Pursuant to Standing Order 68, Sandra Kelly, MHA for Gander, replaces Roland Butler, MHA for Port de Grave, and Ernie McLean, MHA for Lake Melville, replaces Lloyd Matthews, MHA for St. John's North.

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

CHAIR (Aylward): Order, please!

On this beautiful Monday evening we welcome you to the hon. House of Assembly for the Resource Committee Estimates for the Department of Mines and Energy. I would like to welcome the minister and his officials, and also the Committee members. If we could ask the Committee members to introduce themselves into the microphone so that Hansard can record that they are here, I would appreciate that to start off.

MR. TAYLOR: Trevor Taylor, MHA for The Straits & White Bay North.

MR. SHELLEY: Paul Shelley, MHA for Baie Verte.

MS KELLY: Sandra Kelly, MHA for Gander.

MR. McLEAN: Ernie McLean, MHA for Lake Melville.

CHAIR: For the record, I am Kevin Aylward, Chairman and the Member for St. George's-Stephenville East.

Mr. Minister, if you could introduce your officials we would appreciate it.

MR. NOEL: Thank you very much, Mr. Chairperson.

With me tonight are: Brian Maynard, Deputy Minister of the department; Allister Taylor, Assistant Deputy Minister; Darrell Mercer, Director of Communications; Charlie Lester, Director of Policy and Strategic Planning; and Leonard Clarke, Director of Financial Operations.

CHAIR: Thank you, Sir.

Before we get started, please identify yourself at the microphone as much you can for Hansard. That would be very helpful. If it is okay, we will have the minster do the opening remarks of your department, the mandate and so on. Then we will have the Opposition critic speak to their comments and questions that they may have.

Also, if we can, we will open up the subhead for 1.1.01., if the Committee is okay with that. We will leave it open for the duration, towards the end, Mr. Minister.

If we can go to the minister for opening remarks, you have the floor, Sir.

MR. NOEL: Thank you very much, Mr. Chair.

It is a great pleasure to be appearing before this Committee as the Province's Minister of Mines and Energy.

The mandate of the Department of Mines and Energy is to promote and facilitate the sustainable development of the Province's mineral and energy resources through resource

assessment, management, and development activities. Through these activities, we strive to ensure that the Province's mineral and energy resources are developed in the best interest of all Newfoundlanders and Labradorians.

As minister, I am responsible for the supervision, control and direction of all matters relating to mines, minerals, quarries, quarry materials and beaches, onshore and offshore petroleum resources, royalty matters, maintaining and developing electrical resources, monitoring industrial and employment benefits from our major resource development projects, and the administration of numerous pieces of legislation, eleven of which were included in the Province's consolidated statutes.

Our department is also responsible for Newfoundland and Labrador Hydro Corporation, Churchill Falls Labrador (Corporation) Limited, Gull Island Power Company Limited, Lower Churchill Development Corporation Limited, Twin Falls Power Corporation Limited and the Bull Arm Site Corporation. We share responsibility with the federal minister of Natural Resources Canada for the Canada-Newfoundland Offshore Petroleum Board.

Effective leadership by the department is required to ensure the Province realizes the full potential and benefit from our substantial energy and mineral resources. Over the next couple of years the department will face many exciting challenges that will advance our long-term goals. Our primary challenge is to ensure that we are competitively positioned to attract exploration and development investments essential to exploit our mineral and energy resources for the maximum benefit of our people.

Over the past six years Mines and Energy has become one of the most well-known publicized departments within government. The citizens of our Province increasingly recognize potential for our natural resource base and want appropriate development in our best interest.

Our mining and energy sectors, including electricity, are currently worth $2 billion, representing 17.9 per cent of provincial Gross Domestic Product. These sectors also generate approximately 6,800 annual person years of direct employment, with indirect employment estimated at 10,800 person years. Our people realize the importance of these industries and want to see further development.

Our petroleum industry continues to generate new opportunities as this sector of our economy matures. Hibernia, the first and largest Canadian offshore oilfield, is currently producing approximately 200,000 barrels of oil a day. Terra Nova, the Province's second oil project, commenced production in January of last year and is currently producing approximately 150,000 barrels per day. Our third offshore project, White Rose, received regulatory approval on December 19, 2001 and was sanctioned by the project's proponents, Husky and Petro-Canada, on March 28, 2002. Over the ten to fifteen year life of the White Rose field over 1,000 direct and indirect jobs will be created, and $500 million in royalties will be paid to the Province. Production is targeted for the second half of 2005 and will average 92,000 barrels a day.

There are currently in excess of 350 people working on the White Rose Project at AMKC's facilities in Marystown, and upwards to 300 people working at AMKC's engineering office in St. John's. The number in Marystown is expected to peak at over 700 as fabrication integration work advances.

Most recently, a local partnership comprising of M&M Engineering Limited and G.J. Cahill & Company Limited was awarded a White Rose contract and has entered into a lease to utilize the Bull Arm Site during their fabrication activities. This work is expected to create over 130,000 person-hours of employment and will have a peak workforce of 150 people. The work will take some twelve months to complete.

This is very positive news for our industry. We now produce more than one-third of Canada's conventional light crude oil. This year we will continue to grow as more projects are developed. We have had twenty-three significant offshore oil and gas discoveries, as well as one discovery in our Western Newfoundland onshore area.

Since the first exploration expenditures in 1966, over $14 billion has been spent in exploration, delineation and development in our petroleum industry. Significant discoveries have been made, which include: 2.1 billion barrels of oil, 9.9 trillion cubic feet of natural gas, and 432 million barrels of natural gas liquids. Industry is committed to spending some $471 million in exploration expenditures over the next five years.

Petro-Canada and partners, Encana and Norsk Hydro, will drill two deep water prospects in the Flemish Pass Basin this year. These are the first wells to be drilled in this area since the mid-1980s. A discovery in this basin will lead to increased exploration activities.

The C-NOPB announced on April 15 that fourteen offshore land parcels will be up for bids this year, comprising a total of 3,167,445 hectares of land. Interested parties now have until December 17 to submit their bids.

New interest has been shown in our deep water areas such as the Orphan Basin and the Flemish Pass which hold great promise for new discoveries. The Orphan Basin is considered the largest basin offshore Newfoundland, but very little exploration has been completed in the area. Seismic surveys indicate that this area may contain large prospects, and we are hopeful that new exploration could yield future discoveries.

The Newfoundland and Labrador and Nova Scotia offshore boundary dispute was also resolved last year. On April 2, 2002 the arbitration tribunal established to settle this dispute released its decision. The line established by the tribunal is close to what we thought fair. The tribunal's decision provides the Province with almost 70 per cent of the area which was in dispute. Work is now underway to convert old federal government exploration permits into exploration licences. We are anticipating the gazetting of federal regulations shortly. Once this has been completed, new exploration seismic work will begin in this new frontier of our offshore. Government will aggressively promote the potential of this new area.

The Province joined the Energy Council of America as an international affiliate in December, 2001. This will give us another avenue to promote the Province's potential as an energy producer. Northeastern natural gas supplies and electric transmission constraints are two major examples of energy infrastructure concerns being raised throughout New England and the Mid-Atlantic Regions.

The energy concerns of the Northeast, one of the biggest energy consumer markets in the United States, are of interest to anyone involved with domestic energy issues, and particularly to Newfoundland and Labrador as we are poised to become a major energy supplier to that portion of the United States.

Our electrical power industry is also promising exciting developments. Last year, the department carried out a consultation process in government's Electricity Policy Review document. This initiative, conducted by Mr. Wallace Read, sought input from the public and stakeholders on the future policy direction of the Province's electricity industry. On April 11, I released Mr. Read's report summarizing submissions made during these consultations.

I will now hold a series of public forums across the Province to provide Newfoundlanders and Labradorians with another opportunity to discuss this important issue. The first forum will be held here in St. John's on Wednesday night at the Holiday Inn. After these consultations, I will make recommendations to Cabinet which should provide clearer direction for electricity policy to our Province.

To ensure the continued adequacy of the electricity supplied for the Island interconnected system, Newfoundland and Labrador Hydro has been moving forward with the Granite Canal hydroelectric development in Central Newfoundland. This project will produce forty megawatts of electricity starting later this year.

Hydro also entered into an agreement with Corner Brook Pulp and Paper Limited for a cogeneration project which began operation in January, 2002, adding an additional fifteen megawatts of electricity to the grid. An agreement with Abitibi Consolidated to upgrade infrastructure at their operations in Grand Falls-Windsor and Bishop's Falls will add another 32.5 megawatts of electricity to the Province's system once completed this summer.

Hydro's current forecast indicates that no more generation will be required until 2009-2010; however, part of our power supply includes burning oil at the Holyrood facility, which emits between one million and two million tons of greenhouse gases annually. It is also very expensive to fuel during periods of high oil prices.

We have examined other technologies. At government's request, a feasibility study was commissioned by Hydro to examine the viability of wind power. This study has been completed and we are now examining the results to determine if wind power projects are feasible in this Province. If successful, this project could move forward next year creating a new energy source for the Province, reducing our greenhouse gas emissions by over 70,000 tons.

The potential development of the Lower Churchill River, with an estimated capital investment of approximately $4 billion in Labrador and production capacity of approximately 2,000 megawatts, remains under discussion. This renewable energy development has the potential to contribute significantly to the provincial economy and be a major component of Canada's effort to meet its commitments under the Kyoto Protocol.

Our mineral sector is just as exciting. This Province produces over a dozen mineral commodities including iron ore, gold, dolomites, limestone, gypsum, peat, dimension stone, sand and gravel. Western Labrador produces approximately 55 per cent of Canada's iron ore products. The total value of mineral shipments is forecast to increase from an estimated $792 million in 2002 to $826 million this year. The average number of people directly employed in the mining industry is forecast to increase from approximately 2,600 in 2002 to 2,700 in 2003. This is primarily a result of increased activity at the Voisey's Bay site.

We are also witnessing new developments in our mineral exploration sector. Exploration expenditure levels for 2003 are forecast at $19 million and could reach $25 million before the year is out. It is estimated that approximately 20,000 claims will be staked in 2003: 15,000 in Newfoundland and 5,000 in Labrador. Last year, over 33,000 claims were staked. This represents the highest number of claims staked in the Province since the Voisey's Bay staking rush. Of this number, over 27,000 claims were staked on the Island portion of the Province, breaking the previous record established in 1988.

The majority of exploration activity in 2003 will be in an area stretching from Gander Bay to St. Alban's and from Badger to Gander, including the Botwood Basin and an area of the Golden Promise gold discovery. Other areas of the Province, such as the Baie Verte, Bonavista and Burin Peninsulas, as well as Southern Labrador, are also seeing interest in exploration for gold, nickel and copper.

The big announcement in our mineral sector over the past twelve months was the commencement of the Voisey's Bay project. Government and Inco announced agreement on a Statement of Principles for the development of Voisey's Bay on June 11, 2002. On October 7, 2002, the final legal binding contracts were signed. Over the life of the project, the total capital investment in the Province will exceed $2.9 billion. Total employment benefits are estimated to be 76,000 direct and indirect person years.

Provincial Gross Domestic Product impact over the thirty year period is estimated to be approximately $11 billion. Inco and VBNC have already spent over $55 million in the Province and created over 250 jobs last year. This number is expected to increase to around 500 this work season.

The construction of the mine and mill concentrator will begin this year and take three years to complete. This will require an investment by Inco of approximately $710 million. Five hundred and fifty jobs will be created during the construction phase. Another 400 jobs will be created during the operations phase.

An underground exploration program, the development of an underground mine, and an expansion of the mine and mill concentrator are also expected to take place in the future. Capital costs for these activities are estimated at $750 million and could create an additional 800 jobs at peak.

Inco is committed to following the adjacency principle for employment at the Voisey's Bay site. This will ensure that our Aboriginal people get first consideration for jobs, qualified Labradorians get second consideration, with qualified residents of the Island getting third consideration.

We shall soon witness one of the biggest research and development projects ever to take place in Atlantic Canada, constructed at Argentia. Employment and spinoff benefits will be worth millions of dollars to the Province. The $130 million R and D program will be an integral part in developing Inco's new hydromet technology. The main aspect of this program will be the demonstration plant to be built at Argentia, which will establish the commercial, technical and economical feasibility of using hydromet technology for Voisey's Bay Nickel concentrate.

Site preparation has already begun with design engineering and construction commencing in 2004 and the plant being operational in 2006. This component of the Voisey's Bay project will create 200 jobs in the area.

A commercial processing facility will be constructed in 2008 at a cost of $800 million and employing upwards of 1,000 people. Once in operation, this facility will continue to employ 400 people for the long term.

With these new hydromet capabilities, Newfoundland and Labrador is expected to become a centre of excellence for the hydromet technology. We will have the skilled labour force, the infrastructure and the training facilities to ensure that we are leaders in the transfer of technology.

Construction of the Inco Innovation Centre is expected to be completed by 2004. This will ensure the academic related commitments negotiated as part of this project can move forward. This Centre will establish world-class education and research opportunities for fifty to sixty students per year engaged in bachelors, masters and doctorate level programs here at Memorial University.

The construction of this Centre will cost $10 million, with Inco providing an additional annual endowment of $1 million over a ten year period to cover operational costs. This facility will ensure that our Province has the skilled labour force needed to complete the technical requirements that will be associated with the hydromet technology. This project will contribute enormously to our economy for years to come.

As you can see, our mineral and energy resources are vital to the economy of Newfoundland and Labrador. Within five years, 2,000 new direct mining petroleum sector jobs could be created. Associated net spinoffs could double the number of indirect jobs from these sectors. New projects will be developed. Current projects will mature. We, as a Province, will grow with our industries. Our economy will strengthen.

Every new project presents new challenges. Our department is committed to managing these challenges successfully. It is the department's job to ensure that these growing sectors are developed efficiently, responsibly, and in the overall best interest of the people of the Province. This is the reason the Industrial Benefits division of the Department of Industry, Trade and Rural Development was transferred to the Department of Mines and Energy in September, 2002. The Industrial Benefits Branch is responsible for maximizing industrial opportunities and benefits for the Province from offshore petroleum activities in mining development. The branch's prime responsibility is negotiating with petroleum and mining industries regarding the industrial and employment benefits for the Province from major resource based projects. The branch is also responsible for the development and international promotion of the Province's industrial research and development and supply capabilities. In addition, it administers industrial benefits agreements, monitors benefits achieved from major project developments.

The total gross budget for the Department of Mines and Energy for 2003-2004 is $24,435,400. This is a decrease of $1.2 million over the 2002-2003 budget. Two point four million in additional funds was allocated for the reclamation of the former Hope Brook gold mine; $292,500 in additional funding has been allocated for the Canada-Newfoundland Offshore Petroleum Board. We remain a department that generates money for the Province, while we have one of the smallest budgets in government.

Mr. Chairman, the Department of Mines and Energy has responsibility for many activities that are diverse in nature. The department's policies are designed to meet the requirements of our industry and client groups as well as provide for the effective management of the Province's mineral and energy resources.

The department has a total approved staff complement of 126 permanent positions. Our Mines Branch is responsible for the department's mineral resource management program. This branch is divided into three divisions: Geological Survey, Mineral Lands, and Mineral Development.

The Geological Survey division is responsible for mapping describing the geological formations of the Province in order to identify and record the mineral occurrences and the mineral potential of the various regions. Provision of this data is a fundamental service provided by all jurisdictions in Canada and is one of the key ways that Newfoundland and Labrador remains competitive for national and international dollars.

The Mineral Lands division is responsible for the administration of the Province's mineral land and tenure system, regulating mineral exploration activity, managing quarry material resources and preserving drill core from exploration drilling activity undertaken by the private sector within the Province.

The Mineral Development division is responsible for the implementation of the regulatory requirements of the Mining Act, which include the development, operation and termination phases of mining operations. This division also oversees and administers the mineral exploration program that provides funding to provincial prospectors, junior companies that wish to start new exploration programs, and dimension stone companies that wish to establish new operations within the Province.

Our Energy Branch is also a very vital part of petroleum and energy resource development in Newfoundland and Labrador. This branch is responsible for the petroleum resource management, electricity industry development programs within the Province. The branch is divided into four divisions: Petroleum Resource Development, Petroleum Projects Monitoring, Electricity Industry Development, and Policy and Strategic Planning.

The Petroleum Resource Development division promotes, regulates and facilities the identification, exploration, development and management of our provincial petroleum resources.

Petroleum Projects Monitoring is responsible for the promotion, monitoring and implementation of relevant petroleum sector policies and a maximization of provincial fiscal benefits.

The Electricity Industry Development division develops and implements policy to ensure fair and reasonable rates to provincial consumers, fair benefits through the development of publicly controlled electricity resources, and rates which support provincial goals for economic development.

The Policy and Strategic Planning division develops, co-ordinates, evaluates and facilitates energy policies, strategic planning and program frameworks for energy resource development and management.

As I previously mentioned, our Industrial Benefits Branch monitors industrial opportunities and benefits for the Province from offshore petroleum activities in mining development to ensure Newfoundlanders and Labradorians are receiving maximum benefits.

As the committee can see, the Department of Mines and Energy is responsible for many challenging and technical aspects for our mineral and energy resource sectors. I would like to restate that the Department of Mines and Energy is a growing department essential to ensuring that our mineral and energy resources are developed in a responsible manner in the best interest of the people of our Province. As more projects are discovered and developed, we will see the department expand even further. I am hopeful that we will see significant projects developed in the near future. Our department will do everything reasonable to help make that happen.

Thank you very much, Mr. Chairman, and members.

CHAIR: Mr. Minister, that was quite a nice outline of the department. There is a lot there to be talking about actually.

The Opposition critic, Mr. Shelley, has the floor.

MR. SHELLEY: Thank you, Mr. Chair, and thank you, Minister.

If you did not read so fast we could be here until 10:00 p.m. That was quite a -

MR. NOEL: I always have your interest in mind.

MR. SHELLEY: I know you do.

- lengthy and detailed report and opening.

As far as the mines and energy part of it goes, I am pretty familiar with the mines sector, especially growing up in a mining region of the Province. There are some exciting times with mining, there is no doubt, and also with the offshore, as you have mentioned.

The Basin, I could not remember it until you mentioned it in your report - but the Orphan Basin recently, and the interest that is there. That is, I understand, the largest parcel of unexplored off our coast. Isn't that right?

MR. NOEL: Yes, my understanding.

MR. SHELLEY: That is the largest sector. That is interesting. I might have a question on that later.

What I probably will do, to try to keep this going as quickly as possible today, is just stick with the specifics on the Estimates numbers. Then I have a list of three or four questions for comments. As the minister knows, in these types of discussions we save the controversial ones for the House of Assembly. These are more for information and clarification and so on.

MR. TAYLOR: Except for last spring.

MR. SHELLEY: You never know, yes, it could happen here.

I do not think it will take a long time because the department is, as the minister has already said, a small department when it comes to the Budget, but big when it comes to the potential, and, of course, the return to the Province when it comes to offshore mining and hydro electricity, which are huge for this Province.

I will start off with just specific numbers. I will skip the Minister's Office, which seems to be pretty tight and consistent on its numbers. There is always a salary question, and you have to ask it. In 1.2.01.01, Executive Support, Salaries, there seems to be an increase of $85,000. Whenever I ask this question, I am just curious to find out if there is a new position added to that.

Under Executive Support, 1.2.01, the first one, it was budgeted for $445,000 and Revised to $530,000. So there was approximately an $85,000 increase in Salaries. Can the minister tell us where that salary is, or is that a new salary or a new position in that office?

MR. NOEL: Yes, that was increased funding to cover the position of a solicitor to this activity from March 1, 2004, Petroleum Projects Monitoring.

MR. SHELLEY: A solicitor for?

MR. NOEL: That accounts for the entire part of the increase, I guess, does it?

MR. MAYNARD: Mr. Shelley, we had a solicitor who permanently resides in the department. He was in the Petroleum Projects Monitoring Division. This is simply a transfer from the Petroleum Projects Monitoring Division to the Executive, because he is providing broader support for the department as opposed to justice.

MR. SHELLEY: So really it is not a new salary within the department. It was a transferred one. We would see a decrease in the salary. Where did you say he came from?

MR. MAYNARD: Petroleum Projects Monitoring, which is under the Energy side, 3.1.02.

MR. SHELLEY: Yes, salaries there. That does not seem to shake out, though.

MR. MAYNARD: It should not be in Professional Services. It should be in Salaries.

WITNESS: (Inaudible) Professional Services.

MR. MAYNARD: Then it came out of Professional Services?

WITNESS: Yes.

MR. MAYNARD: Sorry. It came out of Professional Services, Mr. Shelley.

MR. SHELLEY: Professional Services, okay. Eighty thousand, $85,000? That is the difference there, is it? Because that is a question for later. So, that was really just somebody who moved around within the Department of Mines from there.

In Transportation and Communications, under Executive Support also, it went from $145,000 to $225,000 revised.

MR. MAYNARD: That was travel associated with some of the larger project files. The White Rose file and the Voisey's Bay file, in particular.

MR. SHELLEY: So that was travel?

MR. MAYNARD: That was travel.

MR. SHELLEY: Increased travel. Voisey's Bay in particular, you say?

MR. MAYNARD: Yes.

MR. SHELLEY: Okay.

On to subhead 1.2.02. Major Projects Benefits Office. It is an interesting office. I am going to start right at the top again, with 01. Salaries. Lots of times we look at why there are increases, but you are also curious when you see decreases. You went from $454,700 to $195,000. Why would you see such a major drop?

MR. NOEL: It is because of a vacant chairperson, and other positions that were vacated.

MR. SHELLEY: Vacant chairperson?

MR. NOEL: There is a substantial saving there.

MR. MAYNARD: The Bull Arm Site Corporation and the Voisey's Bay group were in this subhead. The CEO and president of the Bull Arm Site Corporation, it was previously a full-time person who was doing that. Some time ago that was assigned to the Deputy Minister of Mines and Energy, so the deputy is an unpaid chair, CEO and president of the Bull Arm Site Corporation.

MR. SHELLEY: Okay.

Who was the chair of the Bull Arm Site?

MR. MAYNARD: Me.

MR. SHELLEY: Was?

MR. MAYNARD: Previously, it was Gordon Gosse.

MR. SHELLEY: Gordon Gosse?

MR. MAYNARD: Yes. He retired and, upon his retirement, they thought I did not have enough to do so they gave that to me to do as well.

MR. SHELLEY: Very good.

Is that the way it is going to stay?

MR. NOEL: (Inaudible) realize he has too much to do and we are trying to do something about that.

MR. SHELLEY: Is that the way you plan to leave it, like that, and not put a chairperson there for the Bull Arm Site?

MR. MAYNARD: I will continue to act as the chair, president and CEO. As you are aware, on Friday past there was a vice-president appointed to pick up some of the marketing and promotion (inaudible).

MR. SHELLEY: That is what I thought I heard. That is why I asked you. There was a vice-president?

MR. MAYNARD: Yes.

MR. SHELLEY: That was just late last week - I just heard a sketch on that - was it?

MR. MAYNARD: That was Friday.

MR. SHELLEY: Who was that?

MR. MAYNARD: That was Carl Cooper.

MR. SHELLEY: Yes.

MR. MAYNARD: Mr. Shelley, the remaining was, there were some vacancies in the Voisey's Bay project office that were not filled. Some of those duties now, with the Voisey's Bay project proceeding, have been transferred to the normal workings of the department, in mineral lands and mineral development.

MR. SHELLEY: You, as the deputy minister, will remain the chairperson, CEO, of Bull Arm, and now you have a vice-chairperson?

MR. MAYNARD: I have a vice-president.

MR. SHELLEY: Mr. Cooper is the vice-president?

MR. MAYNARD: Yes. I am only presuming I am staying. I leave that up to government. That is not my decision.

MR. SHELLEY: Government, to this point, have not decided.

WITNESS: (Inaudible).

MR. SHELLEY: Minister, in that particular case then, if the deputy minister does not stay in that position then Mr. Cooper, the vice-president, will move to vice-chair?

MR. NOEL: Not necessarily, I suppose. We would make a decision at that time.

MR. SHELLEY: Okay.

In 03. Transportation and Communications, it is always interesting, $65,000 to $213,000 revised. Why the increase there?

MR. MAYNARD: This is staff people who were working on the Voisey's Bay project in the negotiations, and that is the travel associated with concluding the agreement on the Voisey's Bay project.

MR. SHELLEY: Travel for staff?

MR. MAYNARD: Yes. The previous was travel for the executive, which was basically myself and Allister.

MR. SHELLEY: Okay.

In 05. Professional Services, what were those professional services that increased quite a bit - $130,000?

MR. MAYNARD: That was, again, professional services required to complete the project, the Voisey's Bay project negotiations. We had a substantially utilized one, two, three, four, consulting firms.

MR. SHELLEY: Could you repeat that?

MR. MAYNARD: I am sorry. That is professional advice, consultants utilized in the negotiation of the Voisey's Bay project agreements.

MR. SHELLEY: Consultants. Consultants in Newfoundland?

MR. MAYNARD: No, these were Toronto-based consultants well recognized in the mining industry.

MR. SHELLEY: That was $130,000 or so?

MR. MAYNARD: Yes, that is what I have, $129,000.

MR. SHELLEY: I am going to go back to 01. again for a second, $454,700 was Salaries. That is a difference of - well, I am not too quick on that - about $260,000. I am not far off, right?

MR. MAYNARD: Yes.

MR. SHELLEY: Two hundred and sixty thousand, that was not just Mr. Gosse?

MR. MAYNARD: No, Mr. Gosse's salary was roughly $110,000 and there were salaries provided for the Voisey's Bay project office for staff salaries. There were vacancies in - I think the staff complement was five or six and there were two people on for the year. A lot of the other duties were undertaken by regular staff members in Mineral Development and Mineral Lands.

MR. SHELLEY: Then it was revised down to $195,000, and that is with the change with Mr. Gosse's file, but this year it is budgeted for $378,000. So that would now include Mr. Cooper's salary? Is Mr. Cooper's salary set yet as the Vice-President?

MR. MAYNARD: I have not seen the note but the budgeting was provided for the position in case - for the President and the CEO. As well, there was funding provided for these other positions which were going to be transferred into Mineral Lands and Mineral Development. I recognize it is a tangly answer but -

MR. SHELLEY: Well, right now it is, yes, but this position was planned for, for a vice-president?

MR. MAYNARD: The position of vice-president was not specifically planned for. What was planned for was -

MR. SHELLEY: The salary.

MR. MAYNARD: The salary was left there, recognizing that at some point in time it would probably be appropriate to appoint somebody else.

MR. SHELLEY: In Purchased Services, that certainly begs a question, from $15,000 to $460,000. What were those purchased services for under Major Projects Benefits?

MR. MAYNARD: Those were the costs associated with the announcements, presentations and the rollout of the Voisey's Bay project announcement in June.

MR. SHELLEY: So that was the public relations for the announcement?

MR. MAYNARD: Yes. Public relations and all the travel, the road show, and everything else that went with it.

MR. SHELLEY: Okay, I will move right along here.

Under 2.1.01, Geological Survey, and we will start again with Salaries at $2,429,800. Is that another position again in Geological Survey? Is that a new position? Approximately $55,000.

MR. MAYNARD: That was some students on some of the field programs. Are we talking now the $2.429 million to $2.486 million?

MR. SHELLEY: Right.

MR. MAYNARD: Okay. That is increased temporary staff and students.

MR. SHELLEY: Temporary staff and students?

MR. MAYNARD: Yes. Again, that was a reallocation from other - we had some savings in some other areas.

MR. SHELLEY: Okay.

The next one would be in 12., Information Technology. You set it at $82,000, and estimated it for that too, but it was revised to more than double that. What was the information technology for?

MR. MAYNARD: Most of the information technology requirements of the department were funded through this account and not allocated to the other specific activities.

MR. SHELLEY: Could you repeat that again?

MR. MAYNARD: Most of the IT requirements for the full department were paid through this activity. Again, it is savings and they were allocated to here.

MR. SHELLEY: So it was not just through the Geological Survey division?

MR. MAYNARD: No.

MR. SHELLEY: Back to Salaries for a second. The Budget and Revised, but this year Estimates are for - are you saying that is all temporary staff and students in that additional approximately $200,000?

MR. MAYNARD: No, that is the salary increases and step progression costs, as well as one or two additional temporary staff for part of the year.

MR. SHELLEY: Under Mineral Lands, another additional $40,000 or $42,000. Is that temporary and students as well? In 2.1.02.01, Salaries, under Mineral Lands.

MR. MAYNARD: From the budget to the revised was $744,000 to $755,000?

MR. SHELLEY: No, in the estimates for 2003.

MR. MAYNARD: That is step progressions and normal increases, no additional staff there.

MR. SHELLEY: Mineral development, the incentive programs for exploration and development, that is an interesting department and certainly an important one. I think it is one of the most important when it comes to incentives for exploration. Growing up in a mining industry, and being around people, the bottom line is, if you don't look for it you will never find it. It is a risky business and it takes investment. I understand that very well and I have dealt with people. I was around Baie Verte in the mid-1980s when the flow- through shares were coming through Ottawa. I say activity in that little part of the Province. As a matter of fact, why we see Nugget Pond, the only gold mine in the Province today, is because of that program and the activity that was going on. It just boomed the entire area, there was so much activity going on. Now, of course, you see the core (inaudible) full of core throughout the area and so on. It is definitely a good program, and I can see some day that the federal government might come in again with those flow-through shares. I do not know how likely that is. It is not very likely, the way they are treating us with everything else, but that was certainly a good incentive program for exploration. It really worked.

MR. NOEL: The industry really appreciated the -

MR. SHELLEY: It really worked, and it worked well.

MR. MAYNARD: The federal government are eliminating flow-through shares next year and they are replacing it with a permanent 10 per cent cost reduction for exploration from corporate income tax.

MR. SHELLEY: Is that right?

MR. MAYNARD: Yes.

MR. SHELLEY: Ten per cent?

WITNESS: (Inaudible).

MR. SHELLEY: Ten per cent?

MR. MAYNARD: Yes.

The only ones it will help are existing companies. It will not be for juniors any more. It will actually be for producing mines.

MR. SHELLEY: Okay.

On the incentive program, in the specific sections in Purchased Services again, there is quite a bit of money we talk about there. I assume that has to do with exploration, but first of all in the budgeted and revised it jumped $2.7 million. Could you comment on that first and then also comment on the estimate for this year which is down to $6 million?

MR. NOEL: That was money for the Hope Brook cleanup.

MR. SHELLEY: Is that Hope Brook?

MR. NOEL: Yes.

MR. SHELLEY: Can you give us an update on Hope Brook, and the situation on the cleanup with Hope Brook right now?

MR. MAYNARD: We have finished all the earth works last year, as well as the damming. This year we are currently reviewing all of our costs, but the main contracts this year will be the demolition of the buildings, the removal of the equipment, and the reclamation of the total site. We are hoping to be able to walk away from that project by March of 2004, with minimum monitoring over the next two years.

MR. SHELLEY: By next Spring that should be totally grassed over?

MR. MAYNARD: I do not know about grassed over, but -

MR. SHELLEY: That is (inaudible) by the reclamation, but basically that is it, right?

MR. MAYNARD: Yes. The work we have done -

WITNESS: (Inaudible) before, basically.

MR. SHELLEY: Estimated for this year there is another $6 million to be spent?

MR. MAYNARD: Yes.

MR. SHELLEY: Again with that, under Mineral Development, before I leave that one, in 01., the salaries reduction from budgeted to revised, then back up to the regular again for the estimates for this year, why was that drop of almost $200,000, or $180,000?

MR. MAYNARD: It was basically one or two vacant positions. In particular, the previous year, the Director of Mineral Development passed away, Ferd Morrissey. You know how difficult it was to replace Ferd.

MR. SHELLEY: Yes, I certainly understand that; but he will be replaced this year, it looks like, in the estimates?

MR. MAYNARD: Yes, there is somebody in there now temporary.

MR. SHELLEY: Who is in there?

MR. MAYNARD: Charles Bown.

MR. SHELLEY: He is temporary?

MR. MAYNARD: Until it goes on the board.

MR. SHELLEY: Okay.

Subhead 3.1.01. Policy and Strategic Planning, there is a small change in salaries but we will leave that for now. In subhead 10. Grants and Subsidies, the amount is $85,700, which is the same estimate for this year, but when revised for 2003 there was an additional $80,000.

MR. NOEL: That was due to a grant of $85,500 for the Petroleum Research Atlantic Canada.

MR. SHELLEY: That was an additional grant?

MR. MAYNARD: That was a grant. That is a new organization that has just recently been established. It is, again, transfers of savings from other program areas in order to pay this grant.

MR. SHELLEY: What was it for again? Who is it?

MR. MAYNARD: Petroleum Research Atlantic Canada.

MR. SHELLEY: Which is where?

MR. MAYNARD: Which is headquartered - it has virtual offices. There is an office here. There is an office in Halifax as well. It is currently led - the Executive Director is a Newfoundlander and Labradorian, G. Lee Shinkle.

MR. SHELLEY: Okay. I know Lee Shinkle.

MR. MAYNARD: This PRAC was previously Atlantic Canada Petroleum Institute, which was solely a Halifax based organization. Through a considerable measure of effort on the part of Memorial University and the department we have been able to establish a far greater Newfoundland and Labrador presence in that organization and to make a larger focus on Newfoundland and Labrador based issues.

MR. SHELLEY: Which is good, but that is Atlantic group. I assume the other three provinces, then, also supply grants to that group?

MR. MAYNARD: Funding is provided. It is called Atlantic Canada, but 99 per cent of it is Nova Scotia and Newfoundland and Labrador. Funding is provided by both provincial government, the federal government, and the oil companies themselves contribute to this organization. The intent of the organization is to focus on research and development of offshore related issues. They, in turn, take the money that we provide them and leverage additional research and development money out of that.

MR. SHELLEY: Okay.

Do they help also in preparation for offshore development companies on land, like preparing for offshore, preparing for natural - I know Nova Scotia is doing a lot of preparation for natural gas and so on. Are they involved in that?

MR. MAYNARD: They will take on specific research projects. It is run by a board of directors, a fourteen member board of directors. Actually, their first board meeting is here in the city tomorrow.

MR. SHELLEY: Lee Shinkle is the chair, right?

MR. MAYNARD: Lee Shinkle is the executive director.

What happens is, people make proposals to do the research programs. If it meets the approval of the board, these programs will go ahead. Like I said, this is an organization that basically leverages funding and co-ordinates the research efforts.

MR. SHELLEY: Okay, that is the additional money. The $85,700 that was budgeted for last year, and the same for this year, where is that going? Is that a set group that it goes to, or is it different groups every year? Where is that $85,700 going?

MR. MAYNARD: It generally goes to the same groups year over year. The membership fee for the U.S. Energy Council that the minister referred to was $48,000. We have a membership in the Canadian Energy Research Institute of $25,000. That accounts for $73,000. Then you have things like the national climate change process of $7,000, the national response to Kyoto. Most of the remainder is climate change, environmental and energy issues. These are smaller amounts, like: $1,000, $2,000, $3,000 amounts.

MR. SHELLEY: 3.1.02, Petroleum Resource Development, just a small question. In Transportation and Communications, is that travel again from $57,500 to $117,400?

MR. MAYNARD: Fifty-seven thousand, five hundred to $117,400.

MR. SHELLEY: In Transportation and Communications.

MR. MAYNARD: Transportation and Communications. Yes, this is travel. There are some costs of relocation expenses here. I think a couple of new staff were hired on and there were some costs associated with the development and the natural gas strategy.

Oh, sorry, Mr. Shelley. There are also additional costs associated with amendments to the Accord to provide for an occupational health and safety legislative regime and some costs associated with the boundary dispute between us and Nova Scotia included there as well.

MR. SHELLEY: I will leave C-NOPB alone for now because that is just strictly Grants and Subsidies which they control.

Under 3.1.04. Petroleum Projects Monitoring, could you just comment on that division for a few minutes? It says: ...analysis of relevant petroleum product markets and the provision of related policy recommendations and advice to Government; but especially on the petroleum product markets. How is that division involved? What do they do?

MR. MAYNARD: This is effectively the royalty administration development and policy group. These are the people who develop the regulations and policies with respect to the administration of royalty regimes in the offshore and onshore, and who do the auditing of the oil companies and whatnot.

MR. SHELLEY: They do the auditing also?

MR. MAYNARD: Yes. The division is broken down into two sides. One is an audit side and the other is a research and policy side.

MR. SHELLEY: There will be an additional $100,000, approximately, in Salaries. Is that an additional position?

MR. MAYNARD: Yes.

MR. SHELLEY: Is that just one salary, one person?

MR. MAYNARD: Salary increases, step progression costs, and a couple of temporary assignments associated again with - one of the issues that the department has on its plate this year is the finalization of a royalty regime for natural gas and we have seconded a person to that division to do that. So the salaries have moved over.

MR. SHELLEY: Still with 3.1.04, under Professional Services, it was $250,000 and you revised it to $130,000. So it is $120,000 less. What are the professional services in that division? Why was it $120,000 less?

MR. MAYNARD: I will take the second question, first if I could. The $120,000 less was, there was $100,000 transferred to Petroleum Resource Development for the natural gas strategy, that I referred to earlier, and $20,000 transferred to Information Technology for a file management system. So that was the decrease.

The consultants that we would be engaging, in this instance, would be economists, accountants, accounting firms, people with experience with international royalty regimes and whatnot.

MR. SHELLEY: Okay.

The next section, 3.1.05., there has been some debate lately with Newfoundland Power, Hydro and so on, on the nationalization of Hydro, Newfoundland Power. Minister, would you like to make some comments as to where you are with that, what discussions are going on, and where you are going with this?

MR. NOEL: As I said in the introduction, we have been trying to develop an appropriate electricity policy for the Province for the foreseeable future. It has been a process that has been underway for several years. Last year the department issued a discussion paper and hired Mr. Read to hear submissions. We published that paper a little while ago.

I am in the process now of developing a Cabinet paper to advise government on where I think we should go in this regard, and we are looking at all possibilities to function. Our responsibility, as we see it, is to provide for the generation and distribution of electricity in the Province at the lowest possible cost for ratepayers. We have to look at all the options for doing that. We are looking at whether any changes can be made in the Newfoundland and Labrador Hydro to help control costs and how to operate more efficiently. We are looking at whether any changes may need to be made in the regulatory system. We are listening to what people have to say.

As I indicated in my opening statement, I am going to hold a series of public meetings across the Province, beginning this Wednesday night. One of the issues being proposed is the consideration of integration of Newfoundland and Labrador Hydro and Newfoundland Power. That idea has been floating around for many years. I remember when we had the Hydro privatization issue a decade ago. There were a number of people in the Province who thought that this was the way to go, opposite to what the government, at the time, was proposing, but many people felt that there was a good case to be made for that. That has been considered and proposed various times over the years. As a matter of fact, it was included as an option in the paper that government issued about a year ago; March, I think it was, of last year. Not that government was suggesting it, but it was laid out as an option that people could look at. As you know, it has become a higher profile suggestion in recent weeks. The Consumer Advocate and other people appearing before the recent hearings of the Public Utilities Board have suggested that is something, to them, that seems to make sense. My view is that we should look at everything that people are suggesting and everything that we think, ourselves, could help generate and distribute electricity as efficiently as possible in the Province.

We will look at the case we made for integrating the two companies. It is our government's position that we would not consider selling Newfoundland and Labrador Hydro. We are committed to maintaining that as a Crown-owned corporation. So, if there is going to be integration, as far as we are concerned, it would have to be the other way around, and that means Hydro would have to take over Newfoundland Power. I think that our responsibility in this regard is to look at whether there is a business case to be made for combining the two companies. If that appears to be the case, and if we are prepared to consider trying to acquire Newfoundland Power, we would have to look at what the economics would be, whether it would be in the public interest to do so. If an economic case, a feasibility case could be demonstrated for that, then government would have to make a public policy decision about whether they feel this is the right direction to go in. So that is where we are with that right now.

There are things to be said to lead people to believe that it could help control electricity rates, because Newfoundland Power has been a very successful and profitable company over the years, a very successful company for its shareholders. I guess if it is profitable and beneficial for them, it could also be that for the people of the Province, if they own it, but it would depend on what price it could be acquired at. I do not think the present owners would be inclined to put it on sale at this point.

MR. SHELLEY: Have you done any work on the numbers on that? That is what it all comes down to, the price tag on Newfoundland Power.

MR. NOEL: I think the head of Fortis has indicated they value it at something like $1.2 billion.

MR. SHELLEY: Two billion to buy it and take over.

MR. NOEL: Yes. I think the book value at present is something over $600 million or so.

MR. SHELLEY: But how realistic is that for the government to look at?

MR. NOEL: Oh, it is very realistic to look at anything, but what might be realistic to do might be a different question. For government to do that, we would have to borrow a significant sum of money and pay interest on that over a period of time. So you would have to do the economic analysis, and I think that is what I would recommend doing in the near future.

MR. SHELLEY: It makes for an interesting debate, there is no doubt about it.

I will move right along to the last one, 4.1.02. Research and Development - Offshore Fund, just so that is explained. I understand the heading, but last year it was budgeted in 10. Grants and Subsidies. Is that to do with the federal government revenue, $800,000 to $370,000 and then back up to $830,000 for this year's budget?

MR. MAYNARD: The research and development fund under the Offshore Development Fund is the remnant of the $300 million Offshore Development Fund that we received when we signed the Atlantic Accord. There is roughly $1 million left in there. The decrease in 2002-2003 Revised from Budget was less uptake on some of the projects. We had been anticipating certain projects to be submitted for approval and funding. They did not come in and we are expecting those to come in, in the new year.

MR. SHELLEY: So is that the last of that money, of that program?

MR. MAYNARD: That is effectively the last of the money.

MR. SHELLEY: Another program dried up.

(Inaudible) in the budget. Now I just have a few questions or comments or clarifications, whichever way the minister wants to look at it. As I said, we saved the other questions for the House.

First of all, I will just make a comment on Voisey's Bay. Of course, there are discussions even over this weekend, the past weekend and so on, on problems that people in Labrador see with the adjacency principle being adhered to.

Does the minister feel that the adjacency principle will be adhered to and that it is strong enough to hold the company to the adjacency principle, that the agreements that are in place now are strong enough to hold the company to that principle?

MR. NOEL: Absolutely.

The adjacency principle was, I think, first enunciated during the environmental assessment process, and in that process the company committed to abiding by the adjacency principle, as I outlined in my opening comments, that the people in the area and the Aboriginal people, qualified people, would be offered jobs first, then residents of Labrador, and then residents of the Island, before going outside of our Province.

That principle is part of the development agreement our Province has with the corporation. The corporation has said that they are committed to that agreement and intend to enforce it throughout the construction of the project. We will hold them to that commitment.

Last fall, as everybody knows, there were a number of people hired for positions from outside the Province, which we feel could have been filled by people within the Province. The company's explanation was that in the rush to try and get work going before the season closed in, and because new companies were coming in who had core people they wanted to bring along with them, some people were hired to do jobs that Newfoundlanders and Labradorians could have been qualified for. At the same time, over 90 per cent of the 250 people who were employed up there last year were Newfoundlanders and Labradorians. The company says that they are going to abide by that principle and they are going to require all of their contractors to abide by it.

We think that we can force that under the development agreement, so we are confident that this is not going to be a problem. From time to time there is going to be some differences of opinion as to whether or not somebody met qualifications, I suppose, and that sort of thing, so I imagine we will have ongoing discussions. Some people will be dissatisfied, maybe, who do not get jobs with the project, but we think there is no question that there is a commitment on the company's prior to it and we intend to hold them to it.

MR. SHELLEY: Okay.

The next one, Hydro's annual report. Isn't that about to be ready for this year and it is supposed to be -

MR. NOEL: I understand we will be receiving that shortly.

MR. SHELLEY: It should be before the House adjourns, right?

MR. NOEL: Yes.

MR. SHELLEY: It is supposed to be tabled in the Legislature, right?

MR. NOEL: Yes, it will be.

MR. SHELLEY: The next one, on White Rose, the 80 per cent of the workforce, are you still comfortable with that, Minister, in that 80 per cent of the entire work that will be done will be -

MR. NOEL: We are up to about 83 per cent now. We have no doubt that we are going to get a minimum of 80 per cent. As I said when the Bull Arm contract was announced a little while ago, that should bring us up to around 83 per cent. We are hoping to get more work for Bull Arm. There is no question that Marystown is going to do all the work that it is capable of doing. It was always the company's option to have up to 20 per cent done outside the Province. The company has told me that they are going to try to do as much of that 20 per cent as they can within the Province. There is no question about the 80 per cent. The only question is about how much they can go over that.

There are some constraints, because Marystown and all of the facilities in the Province have limited capacities. We have great capacities, and there are lots of people in the Province who still do not have jobs and will not have jobs even if 100 per cent of the work was done in the Province. There would still be lots pipefitters and other tradespeople who would not get jobs on the project. We are quite confident that we are going to exceed the 80 per cent and we are going to make every effort we can to go as high above that as we can.

MR. SHELLEY: Another one quickly, Minister. I am not sure if it was you or the previous minister who suggested that the Province do some updated work on Kyoto and how it applies to this Province. Has the department been doing any work on that particular agreement?

MR. NOEL: We have been having meetings amongst our own people and amongst various interests within the community here, people at the university and that sort of thing. We have been trying to determine just where the federal government was going with this. Several federal deputy ministers were in the Province recently for discussions pertaining to this. We do not think that there is a lot of federal money committed. So far, I think it is something like $2 billion over five years. It is not a lot to go around the country. The federal government is still in the process of determining what it is going to be endeavoring to do and consulting with the Provinces.

We are looking at what we need to do ourselves, as a Province, but this could be significantly costly if we were to undertake projects on our own so we are really interested in knowing what kind of financing commitments will be available from Ottawa, but we are doing work on our own and we hope to have some definitive indication of where we will be going perhaps later this year.

MR. SHELLEY: I am just going to wind it up with a couple of local ones, but they are mining so they are related to your department, of course. Hammerdown is doing quite well; and, of course, Nugget Pond was the example not just for the Province, I guess, but for the country, that a small mine could do it. For that reason, I think, they have attracted more exploration in the area and so on. Probably the deputy minister can update us on that. I am hearing different things from different groups, that there is some more exploration intended for that Green Bay-White Bay area this year and that could be all connected with more mining continuing at the Nugget Pond site.

MR. NOEL: If I could just make a general comment first, one of the first things I did as minister was go to the PDAC convention in Toronto a month ago, I guess it was, and, as somebody who is new to this particular area, I was really impressed by the interest amongst the mining industry across the country. There were something like 8,000 delegates at this convention, all the major players in the country. Boy, there is tremendous interest in our Province, particularly in relation to gold exploration but in other areas as well. We are expecting a great year in exploration activity here this year, and I was really impressed and surprised, because I was not aware of this in the past, by how well our department is regarded by the industry right across the country and in our own Province.

The government is regarded as being helpful with our incentive programs, but the people who work for the department have done a tremendous job of learning about what we have and how it should be marketed. They know how to deal with the industry people, and the industry people just think that we are doing a great job. We are going to have a staking on-line, I think, the end of this summer. We have one of the best, and the people who are responsible for developing the federal government Web site told me that, as far as they are concerned, we have the best Web site in the whole country, and that is very helpful to people who are trying to get information and that sort of thing.

I am very optimistic about what is happening to the mining industry in the Province. I think we are going to see a lot of exploration and, hopefully, some interesting discoveries over the next little period.

The deputy could probably fill you in a little more on some of the details.

MR. MAYNARD: Yes, sure.

Mr. Shelley, as you are well aware, the interest in gold, and the gold prices where they are today, gold is certainly a very hot commodity and interest in the sector is very good at the current time.

Newfoundland is considered one of two hot spots in Canada for gold, particularly - you know the history of the Baie Verte Peninsula quite well, and the experience in the outcrops and the showings in Baie Verte.

I was speaking to representatives from the company just last week and they did say that they have approval to do some fairly extensive exploration work this year in and around the Nugget Pond deposit. I think we were all a little bit surprised when that one came to an end as quickly as it did. We were hopeful for a couple of more years out of that mine. That is encouraging.

I would expect to see some fairly significant levels of exploration activity on the Peninsula beyond just the Nugget Pond area. There are some very nice prospects. Some of the local prospectors have some very, very interesting properties and some nice showings, so I am hopeful. Whenever exploration numbers are going that way, we are always encouraged. That is the trick to all of this.

The minister knows full well our mantra is exploration first, exploration second, and exploration third. Those are our top three priorities, and that is what it is all about.

MR. SHELLEY: I will close on that one because I have said it for years, and the minister and the deputy have heard me too, that mining can get pretty exciting but unless you have somebody to take that high risk, go underground and find it, then you are not going to find it.

MR. MAYNARD: That is one of the things that a lot of people fail to recognize, not only in the mining sector but in the petroleum sector as well. This is high risk, high risk cost. Exploration, when you look at what they are targeting, the size, I don't know how anybody ever finds anything when you see - the Hammerdown deposit, what is it, three or four feet across? - that seam that they are mining out. I don't know how you find this in the first instance.

MR. SHELLEY: Shooting different angles and so on, yes.

MR. MAYNARD: Exactly. The cost of exploration and offshore exploratory wealth for the offshore oil and gas industry, $60 million, minimum; $100 million if it is an expensive well. These guys, their success ratio is one in six. So they spend $600 million on exploration and they expect to get one discovery. Then they spend a couple of hundred million to see if it is economical to produce. You have to have pretty deep pockets to be into a business of $800 million and not see a penny of cash flow, and risk not seeing any pennies of cash flow. That is not something I have my RRSPs in.

MR. SHELLEY: That is why those junior companies are so important to us. They are the ones still after it.

That is it for me for questions, Mr. Chair.

CHAIR: Thank you, sir.

Are there any other questions from any other members of the Committee?

MS KELLY: I just wanted to ask a question about antimony and what is going on in that area. My understanding is there was a terrible problem in China with their mill and now they are not able to export the amount they did. I am wondering if the price is going up and we might expect to see antimony being mined again?

WITNESS: The price right now is about $2,100 a ton U.S. To break even for Beaver Brook, which is what it is now called, is about $1,500 a ton U.S. The owners have, and are at the current time, undertaking three feasibility studies to see if they can reclaim the operation. They tell us that once those studies are done it will take between three to six months to get it up and running because, as you know, it is an underground mine. So they had to pump it all out. Basically, they are doing their due diligence and they are hoping to get partners that will come in and assist them with the reclamation costs.

They are hoping that if the price stays high for at least - I think they need a price within that vicinity for about two to two-and-a-half years, because that was the problem before when they opened. The price basically collapsed at $800 a ton. So, right now, if the Chinese can hold local production, cut down on the smuggling - and, as you know, there is a major collapse of a mine over there. That is what has driven the price up. The Chinese government is somewhat leery about opening the big mines again. As long as the price remains high, it means that their demand restrains are working within China.

MS KELLY: How long do they think it will take to do the feasibility studies?

WITNESS: They have been at it since late fall, and they have been looking at a whole variety of options to restart the mine. As you remember, they were looking before at producing another product as opposed to just concentrate. That would cost some $20 million to $25 million. I do not think they have written it off yet, but if you remember, it was a commitment they made the government when they first opened, that they would look at the possibility of doing more than just producing a concentrate. They would do another higher value-added product. So, right now that is what they are doing. They have been in to visit government, I think, several times in the past four to five months. I think they really are interested in opening it.

MS KELLY: Good. That is more than 100 jobs if they do.

WITNESS: I think they are looking now at between sixty and eighty. It will be a lot less than what was proposed before. They will try to bring it on with lower costs than what they had before.

MS KELLY: The other question I wanted to ask was about wind energy. Just to get an update on where we are in the Province with a few pilot projects that were being looked at. I have not asked a question in the past, with the high cost in some parts of Labrador on the coast in little small communities. Is there any hope that if the pilot projects work that we could find lower cost energy up there?

MR. NOEL: The deputy just reminded me that we had that discussion on Friday. There is one project that we have asked Newfoundland and Labrador Hydro to look at. They have done an assessment and made some recommendations to the department, and we are now assessing that. We will be making some recommendations to government over the next very short period. There are some other projects that are being looked at. There were a couple up on the - one anyway, up on the Southern Shore of Labrador.

The deputy probably has more detailed information on that which he can relay to you.

MR. MAYNARD: There is another company examining some smaller wind generation projects for potential replacement, or replacement of some energy on the isolated diesel systems. They are currently doing some feasibility work, looking at some options and trying to avail of some federal funding for such initiatives as well. For the isolated diesel systems in rural areas, that one is a little bit further behind than the larger demonstration project that government is now considering.

MR. NOEL: It still remains a higher cost source of power than we have been used to. It depends, of course, on what happens with fuel prices and that sort of thing in the future, whether or not it will become more or less competitive. I guess government will have to decide whether or not we would be prepared to pay higher prices for some power in order to get a few of these projects going, in order to diversify our sources of generation, in order to determine just how successful this type of generation can be in our Province, and in order to contribute to requirements of the Kyoto protocol. Whether or not the federal government may have some funding available to make projects like this desirable for the Province, and whether or not we are prepared to make some additional financial commitment in order to get some projects like this off the ground, we will be making decisions about in the very near future.

MS KELLY: No more questions.

CHAIR: Thank you.

We recognize also that Mr. Hodder is here, just for the public record, Mr. Harvey Hodder.

Mr. McLean.

MR. McLEAN: I just have a couple of questions, or perhaps a comment and then a question. I find it hard to sit here and not ask about Voisey's Bay, so I will ask the question but I will make a comment about it first.

With the latest special projects order, section 6 includes the adjacency principle, and the Voisey's Bay mine-mill undertaking in section 15 accommodated the adjacency principle as well. My understanding is that what is precipitating all of the discontent, I guess, in Labrador is basically contributed by two unions, of the whole group of unions involved in that. One is the teamsters, and my understanding is that the other is the caterers or hoteliers, or whatever they call it, and that other unions are complying with the adjacency principle.

My question is, I guess, in that regard, if there are only two unions that are causing all the uproar up there - and it is causing a lot of uproar because what is happening is when people call the unions they are basically told to get lost. They have their own people and that is the way they are going to work it. That is what precipitates meetings like were held last Friday and Saturday.

I just want to ask the question as to who would be able to sit down with these people to try to bring them into the fold and say: Here is what you have to follow.

Is that the job of the company, or is that the job of the public or the government? Who would have that task, to try to resolve this issue in that regard, where it is already indicated and it is identified and it is firm in the orders?

MR. NOEL: Our view is that the company is responsible for the whole project. It is up to the company to get everything straight. It is up to them to abide by the commitments they have made. We intend to ensure that they do. If there are problems, they should be dealing with the unions, they should be dealing with the people, and they should make sure that the whole situation is clarified.

Now, we all have to be reasonable and understand that you are dealing with a lot of people. You are dealing with people for whom these are very serious issues. You are dealing with a number of unions, and it wouldn't be surprising if you are going to have some people who are saying the wrong things and even doing the wrong things from time to time. All we can do is identify these incidents when they happen, find out what the source is, and make sure that it is dealt with.

We have had many discussion with the company and there is just no question of the company's commitment to the adjacency principle. Now, we hear stories about representatives for various unions giving people information that are causing them concern.

One case I heard, there was one union that did not even have an office in Labrador and people were calling down to the office here in the city and, I believe, getting receptionists on the line and getting information that, you know, we question whether or not it represented the legitimate position of that union, because we have the collection of unions together up there and together they are committed to the conditions for developing the project, and the union representatives have indicated, in their negotiation over the collective agreement, that they support the adjacency principle.

I think there is no question that there is an overall commitment to ensuring that the project develops in this way, but that does not mean to say that there will not be individuals within unions, within different groups and within companies. There may be some contractors hired to do things who may not understand what the requirements are and may try to get around them from time to time, or that sort of thing, and we will just deal with these things as they come up. As I say, the basic responsibility is with the company. It is their project. It is up to them to ensure that it is developed under the terms and conditions that we have agreed to.

If we, at any time, have a concern that a company is not doing that, we will take whatever action is necessary; but, in the meantime, we are in constant contact with the company and with the unions and with the interest groups, and we try to identify problems at the earliest possible phase and deal with them.

MR. McLEAN: Thanks.

Just one question on the wind power. I know we are doing a couple of projects, but my understanding at the beginning of the wind power projects was that the maximum they could do would be supplement current power supplies by 30 per cent in any given community in the isolated areas. That was my understanding, in talking to this Dutch group that was (inaudible).

MR. NOEL: Well, you cannot rely on them entirely because you know that you are not going to have constant wind available to generate the required power, so they have to be developed in conjunction with other sources of power. Whether or not the 30 per cent is relevant....

MR. McLEAN: That is roughly the figure they gave us as probably the maximum that this kind of power could supplement the regular diesel generation with, as it currently is.

I will just make a comment to conclude that, that is I think we have to look at some other way to provide a greater power base for the isolated communities. That will also give them some access power so that there is some opportunity for them to develop things in those communities. I think that is the way we should look, at a firm power base which will provide a cheaper rate but also an opportunity to develop.

Just the examples we are seeing out there now - I met with a guy in Port Hope Simpson three weeks ago. He has to call the powerhouse before he can start his sawmill because the lack of power - he can only do it certain times of the day because of the load factors. I think we have to understand that that is really a detriment to developing and allowing those people to develop industry that will be self-supporting in the end.

These kinds of examples are the things I think we really need to look at seriously in terms of getting Hydro onside to take a more serious look at it.

MR. NOEL: I think Hydro has looked at a lot of these problems pretty seriously over the years, but it is unfortunate and unacceptable that we have these problems with power supply in particular areas of the Province. The reality is that to get power into different locations can be very costly. In order to make it economic is quite a challenge. Wind power is a great option but it still appears to be more expensive than other sources of power, except in some really extraordinary circumstances. Unless a case can be made that that is a reasonable choice to make then government has a problem choosing that particular option. Certainly, we are committed to doing what we can to ensure an adequate supply of power at acceptable prices for as many people as we can.

MR. McLEAN: Thank you.

CHAIR: Thank you, sir.

Mr. Maynard.

MR. MAYNARD: If I could just to add to that, the people of Port Hope Simpson are paying 26 per cent of the cost.

MR. McLEAN: That is right.

MR. MAYNARD: Somebody has to pay the costs. If you increase high cost sources of electricity in Port Hope Simpson the remainder of the Province has to pick up. Somebody has to subsidize it. So it is an issue, one we all recognize and sympathize with but -

MR. McLEAN: Yes, I understand. If we did not subsidize they would not have power, but there comes a time when I guess everybody in the Province would - if we all had to pay what would make it economical right throughout the Province we would be in trouble too.

MR. MAYNARD: Yes, understood.

MR. McLEAN: Thank you.

CHAIR: Well put, sir. Well put, hon. member.

I am not hearing any other questions. Does anybody else - no? Okay.

On motion, subheads 1.1.01 through 4.1.02 carried.

On motion, Department of Mines and Energy, total heads, carried without amendment.

CHAIR: Before we adjourn for this evening, we also have to move the minutes of the April 10 meeting of the Resource Committee. If I could have a motion to move those minutes.

On motion, minutes adopted as circulated.

CHAIR: I want to thank the Committee members for their questioning tonight and their diligence in their questioning, and the minister for the very wise and sage answers that he was able to provide, along with this officials here tonight, and the Clerk of the Committee for a great job, and the Page.

Thank you very much for your help.

On motion, the Committee adjourned.