Pursuant to Standing Order 87, Thomas Lush, MHA, Terra Nova substitutes for Perry Canning, MHA, Labrador West and Ralph Wiseman, MHA, Topsail substitutes for Robert Mercer, MHA, Humber East.

The Committee met at 9:30 a.m. in the House of Assembly.

CHAIR (Acting - Rick Woodford): Order, please!

We usually proceed with the members introducing themselves. I am Rick Woodford, MHA for Humber Valley. I will start off with you Bob.

MR. MERCER: Bob Mercer, MHA, District of Humber East.

MS THISTLE: Anna Thistle, MHA, Grand Falls - Buchans.

MR. WISEMAN: Ralph Wiseman, MHA, Topsail District.

MR. SHELLEY: Paul Shelley, Baie Verte.

MR. FITZGERALD: Roger Fitzgerald, Bonavista South.

MR. OSBORNE: Tom Osborne, St. John's South.

CHAIR: I will ask the minister now, if he wants to introduce his staff and if he has an opening statement he can do it at that point.

MR. FUREY: Thank you, Mr. Chairman.

I say to the committee, that I appear here this morning as the alternate to the Minister of Mines and Energy, who happens to be the Acting Minister of Mines and Energy, who also happens to be the Premier. So, I am coming at you not fully versed, but partially versed about this department.

On my right is the Assistant Deputy Minister responsible for the energy sector, Martin Sheppard, on his right is Frank Blackwood, who is the senior geologist with the mining division of our department, on my left is the Director of Finance, Leonard Clarke, behind him is Fred Morrissey, who is the manager of the mines section, on my back left, and directly behind me is Ken Andrews, who is the Director of Minerals and Lands.

I though I would just go with a brief statement, if I could, for about five or ten minutes to talk a little bit about this most important department.

The total value of output from the mining sector, if I could deal with that first, is in the order of $935 million and that translates into four per cent of the provincial gross domestic product, that is to say, in all of the basket to goods and services produced inside the Province, mining is responsible for all of that output.

The energy sector has considerable more, more than double the mining output, it stands at eleven per cent of the total GDP for our Province and when you combine both, you will see the importance of mining and petroleum and energy because it adds up to fifteen per cent of all of the output for our Province.

In these sectors currently, they represent 12,500 person years of direct employment, associated spin-off employment is estimated to be in the order of another 9,000 jobs, for a total of 21,500 person years, annually. That is quite substantial. You can see that the fifteen per cent impact on GDP, spinning out those direct and indirect jobs is quite substantial to our economy. The mines and energy sector then, I think, represents an important and increasing proportion of the Provinces economic output.

Let me talk about the future just briefly. Over the next several years, we believe that we can look forward to an explosion in the value of output in the mining and petroleum sectors. If you look beyond the year 2000 for example, the value of production from Voisey's Bay alone is estimated to be approximately $1.5 billion per year, $1.5 billion per year as the mine moves forward. Also, we expect that both Hibernia and Terra Nova will be producing in the order of 300,000 barrels of oil per day, for a total output annually of some $3 billion. By 2004, White Rose will also come on stream, producing an estimated further 100,000 barrels of oil per day which will have an economic impact, I guess, of $1 billion per year. So, by the early years after the year 2000, which is roughly three and a half years away, the output from mines and energy sectors of our economy will have increased by approximately $5.5 billion per year. That is pretty substantial. That is what went into the Hibernia project in the last four years, $5.5 billion in construction alone. What we are talking about is when you meld mining and energy together as we cross the threshold of the 21st Century, on an annual basis you are going to have the impacts of Hibernia. Five point five billion dollars per year, that is what the output will be.

While the mines and energy sectors are highly capital intensive, new employment in these sectors will still be very significant. When in full production the Voisey's Bay mine and mill and the smelter refinery complex will create direct employment of 3,000 persons or person years annually. Similar direct employment from new petroleum activities will add another 1,500 to 2,000 jobs annually. Within the next seven years you will see 5,000 new direct mining and petroleum sector jobs, which will be added to the existing level of 12,500 jobs that these two sectors are currently responsible for, bringing it up to 17,500.

Those are direct jobs. I would ask you to bear that in mind. Because the indirect consequences are fairly substantial. Depending upon which economist you believe, it is a three to one spin-off, it is a two and a half to one spin-off, or a two to one spin-off. Even if you take conservative numbers and calculate forward on a two to one spin-off, those are substantial employment impacts in the next seven years.

With respect to the Estimates of the department directly, I will touch on that just for a second. In 1997-1998 the budget is $9.1 million rounded off, with a net expenditure of $8 million. I guess, Martin, the $8 million reflects net revenues from the private sector and any cost-shared agreement? Is that right?

MR. SHEPPARD: Yes. The $8 million is the net amount for the department.

MR. FUREY: Okay. Now, our department under program review, when we scaled across all the programs and cut back slightly, we lost thirteen full-time positions across the department. We have managed to maintain our core programs with slight reductions in some, slight increases in others. I would ask Committee members to bear in mind that on a $3 billion Budget for the economic impacts that this department has and the employment potential that it has, we are less than one-quarter of 1 per cent of the total budget for the Province. No, we are slightly more than one-quarter. We are 0.27 per cent of the entire Budget. So for just over one-quarter of 1 per cent of the entire Budget, you can see that the impacts are significant.

Mr. Chairman, I could touch on what the Geological Survey group does, but if there are questions about that we will ask the people here with the details to talk about it. There is a Geological Survey division, a Mineral Lands division, a Mineral Development division, and a Mineral Exploration division. We can get into those if you like in a second.

In terms of exploration, I would like to go on the record and say that in this Province in 1996 we saw an increase of 28.5 per cent from the 1995 levels in mineral exploration. The total expenditure on mineral exploration in 1996 was $91.3 million, which was up from the $71.1 million in 1995. You are seeing a lot of stampeding into this area, and these truly are blips. But our historic averages show that we are well above what we normally are, if you flatten down those blips. But those blips are caused because of the massive publicity on Voisey's Bay and the attention that it has drawn and the exploration that has come in.

In the first quarter of 1997 we have seen our claims statistics stand at 3,872 new claims staked, and 168,357 claims in good standing. Expenditures for this year are forecast to be in the order of $74 million. The Voisey's Bay discovery caused exploration in Labrador to skyrocket from less than $1 million in 1994 to approximately $60.8 million in 1995, to $75.9 million in 1996, to a forecast $58.8 million in 1997. So you can see a lot of the exploration has taken off in Labrador. Mineral rights to more than 140,000 claims are currently held by some 175 companies or individuals, with some fifteen to twenty companies expected to be active.

Exploration activity on the Island portion of the Province increased by 50 per cent in 1996. Mineral exploration expenditures in 1996 were approximately $15.4 million, and this year we are forecasting $14.5 million on the Island portion for exploration.

The total value of mineral shipments, that is to say all of the minerals we take out and export from the Province for 1995 was $881 million, $935 million in 1996, and in 1997 we are closing in on the billion mark with $988 million.

Shipments of industrial minerals, or non-metals such as dolomite, gypsum, peat; structural materials such as slate, brick, cement, magnetite, stone and sand and gravel, accounted for approximately $49 million in 1996 and we are forecasting $44 million this year.

Metals, including iron ore products, gold and copper, account for the remainder of the mineral production. The value of iron ore shipments is forecast to increase about 8 per cent over 1996, due to improved market conditions.

So the mining industry is an area of potential growth and offers opportunity for new developments, expansion, and further processing. It is an important market for hundreds of millions of dollars in goods and services both for export and domestic use.

Incidentally, I should tell you that Inco is planning a $30 million exploration project this year in Labrador alone. Is it $30 million, Ken?

MR. ANDREWS: It is in that (inaudible).

MR. FUREY: Yes, $30 million.

In 1996, the Iron Ore Company of Canada announced that $75 million will be spent on capital investments in 1997-'98. North Limited, a major Australian resources company, announced in January of this year that an agreement had been reached for the purchase of 59.3 per cent of IOC. The purchase of IOC shares comprised a combination of Bethlehem Steels, 37.5 per cent, National Steels 21.7 per cent. The purchase was finalized earlier this month.

On November 6, 1996, Royal Oak announced that Hope Brook mine will close in the summer of 1997 due to the exhaustion of economic ore reserves. That will wind down, I think, in June of this year and you will see about twenty employees. Then they are going to start a comprehensive rehabilitation program to restore the site, and that would be in the order of some $10 million.

At Nugget Pond, Richmond Mines Inc. began underground mining on December 10 of last year and commercial gold production started April 1 of this year - that is up your way, Mr. Shelley - and I hear good things about it; it is going very well.

There are also a number of developing properties in the Province at various stages of development. The Voisey's Bay project is scheduled to commence in 1999. Roycefield Resources Beaver Brook Antinmony deposit is scheduled to start production this year, and I thinks, Ms. Thistle, we talked about that the other night in Industry estimates; Keels Slate to begin production in the summer of this year, and Burin Minerals is in the process of preparing a prospectus for a public offering of shares on the St. Lawrence fluorspar property, so that is getting under way soon, too.

Mr. Chairman, the Energy Branch, as you know, is responsible for the Petroleum Energy Resources Management Program, and they have the Petroleum Resource Development Division, the Policy Planning, Co-ordinating Division, the Energy Policy Analysis Division, and the Petroleum Projects Monitoring Division which I think, Martin, had a slight increase in their budget this year which is reflective of -

MR. SHEPPARD: It is reflective of - the last year the staff of the division were not on for the total year, and therefore there was a lower budget last year than there is this year. We have brought it to the level where it is fully staffed now, and the functions of the division relate to the auditing of costs related to the substantial royalties that we expect to get from oil and gas development, so it is an important function where we are taking a very close look at what eligible costs oil and gas companies apply against royalties. It is a very meaningful process at the end of the day whereby we would maximize the amount of revenue that would accrue to the Province.

MR. FUREY: Good.

Well, Mr. Chairman, in conclusion, I have two hand-outs. One is a hand-out that we just finished which deals with the mining sector, which gives members a very good, comprehensive, overview of what is happening in the mining sector. The other hand-out - I would ask members to read this carefully. There is some very significant information in here, including the parcels that we just sent out for bids, which came back that shows exploration out on the Grand Banks and in the offshore to the tune of $127 million over the next five years, that is very substantial. Here is the oil and gas update.

With those remarks, Mr. Chairman, I will conclude and ask if there are any questions. I will ask members to be a little patient because I am very much acting as the alternate for the acting minister because we have no minister in place and if there are detailed and specific questions that I cannot answer, I will ask officials to answer.

MR. CHAIRMAN: Thank you Minister for your overview of the department. Before proceeding with questions, I would like for the member, Mr. Lush, to introduce himself and his district for the record.

MR. LUSH: Tom Lush, MHA, Terra Nova.

MR. CHAIRMAN: Did all members get a copy of the minutes of the April 23, meeting? Someone moved that those minutes be adopted.

On motion, minutes adopted as circulated.

MR. CHAIRMAN: We will proceed now with questioning.

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

The first thing I want to say is that this particular resource, being mines and energy, of course, is a bit strange here today for the simple reason and the minister already alluded to it, is simply that there is no minister in place right now. Of course, the former minister has now officially began his campaign today, the acting minister, as I understand, is the Premier and who to be minister we do not really know officials, I guess, maybe this is the minister we are looking at here today, but that is unofficial.

I guess, I want to make the point on behalf of my colleagues here that our intention is not to get very detailed with questions for the simple reason that we cannot because, first of all, a lot of the questions pertain to what happened over the last year and so on, and the estimates into this year. So, there is no connection there yet, officially, as far as I am concerned, and there are some important questions, but we will go general and we do have some questions, and as a matter of fact, as I look through my questions that I had prepared before considering the situation is that, I know we will not get a lot of answers to these questions for that particular reason and I understand that. That is the way it is for the minute, maybe the timing of the meeting was unfortunate, I guess. We will make a few remarks and I think my colleagues have a few questions and I am sure everybody has a few questions and it is very interesting. So, I will start off with a few comments and then a few questions.

First and for most, mining especially, I am very interested in because, of course, my own district, but also the Province, Mr. Chairman, of course the mining is one of the bright spots and something that I am familiar with. The first one we have to talk about, I guess, when you mention mining, although I would like to start by talking about my own district like any member would, but it is obvious that Voisey's Bay is the buzz word, not only in Newfoundland and Labrador and Canada, but around the world. It is magnificent what has happened in such a short period of time up there and there are going to be many questions and the reason why there are so many questions on Voisey's Bay are simple, for two reasons, I have it down to. One is that, we have made mistakes, when I say we, we as Newfoundlanders and Labradorians, not any particular party over the years, with our resources. When we talk about mega projects like Hibernia or Churchill Falls or so on, well Voisey's Bay is in that same ball park and of course, every Newfoundlander and Labradorian, for reasons that we all know of, are sceptical or cynical or whatever when you talk about making deals on such projects and that is par for the course when you see our track record over our history as a Province.

So, I guess as the critic for mines for example, I am going to be asking lots of questions over the next few weeks actually and especially into the fall when we come down to the final agreement because and maybe the acting minister or whatever here today realizes too, that what we deal and sign in the next little while, we are not going to be around to see the end results, it is going to be our children ten years, twelve years and fifteen years from now saying: did these people who were in government at the time, do a good deal for our children back ten or twelve years ago. So, it is important that we put the scheme in place that is going to be beneficial for the long-term because this is such a huge project.

So, it has to be the right one and there have to be a lot of questions asked and there have to be a lot of things answered in the next little while because it is going to affect us in the long-term future. So it is an important project, as we all know.

I have some general questions, I am going to read down through and the minister can stop and respond to some of them or some of the department heads here today and then I will leave some questions for my colleagues. I am just talking about mines for now and maybe will get into some energy questions as we go on.

First of all, according to the Program Funding on page 154, Total Gross Expenditures have been reduced by over ten per cent, from $10.1 million down to $9.11 million. The Mineral Resource Management Program has being reduced by some $598,000, a reduction that is almost eleven per cent, while Gross Expenditures, with respect to executive and support programs, are projected to increase by some $33,000. So, to reduce expenditures in Mineral Resource Management when the Province is in the process of negotiating with Inco., of course, and probably the most important agreements in its history, will this reduction impair the ability of the government to secure the maximum benefits for the people of this Province, with respect to the large copper and cobalt find first of all?

MR. FUREY: I will ask one of the officials to deal with the detail, but I should tell you that it would not be fair just to read coldly these numbers off the page and think that is the only thing government has with respect to dealing with Inco. In fact, there is a team that has been put in place with the deputy minister of Mines and Energy, some people from intergovernmental affairs, some people from the Premiers office, my deputy from Industry, Trade and Technology, Harold Marshall who deals with land claims from the Labrador file, a great many people who are helping us to shape what the new legislation should look like and who are helping us deal with the whole bigger broad brush picture of Voisey's Bay.

It is not just a simple issue of saying, well are you going to negotiate royalties and then when that is done move to something else. There is a comprehensive package we are dealing with when we are dealing with Inco, but I can assure you, it will not impair, in any way shape or form, because this team has been given full instructions to not just deal inside government, but if we need the best experts in the world outside of government, to go and find them and get them and without announcing it here this morning I can tell you, they have found some very good experts with respect to mining taxes, royalty arrangements around the world, with respect to industrial benefits and a whole range of others and whatever the costs are, Mr. Shelley, I agree with you, they are small compared to what the outcome will be for future generations, so we are certainly going to take that quite seriously.

Now, with respect to that particular subhead and I think you are looking at the very beginning pages there, under the Minister Profile. Frank.

MR. BLACKWOOD: In fact, the majority of the reductions in the amounts that the member referred to are included in the geological survey division and these reduction come as a result of the very intensive program review that we carried out as was mandated across government. What we did in the division, was look very intensely at the whole group of activities that we have been carrying out for some two decades and under the auspices of the testing criteria, mandated by program review, we determined that there were a number of these activities that had reached a sufficient level of maturity that we could look at eliminating them to meet the requirement of budget reductions carried out under program review. Nevertheless we were still able to maintain the core elements of the geological survey and we feel that we are still able to meet the surveys mandate of providing the geo-scientific information that government needs to carry out its policy development and land use decision making, as well as provide the basic data base that the exploration and mining industry use to carry out there developmental and exploration work in the Province.

MR. SHELLEY: In the statement to the comparative summary of Current and Related Revenues, mining tax and royalties are only going to increase by $1.6 million. Can you just expand on that and why that is?

MR. FUREY: I am just wondering where you are reading from the subhead.

MR. SHELLEY: I have taken notes from the estimates.

MR. FUREY: But is there a subhead particularly that shows that, Paul?

MR. SHELLEY: Yes, there is, but I just did not make note of it, I just took the notes.

MR. FUREY: (Inaudible) -

MR. SHELLEY: But in general then I can say that -

MR. FUREY: Why is it going to increase?

MR. SHELLEY: Yes. The $1.6 million increase.

MR. FUREY: I think that is reflective of the 100 per cent increase in permits. We have gone from $5 a permit to $10 a permit. As your numbers increase, and they have increased substantially -

MR. SHELLEY: That is what I'm asking. Is it coming from permits?

MR. FUREY: Yes, I think that is what it is, isn't it, Ken? That is part of it.

MR. ANDREWS: The royalties come in part from permits and things that are issued by our departments that are required for people doing exploration activity. But those royalties and rentals are also derived from lease rentals and activities like that. There is no big expansion in the exploration or permitting requirements anticipated over the next twelve months.

MR. SHELLEY: That leads up to my next question. I just want to know where it is coming from, and be sure. I have an idea. I just want to confirm it. But also the previous minister provided a - he is saying $22 million tax dollars in royalties was projected. Where is he getting that projection? How is he coming up with those projections? Because of the number of permits he expects, or whatever?

AN HON. MEMBER: Last year's forecast (inaudible).

MR. SHELLEY: Yes.

MR. ANDREWS: I'm not clear on just exactly what revenue source we are talking about here. We have a number of different revenue sources within the department. I'm not exactly sure what source you are talking about, sir.

MR. SHELLEY: Very generally, that is what I'm saying, we can only ask general questions here this morning. Twenty-two million dollars in tax royalties was projected. How did you come up with a projection of that much tax royalties? How are you projecting those tax royalties over all?

MR. FUREY: Are you saying that last year the forecast was -

MR. SHELLEY: Was $22 million.

MR. FUREY: - that we would project $22 million in revenue?

MR. SHELLEY: Yes, how do you come up - let's say forget last year, even this year. How does the department project the (inaudible)?

MR. FUREY: I would assume they would project it on historic averages. Now, what has happened since 1995, since the great explosion of Voisey's Bay, is that it has been on an accelerated path upward. You saw the numbers go from some $30-some million in the early 1990s up as high as $90-odd million in exploration work. As a direct consequence of that, falling off that, are revenues, based upon permits, based upon monies that companies have to put down to have the right to go in and exercise on those lands to exercise their rights on those lands. I would think that what he was doing was giving you basic historic averages, including Voisey's Bay.

MR. SHELLEY: That is why I made the remarks when we started this. I (inaudible) fully appreciate that there is no minister in place there now and so on, and he has to give his own ideas and philosophy in conjunction with his department here.

Based on the current mining tax legislation, the plans for development of Voisey's Bay discovery then, estimated by Inco, can the minister or somebody in the department indicate the expected amount of revenue? That question has to be asked here today.

MR. FUREY: Can I just respond to your earlier one?

MR. SHELLEY: Yes.

MR. FUREY: I think what you were looking at is under the estimates which really sit in Finance. Because revenue pours into Finance off resources. So you are looking at -

MR. SHELLEY: But it has to come through the department.

MR. FUREY: - the mining tax and royalties.

MR. SHELLEY: Yes.

MR. FUREY: Okay. Not just the permits, et cetera. What he was using as a forecast were current mines that are in operation and current royalty regimes.

MR. SHELLEY: Okay.

MR. FUREY: - one of or a generic royalty regime, which is the case for most mines. He looked at what is currently operating, what we believed would be operating, and he gave a forecast off that.

MR. SHELLEY: That is all I was asking, how he was doing the projections because -

MR. FUREY: No, I misinterpreted because you were confusing me with whether it was permits or the mining tax and royalty regime.

MR. SHELLEY: Okay. Because my very first question was how he came from it, which was permits, and then it leads in -

MR. FUREY: I got you now.

MR. SHELLEY: - and now it leads to a third question. I apologize for that.

MR. FUREY: No problem.

MR. SHELLEY: But I am trying to get to the Voisey's Bay thing and I think for the record here today, although we don't have a minister in place here yet, the question that everybody is asking is: What kind of projection are we talking? We don't expect you to give it to a decimal point or anything, but projections when we talk about Inco and the situation at Voisey's Bay. That is the big question of every Newfoundlander and Labradorian.

MR. FUREY: I have to be very careful of what I say here because I don't want the companies to know what the government's position is until the government has completed its full assessment, using experts that we have hired just recently to review what will be a very specific piece of legislation, Mr. Shelley, relating to Voisey's Bay.

You don't have to be a rocket scientist, based on a twenty-year model, recognizing the current volumes that will be extracted from there, to see - and, of course, look at the bidding war between Inco and Falconbridge and look at the final price tag. You don't put $4.3 billion - the largest single transaction in Canadian mining history in this country, $4.3 billion was - you don't have to be a rocket scientist, based on a twenty-year model, to understand that there are huge revenues that will pour off this gigantic discovery in Labrador, particularly in the early years because it is accessible. It is on tide water. The economics are just outstanding in the early years. As you go deeper into the mine it becomes more capital-intensive, labour-intensive, more costly, etc., and therefore your revenues drop; but if you average the ovoid and the Eastern Deeps you still come out with a magnificent revenue base that pours off this regime.

I don't think it would be wise for me to give a number here today. I know some numbers, I am privy to some numbers, as is our negotiating team that is putting together a package, and the team that is helping us develop and write this legislation, which I think will be magnificent legislation that you and I and every member of this House can be proud of, and that generations from now they will look back on and say: That was a very clever piece of legislation.

I am not at all ashamed or afraid of it. In fact, I look forward to whoever the minister is tabling it in the House this fall, but I have been part of those negotiations as well, but it would be difficult for me to lay a number on the table of what kind of royalties we are talking about because I don't want to go out into the public domain until I, until we - when I say I, the government - are ready to sit down with Inco and say: Here is our position and here is why we have come to this position, and here is what the revenues will mean to our Province, and here is what the profits will mean to you, and here is what the revenues will mean to the Aboriginal peoples, and here is what the revenue stream will mean to the federal government.

I am privy to some of those numbers, but until we fix in our minds what our final position is, I don't think it would be wise or prudent to speak publicly about it.

MR. SHELLEY: I don't expect that, Minister, but I say this today. Like I say, I find this a bit cumbersome this morning because this is so important and this estimates meeting is not official to me, in a funny sort of way, without a minister being in place right now and so on, but I have to ask these three or four questions for the record.

I will ask the next one now, and all of these have been leading up to this one. Of course, what I said in my introduction was that this particular deal on Voisey's Bay, I believe, will be the most significant probably since the Churchill Falls deal - that affected this Province - for a long, long time to come. So everything has to be done so carefully to make sure we have the right deal, for the reasons you said. So my next question is just one line. On what is the new mineral royalties regime going to be based? Profits or...

MR. FUREY: If you look at Bill 43, which was the bill that we tabled originally, which had come to be known as the super tax legislation, that allowed the companies to go in and do all of their capital expenditures, recover their operating costs, and then have a profit of up to 20 per cent where we would kick in at tier one and cause a super tax to happen above the normal corporate taxes and mining taxes, and the other taxes that were in place. Once it reached a 30 per cent threshold then it kicked in at another 20 per cent. So you had a 10 per cent on tier one at a 20 per cent recovery, and another 10 per cent at a 30 per cent recovery, so that you had a total super tax of 20 per cent on top of all of the taxes that were cascading off this project.

Now, if you look at Bill 43, that was aimed at recovering some of the huge wealth that would pour off this project. That is the basis from which we are looking, Mr. Shelley, at developing the new legislation.

As much as I can say, that is what is being formulated now. This is the basis from which we are going, Bill 43. But we need to look carefully to see how we can - there are other ways to maximize benefits to the treasury of the Province, particularly in the early years when the revenue stream is very low. Because don't forget, under Bill 43 we left provision to recover all of capital plus operating during the life of the project. We think there are other ways we can look at to recover revenues in the early going.

I can't give you a definitive answer, but I can tell you we are very cognizant and aware and sensitive to what has gone on in the past. Not just the Upper Churchill, but there have been other examples as well throughout history, where every member in the Legislature, including the Upper Churchill, at that time, irrespective of political party, every member of the Legislature voted for the Upper Churchill. Not a member in their place voted against, it, bear that in mind, and we had some clever and bright minds in the Legislature on all sides. I think of Senator Ottenheimer, I think of some of the members who were on the government side of the day. Very bright and capable men and women who looked at the Upper Churchill and approved it.

When we are ready with this piece of legislation it will be tabled. It will make for very good, vigorous and thorough debate, but I think at the end of the day you as the mines critic will be very pleased with the legislation that I see unfolding, that I've been privy to participating in with respect to asking for my input.

MR. SHELLEY: Minister, I can say this. As the mines critic, I study this and try to watch it as it unfolds. I can tell you, it is more interesting as the times goes. I hope that any member in this House can stand at the time that it is brought in, do the calculations, and see that we do have something that is great.

This will be my last one, until I move it over to my colleagues, on Voisey's Bay, because I just stuck with that for now, understanding the situation we are in here this morning with definitive answers. I will get down to this, and I guess I will use the Churchill again. Not for any particular reason, just because it was a mega-project that we made a mistake on before, and it is the best example probably in our history. Not to dwell on that, but Voisey's Bay now. My fear sometimes is that the quick dollars - like, we are in a desperate situation now as far as our economy goes, and we are going to need quick dollars. Any government of the day will be looking for quick dollars to try to settle people down now, and there are problems.

My fear - and of course you will say that it won't happen, obviously, but it is still a fear, and that is why I watch it so closely - is that when we were looking for quick dollars in this part of a deal, and the people with Inco have a lot of dollars, when we see $16 million for a hospital in Goose Bay for example - which I'm delighted for the people of Goose Bay - but it makes you wonder, are we going to be looking for that quick dollar from big companies like this and relax on our deal? I expect an answer that: No, we won't. But that is what I will be looking for. So as far as you said about revenues early from this particular company, I have fears of the long term.

My biggest interest, and I think it is the interest of government, is that in ten years from now, when we are no longer here in this Legislature, some of us - a lot of us, probably -, that the next group will be here. You are too old, Ralph, you won't be here. My biggest fear is that ten or fifteen years from now we won't be here and the next group of legislators can stand and say: That was a good deal from Voisey's Bay, and they didn't give up too quickly in the short term.

MR. FUREY: You make a couple of good points. Let me address the two points that you raised. The first one, with respect to the hospital in Goose Bay. Inco agreed to cost-share that at no cost to the Province. There was no quid pro quo, not tit-for-tat, it wasn't: You do this and we will do that. We said we needed a hospital, we were searching for money. It came up with 50 per cent of it. It was its gift to that part of the Province which will be the staging area for all of the Coast of Labrador. There was no quid pro quo.

The second point that you make, will we chase the fast buck? No, what I'm talking about, Mr. Shelley, is that once we arrive at a royalty arrangement, and once we have fixed in our minds the time and life of that mine, and the volumes that will come out of that mine, and we have a formula in place that we are comfortable with, that the Province can draw its revenue from, it isn't a question of the revenue getting greater or less, it is a question of seeking the revenue so that it is at the best opportunity for the Province.

In other words, if in year one there is $5 million worth of revenue that comes to the Province, and in year five or seven there is $200 million or $300 million, what we are talking about potentially is equalizing the revenue stream so that there are no blips. That is all we are talking about. It isn't a question of chasing fast bucks up front or chasing quick dollars in a cute way to get them. There are only so many dollars in that mine. Under the formula that we agreed to, we will collect those dollars. Now, is it advantageous to us to create an equalized formula across the life of the mine, so that there are never any blips, ups and downs, and there is certainty on what your revenue is for that twenty years, if you are using a twenty-year model? That is all we are saying. We will look at those things.

MR. SHELLEY: I just want to leave with this comment and conclude on the Voisey's Bay thing. I will use the hospital in Goose Bay as an example. Sixteen million dollars from a company which hasn't made a deal yet with the Province (inaudible) give them $16 million. Like I say, I'm glad for the people. I wish they did it in my district, you know, it would be wonderful. But -

MR. FUREY: Well, they may, in a couple of hours.

MR. SHELLEY: Maybe they will. But -

MR. FUREY: (Inaudible) -

MR. SHELLEY: - I say with all due respect to Inco, or any huge corporate giant such as Inco, I don't think it did that out of the goodness of its heart. Let me say it that way. It didn't do it because it has connections with Goose Bay or anything. It did it because it is starting a business relationship with the Province. That is what I believe. It wanted to show good signs. I have no problem with that. All I'm saying is to make the comment that the deal is what is important, what is concrete, put on the table.

MR. FUREY: I quite agree, plus -

MR. SHELLEY: So I conclude with that. I may have one or two other questions later, but we are going to be briefed on it this morning, I think. I will pass it on to my colleague now or whoever is next, Mr. Chairman.

MR. FUREY: I accept your comments on the hospital. I know you weren't casting any aspersions. I was just simply saying that that was a company that saw an opportunity for corporate goodwill in an area where it needs goodwill. I'm sure there are tax write downs it gets for these kinds of donations and stuff too.

CHAIR: Roger.

MR. FITZGERALD: Thank you, Mr. Chairman. Minister, I don't have many mines in the district. Lots of government wharves or slipways, but not many mines. I do have one -

MR. FUREY: Keels in your district?

MR. FITZGERALD: Keels, I do have one in Keels.

MR. FUREY: What is happening with that?

MR. FITZGERALD: It is a situation where this gentleman has put an honest effort, I think, into mining slate there. He has been getting very little help financially from government from what I understand in talking with him, although he has gotten into some training programs whereby he has gotten the labour and the training from HRD and somebody, the TAGS benefits.

The equipment that he is using there is very crude. If anybody went there - I don't know how he can put forward a product, or how he can carry forward a viable operation, with the equipment that he's - I think his workers have made it. They have gone out and they have bought parts of different hoists and other mechanisms, and have gone back to the slate mine there and designed the saws and that kind of thing themselves. It makes me wonder of the commitment of government to see this mine up and running. It is an opportunity where he can employ twenty-five or thirty people. I think he has slate there comparable with anything else in the world. The markets are available, the colours are what people are looking for. Can you just make some comments on this particular mine and where you see it going?

MR. FUREY: Yes. When I was in another lifetime and wore another hat I was also responsible for Enterprise Newfoundland and Labrador. I remember meeting with the principal responsible for that mine. I think his name was Power?

MR. FITZGERALD: Bas Power, yes.

MR. FUREY: Yes, and had a series of meetings with him. I think we did offer some help, Mr. Fitzgerald, in the early going. In fact, I'm confident we did offer some help and gave him some help in the early going. What is happening now is that there has been exploration, as I understand it, for the last three months in that area, but he is talking about coming into commercial production this July.

MR. FITZGERALD: Yes.

MR. FUREY: I presume he can access the TJF fund for training and stuff for workers, and there is plenty of money around for that kind of thing. ACOA is still offering substantial loans at zero interest rate for a seven-year period up to $1 million, where the business plan makes economic sense. Enterprise Newfoundland is still offering some bridge financing as well in its smaller portfolio in the programs that it currently administers. I assume if he has made representation to those areas, if his business plan makes sense - and it certainly did when I recall looking at it some three or four years ago, I think, Mr. Fitzgerald?

MR. FITZGERALD: Yes, he has been active there now I think for probably three years.

MR. FUREY: But he is talking about going into production -

MR. FITZGERALD: This year.

MR. FUREY: But he is talking about going into production, I think one of his problems might be cash flow, but that can probably be handled if the business plan makes sense and he has talked to ACOA and other, but I would be very supportive of it if he needs some support from the Province.

MR. FITZGERALD: Thank you. I know he has been having some problems identifying, not funding for training or funding for wages, but funding for equipment and you know and I know, in order to produce something that is marketable to be used as shingles and floor covering and that kind of thing, it is important to have some consistency in what you are producing and what you have to sell.

The other one minister is the one, I suppose, that is on the lips of everybody, especially since April 1, and that is the price of gasoline in this Province. It is something that bothers me when I fill up my car here in St. John's and I drive down to my district and it costs me $10 more for a fill-up and it is not because the hand is any closer to the empty mark.

Mr. Chairman, I think this is unfair, I think it is totally unacceptable for rural Newfoundlanders to be paying the price that they are paying for gasoline and heating fuels. I can take it a step further and come a little bit closer to the reality, to say that as I enter my district, in Lethbridge I can buy gasoline for seventy-three cents a litre and when I get to Bonavista, which is forty kilometres down the road, I am paying seventy-eight cents a litre. I think this is price gouging and I think government should do something to regulate the price of gasoline and oil, which is not a luxury, it is a necessity, that everybody in this Province uses today.

MR. FUREY: Mr. Fitzgerald, just two quick points before I ask the assistant deputy minister of energy to give a detailed answer on that. Just back to Power Slate, I meant to mention earlier that he sought EDGE status and we gave him the ten year tax break for that mine as well. I was not sure if you were aware of that.

MR. FITZGERALD: No, I was not. So, that has been recently?

MR. FUREY: Yes, just recently.

With respect to gasoline, look this continues to come up every so often and it is a very vexing problem because when should government intervene in the market place and when should government stay out of the market place?

In the two jurisdictions that I am aware of where they did regulate gasoline, for example in Nova Scotia, they regulated it through the Public Utilities Board and created a ceiling price, but as prices of oil and gas went down internationally and people were buying in, the locals were taking their price up to the threshold ceiling, so that there was really no benefit. If you look at the history of Nova Scotia, since they started regulating, their prices went up. They went up considerably right across the province, so much so that they deregulated within a year of regulating. Okay, so you have to be very careful what you mean by regulating.

The second jurisdiction that I am aware of still has regulations in place where the government has intervened in the market place and caused pricing to be set by a public panel is PEI and they have the highest prices in the Atlantic area. So, when you talk about regulation, you have to be very careful when the big arm of government steps in because what does regulation mean? Does it mean setting a floor price, a ceiling price or what because the companies can go in and if the vagaries of the market place show that a barrel of oil have reduced substantially or gasoline volumes have reduced substantially, but they are allowed to go up to a certain threshold, they are not going down, they are going up and that is what has happened in both of those jurisdictions. I will just ask the assistant deputy minister to speak to that issue because he knows it in more detail than I do, but I am always leery of intervening in the market place, I am personally. That is a personal comment.

MR. SHEPPARD: I think there are a lot of factors in terms of the price differentials that are witnessed, say between the larger urban areas and the rural areas, within the Province. Transportation costs are one factor, but I think the largest factor in the cost differential is the volume at the individual pump and the fact that because the volumes are lower in rural areas and in order for an operator of a particular station to maintain a reasonable working profit level at those particular stations. That explains some of the differential in the price. There are other factors that are brought to bear here as well, I think. Whether or not, for example, the operator has an alternate source of reasonable sort of operating level profit through other facilities, such as convenience stores attached to stations.

It is interesting to note that the bureau of competition policy recently released a report in March where it looked into the pricing practices of major oil companies across Canada. It was essentially a nine-month investigation. I'm referring to my notes here for the details. But it found that there was no evidence produced to support allegations of price fixing. This is not a unique sort of investigation that it did. There were previous investigations as well that essentially came to the same conclusion. It came to the conclusion that there was no evidence to support these allegations of price fixing, anti-competitive behaviour, or misleading advertising. In fact, the evidence came forward to support that the competition actually exists in the industry.

The government looked at this question of regulating prices back early I think in 1990, and came to the conclusion, after a full review of the regulatory mechanisms that could be put in place, that the policy of government was not to interfere in the market, as Minister Furey indicated, by introducing price regulation, but to allow market forces to set the price in a competitive manner. This is somewhat consistent with the finding of the bureau of competition policy which indicated, in effect, that there is a fairly high level of competition existing in the industry.

It is also interesting to note that in March 1997 a select committee on gasoline pricing in the Province of New Brunswick tabled its final report to the legislative assembly. That committee, after an eleven-month investigation, concluded that gasoline regulatory strategies, particularly those involving the control of prices or margins, may work against the consumer interest. It has instead opted for increased monitoring and reporting of prices, and has come to the conclusion that to regulate prices may set in place the danger that the minister alluded to earlier: that you would end up with higher prices at the end of the day instead of lower prices. It has opted for increased monitoring and reporting of prices and letting the market work. That is essentially the same policy the Government of Newfoundland and Labrador adopted in 1990.

MR. FITZGERALD: It seems to be very unfair. I've talked to some of the gasoline dispensers there in the area and they assure me that the reason the price of gasoline is so high on the lower part of the Bonavista Peninsula is because of what they are having to pay to get it delivered there.

MR. SHEPPARD: Transportation (inaudible) -

MR. FITZGERALD: You know, forty kilometres down the road doesn't justify charging an extra $0.05 a litre in my mind for that cost if the cost is certainly not there.

Maybe you might be able to explain as well, Mr. Sheppard, the new way of dispensing gasoline now. Where in essence, from what I understand from talking to gasoline dispensers, that now there is some kind of a modification put on a gasoline dispensing pump. While you might think you are getting fifty litres of gasoline, in essence you are probably getting much less than that. Maybe for an extra hundred or so litres that they are not getting because of the temperature of the gasoline, the way it is built in and the temperature they have set is of such that they feel that the tanks will never ever reach it with the temperatures that we experience in this Province.

MR. SHEPPARD: I would certainly hope that anybody that pulls into a pump and fills up his car and it registers at x number of litres, in fact there is x number of litres going into his gas tank, at least flowing through that nozzle. That is a requirement, but there are volume considerations taking place with respect to gasoline being a volatile liquid and read vapour pressures and loses through essentially evaporation of the methane component of gasoline. So, there are volume considerations to take, it is like, as there are in terms of pumping crude oil into tankers for transport. There always has to be adjustments made in terms of the volume that you are putting in there at one time and the volume that you get out at a different pressure and temperature at some other time. That is just the nature of the product.

MR. FITZGERALD: This is a new way of dispensing gasoline, it has been very recent.

MR. SHEPPARD: Well, I would think that at the end of the day that the customer who is pulling in there to fill up his tank, when he sees that he is getting twenty-five litres of gasoline liquid at that particular point in time being put into car, that he is getting twenty-five litres or whatever the volume is, that he is paying on a per litre basis whatever is shown on the tank. Those things at the end of the day you have to ensure that that is the case, anything else would be obviously illegal, sort of.

MR. FITZGERALD: Some of the garage owners have expressed that concern to me, I do not know who is probably taking the loss, whether it is them or the customer pulling in and filling up his car. According to him there is a tremendous loss in the amount that they pay for now and what is in their tanks to dispense. I have a sneaky suspicion that it is the fellow that is pulling in and filling up his car is probably the fellow that is going to take the loss from it, unless tanks are adjusted in order to reflect the specific gravity or the temperatures or whatever of the gasoline.

MR. SHEPPARD: It is an interesting observation. I just, as a hypothetical situation, put myself in the position of running one of those stations. I think at the end of the day, I would seek to ensure that whatever the fair price at the wholesale level in terms of volume of product that I am getting, that I am going to get that volume at the end of the day, if I am paying what the price is.

I think that this is more, it seems to be on the face value of it, the first I have heard of it, but it is not surprising that these volume adjustments have to be made and it would be the responsibility I would think, certainly the desire of the operator, to ensure that what he is getting, is what he is paying for.

MR. FITZGERALD: You notice that some of the gasoline tanks even carry the sign telling you, the different way of what is happening with the dispensing of the gasoline, not all of them, but some.

MR. SHEPPARD: It is just the nature of the product itself in terms of it being a volatile liquid, in terms of gasoline, that you will get vapour loss from it and that the volume varies with temperature and pressure. It not only applies to gasoline as a product, but as I refereed to earlier, it applies to crude oil, for example, in tankers. You have to be very careful at what temperature and pressure you pay. If that is the registered bench mark on which you pay, then you have to expect that some of these adjustments will have to take place over time because of the change in temperature and pressure.

MR. FITZGERALD: It has been estimated that the smelter and refinery are going to need something like 200 megawatts of power generation. I asked this question the other night to the minister, and I will ask the energy part of it to you as well now. The TACKE wind power generating proposal that is put forward for Cape Bonavista, is that being considered as a serious proposal?

MR. FUREY: Can I tell him what my answer was first?

MR. FITZGERALD: No, no. No, you can't. I would like to know his opinion.

MR. FUREY: You would like to know the truth. I said, as I mentioned to you this morning, that reliability was a problem. I wasn't a technical engineer and I don't know the technical side of it, but I mean, four of them are still on the table. But Mr. Sheppard mentioned to me this morning that they are being considered seriously. I can't answer for reliability. I mean, if there's no wind, what happens to the fifteen megawatts, or forty-five megawatts you said, was it?

MR. FITZGERALD: There are three proposals, fifteen megawatts from each one. I think Hydro came back and said: Pick one and submit your proposal. They picked Cape Bonavista for a fifteen megawatt proposal. There is always a source of wind.

MR. SHEPPARD: Yes sir, there is. In fact, as you may have noticed, we have one of the best wind regimes in all of North America. You are quite correct. There were three proposals in the Bonavista area, Grates Cove I guess, for fifteen megawatts each, for a total of forty-five megawatts. The minister referred to the fact that they are being given very serious consideration by Newfoundland Hydro in their RFP. The reliability question is good, or the observation is a good one. There are some times when we don't get any wind, and therefore there are some times when electricity will not be generated.

As I understand it, the time when the power that would be generated by those is most required, from the standpoint of the system itself, in the winter months, is the time at which we would expect to get most contribution from either one or all of those systems. They are of course very clean from an environmental standpoint. It is an evolving technology, I think, what we are looking at here. It seems to be that the design they have proposed and the equipment they have proposed will be able to stand up to the rigorous sort of icing conditions that we incur, which was the problem with previous equipment that was used on the Island. The minister's response is quite - there is still very active consideration, serious consideration, being given.

MR. FITZGERALD: Those things turn very slowly, and it is only something like sixty-something revolutions or seventy-something revolutions per minute. Then once the wind reaches a certain stage they automatically shut down anyway, so they can't just, you know, go and run themselves out, sort of thing.

MR. SHEPPARD: Fifteen megawatts is fairly substantial. Forty-five is certainly a very substantial amount of power. I think that whereas at certain times it would not be able to deliver the power, there will be enough excess in the system in terms of this RFP to take care of that at times when the power is not available from that source. I mean this is like a hypothetical situation because the selection on the options has not been made yet.

MR. FITZGERALD: Thank you.

MR. CHAIRMAN: Mr. Osborne.

MR. OSBORNE: I have a couple of questions. Mr. Chislett, a number of months ago, brought forward a suggestion that the possibility was there, that once the nickel and the ovoid was mined, that based on a number of contributing factors, such as world nickel prices and copper prices and so on, that it is maybe more beneficial for them, once the easy minerals are extracted, to mine other mines that they have throughout the world and relax on the Voisey's Bay project. Now, I know that the investment in places like Argentia would suggest that they would not do that, but what steps have government taken to eliminate that possibility?

MR. FUREY: Well, government cannot take any steps to eliminate the possibility. This is a commercial transaction, this is a private sector company coming in to invest literally billions of dollars in capital infrastructure. To me it sounds absolutely illogical to think that you are going to come in and invest billions of dollars in a mine site, a smelter, a refinery, the transportation infrastructure that is required, leasing ships to move ore, etc., to and from the sites, that half way through or third way through or thirty per cent or forty per cent through, you are going to stop and increase your production somewhere else. This is the most capital intensive investment program on Inco's books, I hardly think that that will come to be.

MR. OSBORNE: So, you feel that that is not a possibility then?

MR. FUREY: Anything is possible in this life, but it is highly improbable.

MR. OSBORNE: The other question that I have is, I guess on the energy aspect, as we develop more and more power plants on rivers, damming rivers and that type of thing, it becomes less and less likely that in the near future we are going to develop the Lower Churchill. Would it not be more advantageous to the Province to hold back on developing places like Star Lake and the Humber and so on, and set our focused on the Lower Churchill?

MR. FUREY: Yes, it would be in a perfect world, except that you are driven by market demands and the forecasts are that the Lower Churchill power requirements, which are roughly 3,400 megawatts of electricity, the call on that power and the requirement for that power by professional forecasters, not politicians or government people, but people who are in this business are saying that you are at least ten to twelve years out, currently. Now that could change. All kinds of things could cause that to change if you look, for example, at the Ontario marketplace, their power consumption currently has sixty per cent of it being consumed off nuclear energy. Now, some of their plants are very old, in fact some of them are thirty years old and they have a real problem over the next short to mid term, which is roughly seven years, they have to start trying to deal with that.

So, one problem is the demand for the power. It is no good to develop it if you do not have a demand for it. Two, you have to have long-term market contracts in your hand in order to accrue the financing that would be required for such a large mega project, that is the last of the large hydro mega projects left in North America. You are talking roughly $12 billion, it is about an eight years project and you are talking about 6,000 or 7,000 people working on it, so it is huge, it is very huge. It is at two separate sites as you know, it is at Gull Island and Muskrat Falls, which is really the spill coming off the Upper Churchill cascading and coming back into a confluence down that river.

So, you cannot just build it because you want to build it because you cannot raise the financing, and you cannot raise the financing because the demand is not there, and the demand is not there because consumption is decreasing in the U.S. under the deregulated environment and there is larger selections from which now to take because in the U.S., as you know, they have flattened down the utilities and people are purchasing power on a weekly basis now. Much what like is happening now in Great Britain. Great Britain you can change you power company every morning at 7:00, you can go to your meter and change your power company and all of them have to post their bids for prices of electricity each day.

In Great Britain you can change your power company every morning at 7:00. You can go to your meter and change your power company. All of them have to post their bids for prices of electricity each day. So we are in a very deregulated environment. The competition is fierce and it is depressing prices, particularly in our traditional markets where we would look to develop and sell the Lower Churchill to.

MR. OSBORNE: If we are forced to go with non-utility generators such as Star Lake and that type of project, why are we subcontracting these? Wouldn't it be better for, I guess, Newfoundland Hydro to construct these projects and be the owner-operator of these projects, such as the Bay d'Espoir project? That took, whatever, eight, nine years, and it owns it. Now everything that - all the revenues generated there basically are profit. In eight or nine years, Star Lake and Humber are going to produce profits for somebody else as opposed to government or Hydro revenues.

MR. FUREY: That depends upon the calculations. There are some of the projects, like Bay d'Espoir which is included in this latest proposal call, where Hydro is putting on the table its numbers and it is saying it can produce it for a certain cost. Normally the private sector can do anything better than the government. They are more efficient, they are more cost-effective, and they usually produce and save dollars that the public treasury couldn't otherwise save. Can you imagine the government building the Upper Churchill, what the costs would have been, the overruns? That is a mega-project that had substantial costs to it that basically came in on time and slightly over budget.

I'm simply saying to you it is a question of a point of view. You take the Conservative point of view, your party, which is very pro-private sector, which is very much pro-business, which very much should stand behind the private sector doing it better than the public sector. We share that view and we have adopted it.

MR. OSBORNE: In the immediate future I guess Star Lake would be produced more competitively by the private sector, but in eight, ten or twelve years, whatever it takes to pay that project off, then all extra revenues generated would go to the private sector. If that were produced by Newfoundland Hydro, while in the immediate future it would be probably more expensive to construct and put there because of the fact that it is government as opposed to private sector, once it is paid off all revenues would then go to Newfoundland Hydro. So in the long run, isn't it a better investment? While in the short term it may cost more, but in the long run all excess revenues would be Newfoundland and Labrador Hydro revenues as opposed to private sector revenues.

MR. FUREY: First of all, I'm not sure where you are getting financing to do that kind of a project in twelve years. I would like to know where to get that financing. It is difficult to get financing. Those are usually over a longer stream, usually around a thirty year project. I'm simply saying that we have taken a position where we want the private sector to come in and participate in the energy field. One way to do that is to allow them to start bidding, as is done in many other jurisdictions, on these projects. I think your capital costs are reduced substantially. You also create a competitive environment, Mr. Osborne, where you go in and get the best prices.

Because Hydro as you know on the first call had something like thirty proposals. What is wrong with government going out and asking for proposals which are blind, which are opened up, and which you review, where you do get prices that are competitive and within the range of what you could have done them for yourself in terms of your price point? Not in terms of your capital costs now, but just your price point for delivery of energy. We take the position that wherever the private sector can get involved it should get involved.

SOME HON. MEMBERS: (Inaudible).

MR. FITZGERALD: I just have a quick one, Minister. 2.1.01, Minister, in Salaries there. There was $206,700 eliminated there through a reduction in salaries, which I guess is a reduction in the workforce, which is not uncommon as you look through this Budget. But normally, in every other heading as you see it, when you see a reduction in Salaries, you see a reduction in Transportation and Communications as well, but in this particular heading, Salaries has gone down by $306,700, and Transportation and Communications has gone up by $183,400. It is a little different from most other headings in the budget. Why?

MR. FUREY: That is reflective of Labrador, the costs of bringing our people in there, the aircraft charters, those kinds of things. We have had a massive increase in Labrador and we have to send officials and teams from that division in there and the transportation costs are much higher.

MR. FITZGERALD: Okay, so that is as it relates to mining and geological surveys on the Labrador Coast. Thank you.

MR. SHELLEY: I am just going to clue up with what we have here, but the points need to be made this morning before we finish.

First of all, the transhipment facility - I cannot go without putting one question on that. With respect to that facility - I would have asked the minister, of course, (a) to indicate the dollar figure, so that with the concessions necessary to bring this project in and (b) with respect to Terra Nova and Hibernia, the possible reduction in royalties due to the transhipment being here in Newfoundland: Is there?

MR. FUREY: The two answers are very simple. I have stated them in the House before. The concessions the Province made to get the transhipment located here, were $13 million in fuel tax exemptions, that is the total cost to the Province. For that, we get a modern transhipment terminal which makes us the East Coast entry port instead of Nova Scotia where they had planned to build it. And the capital costs of that, Mr. Shelley, have grown substantially from what was projected to be $100 million to $180 million, so the construction jobs on that are going to be substantial as well.

Your second question on that was: Is there any royalty relief or royalty loss because the transhipment terminal has been directed to Whiffen Head at Come By Change and the answer is no.

MR. SHELLEY: Okay, I just asked that for the record. One other question for the record: How many positions have been eliminated from your department?

MR. FUREY: Thirteen, I said in my opening statement.

MR. SHELLEY: Thirteen, I thought that was the number you said.

This is a comment for my colleague, the Member for Kilbride, who was not able to be here this morning, but he has been talking quite a bit about it. It is just a general comment and you can react to it if you want. As to a long-term energy plan for this Province, how does the government feel about this plan, that is, the lack of plan, I should say, and what are its plans to better that plan?

MR. FUREY: Let me just make a general comment that we rely upon Newfoundland and Labrador Hydro to do all of the forecasting requirements over, say - I think they do it over a ten-year period, is it, Martin?

MR. SHEPPARD: Yes, that is part of the envelope that they look at.

MR. FUREY: But when you say a plan, it is very difficult, you have a forecast sheet in front of you on what you think your requirements are going to be based on fish plants opening and closing, the vagaries of the economy. Then, in 1995, their plan was sent completely into a spin, because along comes Voisey's Bay which adds an extra 200 megawatts to the requirements on the grid.

Now, you know, we have a copper study under way, if they come back and say that is feasible, you are going to be looking at another 50 megawatts, which alters any long-term plan. Mr. Byrne calls it a plan; Hydro calls it a forecast sheet. They have a forecast on what they believe the requirements will be on a go-forward basis for the next ten years. How could you plan other than that? You have the technical experts, the best people you have, into a mix of the macro-economic analysis coming out of Finance showing where there will be growth, why there will be growth, and all of that goes into the mix and you put down a forecast over ten years.

Now, if you look back on it, the forecasts sometimes have been negative, the forecasts sometimes have been positive, but on balance they have not done too bad. It is just when projects come wheeling in from nowhere, that you never expected, such as Voisey's Bay, it skews your forecast considerably and therefore your plan. He calls it a plan; they call it a forecast.

MR. SHELLEY: Before I get to the last question, the final one to wrap up, just to make another comment. In my district - I cannot believe we are talking about something in my district - because, as far as mining goes, it is one of the more active. It is not as huge as the Voisey's Bay thing, but it has a lot of potential, as the minister knows. As a matter of fact, we will be pouring the first gold bar, I think - whoever the minister will be, and myself - in June month, and we have a big mining conference to which I invite the entire department. I think it shows good support, because the mining conference has been very successful, so I officially invite you to that. At the same time I would like to hear some comments from your department, if the acting minister is not so familiar with it, not on Nugget Pond and so on, which are looking very positive, but some of the other ones that are up-and-coming: the exploration, for example, at Hammerdown, and also in the Fleur de Lys area, and the Etruscan who just bought up a lot of land in that area and it is very promising. Can we just get a quick update on that, and then I will conclude my last question.

MR. FUREY: I would ask Ken.

MR. ANDREWS: There is an extensive amount of exploration activity happening on the Baie Verte Peninsula. It is one of the more active regions of the Province, and Major General Resources, the operator on the Hammerdown property, completed a major drilling program during the winter on that property. They continue to get some encouraging results, and continue to discover new reserves and potential reserves of gold on that property, so that one is proceeding towards a point in time where the company should be able to make a decision to bring it into production, but they are not there yet.

Atruskan have a large area of claims on the Baie Verte Peninsula which are in the very early stages of mineral exploration activity right now. They plan to do some regional reconnaissance-type survey work over the large area that they have staked, and it is basically a brand new target that is being looked at in that area.

There are a number of other projects that are being explored as well this summer, and out of any one of these things you could have dramatic results pretty well at any time. So things look very good on the Baie Verte Peninsula, and we expect to see several new developments up there over the next few years.

MR. SHELLEY: Okay.

I had one final question, but I wonder if the acting minister is coming back shortly, because I want to get his view if, per chance, he may be the next Minister of Mines and Energy, which I would not doubt at all. I wanted to get his comments on it and then just finish with that.

Acting Minister, I was just saying that I would like to conclude by making a comment on this and getting your comments on this particular issue because if, per se, you may have the chance of becoming the next Minister of Mines and Energy, I would like to hear what your comments are on it. I think it is very important; it has to do with exploration in this Province, and how it has been handled to this point.

Very simply, I guess, I get complaints from the smaller companies, the junior companies, who do a lot of this exploration. As we know, Voisey's Bay was stumbled upon and we know how major finds like this come about. It is sometimes because people are out there knocking rocks around and doing the things you have to do, the grass roots work that needs to be done. What I get complaints about is that once they get into the next stages and look for permits and so on, that there is, let us say, red tape, for the sake of other words that need to be used, to get to that stage. There are a lot of things, I guess, I could bring up, but I will just keep it simple like that. Once you go into the exploration process there is a lot of bureaucracy and red tape that has to be gone through. Sometimes it turns off people and so on. What does the minister see in his new department with his officials there that could expedite this and not turn off people, but encourage them to get out there in the field and discover some of the big things I think need to be discovered in Newfoundland?

MR. FUREY: I will just make a couple of quick comments, Mr. Shelley. We changed the tax regime back in 1985 to attract people to come here and to do a lot of exploration. That is why you saw that ten-year tax holiday in the mining and royalty tax act.

With respect to red tape, I am not familiar with the details, but Ken is. So far as I know, anybody can walk in off the street and stake a claim for $10. It used to be $5; it is now $10. Then there is a certain time period within which you have to do certain work. And so there should be a time period, otherwise, you are just hanging up and soaking up land and not using it properly. You would agree with that.

I will just ask Ken, who is involved in that, to take us through the processes. As far as I understand, the red tape has been streamlined, but the next minister who goes in there, I am sure, will take quite a hard look at that and make sure that - if the next minister happens to be as pro-business as I think he is, he will take a good long look at it. Go ahead.

MR. ANDREWS: Some mineral exploration activities can be very disruptive, can cause serious ground disturbance, and we have had complaints over the years because of the things that have happened in different parts of the Province.

In July 1995, we introduced a new set of regulations to address these concerns and try to mitigate the impacts of mineral exploration activity. This was in the midst of a huge staking rush in Labrador, and it was in the midst of a flurry of exploration activity in Labrador as a follow-up to that staking. We introduced those new regulations at a very difficult time for the department in terms of administering them. We have sorted out quite a few of the bugs with those regulations. We have the necessary personnel and facilities in place to more efficiently administer those regulations this year, and we really do not expect any delays or difficulties in processing applications for people to have the necessary permits to do their work.

We require permits or approvals only for those activities that can cause ground disturbance. That includes things like diamond drilling and trenching, and the establishment of exploration camps. Our turnaround period right now is in the order of two weeks, if there are no sensitivities in the area where people are doing the work. If an area where a company is going to be doing work is sensitive for one reason or another, we may require some studies to be done, or we may require some sort of temporal restrictions or delays to be placed on a particular activity to address the concerns.

MR. SHELLEY: Okay. I will be specific then. For example, in Labrador, I have had people come to me to say that they had a drilling shack in the middle of nowhere, as a lot of places are up there. The next problem they had was an archaeologist had to go in and do research in the area before they put up this small little shack. By the time they called back to the Province the archaeologist was gone somewhere else, and to track down one... This is just one specific example. I can go through it exactly step by step, but it was ludicrous what I heard, as an example. Really, it was so much to go through.

I think those things should be addressed. I know the minister, if he does become the new Minister of Mines and Energy, would like to get those things out of the way. Because we do not to turn off people from this. My attitude is we want as many people as possible out there tapping rocks and drilling and doing what we can to find other Voisey's Bays in this Province. Anything we can do to expedite that, I think it would be good for everybody.

MR. FUREY: Just a comment on that, Mr. Shelley. You make a good point. It is because all departments, whenever you are disturbing the environment in any way, you seek their input. To me it is a cumbersome, long-winded, silly -

MR. SHELLEY: That is my point.

MR. FUREY: Oh, absolutely. I mean, I have a project up in my district, for god sakes, where some turkey in some department is wanting to do a study on the black fly larvae. We cannot kill enough black flies in the woods up in my district. Talk to the loggers and these people. Mr. Woodford knows what I am talking about. The black fly larvae. Right? They are looking to do a study on it.

MR. SHELLEY: (Inaudible) send somebody up there to count them.

MR. FUREY: Here is the problem, Mr. Shelley.

It is humorous until you realize that the companies are being forced to pay $200,000 to do that.

MR. SHELLEY: Exactly.

MR. FUREY: And that is not so humorous anymore. But some silly turkey somewhere buried in some department, if I can find him, I tell you, I will tie him to a tree in July up in Hawkes Bay and he will find out about the black flies up there.

MR. SHELLEY: He will do a study!

MR. FUREY: Right, with a few loggers up there!

MR. SHELLEY: Well, I think is was important that I make the point here today because I have heard it and -

MR. FUREY: It is a good point.

MR. SHELLEY: - those things need to be cleared up, seriously, because we do not want to turn off those people.

MR. FUREY: It is a good point and I hear your point, but I just say in defence of the department, we issue the permits, but then all of a sudden, environment and others go out and ask for everybody's input into it. We will put a little shack down, lay down a little bridge or do something, which is minuscule. We have to find some kind of way to fast-track so that businesses are not turned off and it does not cost them a ton of money. I quite agree with you.

MR. SHELLEY: And I realize, too, by the way, the criticism was not levelled at the mines department, just to justify my point. It is like, where you just said it lies, but I guess what I am looking for is -

MR. FUREY: Your example is tourism, I think. Your example spills out of tourism, the archaeological people. I mean, we have enough bones now, we cannot even house what we have. That is a fact, by the way. Did you realize that all of the stuff we have uncovered now, we do not have a place for it? And we are out telling people we want to uncover more. It is okay if there is an area and historically it says, look this is - well, let us just carve that piece out and you do not have to deal with that.

MR. SHELLEY: I am all for that; all I am saying is -

MR. FUREY: The blanket policy is madness.

MR. SHELLEY: And I just want to substantiate that I am not critical of the department because I know exactly where it comes from. All I am asking is that your department and the new minister, whoever it maybe, will facilitate that and enhance the exploration process so that we can get some good things. I still believe that there is the mother lode on the Baie Verte Peninsula, too, somewhere.

Other than that we want to conclude by saying that we would have more questions on energy and so on, but I think, with the situation, we will wait until the minister is in place and there will be lots of questions.

I want to close by saying, that Voisey's Bay, to me, is a study. It should be for every Newfoundlanders and Labradorian. I am studying it very closely. We should all make sure as a government, as Opposition, as anybody in this House, to ask questions, to make sure that we have the "best" deal for the Province. If it is there I will commend it, if it is not I will criticize it because it is important for generations to come. I thank the department and the acting minister.

MR. FUREY: Stay tuned on Voisey's Bay.

Thank you very much.

MR. CHAIRMAN: If there are no other questions, would someone move the adoption of the heads from 1.1.01 to 4.1.01, inclusive.

On motion, subheads 1.1.01 through 4.1.01, carried.

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

MR. CHAIRMAN: That concludes the Estimates for Mines and Energy. I would like to remind members that the next meeting of the Resource Committee is tomorrow night 7:00 p.m. on Tourism and Culture here in the House of Assembly.

I would like to thank the minister and his officials for the information this morning and for being so open with it. And I thank the members for showing up and questioning the minister and his officials on the estimates on Mines and Energy.

On motion, Committee adjourned.