The Committee met at 5:15 p.m. in the House of Assembly.

CHAIR (Reid): Order, please!

Before we start with the Estimates for the Department of Mines and Energy, we have a copy of the minutes from this morning's meeting on ITT. If there are no errors or omissions could someone move that the minutes pass?

On motion, minutes adopted as circulated.

CHAIR: I would like to thank everybody for changing their schedule tonight to allow us to start an hour-and-a-half to two hours to three hours early.

The procedure we follow, Mr. Minister, is that we give you fifteen minutes to introduce your officials and to say something about your department. Then we pass it over to the Committee members and the Vice-Chair or the critic for the department takes fifteen minutes and then we will call the heads.

If your officials are to answer questions, could they identify themselves beforehand so they can be recorded in Hansard.

We may as well call the head first.

CLERK: 1.1.01.

CHAIR: 1.1.01., Department of Mines and Energy.

Minister, do you want to say a few words before we start?

MR. GRIMES: Thank you, Mr. Chairman.

I just might, as we begin, introduce the staff who are here with me this evening. We look forward to an opportunity to discuss information relating to the Department of Mines and Energy with the Committee.

With me, on my left, is Brian Maynard, who is the Deputy Minister of the department. On my far left is Paul Dean, who is Assistant Deputy Minister with respect to the Mines side of the department. Also joining us this evening, directly behind me, is Mr. Charlie Lester, who is the Director of Policy, Planning and Co-ordination for the department, and Mr. Frank Blackwood, who is the Director of the Geological Survey, which is an integral part of the Department of Mines and Energy.

Just a few very brief comments, Mr. Chairman, completely in line with the way I usually try to present information in the Legislature, straight to the point, very brief and direct, and leaves time for questions and comments for the Committee members.

Basically in this department our goals and objectives as outlined, I guess, as gleaned from the piece of legislation that establishes the Department of Mines and Energy, are fundamentally to try and stimulate integrated mining and energy industries within the Province, and to try and stimulate the development of them with policies that are fair to the developers and also will lead to a continuation of high levels of exploration and development on an ongoing basis.

In order to do that, the department has basically been organized into six lines of business which are conducted in the Department of Mines and Energy. There is the facilitation of resource exploration, critically important. I mentioned that Mr. Blackwood is here as the Director of the Geological Survey because the geoscience that people in this sector use is critically important. Most of the information that they use if provided and available to them through the geological survey. Both onshore and offshore they can get information from the department.

We try to facilitate resource development whenever and wherever we can. We look at monitoring and having responsibility for the supply of electricity in the Province even though we have, of course, a Crown agency in Newfoundland and Labrador Hydro; but there is a mandating in the legislation for the department to make sure that there is an adequate and appropriate supply of electricity in Newfoundland and Labrador.

Then there is resource management and compliance so there is always a monitoring function in terms of making sure people are living within the rules; and a division, of course, a line of business with respect to policy, legislation and regulation.

Within those six areas, what the department tries to accomplish in its long-term goals is to, as I indicated before, maximise mineral and energy production and the associated benefits and to minimize the cost of electric energy to consumers in the Province. All of the staff in the department are consumed in their jobs on a day-to-day basis with trying to achieve these goals and objectives.

Just a couple of things for context, Mr. Chairman. We were delighted in the Budget this year to receive an increase in funding for the Department of Mines and Energy, one of the few departments of government that did receive some funding. One of the highlights, of course, is the mineral exploration program that you may have some questions and want more detail about tonight. That has already attracted a lot of interest. There have been several companies that have taken advantage of the new program already to increase and expand mineral exploration in the Province. We are very proud of that and hope that it continues with the same kind of interest and uptake as it has in the early days.

As well, on the energy side of the department we were fortunate, through the government process, to be allocated some additional money so that we could add some staff on the energy side, in the energy branch of the Department of Mines and Energy, to assist us in finalizing the work of things like the energy policy review that was announced almost a year ago now and things of that nature, and to continue to give the department the ability to formulate generic policies with respect to royalties and revenue related issues, both for onshore resources and offshore resources.

Those issues I'm sure you might have further questions about as we go through the examination by the Committee this evening.

Again, in context, Mr. Chairman, it might be interesting for the Committee members to know that the total value of mines sector mineral production in Newfoundland and Labrador is forecast to be just over $800 million in this year of 1999. Some members of the Committee, at least, might know that that is down about 20 per cent from last year. We got to just about the $1 billion mark last year so there is about a 20 per cent reduction in the expected forecasted values this year. The projection is based mainly on a global downturn in steel markets and depressed prices for a number of the products that leave the Province, particularly iron ore concentrate and pellets from the operations in Labrador.

However, the employment in the mining sector is projected to remain pretty stable around the 3,000 mark in direct jobs, people who are directly involved, never mind in the indirect or spinoff effects, but directly involved in mining activity in the Province.

On the energy side, a major milestone was reached a couple of years ago, as we all know, with Hibernia at the end of 1997 coming into production offshore at its first full year through 1998. Currently it is averaging about 135,000 barrels a day, which makes it the major producer in Canada and all of North America.

The other good news is the Terra Nova project. Currently the facilities, the floating production storage and off-loading system that they are going to use, are in various stages of construction: some of it overseas in Korea, some of it at Bull Arm, some smaller components at Marystown. They are exceeding their expectations of Newfoundland quantities and percentages of work on the project compared to what they announced at the beginning. They are still on schedule, on budget, and targeting to be actually producing oil late in 2000. In November or December 2000 we should have the second producing oil well offshore.

There are still some good signs on the West Coast with respect to onshore drilling. Everybody has their fingers crossed that there will be successes because, of course, if there are, with the capital cost of drilling onshore so much lower than offshore, then the return from any investment would be much greater. Loyalties to the Province would accrue much earlier because capital cost would be covered much earlier and so on.

So there are a lot of good and promising things that are happening in this particular area and this particular sector. We have always had issues where one of the things that the department does in its regulatory and monitoring role is to try to challenge all of the proponents for any development - whether they be in the mining sector or the energy sector, offshore oil and gas and so on - to try and maximize benefits for Newfoundland and Labrador.

I am sure again that all members of the Committee would have heard of or participated in some of the debate over individual projects as to whether or not we are getting maximum benefit for Newfoundlanders and Labradorians and for the Province from the development of these mining operations and the energy sector operations, both in electrical developments and oil and gas developments.

Without saying much more than that by way of introduction - there is a lot more I could say in terms of the kinds of initiatives and the kinds of things that are happening - I just might want to add again that myself and the Deputy Minister were part of a delegation just last week that visited the offshore technology conference in Houston. It is the major offshore oil and gas show that exists in the world. Newfoundland firms have been going there for almost twenty years. Some of the companies that were there this year have been travelling to Houston - they also travel to Aberdeen and Stavanger when they visit North Sea sites for similar shows - for as long as twenty years. This year they were very excited by the interest shown in the offshore oil and gas prospects in Newfoundland and Labrador. Several of the companies actually signed deals while we were in Houston. They were excited by the fact that the turnout and participation by Newfoundland-based firms was the biggest in history. There were almost fifty Newfoundland-based firms that decided to participate at their own expense and their own cost in Houston.

Over one hundred individuals representing those companies from Newfoundland and Labrador travelled to Houston to be part of the show that lasted for almost a full week. They were all very pleased with respect to the increasing amount of knowledge that exists in the oil and gas sector about prospects in Newfoundland and Labrador, particularly offshore. Also, they were very pleased with the amount of knowledge that there seems to be about onshore prospects on the West Coast - the Port au Port Peninsula and so on - and that this whole play, in terms of Atlantic Canada, Newfoundland and Labrador, seems to be really taking a foothold.

I travelled to Aberdeen some five or six years ago when I was Minister of Employment and Labour Relations because the Minister of Energy of the day could not attend. I must say that the recognition factor with respect to Newfoundland and Labrador as a player, as a real site, not only for exploration now but with a producing well offshore, makes a big difference. The recognition factor has quadrupled, if not more, in terms of the major players, the major companies, and the major participators in the energy sector, the oil and gas sector, and their recognition of and their seeking out of opportunities to participate in our Province. It is very encouraging. I think all of those who attended Houston last week were very encouraged to see the interest in what is happening here, and they all continue to try and develop business relationships with companies that have been long established in both onshore operations in Canada and the United States, as well as offshore operations in the Gulf of Mexico, the North Sea and other parts of the world.

Any other issues like that I would certainly try to bring to your attention as we cover off any questions or commentary that might arise as we investigate the Estimates for the Department of Mines and Energy.

Thank you, Mr. Chairman.

CHAIR: Thank you. Mr. Rideout, do you want to lead off or do you want to defer to Mr. Shelley?

MR. RIDEOUT: Mr. Chairman, Mr. Shelley, my colleague and the Member for Baie Verte, will be lead for us.

CHAIR: Mr. Shelley.

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

Certainly I have a lot of personal interest in the mining sector. I always have. I am not the mining critic any more, Mr. Ottenheimer is, but I certainly still follow it very closely, for the simple reason it could prove to be very important for the Baie Verte Peninsula and the Green Bay area in the near future, I would say that.

I have a few comments to make and I then I will ask some specific questions on the Estimates. First of all, I would say about exploration that I'm a firm believer in it, and growing up around a mining community I guess I know full well that exploration is the key. We walked over minerals every day, and like Voisey's Bay and everywhere else, if you have the right incentives in place of course, and the right laws of the Province in place, then these are incentives for people to come and spend money to take a chance. Because that is what exploration is, taking a chance to find out what is really in the ground, and then spending usually quite significant amounts of money to get down to see if there is enough there to mine. So that is where it all comes from. That is the driving engine behind mining anywhere in the world. Exploration, that is the key, that starts it all off.

The exploration incentive program certainly is the right step in the right direction. I assume that is under 2.1.03. That is where that falls under, in that category, is that right? When we see -

MR. GRIMES: Yes it is, the Grants and Subsidies section.

MR. SHELLEY: Under that Grants and Subsidies one, that is specifically with this new incentive program. Is that the cost of it?

MR. GRIMES: Yes it is. Mr. Chairman, as you can see, the budget revised last year was $100,000. This year it is $2,110,000. The additional $2 million that we have been talking about, that is where (inaudible).

MR. SHELLEY: Just for the sake of everybody in here - and of course I have read it already and had some comments from different people - do you want to just basically go through what the incentive program means and how it works, how it is allocated, and so on?

MR. GRIMES: I think what I would like to do, Mr. Chairman, if I may, and Mr. Vice-Chairman, is to ask Mr. Dean, who basically crafted the program for us in consultation with the representatives of the mining sector, to speak. The mining council for Newfoundland and others had a number of discussions with respect to this. Probably the Assistant Deputy Minister could best give you the details of the three or four components. I could ramble on about it but you would get a better answer if Mr. Dean answered for you.

MR. DEAN: Thank you.

The program has three parts. In previous years we had a Prospector Assistance Program, which has been going on for nine years now, funded at $100,000 annually, or on average $100,000 annually. That has been increased to $250,000 under the new program.

What we would call the Junior Company Incentive Program ,whereby the department cost shares exploration expenditures, chiefly drilling, with the junior sector on a 50-50 basis, there is an allocation of $1.5 million under the new program.

The third program is for the Dimension Stone Industry, which is an important part of our mining sector that is growing rapidly. There is $250,000 to, again, cost share infrastructure, trial quarries and development of Dimension Stone projects with the private sector.

All of these programs, except for the Prospector Assistance Programs, are 50-50. We cost share these things with the proponent. A more typical program is more like 30-70.

MR. SHELLEY: Okay. What about exploration specifically though, an exploration program? How does that work? How do these incentives work for the exploration part of it?

MR. DEAN: A junior company, someone who does not have sustained cash flow from mining operations - that is essentially how we define a junior company - will apply to the department for funding. Each applicant or each project is eligible for $100,000 per project. That is the maximum government contribution per project. The company must spend at least $100,000 to be eligible for that. What we are seeing so far in the program is that the proponents, the applicants, are normally committing to $300,000.

MR. SHELLEY: Yes. A few years back the cash flow shares were the way to go. That is what was so interesting around Central Newfoundland, for sure. Are there any discussions or talks with the federal government of ever seeing that again?

MR. DEAN: The flow through shares Mr. Shelley refers to, the flow through mechanism still exists within the federal tax system, so it is possible to raise money through flow through shares. It is just that with the tax reform inside the federal system the incentives for the individual investor are not as great as they were ten years ago. The mechanism is still there and some people do manage to raise some money from flow through shares.

MR. SHELLEY: (Inaudible), because that was very attractive to a lot of people back in the early 1990s and so on.

The (inaudible) there is no doubt about that. I have to ask this question too, of course. Incentives in exploration, I drive that home again. I really believe that is the answer. If we increase the exploration in this Province we are going to find some other big finds on this Island. I really believe we are going to find something in Green Bay and that area. I am in touch with the McWatters Group and so on, and I am going to ask for some updates on some of those mines in a second. There is no doubt about that.

Minister, I will just ask you this. With the change to the mineral act which was done - and of course reasons were given in the House and so on, I understand that part of it - I have also gotten feedback, and I know you have too, on negative implications of that change to the Mineral Act, nationally and so on. With this incentive program you are talking about right here now, there is no doubt that will help, but are there any intentions by the department and by the Province to increase incentives or do more by way of incentives for exploration? Do you believe there was negative feedback from the change that we have had in this Province?

MR. GRIMES: Mr. Chairman, I think the indication, certainly in the couple of months immediately after the changes to the minerals act were proclaimed just before the end of 1998, showed that a number of interests, at all levels, were expressing some concern. Part of the concern was that the changes in Newfoundland and Labrador seemed to be occurring at a time when other jurisdictions in Canada as well were taking certain moves that the mining industry across the country did not approve of. One of the issues that seemed to go hand in glove with it was that in at least two other provincial jurisdictions in Canada the provincial governments were in the process of - I guess the phrase used in the mining sector would be alienating large blocks of land from the prospect for exploration by declaring provincial reserves, ecological reserves and so on. Of course, in the mining sector if you take out whole blocks of land that can no longer even be prospected or explored in any way, shape or form they always express concern.

Because that environment was in other provinces in Canada - and then we had a pretty drastic change in the regime that applied in Newfoundland and Labrador. Whereby it switched completely to being that a licence or permit was not going to be achieved unless the Cabinet approved of it. Instead of going through any process that was seen to be impartial or run bureaucratically or by certain regulations, and then if you did not like the decision that came out of the process you could go to court, the Newfoundland legislation did two things. It put it completely in the hands of the politicians to make the final decision as to whether or not a lease was going to be given to run a particular operation. Secondly, it denied any opportunity for a proponent to go to court if they did not like the decision.

It was seen to be a very strong, very stern type of approach but when we had opportunities, as we did at the Prospectors and Developers Association of Canada - again, the largest meeting in North America, in Toronto, where some 7,000 companies and representatives were there, and they had the biggest meeting they have had in years as well - we did meet with the executive. We met with representatives of some of the major exploration and mining companies in the country and on the continent. When we explained to them exactly what had happened and showed them the experience of what has been happening in Newfoundland and Labrador, that the government - our recent record was not at all to be unreasonable. When someone came forward with a reasonable proposition they were granted a licence.

If they traced the track record of it - as a matter of fact, in Labrador West, if we remember the controversy, people were suggesting we should have been more strident and should have somehow cancelled or altered a licence that has been in place for almost fifty years. We did not do it because we had an examination done of the issues. The government was convinced that a proper examination had occurred and that a reasonable position was to continue on with the current permit and licence for the Iron Ore Company of Canada without alteration, even though there was considerable pressure to say: Do something about it and don't let this corporation make a certain decision.

On balance, once we had a chance to have those discussions - and we had the discussions as well with the federal minister, who had indicated that in some travel to foreign countries where they had talked to consulates and embassies, the issue had also been raised, that some of the legislation in Canada and in Newfoundland was getting to be kind of prohibitive with respect to the future development of mineral and mining prospects. Our discussions with all of them seemed to have mitigated against that kind of backlash a bit.

The more recent indication that Mr. Dean had - again, having been at the CIM meeting in Calgary just last week - is that people seem to understand what was done. They are not nearly as upset now as they were when they first heard about the legislation. What happens in many of those instances, Mr. Chairman, is that people hear something, they hear a story about the change, and after they have had an opportunity, though, to actually read the legislation and speak to people like Mr. Dean - who basically then is given the task of making sure that the legislation works in Newfoundland and Labrador on behalf of the government - they do not seem to be nearly as upset after they have had the full information as when they heard a story saying: The government down in Newfoundland has gone half crazy, there is going to be a bunch of wacko politicians making the decisions, there is no process to go through. If you don't like it you cannot even go to court.

If you put it in that context and describe it as such, then if you were in the mining sector at all you would probably be very upset too. Once they look at the track record of how leases and permitting has been done in the Province, both before and since the changes were made, they understand the context, they understand exactly what was happening, and the good news is that it has not caused any diminution in terms of the interest and activity in Newfoundland and Labrador.

The amount of interest that we are seeing so far in 1999 with respect to people wanting to go out and prospect and explore in the mining sector is every bit as high as it was before the changes were made in the legislation.

MR. SHELLEY: Well, first of all I will say this to you - and that is why the Estimates, I think, are valuable. I do not think you (inaudible) back and forth in the House of Assembly during the session, but this is certainly something I had intended to ask tonight and I asked it in a constructive way because, simply put, I heard those same things too.

I was the mining critic at the time. I had calls from Ontario, British Columbia and so on, asking me what I thought. I tried to explain it, because the bottom line is this: All of us, at the end of the day when you take the politics out of it on this particular issue, had better hope that - and I take you at your word here today - that we have calmed that down a little bit and it is more attractive. That was your job to go up and sell that, as your ADM and so on did. I hope, for all of our sake, that you have done that because it is going to mean a lot for this Province.

That is why I ask again. I take you at that but at the same time I am wondering if there are more incentive programs like you have just announced, which is $2 million. It is not bad and it is in the right direction. It certainly helps and it calms down everybody and lets us know, and lets other people know, that we are mining friendly and you can deal with us, and we are not going to be the bunch of politicians you talked about and so on.

It is really important because I want to see those people down exploring and in the woods again, cutting and so on, because then you get excited and you find out there is something down the road for you. I think it is important for all of us and I really wanted to ask that question tonight.

MR. GRIMES: That seems to be the indication, that the interest -

MR. SHELLEY: The feeling is good -

MR. GRIMES: - (inaudible) this year is every bit as high as it was prior to the changes in the legislation.

MR. SHELLEY: That is good to hear. I am relieved to hear it because I really feel that we have some things that happened in my area - not just my area, I am being local now, but I know throughout the Province and so on.

I guess I will get one more question. I have a list of things here but we will go back and forth, will we? I have only a couple of minutes left, Mr. Chairman?

CHAIR: Yes.

MR. SHELLEY: Archean Resources, as of right now, I know we cannot talk into the detail of legalities and so on right now; we are in the court process and so on. Is it June that we will know the final decision on that? I want to ask you again, from an Estimates Committee point of view, is there any negative impact that you feel from that particular situation, Minister? Can you comment on that?

MR. GRIMES: I will probably again ask Mr. Dean to give the latest information with respect to where they are in the appeal process.

MR. SHELLEY: I know it is in appeal. I do not mean to ask the legal ramifications but just overall.

MR. DEAN: I believe Mr. Shelley is referring to the court case where Archean challenged the Minister of Finance or the Department of Finance on the taxation of their royalty.

MR. SHELLEY: Yes.

MR. DEAN: I believe that the court ruled in favour of the Department of Finance and Archean is appealing that decision. I am not exactly sure where it is in that procedure, or whether a date has been set for the appeal or not.

MR. SHELLEY: Okay. Well, let me say it like this: I understand that and I have been following it very closely. They are in an appeal process and I think by June they will know. Of course, the Finance Department won. What I am saying is that - and I do not want to get into an amount of money. Apparently it is a significant amount of money. I have some numbers. I do not know if they are correct but it is a significant amount of money to Archean Resources if they lose this case and the Finance Department wins the appeal.

I am wondering if there have been any discussions and so on with Archean, the negative impact on that? They are investors in the Province; they are an exploration company and so on. Will that have a negative impact on them?

MR. DEAN: Well, they would certainly pay more tax if the court ruling is upheld than they would if the court ruling were overturned, but a company such as Archean can reduce its tax payable by investing in the Province. In other words, if they spend more money in the Province in mineral exploration or development then those expenditures can be used to reduce the taxes they would otherwise pay. So the tax, as it is designed, is in fact an incentive to reinvest income in the Province.

MR. SHELLEY: Okay.

I just wanted to ask that question too because they are also significant players in the Province and we want everybody interested and attracted to doing more exploration in the Province. I will just stop at that for now.

CHAIR: Thank you.

Mr. Collins, would you like to ask some questions?

MR. COLLINS: Thank you.

First of all, I think the minister indicated in his opening statement about the controversy that was, and still is, in place. I guess as we go forward in time, that is going to be a hard pill for the people in Labrador West to swallow. There is no question about that.

I would like to ask the minister: Regarding the possible expansion in Labrador West of the Iron Ore Company of Canada facilities, and given the fact that the municipalities and the committee had their own study commissioned, what if anything has government done with that report? I understand you are going there later this week. I wonder if you could enlighten us, because the only response that we have had, really, was from the Minister of Finance, who within twenty minutes of receiving the report sort of discounted it as being nothing more than words on paper.

MR. GRIMES: Thank you, Mr. Chairman.

With reference to, I guess, the controversy: I have never seen it as any kind of controversy. It caused quite a kerfuffle in the Province for some period of time and may still be causing some kind of a stir in Labrador West.

The issue, though, is abundantly clear, and the reason that the Minister of Finance, who I believe was the acting Premier on that particular day, was prepared to make a comment within minutes after receiving the report was due to the fact that the engineer, I guess the consulting engineer from St. John's who had worked with the local committee, acknowledged that he did not have financial expertise and that the section on financing and rate of return was done by a local Chartered Accountant in Labrador West.

The information in that had been shared, again, with the Iron Ore Company of Canada who also, minutes after receiving the report, came out and said that the information on the financial side was completely and totally flawed, and that it did not, in any way, shape or form, change or provide any prospect for the corporation to change its decision.

That information also had been shared in an informal matter with officials of the government, both in our department, policy planning, and also in finance. So they were aware of what the report was going to say on that issue before they received it. They had advised the committee, as well, that a couple of the basic premises that Mr. Taylor, I believe it was, had used in the report were absolutely false, that he had completely misinterpreted some federal taxation issues and other issues, and therefore the conclusion that he drew was of absolutely no merit.

If you read the report yourself, as I am sure you have, the consulting engineer was careful not to attach his name to that information. He made it quite clear that: This is not my information, I am an engineer, I am not a financial expert and so on. I think that information was conveyed because of the fact that there is no basis, and we will have the opportunity to discuss it in detail again with the committee for the company.

If I might take a minute, Mr. Chairman: I was not the minister at the time this issue surfaced, but I did make some comments about it at the Federation of Municipalities' meeting because I did think then, and I do think to this day, that it has been the most misrepresented issue that I have come across in ten years in politics, where people are suggesting, totally unreasonably, that the government should have done something about it.

There are two things that the Government could do. The Government could pay the difference because the company has decided, a company by the way that has been in operation for forty years, a company that lived up to its lease and its permitting and its licensing every year and has injected incredible wealth into Labrador West and added to the Province...

AN HON. MEMBER: And Quebec.

MR. GRIMES: And Quebec, because it operates in both provinces. They have lived up to every commitment that was made and asked of them by anybody over the years. Their lease was only renewed two or three years ago. Nobody, at that time, suggested that the terms and conditions of their license should change and prohibit concentrate, as a product, from leaving Labrador West, because concentrate has always been one of the product lines from Labrador West. Mr. Collins would know that, Mr. Chairman, as well as anybody in this room, probably better. We would either have to pay the difference, when the company which is not in violation of its lease at all, as a matter of fact has lived up to it every year, makes a corporate decision to make an investment in a certain way -the government can intercede by offering all kinds of financial incentives, or basically buying the project and paying the difference, which would have been hundreds of millions of dollars, which I am sure that an NDP government would never suggest because they always suggest that we don't tax corporations enough.

Surely goodness, Mr. Chairman, we would never have an NDP member suggest that one of the major corporations in mining in the world should be given additional tax breaks or paid cash. We might hear it from the Liberals, we might hear it from the Progressive Conservatives, we might hear it from the Reform, but we would never hear it from an NDP, that you should give a major corporation a tax break or give them cash.

MR. COLLINS: If it meant saving thousands of jobs, you would.

MR. GRIMES: Oh, you would?

MR. COLLINS: Yes.

MR. GRIMES: So you are very flexible with your policies. So there is no policy basis for the NDP, it is just whatever is good for the moment.

MR. COLLINS: You are doing the same thing this afternoon you have been doing the last few months. Questioning me (inaudible) different meaning.

MR. GRIMES: No, no. I am clarifying again, because I am convinced that if you went to one of your policy meetings - and maybe you have never been to one, a policy of the NDP of Newfoundland and Labrador would never be that you - because I have been to a few myself, by the way, and it always says: Tax the big corporations more; what with student loans and those kinds of things, when I was the education minister. Sure the answer is: Just tax the banks, tax the big corporations.

They used the example, and the hon. member, Mr. Chairman, has used it in the House -

MR. COLLINS: If you taxed the Iron Ore Company more, Mr. Minister, you might have (inaudible).

MR. GRIMES: - has used the whole issue, not to be argumentative about it, but has used the whole issue, when I was the education minister, that you could go ahead and solve all the student loan problems in the Province if you just raised more corporate income tax. They used the example that we get more from lotteries than we do from corporate taxes.

It is an issue that sort of cheeses me off a bit, so I will deal with it just for a second. The notion was, either buy it which this government is not going to do, and the hon. member really is not going to suggest, even though he suggests he might if it means saving some jobs, or secondly, change the actual lease itself to prohibit the export of concentrate from Labrador West. That is one way to do it, but then everybody knows what that means. It means that one-third to forty per cent of the actual revenues and operating of IOC itself stops right away and Wabush shuts down. You can't very well say that the Iron Ore Company of Canada can't ship out concentrate, but in the same part of the Province, on the other side of the lake, Wabush Mines can ship out concentrate; because that is all they have ever done, ship out concentrate to Quebec.

MR. COLLINS: You are comparing apples and oranges, and you are the laughing stock of Labrador West with the comments you had in the paper last week.

MR. GRIMES: It doesn't matter. I will be the laughing stock many times over and I will be the laughing stock when I go in there and have the meeting, because the fact of the matter is: If there is a different reality than one of those two, then I would like to know what it is. I would really like to know what it is. You can pipe dream all you like about these kinds of issues. As I said, Mr. Chairman, the controversy is (inaudible), because I think it has been the most misrepresented - maybe the Member for Labrador West might want to explain to the committee exactly what should have been done differently in terms of forcing a major corporation to make a different decision.

MR. COLLINS: I think that is your job, you are paid to provide explanations. It is not our job.

MR. GRIMES: I have provided the explanation, that we have two choices, buy the jobs or prohibit the export of concentrate, and we are not going to do either one. Now, you tell me what the other options are and maybe we can have a conversation.

MR. COLLINS: You would do it, and then you would close Wabush Mines at the same time. That is incredible!

MR. GRIMES: Who is closing Wabush Mines?

MR. COLLINS: You said, if you do that Wabush Mines would have to close as well.

MR. GRIMES: So, you are suggesting that a government in Newfoundland and Labrador could bring in a rule or a law that says that the Iron Ore Company of Canada cannot ship out concentrate, but a company operating right next door, using the same ore body, can ship out concentrate.

MR. COLLINS: All we are saying is that the resource is in the Province, it is in Labrador West, and in spite of the misleading things you are saying here now, that has not happened. The concentrate that was shipped from Labrador West was shipped as a product to be sold to customers who use concentrate as a product; not to be turned into pellets down the track.

MR. GRIMES: No, and I guess you wouldn't want to suggest, by the way, that the product they turn it into, the other customers, happens to be pellets. When they send it to, for example Europe, as concentrate, they send it to people who turn it into a pellet.

MR. COLLINS: It is mostly used as (inaudible).

MR. GRIMES: They send it to people who turn it into a pellet, and they are going to turn it into a pellet in Quebec. So what is the difference? I am really stupid when it comes to certain things. I am certainly stupid when it comes to seeing the difference.

MR. COLLINS: Well, why don't we get really smart and shut the pellet plant down that is in Labrador, so we can send it all to Quebec?

MR. GRIMES: Why would anybody even consider that? The company is certainly not considering that. The company is considering investing in the pellet plant to make it more efficient.

MR. COLLINS: The long-term plan will bring that reality. We can argue about this all day.

MR. GRIMES: Absolutely! And we will argue about it for a long time any time anybody brings it up without suggesting what the other alternatives are. I only see two and I have not heard you suggest that there are any other alternatives, other than buy it or prohibit the export of concentrate. So, what is it?

MR. COLLINS: There is an alternative. It is in the back of the report which I am sure that you have read as well.

MR. GRIMES: Which is what?

MR. COLLINS: Which is to do it in Labrador West. The cost difference is not what was suggested by Hatch, because don't forget, the Hatch Report was flawed as well. Everything in that wasn't (inaudible) either.

MR. GRIMES: By the way - and this is why I say it is the most misrepresented, Mr. Chairman. I know that the committee usually doesn't get into these kinds of discussion and arguments. I certainly have not in eight or nine years as a minister. The whole notion with respect to the report saying, do it in Labrador West, there is a suggestion that the government can make them do it. This is the point I am making: If the government is going to make them do it, we can make them do it one of two ways, because the company which is living within its lease has said that it is not going to do it.

MR. COLLINS: What about the economic priorities?

MR. GRIMES: So you are suggesting that we should force them to do it. So we force them to do it by giving them the difference in cash, and then they might think about it, or by saying: You cannot ship the concentrate out. So the government didn't make the decision to spend $600 or $700 million in Labrador West on improving the mine and the pellet plant and so on in Labrador West. That is not the government's decision. That is the whole point, Mr. Chairman, that when you say, what can the government do about it, I am telling you the government has two choices, give the company a pile of money, one of the major corporations of the world that you suggest we should tax more, but now because it is not convenient to tax them more we should give them several hundred million dollars, because that is the only way the company is going to agree to do it, if they agree then; or secondly, find some way to prohibit the export of concentrate. Now, think about it, because it is the company that has made this decision, not the government.

CHAIR: May I interject here?

MR. GRIMES: Certainly, Mr. Chairman.

CHAIR: We could go on like this for hours tonight and I don't think the committee wants to pursue this for the next two or three hours. I think you could have that debate outside or in Question Period at some other time.

Do you have any more direct questions, Mr. Collins?

MR. COLLINS: Shabogamo Mining, Mr. Minister. Could you give us an update as to the status of that now? I understand that they have been given approval on a number of issues. I wonder if that is ready to take place?

MR. GRIMES: I think - again, Mr. Dean will correct me if I am wrong - we are in the final stages, actually, of providing a lease or the appropriate documentation that they will need to start an operation. Again, it is an issue that I will address when I go to Labrador West, that Shabogamo, as you would know - and it is being supported, as I understand it, in Labrador West and by yourself - want to ship a raw product out of Labrador West? Is that not correct?

MR. COLLINS: Not to my knowledge. There is still some controversy. I don't think anybody in Labrador West yet has enough information on exactly what their intentions are. The rumour, and I guess what they have been saying, is that they want to send it out. I think the number of jobs they are talking about that would be created was between sixty and seventy. I don't think anybody in Labrador West, to my knowledge anyway, has any information on exactly what they would do, what the alternatives are at this point in time.

MR. GRIMES: I have been visiting Labrador West for ten years and this issue has been on the go for most of that time. Every single time that the proponents came forward to suggest what they wanted to do, they wanted to take the ore out of the ground and ship it out of the Province.

MR. COLLINS: They are going (inaudible) it in a place over there. Right now, as I said, I have no knowledge, and I don't know if anybody else does, enough information, to decide whether that is what should or should not happen.

MR. GRIMES: So, maybe you might just inform me: The actual project that they want to proceed with, taking ore out of the ground and shipping it out of the Province, you are not going to support that?

MR. COLLINS: Now, don't put words in my mouth.

MR. GRIMES: I am just asking a question.

MR. COLLINS: I think the legislation of the Province says if it is economically viable, and if it passes that test, to do it in Labrador West, then, yes, that is where it should be done. I think the one with the Iron Ore Company, you don't want to get back to that, but in our opinion it is economically viable for a company that has been in operation there for forty-odd years and made hundreds and hundreds of millions of dollars, to do that in Labrador West as well.

MR. GRIMES: I guess, Mr. Chairman, it is better not to talk about it because all we will do is agree to disagree.

My understanding is that with Shabogamo it is silicon, I think, and the whole notion, the only thing I have ever heard of in the number of times it has been presented, is that the company, at this point in time, needs to take raw ore outside the Province to have it milled, refined and so on elsewhere, so that they can find out for sure whether there is a good market for it.

MR. COLLINS: They have sent some out for testing.

MR. GRIMES: Right! And if it proves to be something that is marketable, maybe some time in the future they will have a plan that suggests that some further processing should be done in Labrador. Because I am so gun-shy about these issues, and know how we get attacked, I would hesitate to give somebody a license or a permit or a lease to do something, to send out raw ore knowing that the member for the area and the business community in the area, and the unions in the area, are going to condemn the government for letting somebody start up a mine to ship raw ore out of Labrador West.

MR. COLLINS: You weren't too hesitant before.

MR. GRIMES: Remember now, currently we are talking about a forty-year-old lease.

CHAIR: Mr. Collins, I think your ten minutes are up. We will give you time again later on. We are going to move on to Mr. French now.

MR. FRENCH: Minister, before we get into amounts of money and so on, pretty close to my area in Conception Bay South there used to be talc mining. Some years ago I know that the company was sold to a company called Armstrong World Industries Limited, and the facilities out there have shut down. I go back to, I guess, Rex Gibbons' day as minister. I had a conversation with him one time about the mining and he said that the Armstrong World Industries Limited were to get in touch with him within a certain period of time and I never heard anything after. I still have people who ask me about pensions and so on.

I just wonder, does your department have anything to do with this Armstrong? I am led to believe that maybe Armstrong World Industries Limited may have, indeed, sold the facility. I see you nodding your head, so they have; that rumour is correct. I would like to know who owns it today. I do not know how the lease works in this instance. Are they going to be told you have to mine this facility and, if you do not, would we look for somebody else to go in there? There was a time in my district when this mine employed a lot of people, and a lot of people for a lot of years. I understand there is enough ore out there today to probably keep that mine going for another 100 years.

MR. GRIMES: I could certainly ask Mr. Dean to give you an update as to what he knows of the current status.

MR. DEAN: Yes, Mr. French, the mine, in fact, has been sold. Armstrong World Industries Limited did sell the mine last summer to a company called Trinity Resources & Energy Limited. They have a subsidiary called Newfoundland Pyrophyllite, which they operate under. They have two or three, I think, employees at the site; at least two of whom were former management people from Armstrong World Industries Limited.

MR. FRENCH: If you would just excuse me? That is right, but they are not doing any mining. They have, I think, probably Mac and maybe one other fellow still there who just make sure that the place does not fall down around your ears, that somebody does not go in and rob any of the equipment or anything. I am well aware of that.

MR. DEAN: The focus of the new company, Trinity Resources & Energy Limited, is, in fact, to produce different products. The pyrophyllite that was mined at Manuels was shipped to ceramic tile plants in the United States. Those plants have shut down permanently, I am informed, so that market no longer exists.

What Trinity Resources & Energy Limited are trying to do is establish a new market in the paint industry, primarily. They have been doing a fair amount of research on grinding the pyrophyllite and use as a filler in paint manufacturing. I am informed that they are making considerable progress in that regard. They have done some test products, sent them out, and they have been very well received by customers, including our own paint plant here in St. John's.

The focus, if you like, the market focus, has changed with the new ownership. They are attempting to find new markets for the material and put the operation back in production.

They would also mill the product on site, if you like. If you remember before, the pyrophyllite went out as a lump product and they would produce essentially a powdered product which would be produced on site or near site there.

They are having some success. There is not very much in the public realm that I can inform you on today but we hope that they will be successful with this new venture.

MR. FRENCH: Could you send over to my office an address of this company, because I would really like to have a chat with them about what exactly is going on. One time, like I said, the stuff was shipped out about five minutes' walk from where I live, and at one time that facility employed a helluva lot of people. Of course, now it is down to two people. That, to me, is very sad. If it is there and the product can be used, I think we should be doing everything we can to encourage the use and the mining of it.

Thank you.

CHAIR: Mr. Hunter, do you want a go? Okay, go ahead, Mr. Shelley.

MR. SHELLEY: Okay, I will just stick now with updates on some sites and so on around. First of all, Minister, as you know, Nugget Pond on the Baie Verte Peninsula is nationally renowned, I would say now, from the cost-effectiveness of that particular site. I have visited it a few times. I do not know if you have already been to the site or not.

MR. GRIMES: No, I am actually planning to, and have been invited to visit during the mining conference (inaudible).

MR. SHELLEY: Yes, that was my next question. I always do this in Estimates. I know you have already been officially - I'm hoping you are going to be at the mining conference in Baie Verte.

MR. GRIMES: Yes.

MR. SHELLEY: It has been a very positive one, as Mr. Dean will tell you over the years. It continues to be, even when there is not a lot of excitement going on, but apparently this year it is going to be a little bit upbeat because of Nugget Pond but also some other things in the area that I will mention in a second. Of course, Nugget Pond, I cannot say enough about it. They have even an environmental award recently.

The one I want an update on now is the Ming Mineral and the old Rambler site. I was wondering if Mr. Dean or yourself can just update me on that. I'm hearing bits and pieces of things but it would certainly be nice to know exactly what is happening there.

MR. DEAN: The current project that is being pursued at the former Rambler site is the tailings. There was an attempt to recover the gold from the tailings by a company called Raymo Processing. That attempt failed for technical reasons, essentially. The department has cancelled that mining lease of sale by Raymo and the minister has now called for proposals for that resource. I believe the closing date is the end of this month, May 30. We are confident we are going to get at least one proposal.

MR. SHELLEY: You do not have one yet, do you?

MR. DEAN: The closing date, Mr. Shelley, is May 30.

MR. SHELLEY: Okay.

MR. DEAN: We have been informed by at least one company that they will give us a proposal to reactivate.

MR. SHELLEY: Yes, I'm hearing the same thing. It certainly sounds interesting. They keep coming back to it. (Inaudible) hopefully will make it work there. They know there is an ore body there.

The other one of course in the area again is McWatters' interest up in King's Point area, and I have been trying to keep in touch with them as much as possible. I have spoken to them a few times. The time frame is hard to nail down. I understand the gold prices are going to influence that, but from what I understand, throughout the summer, maybe even by this fall, we might see some movement and heading to construction of that type. Is that possible?

MR. DEAN: The price of gold today I think is at a twenty-year low. Gold companies, including McWatters Miller, are having a lot of financial difficulties in their operations and in their corporate financing because of the price of gold today. The reason that project has not moved ahead I think is largely due to the corporate difficulties the company is having due to the price of gold. There is another (inaudible).

MR. SHELLEY: There is no update on when they expect - because last year at this time they were saying that this fall they could be into something (inaudible).

MR. DEAN: That is right. The financial health of the company has changed considerably since they announced they were going to proceed with that.

MR. SHELLEY: Yes, I realize that.

MR. DEAN: I think that rebounding gold prices is necessary for McWatters to raise the financing that is necessary to proceed with the feasibility study and ultimate development. We have had a good look at the resource itself and we are very confident that the resource is there in the ground. There are some challenges on mining but the grades are similar to Nugget Pond, which Mr. Shelley referred to before, so I think ultimately that project will go forward. In order to get financing we are going to need to see gold prices going the other way.

MR. SHELLEY: I just have to leave that for a second and come back to something I missed earlier. Last year I brought this up, and I think we have had something done with it since, but I would to get an update. It is about when you are staking claims down here at the building and the lineups outside. It was supposed to be corrected. Is that process in place now? Have we made some corrections?

MR. GRIMES: Yes. The new process, Mr. Chairman, has been in place a month or so now I guess. I've noticed it because even going into the building every day you find out that the people who used to be waiting outside the door are absent.

The new staking system has been activated. My understanding again too is that it is well received within the industry, that they now quite understand the procedures and are quite pleased to know that from any other location, you don't have to have somebody paid, or you don't have to take time yourself, to leave Central Newfoundland as an example, or the West Coast or Labrador, to come into a physical location in St. John's and stand and actually stake a claim on the map with the proper coordinates and so on. The electronic system has been working well, to my knowledge. Either Mr. Dean or Mr. Blackwood or someone might be able to give you more information.

I have certainly noticed that the lineups have disappeared from the building. The general feedback from the mining sector again, now that they fully understand the process, is that they are quite pleased with the new approach.

MR. SHELLEY: That is good to hear because I have raised that a few times. I had people down here from my district calling me at 1:00 a.m. looking for heaters for their cars because they are sitting outside and that type of thing.

There was one loophole there - I do not know if it was closed up - dealing basically with the call-in system, or however you do it now. A fellow might be staking a claim, then his wife, son, daughter and everybody else could do the same thing and sort of double up or triple up on it. There was some discussion on that with the previous minister. I do not know if that is closed off now or exactly how it works. Paul, is it taken care of now, can you tell me?

MR. DEAN: This is really only an issue when people are competing for the same piece of ground if you like or the same mineral rights. The new system will essentially -

MR. SHELLEY: It hasn't run into that yet.

MR. DEAN: We haven't run into it.

MR. SHELLEY: There is potential there for it, I say to you. Because if you do get a bit of excitement in the area - something was brought up by the people who were staking it, by the way. They said it to me: What if that happens?

MR. DEAN: I guess we will have to cross that when we come to it. The minister is right. The system works fairly well. It is also a very tight, confidential system. If someone does apply, no one else knows that a person from Baie Verte or Grand Falls or Labrador City has applied. On the designated day, if you like, if there are two people who applied for the same ground, there is just a matter of doing a computer (inaudible).

MR. SHELLEY: No, I think it is great, and I congratulate you for doing it. All I am saying to you is that down the road if you have a hot spot again, something like Voisey's Bay or whatever happens somewhere else, people will use the loopholes. It is a matter of closing them up, like with any process I guess. That was mentioned to me by a person who was staking a claim that that could possibly happen if you saw some competition around the area. It is something to consider and something you might have to handle down the road. I'm glad that it is fixed, or better than what it was before, for sure.

There is something else I wanted to mention to you. It is sort of in your department and it is not in your department. It is old mine sites and cleanup. Over two years ago I brought it up with the Little Bay mine, myself and actually a constituent out there. It was two and a half years ago, probably. Irving owned that site, the Little Bay mine. I had complaints there were people throwing garbage into the pit that was there, it had caved in, they were throwing animals in there. Everything. I've had some contact with Irving and so did this particular constituent.

The Little Bay mine site, Gullbridge and Tilt Cove were owned by Irving. I understand they are planning to do some cleanup at those sites. This is unofficial with me, but what I have heard from one phone call is that it is something like $2 million to clean up some of those sites. I think it is supposed to happen this summer. I was just trying to get an update on that. Do I have to go to Environment and Labour, and that is out of your hands? I'm not sure. I just ask the question.

MR. FRENCH: Excuse me, Minister. Before you answer that, Mr. Chairman, I wonder if I could be excused. I have to go and meet with a council in my district. It does not have any mining, but they have a lot of votes.

MR. GRIMES: You are still trying to get re-elected.

MR. FRENCH: (Inaudible).

MR. GRIMES: He must be going to run again.

WITNESS: Long-term prospects as well.

MR. FRENCH: It is too exciting now to give it up, boy, especially if I have to see you sitting over here (inaudible).

MR. GRIMES: Mr. Chairman, Mr. Dean will give more information. Basically most of the cleanup issue is dealt with in one of two ways: either in some incidents part of an original lease, a commitment given to clean up afterwards, and the monitoring of those functions usually fall with the Department of Environment. Because we are dealing with issues now, for example, like the Hope Brook gold mine and those kinds of issues as well.

The other thing is this. I understand we are in the final stages as well though of making another change or a change to the act or the regulations to indicate that in order to get a lease or licence in the first instance the whole commitment would have to be the decommissioning.

MR. SHELLEY: That is with the newer mine sites.

MR. GRIMES: Also, a commitment for the new ones. That is the direction for the future. Because everyone understands that it has been difficult sometimes in the past to get someone after it has become uneconomic - they have abandoned the site, to track them down to see where they are financially and to get them to live up to commitments to restore and reclaim the sites. As to the ones that you mentioned, Mr. Dean might want to give you a brief update as to where they are and whether or not the actual reclamation work is scheduled to happen this summer.

MR. DEAN: The three sites Mr. Shelley referred to - Little Bay, Gullbridge and Tilt Cove - the surface rights in those areas where the mining took place are still owned by the Irving group of companies. They have a couple of different mining companies. The Irving group has acknowledged that it is their responsibility. If something is needed to be done on that site, they either do it or sometimes we do it and send them the bill.

The St. John office of Irving sort of - I guess, we have a working relationship in Mines and Energy, and Environment and Labour, that if there is an issue there to be dealt with it is brought to the attention of the St. John office of Irving. They either have someone do it or say: Would you get a contractor to do it and we will reimburse you for that?

I'm not aware, however, that there is a major funding initiative for this summer for cleanup of those sites but I stand to be corrected on that.

MR. SHELLEY: Okay. I'm not officially aware of it but, like I said, I have done this for a couple of years back. As a matter of fact, I call your department and call this guy. I will try to get some names and hopefully get an update on that because it is important.

It started with the Little Bay site because of what was happening there and complaints by local residents, and the skidoo almost went into the (inaudible). All these type of things were happening. Basically, it started from simple complaints like that. I've just heard this from this constituent so it is all secondhand, I will say that to you, but it would be nice to know if it is true.

Those are the older mine sites around, Mr. Minister. That is like the Baie Verte mine site which I am going to get to in a second. While we are on that note, that is something that is going to have to be raised with that particular site pretty soon. Maybe we might be saved from that because I think there may be some good possibilities coming there, and I will get to them in a second.

Also, while we are on this same track, could I get an update on a newer mine - about which hopefully there will be some regulations in place - and that is the Hope Brook? Can I get an update on what is going to happen there with the cleanup, the reclamation and so on?

MR. GRIMES: Again, the issue largely is being dealt with by the Department of Environment and Labour. I think all of the indications are that with the particular company involved every indication has been that they will honour their commitments at the Hope Brook site even though they are going through, I think, some financial difficulties that all of us have followed through the news, and protection proceedings and so on. The indication given to the government is that we can fully expect that their obligations at Hope Brook will be met over the next period of time because I think it is, again, substantial at that gold mine. The Minister of Environment certainly would be the first to let the people of the Province know if there was any real suggestion that the commitments will not be lived up to with respect to cleanup at Hope Brook.

MR. SHELLEY: Okay, thank you. Just a couple of other small ones. First, about the silica bulk sample last year in La Scie. I haven't heard anything about it since but the bulk sample seemed to turn out alright. I understand that that type of silica was for blast furnaces and so on. The market was for blast furnaces in Iceland and that type of area, but they had some problem with that market after. Is there any update on if they are going to come back again? Apparently, the sample worked out alright but we have not heard since.

MR. DEAN: Yes, I understand the bulk sample was successful and went to a silicon smelter in Iceland. There may be a requirement for further bulk shipment before they could look at a commercial venture. At the moment there isn't any sort of approvals for a commercial mine at the La Scie silica project. In other words, it has not gone into the environmental assessment process. We do not have an application before us for a mining lease or anything like that. It is still one of those that is at the advanced exploration stage but might eventually make it into a commercial mining operation.

MR. SHELLEY: Okay. I will bring up one more and then just make a comment on the last one. The question is for another one. I'm hearing again about the antimony mine site at Glenwood. Could I get an update on that? That could be a possible positive spin soon, as I'm hoping. I know the Japanese market ruined it before, or the Chinese market, I'm not sure which one.

WITNESS: (Inaudible).

MR. SHELLEY: Chinese, was it? Are there any new developments there?

MR. DEAN: The price of antimony is the major factor that is affecting that operation, and China is a major producer of antimony and essentially does have a major influence on the price. The current price today is about $300 per ton of concentrate below what the company at northwest Gander, Roycefield Resources Limited, would require in order to reactivate the mine. The price needs to go up by 20 per cent to 30 per cent from where it is at the present time before they could have a successful mining venture in the Glenwood area. Having said that, it is a good deposit, it is a good mine, it is a good company, and the initial production that they had was well received in the marketplace. Unfortunately, the market took a dive just as they were coming into production, but that is the cyclical nature of the mining industry. The market will come back, undoubtedly.

MR. SHELLEY: I will just make a comment on these next two things. The Canadian Magnesium Corporation, since its very beginning, with the magnesium potential there at the Bay Verte mines, with the tailings - I have taken it on as a research study myself and learned quite a bit about it. There is so much more to learn about it still. Asbestos tailings are full of magnesium and silica. As late as yesterday I had the press release from Magnola in Quebec. I have studied that process also. It is a huge project, $733 million so far invested in Quebec, a magnificent project. The headline - I don't know if you have seen that article yet - is: Magnesium magnificent. That is what it was yesterday, Magnola. It is really interesting. From my limited resources and the research that I can do, the Internet and getting articles - I just faxed a group from the United States and so on - I've gotten to find out pretty quickly that magnesium is one of the most interesting materials on the market right now.

As a matter of fact, Ford had a statement out a few weeks ago that last year they used - I think I have this right now - five kilograms of magnesium per car. By the year 2020 it will be over 200 kilograms per car. That is where the interest is going. I have been to the magnesium conference. I would suggest actually, Minister, that that is where we encourage travel. The one for this year is in Rome. You should take that money - but in all seriousness, if you go to these you really find out quickly. Unless the former minister wants to go again. I will say to you that the magnesium - I don't know in this Province, and the ADM can tell me, he knows more about it, but I certainly did not, and I don't know how many people in this Province know about it. Certainly the market is going to expand and explode.

At that last magnesium conference I watched, I don't know, twenty presentations. Mercedes-Benz, all the car companies, were talking about the increase of magnesium in the products. Obviously because it is a lighter material and therefore there is the environmental aspect. If they are lighter machines there are less emissions and so on. It is certainly getting very interesting. I can only wish them well. I know the feasibility is ongoing now with the Canadian Magnesium Corporation and that they are going to be doing some work in the area very soon now. In fact, in a little while. I think that is going to be a very exciting project. It has the potential to be, from what I have seen of it anyway.

Hopefully that will answer two questions as to what is happening at that site down there as far as the environmental problem anyway. I think we have the potential for a huge, very good, project. Haven't said anything about it publicly or anything, and for good reason, because people in the Baie Verte area have heard so many things in the past, like many parts of the Province, and not see it come to fruition. So it has been just very quietly done. I know they are doing their homework. Basically, when people ask me locally I just say they are doing their homework, they are doing what should be done and hopefully down the road something will happen with it. I know they are ongoing.

On that same note, the North Co Forest Group are at the mine site now - as the ADM and the minister probably knows - and doing very well. They made all of their equipment and they are ready to start producing lumber about the first of June. They made all of the equipment at the machine shop there in Baie Verte. It is a fantastic job. I hope you visit them when you go down there too.

Of course, we do not know what will happen with Canadian Magnesium Corporation. We hope they (inaudible) there and they may want to use that machine shop down the road. I just want to make the comment here tonight that these people at the sawmill made very good use of it. For one thing, they stopped it from dilapidating. The roof was leaking, it was a mess. They have it all cleaned up. It is all lubricated. There are no leaks there, so they have done us a favour already. I'm not making proposals here, but I'm just suggesting that these guys did do that and maybe along with Canadian Magnesium Corporation down the road, there is a potential that these guys can continue to use the machine shop, maybe continue to operate it, I don't know. They could work jointly in having a first-class machine shop on site that is up and running. They had some people to work down there and I think it was good for everybody.

So I just want to make that comment about the North Co Forest Group that are there now and commend them for doing that. I am hoping that in the very near future some of these things we are talking about here tonight - I hope it is in the near future - can come to fruition and we can see some real heavy activity going on there. I understand that could be as early as the fall, if everything goes along well with the study and so on.

That is all I have to say. It is just that every time I think about mining - I suppose where I grew up around it and so on - I'm always an optimist about mining, that somebody is going to find something and have the money to go down and dig it out and find out, so that we can put people to work. Because when you talk mining you are talking about new money in the Province, and you are talking about putting people to work. I certainly support the mining industry.

Anything I can do - I say that in all sincerity, and I've worked with the last mining minister - I certainly would do in promotion, in any way assisting for any of these companies, not just in my district but anywhere, to come into production.

Thank you very much.

CHAIR: Thank you, Mr. Shelley.

Mr. Rideout.

MR. RIDEOUT: Thank you, Mr. Chairman.

I would like to switch focus for a few moments from mining, as important as that is, to the energy side of the department. I noticed the minister in his introductory remarks indicated that the Terra Nova project, I believe he said, was on time and on budget. I'm not responsible for energy matters for our caucus but it seems to me that it was only just a few weeks ago that there was some concern expressed that one of the fabrication yards - I believe it was in Korea - was experiencing some difficulty. There was some concern as to whether or not some of the units being constructed and fabricated in Korea would be delayed. Am I safe in gathering from the minister's comments that that fear is not realistic, is not about to materialize, and that whatever the difficulty was at that yard has been overcome and the project is not going to negatively impacted by it?

MR. GRIMES: That, Mr. Chairman, is the company's expectation right now. They did discuss with us the circumstance in Korea at the Daewoo yard, where they were actually constructing the hull which they will bring over here and assemble all the topsides at Bull Arm. Some of the topsides' components, as I indicated, are being built and constructed at Bull Arm. As we speak, all of that will occur.

They indicated to us in advance that a Japanese company had been buying out the shipyard in Korea and that they fully expected that because of the ongoing normal tensions and relationships between Japan and Korea that when it happened, when it became official that the take-over by a Japanese company of a Korean yard was public, the most likely thing that would occur was that the workers would protest, which they did. They did indicate that if it went on for any period of time then there was some possibility of course that it could jeopardize the completion of the hull and so on.

The latest information that I had, again, was that it was more of a protest to make the point than any long-lasting strike at the yard that has now delayed work. The protest and the demonstration did occur. The work did stop for a day and a bit but the workers have resumed, and that short interruption should not cause any difficulties there.

The other interesting part, Mr. Chairman, with respect to it as well is that the work that is occurring here offshore - I think the particular vessel that was supposed to do the glory hole excavation at the site where they are actually going to put the subsea components was in port in St. John's Friday past. They got supplies and fuelled and they should be at the site now. It is a couple of days steam for them. They are in the process now of doing the excavation and digging out the glory holes, I guess, for those who are not familiar with the terminology.

They have to actually dig a hole below the actual seabed so that they can put these things underneath so they will be not impacted by scouring icebergs. What they do is they actually go down underneath the seabed and put these things several feet underground so that they are not disturbed. That work is on-going, and they are assuming that with everything in place on the seabed a lot of that work will be done this summer.

Newfoundland firms, like New Dock down here at the yard in St. John's, are participating in some of the plating and so on that is going to be required for that, actually constructing them in Newfoundland as well. They will do that kind of installation, if the weather holds and if the season prevails, this summer after they get the glory holes done, with the full expectation that they will have that in place so that when they steam across the actual vessel late this year, or very early next year, then they will have that time to do the assembly at Bull Arm. They will reach the target date of somewhere in mid-November or early December at the latest to have the whole rig out at the site, hook up to the subsea structures that they are doing now, and actually be producing before the end of the year 2000.

MR. RIDEOUT: I thank the minister for the information. The minister mentioned that the target date for Terra Nova is late 2000, I believe. Of course, ideally in growing this offshore oil and gas industry, as one project is coming on stream you like to look to the prospects of others gearing up. Can the minister tell us what appears to be on the horizon in terms of White Rose and Ben Nevis in particular, and what the plans are by the owners of those particular fields now, and where they fit in, without giving commitments, in terms of possible projects down the road and how far?

MR. GRIMES: Mr. Chairman, I am sure the Deputy Minister or others will correct me if I start giving the information that is incorrect, because we would not want to give any incorrect information.

The good news with respect to the offshore development at this point in time is that there certainly seems to be continuing great interest in both Hebron-Ben Nevis and White Rose in the sense that there is further exploration that has occurred this spring and more will occur this summer. There will probably even be an announcement of results as we go through this late spring and early summer. All of the preliminary information - and again, this was the kind of buzz that was evident in Houston, because people were so well aware of this - has been very encouraging, I guess is the phrase that I would use, to the point that the major companies again are continuing to invest in very accelerated drilling and further exploration to delineate exactly what the resource is.

I guess if I were in this position a year ago, the indications would have been that at both White Rose and Hebron the partners in the operating companies - Husky being one of them, and I think Petro-Canada again is to be the operator for the other on behalf of a consortium of companies - were both speaking most probably of floating platform systems again for both of these.

The most recent discussions that we have been involved in - they are still exploring - is that one if not both of the companies think again, because of the depth of water or the lack thereof, that it may even be quite possible that one of these projects may again be a floating concrete structure like at Hibernia, somewhat similar, which would again be great news, particularly from the point of view of - these companies ever since Hibernia now are doing this all on their own ticket. There is no government money in this, but everyone I think would understand the construction impacts and so on out of Bull Arm if someone decides to build another gravity-based structure rather than a floating production system.

They are seriously looking at that. Because the last sessions that we had indicated clearly that with the depth, I think, which is in the eighty metres or just a little bit more that they expect to have some anchoring and mooring difficulties with the shallowness of the water, and with tides and wave action. Eighty metres sounds pretty deep to me, but I guess in this industry they are talking about that as being shallow. It is not quite deep enough for the floating system that is going to be at Terra Nova. It is questionable right now, but both groups are examining both options.

Because of the exploration that is going on, I guess it will depend upon the results of the drilling that is occurring now, the further exploration, and who is in the best capital position. The phrase that was most used in Houston in the last week is that there is shaping up to be a foot race as to who is going to be next, whether it is going to be Hebron or whether it is going to be White Rose. Both of them, though, depending upon the latest result of what will happen out of this spring and summer, are in a position to follow very quickly after Terra Nova, in the range of maybe being out there and producing, again, around 2003. One, for sure, I think - it all depends on proving the reserve - seems like it would be ready in 2003 and another one - they may even both be ready about the same time, or one very shortly thereafter.

In short, Mr. Chairman, it looks very much like a continuing, growing, developing industry, so that we could look five years out and see the offshore for Newfoundland and Labrador going from a single producing operation at Hibernia to four producing operations within that span of six or seven years.

Again, there is a nomination of land bid that is out now for consideration, expressions of interest. I think it closes in November this year. The other good news, again, is that the land that is being put up - some of it, again, is in the Jeanne d'Arc Basin, the same area - but some of it as well is moving out into some deeper water, into other areas. There is a full expectation - because these lands were nominated by the companies. The process is that the companies say: We would like for you to put these lands up for bid. Then C-NOPB determines which ones they actually will and will not. They are going to try a few deeper water parcels in this particular process, fully expecting that the companies will go out there - they already have done some seismic work - in the deeper water and do some more drilling.

The expectation for all of the companies involved is that there will be a continuing development even beyond the next two. They fully expect that because of the seismic work that has been done. As well, then, there is the prospect of moving into gas production as well as oil. So far it has all been concentrated on extracting oil from under the sea but a lot of the work, again, has indicated that there are significant recoverable gas reserves.

There is at least one company which is actively pursuing a partnership with Husky Oil, which has come to the government on a couple of occasions now outlining proposals to build a subsea pipeline as well that would do two things.

The two components: one would be to carry gas and hook into the Sable system and go directly to the northeastern United States and New England market. Secondly, and very importantly for us, there would be a spur line that would come into the Island to bring natural gas as well to the Island so that we could look at natural gas for electrical generation. Also, natural gas being used for a whole bunch of downstream product development, such as they are doing in Trinidad and so on. A trade mission from NOIA visited Trinidad in February and were absolutely amazed by the level of industrial development that is in a tiny little island like Trinidad, because of the fact that they brought natural gas ashore and developed all kinds of chemical and petro-chemical plants right on the island by maximizing the use of the gas.

There is at least one company as well that is actively pursuing a partnership with one of the majors for the beginnings of the extraction of the gas as well as the oil. There is an awful lot of interest in the offshore, and it certainly has all the markings now of not being a one or two project area, but three or four producing oil wells within the next five years, and then gas production shortly thereafter, as well as more oil production following on that.

MR. RIDEOUT: Thank you.

CHAIR: Mr. Hunter.

MR. HUNTER: Mr. Chairman, I have a question for the minister. Minister, are there any small hydroelectric projects being proposed on the Island? If so, could you tell me a little bit about if there are any proposed or being planned for the near future?

MR. GRIMES: Not right now. In the context of this energy policy review that we are conducting, there were a whole series of them that had gone through a request for proposals with Newfoundland Hydro a year and a half or two years ago. My understanding is that all of them were cancelled. Pending the outcome of the energy policy review, at this point in time there would not be any to be proceeded with. There are no requests on the books in any active state.

There are some interesting issues. Again, I would let the Committee know, for example, that Corner Brook Pulp and Paper and Kruger are very interested still in doing a co-generation plant at the mill in Corner Brook. Not to dam a river, but burning bark and so on to provide electricity that partly would service the needs of the mill but also be available to the grid.

In terms of small river hydro, that whole issue has been completely set aside for inclusion in the energy policy review as to whether or not that is an appropriate policy position to be taking in the Province, or whether or not we would proceed with more thermal, gas or oil produced things by expanding Holyrood, for example, with Hydro. There were some propositions before, Mr. Chairman, with respect to wind power. There was a company that had proposed generating electricity from wind power on the Bonavista Peninsula.

Some of those may resurface again, but the whole issue as to whether or not we would dam any small rivers and do any small river hydro projects has been deferred and delayed until the outcome of the energy policy review. The main one that Hydro itself has always had on the books that they would like to do - and apparently the initial information is that it is the most cost-effective one on the Island - is the Grand Canal one that basically would be in back of Bay d'Espoir, back in the same water system. At some point, either by having a preliminary release of the review or bringing some changes forward in the Electrical Power Control Act to this Legislature, the government may decide that we would like for one, two or three of these to proceed.

At this point though, in order for them to proceed, my understanding is that we would have to come to this Legislature and basically ask for some kind of a change to the Electrical Power Control Act in order for any small hydro projects to proceed in the Province. If it is deemed that one or more of those is appropriate and should be done, then we would certainly have an opportunity to debate it in the Legislature because the government would have to bring the issue here for discussion and debate.

MR. HUNTER: Minister, could you just update the Tally Pond proposed site there? What is the status on that site right now?

MR. DEAN: The previous owner of the Tally Pond site, Noranda Inc., have made an agreement with another Canadian based company called Thundermin Resources Inc. to go in and do extensive drilling and a feasibility study to see if the Duck Pond deposit can be put in production. That has a preliminary cost of about $1.4 million. Last week, Thundermin Resources Inc. entered into a joint venture with a related company called Queenston Mining Inc. to provide the financing for that.

The drilling is about to start. Tenders have been called for the first phase of drilling, which I think is roughly around $600,000. I suspect before the end of May the initial drill program will begin. People are on site at the camp south of Millertown getting ready to start that project. There should be a fairly intensive drill program there this year and the $1.4 million commitment, I believe, is meant to be spent by June of next year. That particular area is going to be quite active in the next twelve months.

MR. HUNTER: Thank you very much. That is good news.

Thank you, Mr. Chairman.

CHAIR: Mr. Sweeney, do you have a question?

Mr. Parsons.

MR. PARSONS: Just one comment, Mr. Minister. I had the benefit of seeing Hope Brook recently with the Minister of Environment. I noticed someone raised the question tonight. Again, I understand there are no current regulations concerning postings of bonds by mining companies in advance. I'm not sure which department it falls under, but so it doesn't get lost in the cracks, I think certainly it would be a worthwhile thing to look at, to make sure that mining companies do in fact have some bonding procedures.

MR. GRIMES: That, Mr. Chairman, is the issue that is addressed in the new mining act, a requirement before any new lease is given of either the bond or a commitment to the reclamation and restoration plan as part of the lease itself. I think it was identified in the past by me. That was a gap that was not adequately covered off. Commitments were asked for and received in a variety of ways but it will be much more specific and much more transparent in this new legislation that it would be an absolute condition of getting a lease to operate in the first place. The commitment to the cleanup will be part of the provision of the lease in the first instance.

MR. PARSONS: Thank you.

CHAIR: Thank you. Mr. Collins.

MR. COLLINS: (Inaudible) I'm sure Paul is pretty familiar with the

On motion, subheads 1.1.01 through 3.1.05, carried.

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

CHAIR: Before we adjourn, I would like to thank the Committee members for their questions, and Minister, I would like to thank you and your officials for coming tonight. I found it to be very informative, actually. A lot of questions were asked that enlightened me on a number of aspects of your department.

Without further ado I would like to have a motion to adjourn.

MR. RIDEOUT: So moved, Mr. Chairman.

MR. GRIMES: Mr. Chairman, as you adjourn, could I just again do two things? I thank the Committee for the attention paid to these estimates and apologize for my uncharacteristic behaviour.

MR. SHELLEY: We thank you for the sandwiches.

MR. GRIMES: Mr. Chairman, I'm surprised and disappointed, though, that there was not an increase voted to Transportation and Communications so I could take more of you to Rome.

Thank you very much for everything.

MR. RIDEOUT: You got a substantial increase as it is.

MR. SHELLEY: You will not see me complaining if you take it.

The Committee adjourned.