The Committee met at 9:00 a.m. in Room 5083.

CHAIR (Mr. Walsh): Order, please!

Good morning everyone, and welcome to the Resource Estimates Committee. There are a couple of housekeeping duties before we start. In order to speak, you have to press the talk button in front of you and do the same when you are finished. For the record, as some of the voices may not be recognized by the Hansard staff, I would ask you to identify yourselves, especially staff, and we will begin.

I will ask the Committee members to introduce themselves. Then, Minister, we will go to you and if you have an opening statement, by all means. At the same time you may wish to introduce your staff or you may just wish to acknowledge that they are all here. I am not sure if Hansard can cover the excess paper required to list the staff.

We will start by saying hello to the members first. Ross, we will begin with you.

MR. ROSS WISEMAN: Rose Wiseman, MHA for Trinity North.

MR. ANDERSEN: Wally Andersen, MHA for Torngat Mountains.

MS JONES: Yvonne Jones, MHA for Cartwright-L'Anse au Clair.

MR. OTTENHEIMER: John Ottenheimer, MHA for St. John's East.

MR. FITZGERALD: Roger Fitzgerald, MHA for Bonavista South.

CHAIR: Minister?

MR. TULK: I am Beaton Tulk, Minister of Industry, Trade and Rural Development.

I am going to start on my left and ask each one of the officials who are in the room to identify themselves and tell you who they are. I haven't yet figured it out.

MR. SCOTT: John Scott, Deputy Minister of the department.

MR. McCARTHY: Phil McCarthy, Assistant Deputy Minister, Strategic Industries and Regional Development.

MR. STIRLING: Bill Stirling, Executive Director, Regional Economic Development.

MR. CURTIS: Ken Curtis, Manager of Budgeting.

MR. TOBIN: Pierre Tobin, Assistant Deputy Minister, Industrial Benefits, Research and Advanced Technology.

MR. GUINCHARD: Larry Guinchard, Assistant Deputy Minister, Regional Operations.

MR. BLUNDON: Mac Blundon, Manager of Financial Operations.

MR. HEALEY: Keith Healey, Assistant Deputy Minister, Investment, Prospecting and Export Development.

CHAIR: Thank you very much.

Before we start, there is one other housekeeping duty. I want to move the minutes of the last meeting. The meetings read as: Here are the members who attended. It was the Department of Mines and Energy, with Minister Matthews and his staff. The Committee reviewed and approved without amendment the estimates of expenditure of the department. On a motion by Mr. Andersen, the Committee adjourned at 6:00 p.m.

On motion, minutes adopted as circulated.

CHAIR: Minister, our format in this Committee in particular has been somewhat relaxed in the sense that there is an opening statement from the minister. We then move to questions from our colleagues in the Opposition. The normal time would be five or ten minutes each. We have allowed them to go longer if they so desired. Stay reasonably close to the Estimates themselves, although some questions and comments, I am sure, will range outside of that. Hopefully we will conclude at a reasonable time. With that, Minister, if you have an opening statement, go ahead.

MR. TULK: I will not be too long, Mr. Chairman, with my opening statement. The Estimates are in front of people, and if there are questions to be asked, I hope I have the resources here to answer them for you.

Let me just say that it is a pleasure to be before the Committee. As you know, this year we are looking at the creation or the amalgamation, if you want, of two departments: the former Department of Development and Rural Renewal, and the Department of Industry, Trade and Technology. The creation of the new Department of Industry, Trade and Rural Development brings together all of - and this is the reason for doing it - government's core economic and business development tools into a single organization.

If you read the Jobs and Growth report, which is a result of the presentation of some 300 briefs to us by people from around the Province, consulting with eleven sectoral parts of the Newfoundland economy, you will note that was one of the recommendations to government. People felt that we were probably a little too dispersed in the way we organize government to look after development in the Province, and that we should bring it back together into one department.

As a result of that, as a result of the Jobs and Growth report, that is where the new department is going to find its mandate. That is where its mandate is. I would encourage all members of the House, on both sides of the House, to read it, because it does represent the views of the people of this Province in some year-and-a-half of study, looking at those views and trying to consolidate them into an overall economic agenda for the Province, not necessarily a prescriptive economic agenda. That is the mandate of the department, to implement that report and to see that economic development is carried out in the way that report suggests it should be.

In relation to that - and I will clue up here very quickly, Mr. Chairman - one of the moves that we felt was necessary was to make the Minister of Industry, Trade and Rural Development also Chairman of the Economic Policy Committee of Cabinet. We will be taking that report, taking it department by department, going through it with the departments, and saying: From here, we would like for you to focus on what it is that is in that report that affects your department.

We believe that we have established some momentum over the past four years and we want to be far more aggressive in moving the economy forward. That is especially true in rural Newfoundland and Labrador. In actual fact, the Province has recovered somewhat but there are areas of the Province - and there are areas that are not easy to deal with - that have not recovered from the shutdown of the groundfish industry. We could name four or five areas in particular. The Member for Bonavista South will know what I am talking about. The Bonavista Peninsula had a large number of people who were engaged in the groundfish industry. We had a plant in Catalina. Was it Catalina-Port Union, Roger?

MR. FITZGERALD: Port Union.

MR. TULK: In Port Union that employed, I think, at peak, some 1,200 people year-round. Bonavista itself was a big fishing town, primarily inshore. When you shut down that kind of momentum, as we did - I am not laying blame here; it had to be done. I don't think there was any choice, as there was nothing there to catch anyway, because the groundfish industry, in actual fact, shut down years before it was officially announced. When you do that, the problems of recovery with that large number of people engaged in a particular industry, I think it is safe to say that at that point in time places like the Bonavista Peninsula were one-industry communities, if you look at the whole of the Peninsula.

There are areas like that. There are areas on the Great Northern Peninsula, as all of us would know just recently from the by-election, Englee for example. If you establish St. Anthony as a regional centre of development, I think it is somewhat difficult to believe, in my mind, that people in Englee are going to drive to work in St. Anthony, because of the distances, because of the kinds of roads in winter and so on. We have to take a look at those places and see just exactly what it is that can be done.

Let me give you another example. Burgeo, Ramea and Trepassey, those are areas that are out of the main stream, so to speak, when it comes to the geography of the Province. They are off the Trans-Canada and it is extremely difficult to find things that can be done, but hopefully we will keep making some progress.

At the present time we are currently working to restructure the department, to get it together and focus our attention. In that regard, I think somewhere around the next week or so, or two weeks, we will be taking a couple of days, all of us, with all those people and our regional people and saying: Alright, we have to focus here. We have to focus on certain areas of this Province in particular and move along.

Also, and I don't believe he is here this morning, George Sweeney as been appointed, as you know, as the Parliamentary Secretary to the minister. In that regard, I have asked him to concentrate on the IT sector, to push and see what can be done in that regard for any part of the Province that we can help in overcoming their economic challenges.

Having said that, Mr. Chairman, giving that general overview of where we hope to go, I throw the floor open to questions.

CHAIR: Before I go to John or Roger, I, on behalf of the Clerk, will move 1.1.01. The Clerk does not have a microphone, but I acknowledge that the Clerk moves that.

George Sweeney is chairing another committee this morning in the attempt to conclude as many as possible today, with an attempt to go to concurrence before we take the Easter break.

John or Roger. Microphone, please, and identify.

MR. OTTENHEIMER: Thank you, Mr. Chairman.

I think, with the Chair's permission, we may change our approach somewhat this morning. We are pleased that the critic for this department is present, my colleague, the Member for Bonavista South. I know Mr. Fitzgerald has a few questions and, with the Chair's permission, I am going to ask Mr. Fitzgerald to lead in the questioning.

Thank you.

CHAIR: Roger.

MR. FITZGERALD: Thank you, Sir, and welcome to the minister and staff.

Minister, I am glad you touched on a few real problems. If there are any sore spots, I think you probably touched on them in your opening statement. I know my area, I guess, better than others that you named, but I am also aware of other places like Ramea and Burgeo and those places.

I do not know what your department is looking at for places like the Bonavista Peninsula. Some people think that the Bonavista Peninsula today is doing alright because there are two active processing plants there, but when you look at a plant that employed in excess of 1,200 people year-round, now versus a new, modern plant that employs less than 135 people for sixteen to twenty weeks of the year, it is a vast difference.

I do not think this problem is going to go away. The people who are living in those areas now, with the programs that we have gone through, the NCARP, the TAGS program, the mobility program of each, I think the people who are there today are people who are going to stay. We have to do something. I do not know what it is. I do not have the answer to what we can put down in Bonavista or Port Union in order to create some economic activity there so that the people might be allowed to continue to live there.

The upper part of the district, the Lethbridge area, feeds off Clarenville with the economic things that are happening there.

MR. TULK: Close enough to do it.

MR. FITZGERALD: Sure. A lot of the people make the drive every morning and come home every night. With the agricultural industry and the logging operation there, it has provided some stability. From Charleston down, I say to the minister, we have a major problem.

I am a little bit disappointed in the functioning of the RED board, especially in that particular area. I am not a little bit comfortable with it. I am certainly highly disappointed with it. I know that this board operates under the umbrella of your department, and I know that your department funds it, and it causes me great concern. I brought this up at their annual meeting as well, when I see them now getting involved in real estate. I drive down through Clarenville and I see a major amount of money being spent on a building. By God, we should have learned our lessons when it comes to allowing development associations to get involved in real estates and buying property rather than to focus their attention on creating economic opportunity.

I can probably go back to the Sprung Greenhouse. If the Sprung Greenhouse were built down in Bonavista or out in Deer Lake somewhere, we probably could have justified why we spent some of that money, because we would have tried to reach out to help an area; but, for the RED board to try and convince me or your department that they are looking at bringing in new people to the Clarenville area, and that is the reason why they had to buy this building and go after your department and HRDC in order to pretty well construct a new building to create economic activity, it might have been justified if they had put it down in Spillars Cove somewhere. I do not think it is justified in Clarenville. I know lots of businesspeople in Clarenville who were willing to create space and allow them - and I do not believe they are paying any rent up until now - to generate economic activity there. I do not know where you stand on that. I do not know what your thoughts are, or who approved the money for it, but I would like to know.

MR. TULK: Well, let me just say to you that -

CHAIR: Is your microphone on, Minister?

MR. TULK: Oh, I am sorry.

CHAIR: I am not sure if you will get feedback or not from these. We can leave some of them on and take a chance.

MR. TULK: It has the appropriate color. It turns bright red when you turn it on.

MR. FITZGERALD: But the red is getting weaker all the time.

MR. TULK: Actually, I will tell you something. I just met your leader on the way up and I said to him: Did you write that speech out of my Jobs and Growth report or what? I think he admitted that he did. I believe he did but I am not sure. Anyway, the mike is on again.

Let me just say to you that we believe that the importance of RED boards is not to get into projects. We believe that their importance is in working to develop, along with people in the area, to point them in the direction, and there are some very successful ones in the Province. The Discovery Board is working, so I put that in that context, but to be open and say this to you: We have not approved any funding for that piece of real estate because we do not believe that should be the primary focus. Having said that, those people are somewhat independent themselves, and get elected in their regions.

In regard to your own area, I think in November when I was in the Premier's office, I met the Mayor of Bonavista - Fitzgerald.

MR. FITZGERALD: I am sorry?

MR. TULK: Does he have the name Fitzgerald, too?

MR. FITZGERALD: The mayor?

MR. TULK: Yes.

MR. FITZGERALD: Yes.

MR. TULK: Two of you.

- and suggested to her that we do want to concentrate on that particular area of the Bonavista Peninsula because we recognize that it is somewhat off the end of the area. I believe - well, I hope we have - that we have approved an economic development officer to work in conjunction with the towns down there to see what it is, in particular, that we can get in Bonavista; what it is that they would like to see us go after, as a government. If there is some infrastructure that is necessary, then we would go after that kind of infrastructure for them.

There are some interesting concepts that are developing in regard to how you can get the information highway in the people's hands. One of the things that we have been looking at with the Discovery Board, for example, is the satellite type, wireless type, of movement into areas such as the Bonavista Peninsula so that people get connected to e-commerce through maybe a call centre; because while the wages, perhaps, are not as high as some people would like to see them in call centres, they do provide employment, especially if you live in your own home, you own your own home, and that kind of thing.

We have recently moved - and I would hope that the letter has gone out to approve that position - to say to the REDB that we need a particular focus on those regions. Hopefully, in the coming months, we will be able to get down into Bonavista and bring some of the prosperity that is happening in places like Clarenville, like Gander, like Grand Falls. If the U.S. economy does not go bottom up, and the Canadian economy go bottom up and consequently affect our economy, then there is a real opportunity for us to do some things in Newfoundland and Labrador that were formerly done in other economies; because, the truth of the matter is that the U.S. today are finding that labour rates are on par but the amount of labour that you can find in the U.S. today is rather insignificant, with people finding jobs. What happens to the U.S. economy, I do not know.

We are determined, as a department, to now start focusing our attention on those - I don't even know what kind of name to stick on them. I don't want to say anything degrading about them, because you shouldn't, but I will have to call them, I guess, the outlying areas of the Province that you have to concentrate on. The truth of the matter is that, as a Province and as a people, we are going to have to come to some decisions. If we can't find work for those people, then I don't know what the hell you do, to be frank with you. There are some areas of the Province that we have to try and concentrate on. Burgeo is one of them, Ramea is one of them and Trepassey. I can go through the names again. They have one thing in common: they were all big groundfish communities or areas, big groundfish communities.

Some areas of the Province have come out of it very well. I know areas that have come out of it very well, with Beothic Fish and so on. One of the problems that you have, obviously, in the Bonavista area is: you have fish plants there that are specialized in crab or in shrimp. Whereas in the case of Beothic Fish, for example, I think they doing some twenty-one species at this point. I think they are now doing some crab from Greenland. That is the kind of initiative that I think you need from some of those communities. You need to be more community oriented, get in there and do the kind of work that needs to be done.

I would hope that over the next little while we can concentrate - there is another area of the Province, for example, that has come out of it very well, the (inaudible) area. They have come out of the groundfish shutdown very well. They have a booming - I was going to say a booming economy, but I suppose that is a bit of a stretch, is it?

WITNESS: They are doing relatively well.

MR. TULK: They are doing relatively well. They have done that over the last three or four years by becoming engaged themselves, by engaging their members.

There are success stories out there that you can take some feed off and go to work on. To be frank with you, over the next year we will do it on the Bonavista Peninsula.

MR. FITZGERALD: While I welcome the idea of an economic development officer, and I think that is something that has been identified by some of the communities there, I have seen community development officers here before, as well, Minister, but if we are not going to give them the tools to do the job then we are only going through the motions. There is no point in having an economic development officer and say: Here is your fax machine and here is your telephone. Now submit your telephone calls. We want a list of your telephone calls at the end of the month.

MR. TULK: No, I agree with you.

MR. FITZGERALD: This is the mentality that we have had up until now when we have put those people out trying to look at economic activity. It doesn't work that way. Those people have to have leverage to follow up whatever ideas, or to go and try to flush out - or whomever they might take around and show them what we have to offer.

MR. TULK: We have put some money in the budget of the new department, that has that kind of flexibility, that is not tied to a specific program. We do believe that with private enterprise people are going to develop. The Department of Industry, Trade and Rural Development no longer does loans. We do not do loans. We make equity investments, up to a maximum of $50,000, if you are prepared to put up $25,000 of your money. We are prepared to put up $25,000 of the public taxpayers' money once we both agree that the business program you have put in place is good.

In terms of marketing, we have said: Alright, up to $25,000 if you have a project that both of us approve. You just cannot have anybody going off doing their own market, but we will put in up to a maximum of $25,000; 50-50, for marketing. We have set in place a tax credit program which is geared towards rural Newfoundland. If you invest in rural Newfoundland, you can get a return on your taxes - not on your taxable income - of up to 35 per cent, up to a maximum of $30,000 a year. Am I correct?

WITNESS: Individually.

MR. TULK: Individually. If you invest - I am sorry about this, John - on the Northeast Avalon, you get a tax break of 20 per cent. So, we are using those kinds of things. I will be frank with you: I think one of the things that we started last year, the program got pretty well taken up; but, as a government, we will not limit ourselves. If we spend $1 million and it is gone by July, and Treasury Board approves it, I would not hesitate at all to go back to government and say: We have had great success with this program. We did last year. It was late getting off the ground, it was August month, but the take-up on it was good. The equity program did not use all of its money, but I think we transferred some of that to the marketing side because there was a great deal more interest in the marketing side - and that is as it should be - of the program than there was in the equity side of the program. There is a lot of work to be done, but I sincerely believe that if we follow what people have told us here on a broad based sense, over a period of time we could overcome the disparities that are there.

MR. FITZGERALD: The goat farm on the Bonavista Peninsula -

MR. TULK: In trouble.

MR. FITZGERALD: - were there eight farms in the beginning, eight or ten or something?

MR. TULK: Yes.

MR. FITZGERALD: Now there are two. What is the latest story on those? The last time, I know, when I got involved, or was asked to be involved, they were looking for feed that needed - I think, John, I chatted with you - to look after them for a couple of months. Then we were talking about providing them with some expertise to look at markets which they said they had identified but did not have them signed and sealed. Where are we going with that?

MR. SCOTT: That process is continuing. We have engaged the remaining farmers in looking at the markets that they have tapped and sizing up the extent to which those are feasible opportunities to sustain the entities. Suffice it to say right now, they are going to have to approach their business differently if they are going to have a long-term future. We are probably about a month away, Larry, in terms of developing a new business plan that will take it forward on a reasonable basis. There will not be eight separate entities, as you know, but for a core of two enterprises it looks, on a preliminary basis, that there may be some room for optimism there. It is tough slogging and they are the first to acknowledge it as well. Right now we are trying to restructure and hopefully come out of that with a long-term sustainable plan of action.

MR. TULK: I believe, if I could just add one thing, that one of the problems - I actually had my picture taken with one of those goats, and it was not a bison by the way.

MR. FITZGERALD: I was talking to somebody and they did not know who was who.

MR. TULK: Listen, I can tell you who was best looking: the goat was.

In any case, I think one of the problems that we identified there and I think is there is the availability of feed. I think it is one of the biggest problems that is there. If you have to import feed today for anything, it causes you the difference between bankruptcy and - that is my own personal view of what I saw there: a good system, but I detected right away that one of the problems -

MR. FITZGERALD: Their big problem, I think, was in the beginning when the fear of Q fever hit. That was the end of the local market as they knew it. I do not know how they could have survived anyway, having a milk truck going around with cartons of milk in the back, knocking on somebody's door and picking up what was outdated and bringing it back again. Sometimes what was coming back was just as much as what was going out.

Marketing seems to be a big problem there, if you listen to them. I do not know anything about it but, if you listen to them, they talk about all the markets that they have identified for cheese and the monies that would be returned to the farmers here, if it is that simple - I think it is much more than that.

MR. TULK: I think it is a little more than that.

MR. FITZGERALD: That is still a work in process, John, if I understand correctly.

MR. SCOTT: About a month away before we will have a good solid team plan that is reasonable, that is focused on some opportunity that makes sense and deals with issues such as feed, such as markets, such as the capacity of the local people - which are former fishermen from TAGS days - to really adapt to the business environment.

MR. FITZGERALD: Friede Goldman, Minister, what is the situation there right now as it relates to the possibility of some new work coming to that facility there? I think it is criminal, and I have said this before and I know you were not part of the situation when it happened, that we go and allow a facility worth in excess of $100 million to be given to somebody for a dollar. I have no problem with that, if it is going to create some economic activity and get people working, because that is what it is all about, but to learn that we did not have the assets secured there and that there is a possibility of those assets now being - probably have to go and have people come out and surround them, to stop something from being taken from there in order to secure assets and commitments made in other parts, outside of this country altogether. That is criminal, that we allowed that to happen.

MR. TULK: I think, in fairness to that decision, I would have to say that the people who made that decision made an attempt to get government out of the shipbuilding industry. Obviously, if you own the asset then you are still part of the business. I think that was the approach that was taken.

In regard to what is happening at the present time with Friede Goldman Halter, who owns the facility, I noticed your press release this morning saying that the minister did not answer the question. I think it is a question of what projects we are trying to do down there. The truth of the matter is that Friede Goldman found themselves, in the last couple of weeks, in less than a desirable situation on the stock market in terms of the amount of capital that they had. It is my understanding that they have now negotiated in principle - Perry is the guy who works at it more than anybody, but the people in my department tell me that they believe the structure of the company is sound, Friede Goldman, in terms of its structure. It is sound. They believe it is a fairly good company. They have now negotiated in principle with a group called Pegasus, a $100 million loan to get them out of the present cash crunch that they find themselves in. A lot of their difficulties came about as a result of the building of two rigs called Ocean -

WITNESS: Ocean Rig. I think it is out of Norway.

MR. TULK: Ocean Rig, out of Norway. I think they have resolved those issues. We had meetings all weekend with the union from Marystown and decided, where do we go from here? I can tell you that the government is not getting back in the shipbuilding business. We are working with them to do anything that we can to attract projects to Marystown. There is a downturn in the shipbuilding industry. I just read over the weekend - and I say to all members of the Legislature that I think we should all read the report on the shipbuilding industry that came from the committee that was established on the shipbuilding forum, because one of the difficulties that you have in attracting shipbuilding to this Province, for example, is that in Korea, it subsidizes its shipbuilding industry by approximately 40 per cent. If you look at the European communities, they have been subsidizing their shipbuilding industry to the tune of about 20 per cent, and they have committed themselves to do away with that this year; but, in view of what is happening in Korea, I understand they are even talking about increasing their subsidies, and Canada has not done it. The Jones Act in the U.S. requires anybody who is doing commercial work - any bottoms, as they call it - in the U.S., that they be built in the U.S. Canada has not been subsidizing, at least on a federal level, its shipbuilding industry.

I notice that in P.E.I. there was a considerable subsidy given by the provincial government, I think, and maybe HRDC, too - so there might have been a bit of back-door stuff - but the provincial government, certainly, in P.E.I., and we believe that the provincial government in Quebec, in terms of Davie, has been subsidizing the shipbuilding industry. I am not at liberty to say exactly what we will do but I can say this to you - now, let me come back to the report first. The report shows us how, by using the tax system, we can be put on a level playing field with the subsidies that are in place, so I would commend it to every - is it a public document yet?

WITNESS: Yes.

MR. TULK: I would commend it to every member of the House to read. I think it lays out that it is done by a group of people who are in the business and who are independent of government. Do you have it read yet?

MR. FITZGERALD: No, Minister, you are ahead of me.

MR. TULK: That is right.

It lays out a very good policy direction for the Government of Canada to take. I am sorry, but I am not in any position, at this point in time, because of the kind of stuff that I am trying to do, and I do not think you would want me to - you are great with politics, but in final analysis I do not think you would want me to - put in danger anything that we are trying to do with Marystown by making a public statement. We are trying to do some things. We are working with the union, and we are working with the company, but I think it is a conscious decision of all of us that we will not get back in the shipbuilding industry.

In regard to the assets, the assets have not been put up as collateral but they are owned by Friede Goldman Canada. I think two-thirds of their shares have been pledged as security for loans.

WITNESS: That is for Friede Goldman Halter?

MR. TULK: For Friede Goldman Halter. In that case, Friede Goldman Halter has not yet - there is a long process here to be gone through if anything is going to happen. Friede Goldman Halter, as you know, could apply for Chapter 11 protection in the U.S., which would stop their creditors from coming in and putting them into receivership for a period of time. The best example that is known in North America about Chapter 11, I guess, is Chrysler, before Lee Iacocca took it over. It was in business for years while it was in Chapter 11 - that depends on the courts - and then, of course, there is receivership. We will pursue whatever angles are available to us at the present time to see that the assets are protected, if it should go into receivership. To be frank, at this point, I am trying to concentrate on working with Friede Goldman. I believe that in the next little while, as soon as we can arrange it, we will be meeting with, hopefully, the top officials in Friede Goldman Halter to see just exactly where they intend to take this and to review their whole financial and whole structural base.

MR. FITZGERALD: I know you have recently met with the Atlantic Lumber Producers Association.

MR. TULK: Yes.

MR. FITZGERALD: My question is in relation to softwood lumber exports into the United States. Right now, as you know, the Atlantic Provinces have had a free trip to be able to ship whatever lumber is produced in the Atlantic Provinces south of the border. In fact, I think more than half the amount of lumber exported from this Province goes to the United States. Some fear now that may be included in the general softwood lumber agreement, should a new one be signed, and restrictions put on it. Is there any indication that might happen?

MR. TULK: Last weekend, I represented the Premier at the Conference of the Atlantic Premiers in P.E.I. One of the concerns, one of the issues, on the agenda among the four Atlantic Premiers was the softwood lumber business, and there was a presentation by the Maritime Lumber Bureau. We conveyed again to the Prime Minister and Pierre Pettigrew our strong stance that we believe there is no subsidy being put on Maritime lumber. We are not like Quebec or British Columbia where the Americans are claiming, at least, that there is a large amount of subsidy going on it and that it is not private land. The stumpage is not up to where it should be. We conveyed to the Prime Minister and Pierre Pettigrew our strong belief that we should sign the agreement, the Accord, again.

There was one thing of interest: we were able, through the Maritime Lumber Bureau primary, because they have done a great job on this, to convince the organized lobby group in the U.S. that, when they filed their petition, Atlantic Canada was not included for countervailing. So I do not anticipate that there will be any countervail put on Maritime lumber. The lobby group in the U.S. is not seeking that. For the purposes of anti-dumping and export tariffs, we still said to the federal government, Pierre Pettigrew, that we want them to sign that Accord.

The effort has been made by the four Atlantic Premiers to convince the federal government to do that, and we will be conveying that to the federal government in other meetings that we will be having with them in the next two or three weeks.

MR. FITZGERALD: That was an indication just last week, according to the story that was in The Telegram, that some of our lumber was stopped at the border and was not allowed to cross. Was that accurate?

MR. TULK: I never heard that. I do not have any information that tells me that is the case.

MR. FITZGERALD: I thought I read it in The Telegram, in fact just either Wednesday or Thursday of last week.

MR. TULK: I will certainly check to see. The Premiers' meeting was on Monday of the week past. I wasn't up in the House, in Ottawa House.

MR. FITZGERALD: I understand (inaudible) after. There was not need for you going back there to -

MR. TULK: No, it was done before.

MR. FITZGERALD: I just have a couple of more quick questions and then I will be through. I will pass it on and you will not have to come back to me. It is hard to ask questions on Estimates here because when you look at the figures - I understand that this is a combination now of two departments. I guess some of the figures, like the salaries and that kind of thing, the budget would have been one thing and the revision would have been something else to reflect what has happened when you combined both departments, Industry, Trade and Rural Development. Would that be accurate?

MR. TULK: In some cases.

MR. FITZGERALD: Okay. The one that I want to ask is on page 133, heading 4.1.02., Comprehensive Economic Development. This would be one area where I would see that we would access from -

MR. TULK: What number is it?

MR. FITZGERALD: Under 4.1.02., page 133.

MR. TULK: Okay.

MR. FITZGERALD: This would be one area that I would see where places like the Bonavista Peninsula would be able to access funding in order to be able to reach forward and look for some economic development or to provide funding in order to attract somebody there to provide employment.

When I look at 01., Amount to be Voted, Federal, the budget was $4,418,000 and we actually spent $2,981,000 of federal money, why would we have not used that particular budget when those problems were just as prevalent, if not greater, six months ago as they are today?

MR. TULK: Let me just give you the truth. Cash flows were down due to some staff turnover; and, besides that, the projects did not proceed as fast as we had anticipated they would.

MR. FITZGERALD: Were they some projects that we had identified and later changed our mind? There must be something that would give you what money you would need to (inaudible).

MR. TULK: No. It just didn't get through the system as fast as you would have wanted it to get through.

MR. FITZGERALD: Does that mean we lose any money?

MR. TULK: No.

MR. FITZGERALD: That would then be transferred to $8,852,000 for this year?

MR. TULK: I would think so. It was committed, but not spent.

MR. FITZGERALD: Okay, so that money is there for us to spend now and we can access that?

MR. TULK: As long as you have finished it by the time that the agreement expires, the money is there.

MR. FITZGERALD: Is that the amount of money that is left in that particular agreement?

MR. TULK: As I understand it, when Minister Tobin and myself signed the agreement on, I guess it was February 2, the last day that I was Premier, I think the amount that was left in that program at that time, John, in the total, over a two or three year extension -

MR. SCOTT: Two years.

MR. TULK: - a two-year extension, would have been $42 million, including our input and theirs, thirty-one (inaudible).

MR. FITZGERALD: What is the breakdown, 75-25?

MR. TULK: It is 70-30.

MR. FITZGERALD: It is 70-30?

MR. TULK: They put in thirty-one and we put in thirteen.

MR. FITZGERALD: So, we do have our money committed for that as well?

Do you have any second thoughts, or have any concerns, about the present possible takeover of Fishery Products International by a dissident board of directors, of what the repercussions might be to at least nine communities of rural Newfoundland and Labrador, two that we have already mentioned, and maybe the whole fishing industry?

MR. TULK: Of course there are concerns as to what is going to happen to the communities in any takeover. Let me just say this to you: I remember meeting with the president of FPI - I think it was the morning before or the morning after the news broke - and his only request to us, at that point, was to not get involved in it in any way. They felt that they could handle this whole thing, but not to get involved in it in any way.

I think our concern has to come from the point of view that we will do whatever is necessary to protect the economies of those communities. I am not sure, and I don't believe, there is a role for us to play in terms of who sits on the board, but I think there is a role for us, there is going to have to be a role for us at some point in time, to keep a close guard on just what goes on. Who knows? This may never happen. There is some indication that this is going to end up in court, that the whole procedure will end up in court. There is some suggestion, and John would know this probably better than I would, to be frank with you - I am talking about John Ottenheimer - we have seen it in the papers, that the present board of directors of FPI are presently saying that this is not legal, it does not fit under the Corporations Act, they did not give enough notice for appointing their board of directors.

The truth is that, at this point in time, you wait. I don't know if you can do anything except wait, but you have to start looking at what happens if, and how do we combat that. I think, in all fairness, that is the mode that I am in at this point as the Minister of Industry for the Province. Certainly there is a commitment there.

I want to say something else to you. One of the things that I would like to see happen in your own area, for example, is for FPI to become more diversified. As you know, last year FPI did not supply the amount of employment that we would have liked to have seen on the Bonavista Peninsula, the same way as, say, Beothic Fish did in Bonavista North. I think it is important that FPI become aggressive and that they move in that direction. I think we have to, at some point in time, say to the community: You have to keep it as a tenet, that you will try to protect the economy of some of those communities. I mean, FPI has closed out fish plants in this Province too, and some of those communities are now taking the lead again.

I believe the fish plant in Englee was owned by FPI. In Twillingate the fish plant was owned by FPI, and it is shut down. So, it is not that FPI has not shut down fish plants. Maybe we went a little too far with them at that point, and I say we, as a total government, as people, not as a Liberal party or anything. I think in the case of some of them, your party was in power when that was done. I am not being political, I am just saying that maybe we should have taken a closer look at the situation at that point and said: Look, diversify those plants, don't lock the doors on them too quickly, slow up here a bit.

We have forwarded our concerns about quotas and where they go to the federal fisheries minister and said: If there are quotas to be processed, they have to be processed in Newfoundland. Then you will reach the point where you say: Okay, the truth of the matter is, that purely from an economic and cost-effectiveness point of view - if I can be totally frank with this Committee - in Newfoundland, if you are going to operate totally on a business model, there is probably only need for one fish plant; but you can't do that. We have to make up our minds what kind of Province we want. If you want to keep the demographics in Newfoundland somewhat like they are now, then there is a price to be paid for it, and I think it is a price well worth paying, to be frank with you, in terms of cost-effectiveness, efficiencies of businesses and so on. I suppose, if you wanted to carry it to it's extreme there is probably no need for a fish plant in Newfoundland at all. You can do it all by factory freezer trawler and ship it out of here. That is not the type of Province that we want, as a people. I don't think it is. I would be surprised if it is.

The role of government, in my estimation, is, regardless of who sits on the board of directors, we have to use whatever powers are available to us to ensure that those communities survive.

MR. FITZGERALD: I think we should, as a Province - there are thirty-six very privileged people in this Province today, and while we don't control quotas and we don't control fishing seasons and that kind of thing, there is one thing that we do control and that is processing licenses.

MR. TULK: Yes.

MR. FITZGERALD: You have thirty-six very privileged people in this Province today who hold the most lucrative licenses of all, the snow crab licenses. It seems like we sit back , allow them to tell us what they are going to do, how many people they are going to hire, the products that are going to reach the market, and in what state the product reaches the market.

I have always maintained that what those companies should do with that resource is they should have to file for a license. Why should somebody hold a license in perpetuity because they happen to have gotten a license from government? Let them file a five-year plan.

MR. TULK: If I could, just for a moment. If you will recall, in the four months that I spent as Premier I took one license away from them.

MR. FITZGERALD: Let them file a five-year plan. Let them tell government what they intend to do. I say five years because there is a major financial investment to get involved in that. You can't say one year, but let them file a five-year plan and if that is not what government feels should be done, or doesn't provide the greatest return to the people and to this Province, let somebody else do it who might want to do it in that kind of a way.

CHAIR: Order, please!

Roger, I appreciate the comments, but they are probably better directly to the minister who would be responsible for the license themselves. I understand from the economic point of view exactly where we are, but licenses will be controlled by -

MR. FITZGERALD: It is just an observation.

CHAIR: I understand the observation.

Are we prepared to move the actual numbers, bearing in mind it is a brand new department and we have rolled in two departments into one? As was stated by, I think, Roger, yourself, it is pretty hard to pursue the numbers. I am only asking that because I understand that there are a number of other meetings taking place this morning that all members might want to -

MR. OTTENHEIMER: Can I just make a point or two, Mr. Chairman?

CHAIR: Yes.

MR. OTTENHEIMER: It gets back to the Friede Goldman issue. My guess is, that perhaps right now one of the biggest challenges facing the department is in terms of what the repercussions and consequences, depending on what happens in the U.S. courts, would be to the this facility and the people of the Province, generally.

It was confirmed last week, in the House, by the Premier in response to questions, and, of course, it is public knowledge, that the company has taken steps, certainly in their filing under the securities legislation in Washington, to give notice that there are concerns. The schedules that were attached to the filing, as I understand it, make it quite clear that the company's obligation in Marystown would be difficult to meet and to satisfy in terms of its obligation to the people of the Province at this time.

Therefore, Minister, really, where are we with that? Has the government even considered taking the drastic step of initiating legislation that would preserve and protect these assets? Granted, it is an act that will perhaps easily be challenged, and I am sure in all likelihood would be challenged. Nevertheless, it is a step that could be taken to protect the assets, and it would show the people of the Province that the government is doing whatever it can do to protect the interests of the citizens of our Province. It is a drastic step, but is it something that government is prepared to consider?

MR. TULK: At this point it has not been considered.

MR. OTTENHEIMER: Why not, Minister?

MR. TULK: Well, it is very simple why not. We are still working with the company to see: Can we work our way through this, can you work your way through this. As I said, probably within the next two weeks, as a result of the meetings that we have had with the union over the weekend, you will see just where you intend to go and what your capabilities are. It also depends very clearly on what FGN is - Pegasus has signed off in principle. I think Pegasus is a venture capital group.

WITNESS: A substantial industry.

MR. TULK: A substantial fund. Will they sign off and bring Friede Goldman around to the place where they do not need to file for Chapter 11, and they do not need to go through the bankruptcy proceedings, and maybe they can get into doing some of the things that we want them to do in Marystown?

MR. OTTENHEIMER: But, of course, we would lose control though, because I mean it is other people who will dictate and control what is going to happen.

MR. TULK: We would lose control, as I understand it, once they go into receivership.

MR. OTTENHEIMER: Creditors will have all control and will dictate what we do as a Province. We lose our authority once that proceeds -

MR. TULK: Once it goes into receivership.

MR. OTTENHEIMER: Right.

MR. TULK: So the decision has to be made as to what the government is going to do before you go into receivership.

MR. OTTENHEIMER: Can't we take somewhat drastic steps at this point?

MR. TULK: No. I think that would just push the sense of panic that you can develop in those situations. I think you have to be looking at it. We are looking at it with the Department of Justice seeing what is possible there, what should we do, what should be our options and so on. At this point in time, I think you might be pushing a panic button that you do not need to push.

MR. OTTENHEIMER: I hope you are right.

MR. TULK: Well, I hope I am right too, because we all hope, to be frank with you, that what we do is in the best interest of Marystown, and will keep that company whole and keep it functioning. I do not want to do anything to jeopardize that at this point. That is where I am.

CHAIR: The Chair would like to move 1.1.01. through to, and including, 5.1.02.

MR. FITZGERALD: Are there any more questions before we move, Mr. Chairman? There may be other people who want to ask questions. We should not be guided by a time frame of one hour. We have three hours for an estimates committee meeting.

CHAIR: Indeed we do.

MR. FITZGERALD: I think we should ask if there are other people to ask questions before we start moving heads on these topics.

CHAIR: I asked the other members prior to and they told me that, no, they could speak directly, if they wished, to the minister and cover off their questions at that point in time. So the Chair is simply responding to what other members have said.

So moved?

MR. FITZGERALD: No, I have another question to ask.

Minister, you indicated a couple of initiatives that your department had put forward. One of them was that your government would match dollar for dollar, up to $50,000, if somebody was involved in a new opportunity that was recognized and identified as something being positive. The other one was a reduction in allowable income tax - 35 per cent, 25 per cent - depending where the opportunity was or the company that you invested in. Is that for market trade on the stock exchange as well? Is that for companies that trade on the stock exchange?

MR. TULK: No. I don't think we have ever come across it, and I don't believe, with that kind of money, that we will.

The other thing that we have tried to do for people who want to invest is the creation of a venture capital fund. John, you probably know better than I do where we are with that, because I have not had a chance to ask you, but I think we are now in the stages of putting out the ads for people who want to get involved in the creation of a venture capital fund, to build a pool of capital that we believe is - for example, if you look at Newfoundland, if you look at the Maritime provinces, generally, a lot of our RRSP money and a lot of our tax rebates and so on end up in pension funds, and our pension funds end up in pension funds on mainland, Canada and, I suppose, some of it in the US.

So what we have basically said here is: Look, invest your money in a venture capital fund for Newfoundland, and we will provide you certain breaks in that as well. We are hoping to work that in with Labour to see that this is done in the Province. We have put together what we call a Labour Sponsored Venture Capital Fund that again uses that tool of saying: Alright, if you invest outside of the Northeast Avalon, you will get a better tax break when you do invest. I think it is a good opportunity, and I think we need to publicize it and we will be publicizing it. I think it is a good opportunity for Newfoundlanders and Labradorians to get involved in investing in their own Province. I think the key to understanding it is that we are not saying, take money off your taxable income, we are saying, if you pay taxes this year, if you pay $20,000 in taxes and you invest $30,000 in a company, if you live outside St. John's we will give you 35 per cent of that, which will be $10,500. In actual fact, your tax bill for this year will probably be $9,500. So it lessens your exposure as a person and puts you into higher risk. But, no, we have not run into anything from the stock exchange.

I have to say this to you, that there have been some people who have approached us recently to look at establishing a certain kind of stock market in Newfoundland. If you look at the Icelandic people, for example, there are 260,000 of them - I know their country and all that kind of stuff, so there is a difference - but they have their own stock exchange in Iceland. I think there are approximately fifty-seven listings on their stock exchange.

MR. FITZGERALD: It was only a few years ago, I think, that we allowed people to look at it as a income tax reduction with Newfoundland Power.

MR. TULK: That is right.

MR. FITZGERALD: This initiative is not for companies to trade on the stock exchange.

MR. TULK: No. We have not reached that point and I do not think we will. It is for smaller businesses. I have to tell you this and confess to you that it is designed primarily for rural Newfoundland.

MR. FITZGERALD: Are you interested or are you looking at moving parts of your department to rural areas? The name of your department is Industry, Trade, and Rural Development. Are you looking at transferring part of your department to a rural area?

MR. TULK: Yes, we have done part of that. We just moved some people down to Marystown.

MR. FITZGERALD: I am talking about rural areas, minister.

MR. TULK: Marystown not rural?

I have to say to you, and I understand -

MR. FITZGERALD: I don't consider places like Gander and Grand Falls rural areas, to be honest with you. I don't think because it is outside of St. John's that it is necessarily rural.

MR. TULK: Can I interest you in a concept with development in the Province called regional development? Let me just say to you, that in the movement, for example, of air services to Gander, at least four of the people who are moving will come from an hour's drive from Gander and they will live in their own communities. So, in that sense, I do not believe that you can put jobs in every small place in this Province, but I believe you can develop regional economies. Now I think there are areas of the Province that have to - and I do not want to use this phrase, but smaller regions. Some people use sub-regions, but I like to use smaller regions. Your own is a case in point. I think Englee, for example, is a case in point. I think Burgeo is a case in point. Let me just say this to you, that the people of Grand Falls and the people of Gander have no trouble today being called rural. In my lexicon, anything outside the Northeast Avalon - and there are some rural areas on the Northeast Avalon - but certainly anything outside the greater metropolitan St. John's area, I consider to be somewhat -

MR. FITZGERALD: Rural?

MR. TULK: Well, it depends on how you define the term. Obviously there is rural and there is more rural, but, yes, there is. If I can develop a regional economy in Clarenville so that the people of Musgravetown and Lethbridge can drive to work there within forty-five minutes, thirty minutes, then I really do not think that is too bad. If I can develop a regional economy in Gander so that somebody can drive from Carmanville or Gander Bay or Musgrave Harbour, as they have done all their life, then I do not believe that is that bad. Because, do you know what? They will be back home in the evening living the type of lifestyle that they -

MR. FITZGERALD: I know exactly what you are saying, but it bothers me when we see opportunities where we can build in some of those rural areas and we take them and put them in not-so-rural areas.

I refer back to the Department of Fisheries and Oceans, and I know it is not your department, but here is a prime example. On the one hand we are talking about renewing rural areas and revitalizing rural areas, and what are we doing? Closing offices that relate to activity in rural areas and moving them further away from the area where they have been present for the last fifty years.

MR. TULK: In the case of our own department, you will note that we have twenty regions around the Province and we do put people in the - I mean, I am not adverse at all. If you are prepared to put forward the motion in the House that we move more in the department of development and rural renewal outside of the Northeast Avalon, I am not opposed to it.

MR. FITZGERALD: It depends on where you put them. I certainly would not be opposed to it either.

MR. TULK: If you have the nerve to do it, I might have the nerve to follow. Mr. Wangersky, I think, wrote a comment this fall: Unless you put the department of development and rural renewal in Buchans - he does not know how close he was to the truth.

MR. OTTENHEIMER: One quick question, and then we can adjourn, if that is okay.

Research and Development - Offshore Fund, and under Special Initiatives - Offshore Fund. This is a general question, so you do not need the detail.

Obviously there is emphasis on the marine petroleum industry when we talk about these largely federally funded programs. My question is this: What is the relationship within this department and these offshore fund programs with the provincial Department of Mines and Energy and/or C-NOPB? Is there a day-to-day working relationship with these offices or is it somewhat limited to what its role is within this department?

MR. TULK: The officials can answer this better than I can because they have been around. That was in ITT. If it was the old Department of Development and Rural Renewal, I could flick it off at you.

I think it is fair to say that the industrial benefits side of offshore lies with this department. I have to say this to you: We are presently looking at - I don't know where it will go, I will be frank with you again - what the industrial benefits are that we are getting from the offshore and whether indeed they are what we would want. Well, not what we would want, we would want the whole damn works to be done here, if we could , but just what is available for us to become engaged in.

If I could go back to the shipbuilding recommendations that came out of the shipbuilding forum and - what did they call themselves? - National Partnerships Project Committee, One of the things that came out of there is that Canada has to push to see that the offshore resources are used to get more shipbuilding carried on in Canada.

So our side of the equation, we work closely with the C-NOPB in terms of industrial benefits and we coordinate that with the Department of Mines and Energy. There was a discussion on this, as to whether we should move the industrial benefits all over to Mines and Energy, but we felt that it was necessary to keep it within the Department of Industry, Trade and Rural Development so that you concentrate, perhaps, more on the industrial benefits from an industry point of view, from an economic point of view, than if you moved it over into a department that is primarily concerned with the physical side of, shall we say, development, the nuts and bolts of mining and oil drilling and so on. So, that is the reason we made the decision to keep it where it is.

CHAIR: The Chair has already moved Estimates 1.1.01 through to and including 5.1.02.

On motion, subheads 1.1.01 through 5.1.02 carried.

On motion, Department of Industry, Trade and Rural Development, total heads, carried.

CHAIR: I do not know if there might be a couple of other things, Roger, that you might like to cover? You are welcome to -

MR. FITZGERALD: No, no. That is okay.

MR. TULK: No, he showed you, boy, who was the boss, and that is all he wanted to do.

MR. OTTENHEIMER: We will save the rest for the House, Mr. Chairman. It is more interesting.

CHAIR: Thank you very much.

On motion, the Committee adjourned.