in 1996.

MR. SHELLEY: I guess, this summer, maybe?

DR. GIBBONS: I don't want to put a particular time frame on it because as surely as I do, we will miss it, but I don't see any problem now with meeting a '96 target.

MR. SHELLEY: With Whiterose, it says that if everything goes according to plan, Whiterose could be flowing by 2004 with 400 to 500 people employed during peak times. As far as training people for these 400 to 500 jobs, does your department set up programs? What preparedness are we doing for those types of jobs?

DR. GIBBONS: Well, the Education department is co-ordinating that. At this time, of course, it is relative to Hibernia, where we are moving into the production phase. Terra Nova is right now projected to be in production by 2001, it could be a bit earlier, and Whiterose in production by 2004. So there is lots of time for these others, but we know that with oil and gas right now, we are developing an industry and we are moving into the production stage of an industry that is going to last a half-century, in my view. So there are a lot of young people in Newfoundland and Labrador who are taking the appropriate programs to get into the petroleum sector. There is a whole variety of jobs, whether you are again, talking about the petroleum technology speciality jobs or just other jobs associated with the business.

But there are programs and I referred to some speciality courses at Cabot College, for example, that are being well attended. So we are helping with these programs. We are helping with them through the offshore development fund, in some cases, putting in the infrastructure. Some of it is worth visiting. A lot of progress is being made in that area. Anyone who is interested right now should say, `Yes, I know there can be a career in oil and gas and I can go for it. Yes, there can be a career relative to nickel, I can go for it and plan for it today.' So there are options there that people should not hesitate to plan for. They are going to be with us for a quarter of a century at least.

MR. SHELLEY: Yes, well, all Newfoundlanders are concerned with that, especially as we see Voisey's Bay developing, the oil industry developing, and we want to make sure we have people trained here in this Province and not have to bring them in from outside, of course.

DR. GIBBONS: Relative to that again, we just recently approved some further things in Cabot, for example, to add to the present petroleum technology training programs to make sure that we are providing what residents of this Province need to learn.

MR. SHELLEY: That is good to hear.

DR. GIBBONS: Let's get them trained here.

MR. SHELLEY: Now back to Voisey's Bay again, as you just said, you just received this evening confirmation, of course, no surprise - that Inco will be the developer of Voisey's Bay. As far as time frames go, I know it is only speculation and guessing at some points, but as to the development plan for Voisey's Bay, the development plan for the entire smelting, refining, mining and so on, what kinds of time frames are we talking about? When we see that on the table, what exactly will be -

DR. GIBBONS: In my view, it is going to have to move quickly if the company expects to meet the very optimistic time frames that they themselves mention. Even in today's announcement, they said they would wish to be able to see some production by the latter part of 1998. Now, I think that is really optimistic, really optimistic. Tech Corporation has been doing a feasibility study on the mine and mill for several months, targeting completion by the end of June, next month. So once that's done, I would think that they can quickly register with the Environment department and be into the complete environmental assessment process for Voisey's Bay development.

MR. SHELLEY: So Tech was doing - just to mining?

DR. GIBBONS: Mining mill, I think - mining mill was being done by Tech and it is targeted for completion by the end of next month.

The other stuff, I don't know - Inco itself has been doing the assessment of the further processing and they have had consultants in this Province who have been reviewing sites and doing things relative to it. They have not, at this time, made a public announcement on what they are doing on this and the exact schedule. I don't know if Paul has anything extra to add to that, but Inco has been doing the further processing assessment. In regard to all of it, the full package, if they expect to move at all and be close to the optimistic time frame that they themselves mentioned again today, they should have been registered last year, because we understand how long it takes to get through an environmental assessment process and some of these other matters.

MR. SHELLEY: Well, they are still buying nickel, as I understand -- isn't it 20 per cent to keep up with their own market demands?

DR. GIBBONS: Inco again it mentions here in this particular press release today, is buying one-third of the nickel that they are presently selling, so they would like to be producing that themselves, which is understandable; they would like to have it on a fast track. But there is a process which has to be followed and the next step of that process after the completion of the feasibility studies, is to register with Environment, and we know that takes a certain time frame, so you have to get through that before you get a sign off and get into the construction phase - and you have to go through your construction phase before you get to production. So, it is relatively easy to add these time frames together.

MR. SHELLEY: Yes. Every time I read something on them on the Internet or anywhere, they want to move quickly, for obvious reasons, the size of this project and the need for this nickel and how fast they can recover with this (inaudible) profit and so on. It is a magnificent project. And when we start talking about the smelter and so on, we joked about it before, and there was no doubt about it, especially during the election, it was like a smelter on wheels; everywhere you went, there was a smelter going there. Well, we know that is not going to happen, but there is going to be a smelter and there is going to be refining, and to be quite frank about it, the more I read and study it, it is all new to me - and I don't mind admitting ignorance to that kind of development or how big it is - refining is what I am really interested in, and I think probably your department is, because we know that those are the best jobs, the highest paid jobs, and maybe the most jobs are in the refining part of the process, besides the actual mining itself from what I can gather, and you can correct me if I am wrong. It is all guessing, of course, and when you develop the mine, it is the mining part, then you have the smelting portion and the refining process. And, of course, with Falcon Bridge, although there was legislation in Ontario, the refining for Falcon Bridge was done in Norway. I think that is right?

WITNESS: That's correct.

MR. SHELLEY: So I mean, that fear is there. Now, the next question to you - and of course, I am just asking for your opinion, I guess you could say at this point, is when it comes to smelting and refining, do you see the two staying together in the same location or is there the possible breakdown of smelting to refining in different locations?

DR. GIBBONS: They could be either together at the same location or they could be at separate locations. It happens both ways, nationally or internationally; if you were out in Thompson, Manitoba, you would see it all together in a single complex but if you are up in Ontario, you see the smelter in one place, the refinery in another place and, as you said, refineries on the other side of the Atlantic; you might have a cobalt refinery, a copper refinery, a nickel refinery in different places. So there are different concepts to consider and to assess in each case.

MR. SHELLEY: There are all kinds of possibilities.

DR. GIBBONS: A lot of possibilities there and, you know, there is nothing any of us would want more than to see as much further processing as possible. And in some speeches that I have given, I have been conveniently sitting at tables with knives and forks and said: I would love to see the time when we could make some knives and forks and make a few kitchen sinks, because about 60 per cent of the nickel and stainless steel is going into kitchen sinks and things related to that. So if you are doing the processing, if you are producing the metal, the pure metal, then it is not a big step from there to doing some of the other things.

MR. SHELLEY: No, that is fair enough, and those were general questions - that is why I asked them. I think this is the right time to ask them. There will be lots of questions, as the minister can imagine, and so there should be on this project in the House of Assembly as we move on. I don't think anybody in this Legislature tonight would not feel that with such a project, this could very well be a big part of the solution to building Newfoundland's economy. There is no doubt about it, Newfoundland and Labrador, if handled properly -

WITNESS: (Inaudible).

MR. SHELLEY: Yes, we should remember that - and if it is done right. I will have more specific questions as it develops and we see how fast it will go, according to Inco, now that they have put the hammer down, so to speak.

DR. GIBBONS: As a government, of course, we are looking at this very closely, very carefully. We want to ensure that we get the maximum out of this for the people of this Province, the absolute maximum. When we brought the amendment to the Legislature last fall to put that requirement in the Mining Act, people were saying: Well, maybe there are thirty million tons to fifty million tons of ore in the ground. Well, in January that moved to 100 million tons - on January 8, I believe the date was. About a month ago, INCO, big conservative INCO said, we now believe we have one hundred and fifty million tons. So we are going to continue to watch this and we hope that the Archean people who are doing the drilling can continue to increase the reserves, because right now we know, based on what is in the ground, that this has huge potential for us and, as I said, we want to maximize the benefits from it.

MR. SHELLEY: Now, the $4.3 billion that was put forward as the bid by INCO - I think it is $4.3 billion; I saw it as $4.5 billion, then it went to $4.3 billion.

DR. GIBBONS: It varies depending on the prices of the stock, because you are looking at a stock swap. What is the price of INCO stock today and what is the price of Diamond Field stock today? So it is going to vary a little bit on the price of the stock.

MR. SHELLEY: Now, I will ask this for the sake of the record. Because I have been asked it and until I did a little bit of research of my own - but I will ask you the question because Newfoundlanders who do not know about this type of project, they say, of course, $4.3 billion traded hands and a resource that is owned by Newfoundland and Labrador, we did not get a cent out of it. Okay, just to elaborate on why we didn't.

DR. GIBBONS: At this time you are really talking about the value of stock. We have not produced one ounce of nickel, not an ounce. So it is just the value of a company that two years ago had about 130 million shares outstanding on the Vancouver Stock Exchange at about $3.30 each. That stock today is worth about $160 for the same 130 million shares. So you see the value that is being attributed to it by INCO. So it there is very little cash changing hands in this deal. You are getting a lot of shares changing hands. So you got an exchange of INCO shares for Diamond Field shares. So you still have 130 million owners of shares, I do not know how many owners of shares, but 130 million shares owned by somebody out there. So now the Diamond Field shares become shares of INCO, for whoever owns shares, as you do the stock swap. So there is no big amount of money. And my understanding is that at this stage you are not even into a situation where something is income taxable unless somebody decides: well, I am going to take my money and run and sell my shares, and you can do that on the stock market any day through the Toronto Stock Exchange. Then you are going to be taxable, depending on where you live, and a lot of people live in Newfoundland and Labrador who have shares in Diamond Field and INCO, a lot of people. I have heard stories where some of them have done very well, thank you. So the taxes will be paid when people sell their shares.

MR. SHELLEY: I understand that. And by the way, it is pretty well the answer that I have been giving to the people who ask. Of course, I did a few calls in the different provinces around the country, and asking - but I guess, for somebody who does not understand it, to see two big corporate giants battling back and forth in the billions of dollars over resource that belongs to Newfoundland and Labrador, then you say this all happened and we didn't get anything out of it. But, of course, I agree with you, it was stocks changing hands but nobody really making any money off anything. When it goes ahead, we will hopefully will get the full and fair share out of it.

But the development plan and so on is what is going to be very interesting to see, how they proceed with that, and to see what is really laid on the table and how that develops.

I have one other short question, actually two more, but I will ask this one first. It is specific to it. The antimony find in Glenwood - there has been some talk and speculation about problems with the environment. Could you just elaborate on that?

DR. GIBBONS: I wouldn't think there should be any problem with the environment.

MR. SHELLEY: Is there any problem with that mineral itself?

DR. GIBBONS: No, no, there is no problem with that particular mineral, it is rather inert. I am aware of the question that was raised a year ago in the House of Assembly about antimony as a metal. I think it was totally taken out of context. We are not talking about antimony metal here, we are talking about antimony sulphide, a rather inert substance, and we are talking about processing that antimony sulphide into an antimony oxide which would be used as primarily a flame retardant in plastics and rubbers, and various other fabrics. We may have some clothes on now that has antimony trioxide as a flame retardant on it.

MR. SHELLEY: It is like asbestos (inaudible).

DR. GIBBONS: So I do not see that as a problem. The project is presently registered with the Environment department as a mining project, and personally, I hope it gets through fairly quickly so that we can get on with this mine development. It is big enough to have at least a ten-year life. As a project in this Province, it would hire about 125 to 130 people. I think it would be great for Central Newfoundland. I look forward to the day when it operates.

MR. SHELLEY: Definitely. I just wanted to ask that, and to have it clarified here, because I certainly would not want to see it held up either. Hopefully, it will progress as quickly as possible.

I am just going to make two comments on the mining conferences now. I will let a couple of questions go and maybe come back and finish off with one or two. First of all, of course, the mine in Baie Verte has been a great success, has been growing, and I look forward to seeing the minister and maybe some of his officials there again this year. I'm sure you will be. I think it would be fitting, and I will mention it again, that we do something for Sam Blagdon at that conference. I will be talking to the organizing committee and I will also let them know that you have mentioned it, that we have both mentioned it.

Also, the Goose Bay convention which is about to come up, I think that is going to prove very good for this Province and it is going to attract a lot of attention to Goose Bay at that particular time. I certainly wish them well in that conference, too. I think it opens up Newfoundland to potential exploration and so on, and makes it more interesting here. I will try to attend - well, I will definitely be at the Baie Verte conference, and I'm going to try to attend the Goose Bay one, as well, although I will have to sleep in an igloo, maybe, but I will find somewhere to sleep. I look forward to seeing the minister and his officials at both those conferences.

Thank you very much.

DR. GIBBONS: We are going to be at them. This, I believe, is going to probably be the most exciting year we have ever seen in terms of mineral exploration, the most money spent in the history of the Province in mineral exploration. The conference in Baie Verte will probably be one of the highlights of the year for the Province and the beginning of the field season. We are looking forward to that. Goose Bay - it is sold out, you can't get a bed in Goose Bay. You will have to call your buddies.

CHAIR: Thank you, Mr. Minister.

Mr. Fitzgerald, do you have any further questions?

MR. FITZGERALD: Yes, thank you, Mr. Chairman.

Minister, a few minutes ago you talked about refining and smelting. Up until now, when you speak of a refiner or smelter you think of big consumptions of electricity, and you obviously sounded very optimistic about being able to respond to the need. There are a couple of other processing methods that I'm not even sure if I know how to pronounce them. I wonder if you can explain to me how they work. One, I think, is hydrometallurgy, and the other is pyrometallurgy, which is used now in refineries and smelters from what I understand, and that uses much less consumption of electricity. Would this be an option for something like Voisey's Bay?

DR. GIBBONS: Yes. Pyrometallurgy is the standard technology that is being used today. Hydrometallurgy is the developing technology. I'm not sure what - well, we have chosen probably pyro, isn't it Paul? Are we sure at this stage?

MR. DEAN: I think for the smelter, but for the refinery it will be almost automatically pyrometallurgy.

DR. GIBBONS: Okay, yes. It will probably be a standard technology, pyrometallurgy smelter, rather than a hydromet project. Again, different technologies, but hydromet technology is sort of an evolving technology. Of course, it is always evolving, even pyrometallurgy evolving, itself, as a technology.

MR. FITZGERALD: The Hibernia site, Mr. Minister. What does government plan to do with that after the ground-based structure is launched and we are finished the construction phase? From what I understand, you have somebody hired there now to look at disposing of the assets there. Surely, we aren't going to tear everything down there and allow people to go in and bid on whatever is there, and do away with an opportunity to have something else happen there, are we?

DR. GIBBONS: No. My colleague will probably talk to you more about that. Minister Furey in the Department of Industry, Trade and Technology has responsibility for that site. It is under that department that Max Ruelokke has been hired as the president of the Bull Arm area committee, the site committee, or corporation. We are marketing the site worldwide right now.

When I was at the oil show in Houston in early May, the staff were there then with a complete description of the site, marketing it to the industry in Houston. They will be doing it elsewhere internationally as a great site to do business. It is a state-of-the-art site, modern technology for everything, and we want to find future uses for it. We are looking, actively looking, for future uses for the site.

Of course, the second project to come along will be Terra Nova and that site, as well as Marystown and probably others, can be used and be bid for work relative to Terra Nova, but there is going to be much less work. Terra Nova is going to be done with a floater. It is not a gravity base, so there is not nearly the same amount of work. But that is a superb site. We just hope we can find work that we can bid on internationally, because if Korea can bid to do work for Newfoundland and Italy can bid to do work for Newfoundland, why can't Newfoundland bid to do work for somewhere else in world? And that's our plan. We have the facilities and we believe we have the people. Anyone who has looked at the topsides work that was done on the super module at Bull Arm and compared it to the two done in Korea and the two done in Italy, will say that the one built here by our Newfoundland workers was done best of all. So we know we can do the quality work, and we are aggressively looking, actively looking, for future uses for the site.

MR. FITZGERALD: I understand as well and talking to some people out there - in fact, I worked there myself and from what I saw there, the Newfoundlanders, the local people, were certainly quite capable of doing the work that needed to be done there. I think it would be a shame if we allowed it to be disposed of and not take advantage of it to do other things here.

When do Hydro revenues decline? There is a time frame there built into the Churchill Falls agreement that is supposed to happen sometime in the near future when even the paltry amount that we get from Hydro now - Quebec, from -

DR. GIBBONS: Forty years - 2016. After the first forty years of the contract, for the last twenty-five years the rate decreases from three to two, over time gradually. So it is after 2016, twenty years from now - to halfway through the first forty.

MR. FITZGERALD: So up until that time the revenue stays as is?

DR. GIBBONS: As is now, yes.

MR. FITZGERALD: Where you on the news tonight giving an update on the royalty regime for offshore petroleum in the Province?

DR. GIBBONS: Me?

MR. FITZGERALD: Yes.

DR. GIBBONS: No.

MR. FITZGERALD: Was somebody?

DR. GIBBONS: The Premier gave a speech today at Ocean Industries Association, he may have gotten scrummed afterwards. I was there for the speech and there was just a mention of the fact in the speech that we are close to completing a generic royalty regime for the Province and close to making an announcement on it and we hope to do so over the next few weeks. No time has been set yet, to the best of my knowledge. I don't know what might have been said in the scrum but I know the lines that were in the speech.

MR. FITZGERALD: So there wasn't something announced?

WITNESS: (Inaudible).

DR. GIBBONS: What I just said is that we are getting close. We expect, in the very near future, to be making an announcement about a generic royalty regime for the offshore, for oil and gas. We have been studying this now for about two years or so in great detail, particularly in the last year, and we are getting there.

MR. FITZGERALD: What is the expected life span of Hope Brook? Is that particular mine close to its production life?

DR. GIBBONS: Yes, it is getting close. When Hope Brook reopened, we were saying about four or five years left. So by the end of next year we will be getting close to the end. I am sure that company is aggressively - I know, as a matter of fact, that that company is aggressively exploring along the south coast of the island in areas adjacent to Hope Brook and they are also exploring in other parts of the island to try to find more mill feed for the Hope Brook mill, because again, there is a great mill there. Its capacity is close to 4,000 tons per day. And, unfortunately, any mine has a limited life.

MR. FITZGERALD: Are you planning on making a submission before the Public Utilities Board against the increase of rates for Newfoundland Power?

DR. GIBBONS: No.

MR. FITZGERALD: Are you planning on sending one of your ministers or some of your staff?

DR. GIBBONS: No. We have made it possible to have a great consumer advocate to represent the public. He is doing, in my view, the best job that has ever been done by a consumer advocate in this Province and I am looking forward to the results.

MR. FITZGERALD: That is not to say why we can't give him some support.

DR. GIBBONS: We are giving him the support. We give him all the information he needs.

MR. FITZGERALD: Do you personally agree with the proposed rate hike - the hike they are looking for?

DR. GIBBONS: I believe that if we did not have a Public Utilities Board to review such matters, we would have to invent one. So I am not going to give my own opinion on whether there should be a rate hike or not. I say the Public Utilities should look at all of the facts and decide whether or not there should be an increase in rate, a decrease in rate or whether it should stay where it is. But the Public Utilities Board should set the rate. As I said earlier, the consumers advocate that we arranged to represent the public is doing a superb job so far. I wish him continued success in that.

MR. FITZGERALD: One last question. Do you think $28 million was enough for any company or any utility to make here in Newfoundland, considering the economic climate that we are experiencing today?

DR. GIBBONS: Let me refer you back to my earlier comment about regulated utilities versus market-driven industries. Regulated utilities in the electrical and related sectors have been making 12 per cent to 13 per cent because that is normally the rate of return they have been allowed.

MR. FITZGERALD: Yes.

DR. GIBBONS: But market-driven industries like downstream oil and gas have been making 4 per cent and 5 per cent and less in the last several years. So, you know, I buy electricity and gas, too.

CHAIR: Go ahead, Mr. Shelley.

MR. SHELLEY: A couple of quick ones, since I have been mostly provincial. I will get to my district. First of all, have you heard anything from an old copper find near Fleur de Lys?

DR. GIBBONS: I am not aware of anything, Mr. Shelley.

MR. SHELLEY: I do not know, if Mr. Dean does. All I know is that there have been some drill holes from back in the early 1900s and apparently there is some interest there again. That is all I know.

DR. GIBBONS: Maybe Paul Dean can report on it. I am not aware of anything new.

MR. DEAN: Yes, Mr. Shelley, in the last few weeks we have been contacted by some companies and legal representatives from some companies expressing an interest in some old mining properties in the Fleur de Lys area. So there is a renewed interest in those properties. We are dealing with some interests on a daily basis.

MR. SHELLEY: That is all I have heard, too. I just wanted to see how far it was with it.

Now, still again on the Baie Verte Peninsula. Exploration like Nugget Pond, of course, is looking pretty well. I think they will be starting construction of the mill site before the end of the month is out. They expect to be in production very soon. Exploration with Nugget Pond and Ming Mineral and so on, (inaudible) that will take place this summer.

DR. GIBBONS: Paul, is there anything further you want to add to that?

MR. DEAN: I think the figure that the minister mentioned, the total figure for the Province, is $111 million. Of that $111 million, I think something in the range of $25 million is being spent on the Island portion of the Province. A lot of it is in Central Newfoundland, Baie Verte, Springdale, Buchans, the traditional heart of the exploration sector. I do not have an exact figure for the Baie Verte Peninsula.

MR. SHELLEY: I can get that though, can I?

MR. DEAN: I think we can give you an estimate upon request, Mr. Shelley. No problem at all. We are aware of some new ventures on the Baie Verte Peninsula that are still in the making. But we are confident they will translate into hard exploration dollars spent on the ground this summer.

MR. SHELLEY: Yes, Pine Cove, Rambler, and Nugget Pond, and so on.

Anything being revised with places like Betts Cove and a few of those other new ones?

MR. DEAN: Yes, there is more activity than we have seen in previous years being planned for that whole belt that goes from Nippers Harbour to Tilt Cove. As a matter of fact, there is some current drilling at Rouges Harbour, south of Nippers Harbour, as we speak.

MR. SHELLEY: Okay. That is what I want to know. I just want to see how much interest was there, especially in that area. I know it has a lot of potential.

DR. GIBBONS: The interesting thing is that Voisey's Bay is really having a spin-off for the Island as well. Because companies that are coming here to look at Labrador are saying where else can we do some exploration? So again, comparing 1993 when we had $8 million spent for the whole Province, now we are going to get about $25 million this year on the Island. A lot of that is spin-off from companies that are looking at Labrador and saying, we want to look at the Island, too. We are getting a new look by some new companies.

MR. SHELLEY: That is what I said in my opening comments about the prospector's course and the assistance, anything we can do with these small companies to get out there and look around. Because as we know, I mean, Voisey's Bay was jumped over a hundred times before our own local people finally got in there. I think the same thing could happen in any part of the Province. I know, on the Baie Verte Peninsula, of course, speaking of my district again, there is great potential there, and also the Central Newfoundland area, around the Grand Falls - Buchans area and so on. Whatever we can do to encourage that type of thing in this Province, I think it is a plus.

That is all I have for questions.

CHAIR: Thank you very much.

I am very pleased with the level of debate tonight. In fact, the decorum was above ten out of ten, so I am very pleased with that. It has been an interesting and thoughtful night. The debate was eye-opening. It is ironic, and I don't think the irony should fail on anybody, that a department that consumes 0.3 per cent of our revenues has such an impact on the whole of the Province. Each of us is very pleased and proud to see what is happening in the mines and in the energy sector of our Province.

I would now ask the Clerk if it is in proper order to entertain a motion to approve the Estimates of the Department of Mines and Energy. That includes the minister's salary.

MR. WOODFORD: So moved, Mr. Chairman, to accept the headings from 1.1.01 to 4.1.01, inclusive.

On motion, subheads 1.1.01 through 4.1.01, carried.

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

CHAIR: Thank you very much. We will adjourn now, and go home and watch the hockey game, I guess.

DR. GIBBONS: Mr. Chairman, on behalf of my department and my staff, I want to thank you and the Committee members, and the staff who are with us tonight. We sincerely appreciate it. It was a good evening.

The Committee adjourned.