April 24, 2018
RESOURCE COMMITTEE
Pursuant to
Standing Order 68, Keith Hutchings, MHA for Ferryland, substitutes for Tracey
Perry, MHA for Fortune Bay - Cape La Hune.
The Committee met
at 9:05 a.m. in the Assembly Chamber.
CHAIR (Warr):
Good morning, everybody.
Beautiful spring
morning, and a great morning to get started with our Estimates on Natural
Resources. My name is Brian Warr and I'm the MHA for Baie Verte - Green Bay and
it'll be my pleasure to chair your meeting this morning.
Before we start,
I'd like to ask the Resource Committee to introduce themselves, please.
MR. HUTCHINGS:
Keith Hutchings, MHA, District of Ferryland.
MS. DRODGE:
Megan Drodge, Researcher with the Official Opposition Caucus.
MS. MICHAEL:
Lorraine Michael, MHA, St. John's East - Quidi Vidi.
MR. MORGAN:
Ivan Morgan, Researcher, NDP Caucus.
MR. LANE:
Paul Lane, MHA, Mount Pearl - Southlands.
MR. FINN:
John Finn, MHA, Stephenville - Port au Port.
MR. BRAGG:
Derrick Bragg, MHA, Fogo Island - Cape Freels.
MS. PARSONS:
Pam Parsons, MHA for Harbour Grace - Port de Grave.
MR. DEAN:
Jerry Dean, MHA, Exploits.
CHAIR:
Thank you very much.
Minister, we'll start off
with you with some comments and perhaps your staff can introduce themselves as
well.
MS. COADY:
Thank you, Mr. Chair.
And thank you all for
being here on such a lovely day. My name is Siobhan Coady. I'm the MHA for St.
John's West, Minister of Natural Resources, and it's our pleasure to be here
this morning. I've brought our full team for whatever questions you may have
this morning, but most importantly I have the parliamentary secretary.
Perhaps what I'd like to
do is turn to the parliamentary secretary and then let our team introduce
ourselves for the Broadcast Centre to hear their voices.
MR. LETTO:
Graham Letto, Parliamentary Secretary, Natural Resources.
MR. MCINTOSH:
Gordon McIntosh, Deputy Minister of Natural Resources.
MR. CANNING:
Good morning.
Perry Canning, ADM, Mines.
MR. COWAN:
John Cowan, ADM, Energy Policy.
MR. TRASK:
Doug Trask, ADM, Royalties and Benefits.
MR. IVIMEY:
Philip Ivimey, Departmental Controller.
MS. NOSEWORTHY:
Tanya Noseworthy, Executive Director of Planning and Policy Coordination.
MR. WHITE:
Keith White, Executive Assistant to Minister Coady.
MS. QUINTON:
Diana Quinton, Director of Communications.
MS. COADY:
Thank you very much and welcome everyone this morning, and thank you to my team
for being here. It's an exceptional team; responsible for approximately a
billion dollars in revenue to the provincial government each year, this
department is. I thank all the officials here for their efforts and their
continuing efforts on behalf of the people of the province of Newfoundland and
Labrador.
Really, the Department of
Natural Resources is focused on three main areas: oil and gas development and
prospects; we also have a division responsible for mines and the geological
survey, and work around the mining industry; and we also have a full division
responsible for electricity, including Muskrat Falls Project, as well as
renewable energies.
As you know this year
we've worked very, very diligently on
Advance 2030, which is a process to see the development of oil and gas in
the province of Newfoundland and Labrador. We're really focused on maximizing
our efforts for the development of oil and gas. The
Advance 2030 spells out a very good
plan, I think, that really will focus on exploration as well as project
development.
I think what you've seen
with Advance 2030, we've had about
150 stakeholders involved in the development of that plan and we've also had a
tremendous response from the community all over Newfoundland and Labrador in
terms of making sure that we develop our offshore oil and gas, and we're very
pleased about that. You also see through Nalcor Energy, the oil and gas
division, we're talking about moving that to a stand-alone Crown corporation
this year and really utilizing this Crown corporation to help us drive the
developments under Advance 2030.
Of course, we work
directly with the Department of Natural Resources to accelerate the growth and
opportunity of our petroleum industry, returning significant value to the people
and economy of Newfoundland and Labrador. These efforts will also result in
greater transparency and accountability for the oil and gas division as well. It
won't be a subsidiary. It will focus directly on achieving
Advance 2030.
Budget 2018
is committing $60 million over 10 years to the Innovation and Business
Development Fund, which is focused on strategic investments for growth in the
Newfoundland and Labrador oil and gas industry. This will support actions
outlined in Advance 2030.
Budget 2018
is supporting mineral
exploration and growth in the mining industry, a major contributor to the
economy particularly in rural areas of the province. Commitments include $1.7
million for the Mineral Incentive Program, including the Junior Exploration
Assistance Program, to encourage mineral exploration and to the support the
mining industry. We've seen great growth in the mining industry, specifically
around prospecting in the last number of years. We've had about 21,000 claims
staked over the last couple of years which is more than the last five years
combined.
We have
approximately $4.5 million allocated for the geological survey which maps our
diverse geology and provides sophisticated geoscience to help position the
province globally as an exciting prospect for commodities including iron ore,
gold, nickel, copper, zinc and industrial minerals. Cobalt is also an important
mineral for us as well.
Budget 2018
is focused on completing the Muskrat Falls Project through an equity investment
of $723.9 million in Nalcor, and of course we are working diligently for
electricity rate management. Government is also exploring other renewable energy
opportunities to provide the province with a potential for use here at home by
residents, business and industry, as well as exporting to satisfy the clean
energy demands of the North American market. You would've seen in
Advance 2030 some reference to
offshore wind opportunities and how we may be able to work with some of our oil
and gas partners in developing that opportunity, much like what we are seeing in
some other locations around the world.
I'd
like to note that if you exclude the funding from Nalcor, the
Canada-Newfoundland and Labrador Offshore Petroleum Board and the Business
Development Fund and other items outside the direct department's control, the
department's core operating budget is approximately $3 million. So that's what
we really use for activities within the Department of Natural Resources. So it's
a very small – when I say a small department, it's a small, effective department
that is very cost effective.
There
are approximately 154 employees in the department. Our current staffing levels
are the same as they were a decade ago, so we haven't had that kind of massive
increase you've seen in other departments. For 2018, salaries are $13.1 million.
We have
a great team at the Department of Natural Resources who are committed to moving
very forward on continuing to develop our economy and continuing to develop the
opportunities that we have in the province to the benefit of Newfoundlanders and
Labradorians.
I want
to thank them on behalf of government and on behalf of the people of the
Province of Newfoundland and Labrador for their continued hard work, their extra
efforts and the great success that they've had. I can tell you there is a lot of
energy – no pun intended – in the department focused on the areas that I think
are very important to the people of the province.
This
year, I would like to note as well, as you know, we are situated on Elizabeth
Avenue in the Natural Resources Building. We have now, as you're well aware
through the Estimates process, a number of departments that have come together.
We have welcomed three new divisions within the Department of Natural Resources
– within the building. I shouldn't say the department, within the building.
We've welcomed Labour Relations, Human Rights and Fines Administration, they are
now housed within the building of Natural Resources. We welcome them there.
They're a great addition to us.
We are,
I think, completely filled now in the building, or very close on completely
filled, every square inch is completely filled, which I think is a very good
thing for cost measures for government.
Having
said that, I'll leave it at that, and welcome any questions that you may have
about the budget or about anything that we're doing at the Department of Natural
Resources.
CHAIR:
Thank you, Minister.
I just
remind the department, these people should know, but if you're asked to answer a
question, just say your name, look for your tally light and go ahead and answer
the question.
I'd ask
the Clerk to call the first subhead.
CLERK (Hawley George):
1.1. 01.
CHAIR:
Shall 1.1. 01 carry?
Mr.
Hutchings.
MR. HUTCHINGS:
Thank you, Mr. Chair.
Good
morning. I don't have anything, Minister, on 1.1.01, Minister's Office. I'm sure
things are going well there.
MS. COADY:
Very streamlined. As you can
see we're continuing to fine tune the Minister's Office and bring costs down.
You'll see a decrease again this year.
MR. HUTCHINGS:
Okay, thank you.
1.2.01,
Executive Support, last year, Minister, in
Budget 2017,
Salaries were reduced $1,689,800 to $1,427,900. When we asked about that in
Estimates last year, you indicated there was an elimination of associate deputy
minister position and the elimination of the executive director of iron ore.
In
recognition of that reduction last year, the salary line for '17-'18 went over
$147,300. I'm just wondering: Was there a position added back or the result of
that increase was a severance payments or exactly what it was?
MS. COADY:
Thank you for the question.
You're
exactly correct, it is severance and leave payouts required for the former ADM
of Petroleum Development who retired during the year. A big loss to the
department, I can tell you he had a wealth of knowledge, but that exactly is
what it was, it was severance and payout. As you can see in 2018-2019 Estimates,
we're back down to $1,458,000, which really the variance there is due to step
costs for the current executive staff.
Last
year's budget was $1,427,000, this year's budget will be $1,458,000 and that's
just step increases.
MR. HUTCHINGS:
Okay.
When I
look at Salaries I can see the increase, so that would be basically due to step
increases?
MS. COADY:
Correct.
MR. HUTCHINGS:
Okay, thank you.
Transportation and Communications, under the same heading, 1.2.01, Executive
Support. Last year, $83,000 was budgeted, $100,000 was spent. Just wondering
what caused the line to go over budget in regard to that. What would that be
about?
MS. COADY:
Certainly. Increased travel
by the new deputy minister, making sure that we are maximizing efforts,
specifically, around oil and gas. We also have a new ADM of Royalties and
Benefits. We're glad to have both of them with us. There was additional travel
to support that position and making sure that he had the supports and the
information and knowledge that was required.
Certainly, I can give you kind of where we are in travel. We do take in a
significant amount of travel in the Executive branch of Natural Resources, in
support of both mining activities and oil and gas activities and even in the
electricity sector.
Just
for example, the World Energy Cities Partnership AGM, the Offshore Technical
Conference, which is coming up now shortly, Offshore Europe, the Baie Verte
Mining Conference, the Expo Labrador, the Energy Mines and Ministers' Conference
and the Labrador West Iron Ore conference. So really making sure that we have a
good executive presence at some of these opportunities to really promote both
the mining and minerals as well as the oil and gas and the electricity sectors.
MR. HUTCHINGS:
So some of these events,
Minister, executive would attend, would we be involved in having booths and
those type of things for marketing and all those types of things?
MS. COADY:
Certainly, and that will
come in a different Estimate, but absolutely.
For
example, at the Offshore Technical Conference, which is coming up shortly, as
you're very familiar with that conference, there would be a booth from
Newfoundland and Labrador. We do have a prominent position on the floor there
attracting people specifically around the oil and gas that one is. I'll use PDAC
in Toronto, we were there in February, I believe.
OFFICIAL:
March.
MS. COADY: In
early March, we were there
in early March and, again, Newfoundland and Labrador would have a prominent
location on the floor of that convention centre as well.
Very
important for us to continue to promote both oil and gas and the mining sectors.
I can tell you that we have ongoing dialogue with a number of companies, both
from supply and services as well as operators, producers and developers who will
visit the booth to gain more information. It is a valuable investment, I
believe.
MR. HUTCHINGS:
So just on that note, it may
not be this section, but have we seen an increase or decrease in those
expenditures for the past few years in terms of – or is it stable?
MS. COADY:
Very stable. Certainly,
within this fiscal climate we haven't been able to increase that. What we've
done is fine tuned it, making sure that we're choosing the right locations at
the right time to be partner in, but, no, there's a promotions plan within the
department, we're sticking to that plan. As we move forward, if we identify
other opportunities, we'll do so, but, at this point, it's pretty stable.
MR. HUTCHINGS:
Okay.
Minister, in preparatory work for Budget
2018, would you have gone and done a zero-based budgeting process for the
department again this year?
MS. COADY:
Absolutely. Each line – and
you'll see they're all very fine tuned, you'll see even $100 changes sometimes
and that is the fine tuning that we do.
Under
Transportation and Communications, as you can see, there was a $100 reduction
from budget 2017-18 to this year, and that really is looking at very
specifically how much the cost will be. We don't anticipate the overage that we
had in '17-'18 because positions are now established within the department and
we'll be making sure we hold to that budget.
MR. HUTCHINGS:
Would Nalcor be required to
do zero-based budgeting process as well?
MS. COADY:
Correct.
MR. HUTCHINGS:
Okay. That's it for me on
that particular section, 1.2.01.
Just
another question I had, in your opening comments you mentioned
Advance 2030. The Executive Support
speaks to the establishment and evaluation of policies and objectives.
Who's
the lead in regard to Advance 2030
and oversight and execution of that particular plan through your department?
MS. COADY:
The Royalties and Benefits
division of the department. The DM of Royalties and Benefits really does have
the Industry Council and the responsibility for the Industry Council, therefore
the responsibility for Advance 2030.
MR. HUTCHINGS:
Okay.
MS. COADY:
And doing a great job of it,
by the way.
MR. HUTCHINGS:
Yeah.
Forgive
me, I know I read through it, but is there a reporting process with
Advance 2030 in regard of goals and
milestones and hitting those targets?
MS. COADY:
Yes, certainly. As you know,
we have an Industry Council that was developed last year –
MR. HUTCHINGS:
Yes.
MS. COADY:
– and they're really helping
us with the oversight and making sure we're moving through the implementation
plan for Advance 2030 and, of course,
I am the chair of the committee. So that reports back to us and we report back
to Cabinet.
MR. HUTCHINGS:
Okay, thank you.
Mr.
Chair, I'll move to 1.2.02 Administrative Support. Last year under Salaries
there was only $835,000 budgeted and $985,600 was used. I'm just wondering what
the issue was in regard to that difference?
MS. COADY:
Budget $985,600. This is
under 1.2.02?
MR. HUTCHINGS:
1.2.02, the first line,
Salaries.
MS. COADY:
Yeah.
Last
year's budget was $985,600, the actual spend was $835,000. The savings were a
result of a vacant clerk position in the Information Management Division during
the year, as well as a vacant account and budget analyst position in the Finance
Division.
As you
can see from the Estimates this year, the variance is going to be – the estimate
is $922,600 and the difference between the budget last year and the estimate of
this year is there is planned attrition management in the department.
MR. HUTCHINGS:
Two of those positions, are
they vacated because of attrition or are they kept, or –?
MS. COADY:
I'm turning to the person
responsible to make sure they are kept.
MS. NOSEWORTHY:
The clerk position has since been filled. The accountant budget analyst position
is under review for attrition.
MR. HUTCHINGS:
I'm sorry; the accountant
budget –
MS. NOSEWORTHY:
Position.
MR. HUTCHINGS:
Is under review?
MS. NOSEWORTHY:
There are two positions there. The accountant and budget analyst position.
Budget analyst will be filled, the accountant position won't. The clerk II has
been filled since.
MR. HUTCHINGS:
Okay.
The
accountant position would be eliminated through attrition. Okay.
MS. NOSEWORTHY:
Yes.
MR. HUTCHINGS:
Okay.
The
Finance Minister, too, spoke of an attrition plan and reducing the public
service through that means. The attrition plan for your department, Minister,
could you just give me a little rundown on that and what it is. Are there
targets set or progress made to date? Just give me a general overview, if you
could.
MS. COADY:
Certainly. I'm just getting
my notes out here because – just one moment, I want to make sure I have the
correct notes.
MR. HUTCHINGS:
Sure, no problem. Yeah.
MS. COADY:
I had hoped to have them all
written on one piece of paper. Unfortunately, I do not. There is a 1 per cent
attrition target for the department.
MR. HUTCHINGS:
Okay.
MS. COADY:
So we're working through and
looking at it on an individual by individual position basis. As a position
becomes vacant – as we know, people are retiring and we're considering the tasks
performed by that person and that job, and moving forward with meeting those
attrition targets.
MR. HUTCHINGS:
Okay, and that's 1 per cent.
That 1
per cent, is that related to actual positions or people? Because we know there
are often positions that are left vacant. Is it 1 per cent of actual all
positions?
MS. COADY:
One per cent of all
positions.
MR. HUTCHINGS:
Okay. Thank you.
Do we
have any idea of how many vacant positions are in your department today?
MS. COADY:
Yes; that I have.
MR. HUTCHINGS:
Okay.
MS. COADY:
There are 21 vacant
positions that we have currently.
MR. HUTCHINGS:
Okay. Would they be moving
forward through the public service to fill those positions, all of them?
MR. NOSEWORTHY:
Yes, there are a number of positions with the Public Service Commission right
now up for recruitment and some are working through the process.
MR. HUTCHINGS:
Okay.
My
final question on that one. So the intent is to fill these 21 positions?
MR. NOSEWORTHY:
Yes.
MR. HUTCHINGS:
Okay.
MS. COADY:
Just if I may, we have a
number of new hires as well to existing positions. We've just, over the year,
hired about 11 new people. These are hires to existing positions and they were
public hires, I'll call them, through the Public Service Commission.
MR. HUTCHINGS:
Okay.
Was
there any that would not have gone through the Public Service Commission?
MS. COADY:
No. We have one 13-week
position. That would be the only one that would not go through. That was a
position we required for the Muskrat Falls inquiry. We had to go through a
number of boxes and that type of thing.
MR. HUTCHINGS:
Mm-hmm.
MS. COADY:
As we move those materials
over to the public inquiry, that position will no longer be required.
MR. HUTCHINGS:
Okay.
That
would've been for the past fiscal year, would it, the 13-weeker?
MS. COADY:
Correct.
MR. HUTCHINGS:
Yes, correct.
Okay.
Thank you.
MS. COADY:
And I think that person is
going to remain for some part of this, what I'm going to call this fiscal year,
because of course we're still moving through, making sure everything is at the
public inquiry.
MR. HUTCHINGS:
Okay. Thank you.
Under
1.2.02, under Revenue, I'm just curious, there's a marker there of $5,000 in
revenue that wasn't received in prior years. Is this kind of a placeholder for
some kind of revenue stream, or what would that be? Provincial Revenue, it's
listed as.
MS. COADY:
Now I see it. Does anybody
know what that is?
MR. IVIMEY:
That is more or less a placeholder for miscellaneous revenue within the
department. That's the only spot that we have in the department for any kind of
a miscellaneous revenue that we receive such as supplier credits or refunds or
repayments of employee expenditures or anything like that. The $5,000 more or
less is a placeholder.
MR. HUTCHINGS:
Sure.
MR. IVIMEY:
Historically, we have hit that mark but it's just in the past year we actually
had no miscellaneous revenue received.
MR. HUTCHINGS:
Sure. Yes, okay.
Thank
you. I'm good with that section.
1.2.03,
Administrative Support. I'm just wondering, in Purchased Services there's
$52,400. I think before this was told to us that it was a placeholder for
possible vehicle purchases. Is that the same again?
MS. COADY:
Thank you.
It's
actually not a vehicle purchase; this was required to address some of the
deficiencies in the racks where we keep our core storage. When we did a review
of where the core storage – as you know, the core storage for mines, quite heavy
pieces of core samples and when we looked at the racks, they needed to be
replaced and that $52,400 was used to do just that.
MR. HUTCHINGS:
So where would these racks
be? They'd be all over?
MS. COADY:
Yeah, in the core storage
facilities around the province.
MR. HUTCHINGS:
Right.
MS. COADY:
For example, in Deer Lake.
Where else do we have them, Perry?
MR. CANNING:
There are six core storage
facilities across the province. I think we have 1.4 million metres of core; many
of these are 12- to 15-feet high. In Buchans, we understood that a number of the
shelving was constructed of wood and started to shift, so we had to have an
engineering review and manage required repairs.
MR. HUTCHINGS:
Okay, perfect.
Thank
you.
CHAIR:
Thank you, Mr. Hutchings.
Ms.
Michael, good morning.
MS. MICHAEL:
Good morning.
Thank
you very much, Mr. Chair.
Thank
you, Minister, for being here, along with all your staff. All the questions I
may have had prior to this have been asked, so I'll just continue from where we
are.
Geological Survey, 2.1.01, just a brief explanation of why the salary line is
down this year from last year's, both the budget and the revision.
MS. COADY:
Certainly.
For
context, last year was $3.74 million. The actual spend was $3,723,000. We had
some vacancies within the division, partially offset by additional costs for
some severance. When the puts and the takes come through and, over a year, some
people were vacant and we had to fill those positions, we had some severance, it
went down a little tiny bit. This year, it's going to be $3,612,000 and the
variance is due to lower salary costs for 2018-19 as a result of some attrition
management due to retirements within the division.
MS. MICHAEL:
Perhaps you could give us a
description right now as well in this division of the staffing component. Do you
have vacancies at the moment?
MS. COADY:
Yes, we do. I just have to
look them up.
I'm
just going to go through some – we do have a number of positions vacant in the
Geological Survey: a geologist II position, a geologist III position, another
geologist II in the Mineral Lands for example. Some of these positions are with
the Public Service Commission at present, some people are temporarily positioned
elsewhere and we're waiting to backfill them.
There
are a number of positions that are available. I can add them up at present: One,
the interview has been conducted and we're waiting on the board to report;
another is now with Executive for approval; there's another position that is
temporarily relocated.
MS. MICHAEL:
Thank you very much,
Minister.
Under
Transportation and Communications, there's a variation this year downwards. Last
year both the budget and revision lines were $557,700 and this year it's down to
$468,600. Could you give us an explanation of why?
MS. COADY:
As you know, each year we
look to see where the Geological Survey will be located in the province; we have
to allocate certain monies of helicopters, for example, if they're in remote
areas. What we've done here is looked at a reduction in the Transportation and
Communications really for that very purpose.
There's
been some moving around in the way that we can conduct our work during this
year. What that is denoting is that there has been a change in the allocations
and movement around the province this year.
MS. MICHAEL:
And it's part of the
zero-based budgeting?
MS. COADY:
Correct.
MS. MICHAEL:
Okay, thank you very much.
One
other question, Professional Services – again, last year the budget was $33,500,
but $55,400 was the revision. Can you explain what the extra cost was, that you
hadn't anticipated?
MS. COADY:
Absolutely.
This is
an unanticipated requirement to update field data collection processes. We
actually had to – the Department built an app so that we can have it on a
hand-held device and that's really for data collection in the field. We made
sure because that was a requirement to collect field data, which is important
for our prospectivity and for prospecting as we go forward, we made sure that
was allocated.
That's
the difference and now we've rightsized it again this year and we don't
anticipate that to happen.
MS. MICHAEL:
Okay, thank you very much.
MS. COADY:
If I may I will note, as you
know, there's been a move within Transportation and Works. We're moving a lot of
our vehicles into Transportation and Works and we'll be leasing them. There's
been some movement in from both Supplies and Purchased Services to help fund
that in Transportation and Works. There's been a movement of funding.
MS. MICHAEL:
Okay, so under Purchased
Services that explains the extra 10,000 last year?
MS. COADY:
Correct; $36,000 will go to
TW for that requirement.
MS. MICHAEL:
Okay, thank you very much.
That's
happening with a number of departments, I understand.
MS. COADY:
Yes.
MS. MICHAEL:
Coming down to Grants and
Subsidies, can you explain this line to us, Minister?
MS. COADY:
Certainly.
The
Grants and Subsidies line includes $352,500 in funding for Defence Research and
Development Canada proposal related to disaster-risk reduction in communities.
The objective is to identify high-risk residential areas and present strategies
for cost-effective avoidance and mitigation techniques to prevent slope
stability failures from occurring.
C-CORE
– this is all for C-CORE – has submitted a proposal to the Defence Research and
Development Canada for the project; however, to obtain the funding, C-CORE
requires a provincial government department to be the signatory. So it's a flow
through.
MS. MICHAEL:
Okay.
MS. COADY:
But I think it's a really
interesting project because all it talks about are the mitigation techniques for
slope stability, and of course that would fit under what we do in the geology
department. I think it fits there very, very well. We'll receive 100 per cent
offsetting federal revenue for it, but it is an important project. It's erosion,
really.
MS. MICHAEL:
Right. Okay, well there are
probably many things in the province that could gain from that. Would that
information from Defence be information that they're going to be able to share
with the province?
MS. COADY:
That's a very good question,
I'm sure that they will be sharing their information. I'm getting an indication
that, yes, we're sharing in that information. I have to say through the
Geological Survey, we do co-operate very closely with other provinces and, of
course, the national Geological Survey, the sharing of this type of information
is incredibly important.
MS. MICHAEL:
Good.
What is
the deadline? Do you know that they hope to have that finished in this fiscal
year or …?
MS. COADY:
It's a three-year project.
MS. MICHAEL:
Okay, thank you very much.
Just a
couple of general questions: Last November, you issued a release on new research
for potential gold resources in Central Newfoundland. Is there any uptake yet on
that information?
MS. COADY:
Certainly, we've had a
tremendous increase – I was going to say boom, but a tremendous increase in the
interest in Central Newfoundland. It really is based a lot on what the
Geological Survey has been finding. So if you overlay a map of where some of the
staking has taken place in the last year and overlay where the geological survey
was, you'll see that they are very closely aligned.
Twenty-one thousand claims staked in 2016 and 2017. A very high interest in
gold. We do have Marathon Gold who is doing a lot of research and a lot of
exploration. They're moving very, very well forward. We have others that are
doing a lot of work in that area as well. So a high level of interest in gold in
Central Newfoundland.
MS. MICHAEL:
Minister, I know
environmental studies isn't part of your department, but we do know that gold
mining is one of the most unfriendly environmental mining processes.
Do you
have concerns about that? Is your department involved in any way in looking at
what can be done with gold mining that would cause less endangerment to the
environment?
MS. COADY:
Well, certainly, we work
with companies that are involved in gold mining, companies that are involved in
any of our work with mines and minerals to make sure that they have remediation
plans, to make sure they have the funding for remediation plans. So one the most
important things, I think, that the department has to ensure is making sure that
they can fund the remediation.
We also
work with companies on an ongoing basis to make sure that they're using the
latest techniques, that they're doing some innovations to try and reduce the
harm to the environment. We have a number of people within the department that
work hand over hand with companies to make sure that they're doing as little
disruption as possible.
I don't
know if the ADM would like to make a comment on that because I think it's an
important point?
MR. CANNING:
It is an important point. Thank you for raising it.
I would
say that, currently, we're in the exploration phases and any development
proposal from a proponent would go through a significant and deep environmental
assessment. That's where those matters about how they're going to process their
gold, what will the tailings look like and all that stuff, that's where that
would really come under a pretty glaring light to understand what the impact
will be and how to mitigate such impacts.
MS. MICHAEL:
Thank you very much.
Obviously, the environmental assessment process will be the most important step.
So during the exploration stage, the actual exploring doesn't have any effect,
I'm aware of that because it's the process, rather, that causes the
environmental damage.
MS. COADY:
An important distinction, of
course, is prospecting versus a mine under development, but I will say that I
think we all want responsible development and we want to ensure that those that
are involved in mining activities or any of the natural resources extraction
activities are doing so responsibly and working with companies to ensure that
they are using the most innovative techniques.
Again,
as I said, the department is very focused on remediation so that we can – once
the mine is complete, there is remediation and there are funds available to
remediate, I think, is critically important.
MS. MICHAEL:
Right.
CHAIR:
Ms. Michael, I have to remind you your time is expired.
MS. MICHAEL:
Okay, thank you very much.
CHAIR:
Thank you.
Mr.
Hutchings, from 2.1.01 to 2.1.03.
MR. HUTCHINGS:
Thank you, Mr. Chair.
Minister, just to reference comments you made in regard to Purchased Services
and going from a leasing process as opposed to purchasing. Could you just
explain that again or a few more details on that?
MS. COADY:
Certainly.
As you
know, there will be a centralized point within government in Transportation and
Works responsible for vehicles. So they'll maintain them, they have the
inventory of them and they replace them. It's really to maximize the
availability and use of vehicles within government so you don't have, for
example, a vehicle sitting parked in a parking lot – and I'll use Natural
Resources – in Natural Resources that could be utilized by another department if
there was a centralized pool.
So some
of the monies that were in various divisions within Natural Resources and with
other divisions around government are now being pooled and put towards one
central agency. So it will be like leasing. We would go and we would say to
Transportation and Works that we would need a vehicle for this particular period
of time, this type of vehicle, and they'll make sure that we have it, but it
maximizes the use of vehicles all across government.
MR. HUTCHINGS:
So you're leasing within your pool. When you say leasing, you're not meaning you
stopped purchasing vehicles and you're leasing from agencies?
MS. COADY:
No, sorry. I should clarify that.
MR. HUTCHINGS:
Yeah.
MS. COADY:
No, it's that we would be utilizing the centralized service within government to
have our vehicles.
MR. HUTCHINGS:
Across all boundaries.
MS. COADY:
Correct.
MR. HUTCHINGS:
Okay.
You
also mentioned there was an app that was developed within the Geological Survey
Division. Was that done in-house or was it done outside privately?
MR. CANNING:
The app is being done by an outside developer.
MR. HUTCHINGS:
Okay.
MR. CANNING:
The previous software is no longer available and supportable, so we want this
app to be on the devices that folks will take into the field – iPads, I'd call
them – so they can bring back their information after the day and download it
into a laptop computer.
MR. HUTCHINGS:
Sure.
So who
would have been doing that piece of work and what's the estimated cost?
MR. IVIMEY:
That I'm going to have to
get back to you on.
MR. HUTCHINGS:
Okay.
MS. COADY:
If I may, it wouldn't have
been a tremendous amount because you can see the difference is $33,000 to
$55,000.
MR. HUTCHINGS:
Sure.
MS. COADY:
I'll make a good stab and
say probably $20,000 only because I see the change in the estimate there.
I think
it's really crucial for us to understand that having this on a handheld device
allows us to have real-time data in the field. Certainly, if you go back in
time, it would have been by handwritten notes and those would have had been
transcribed over. This gives us real-time data in the field.
MR. HUTCHINGS:
Right.
MS. COADY:
So it's a great tool and a
great use of funds to make sure that we have that real-time data.
MR. HUTCHINGS:
Okay.
Minister, in Estimates last year, 2017-2018, two line items here, Supplies and
Purchased Services. The estimated last year for Supplies was $116,100 and for
Purchased Services was $403,200. The stated budget for 2017-2018 and the
documentation this year, those two numbers are different. I wonder if we could
get an explanation on why those numbers are different.
MS. COADY:
Could you tell me what – are
you at 2.1.01.
MR. HUTCHINGS:
Sorry, 2.1.01, Geological
Survey.
I'm
referencing under Operating Accounts, Supplies, we can do that one first. Last
year, the estimate in 2017 was $116,100. What's in your document this year for
the budget for 2017-2018, which would be the estimate, is $65,100.
I'm
wondering why it was stated one number in the estimate last year and it's
restated to a different number this year?
MS. COADY:
I'm going to ask Phil to
answer that question.
MR. HUTCHINGS:
Okay.
MR. IVIMEY:
The difference in those
numbers is the items that the minister referred to earlier in regard to vehicles
and leases, so the costs that were associated for the fuel for our vehicle fleet
and repairs and maintenance for the vehicles. The repairs and maintenance would
have been under Purchased Services and the cost of the fuel would have been
under Supplies.
So the
funding for two of those items were transferred from our department over to TW
because they now are responsible for those items. The numbers were restated in
those two particular areas.
MR. HUTCHINGS:
Yeah, so it was a policy
decision made during the fiscal year which resulted in, I guess, what we voted
on here in the House, then it was a reallocation of those dollars. That change
there from last year to this year would show up, I guess, in TW?
MR. IVIMEY:
Correct, exactly. You would
see the exact opposite of those numbers in TW.
MR. HUTCHINGS:
Right, okay.
I won't
ask you about Purchased Services because, I guess, that covers it off as well.
Just a
broader question in regard to the role that Research Development Corporation had
played, which evolved, I understand in the last budget, into InnovateNL, and the
RDC would have interaction with the mining sector and different opportunities
that would exist.
Is that
still a critical part in some of the things you've talked about recently in
regard to promotion, Advance 2030? Is
there still a connection, or would we say opportunities to innovate and drive
that sector through InnovateNL? How does that work today? Is there any
difference from RDC, and what is it?
MS. COADY:
Thank you. An important
question.
The
promotions and Geological Survey and all of that remains with the Department of
Natural Resources. Funding for companies or organizations who wish to do
innovations would still be under InnovateNL. Companies would go to InnovateNL as
they did to RDC previously for that funding pool.
MR. HUTCHINGS:
Okay.
In your
opening statement I asked about the oversight of
Advance 2030. No doubt, under the
auspices of InnovateNL that would be a mechanism to drive that opportunity that
you outlined in Advance 2030.
Those
that oversee Advance 2030 in the
department, they must be in contact with InnovateNL to see exactly what's
happening to make sure that this component or InnovateNL is being used to drive
the Advance 2030. I'm just thinking
about the synergies and the interconnection, they can't be doing it in
isolation, I would suggest.
MS. COADY:
Okay.
Well,
Advance 2030 is for the oil and gas
industry, and you're correct –
MR. HUTCHINGS:
Yeah, okay, but I mean in
terms of overall mineral and development.
MS. COADY:
Yeah.
Advance 2030,
the department liaises with TCII on a regular basis, obviously, to ensure that
we are working together. I think that's very, very important. We are talking to
the folks at TCII about Advance 2030
in how we move the oil and gas industry.
We are
in the early stages of developing a new minerals strategy for the province.
We've announced that we will be working with industry and the communities to
develop – similar to what we've done with
Advance 2030 we're going to do in the minerals industry.
MR. HUTCHINGS:
Okay.
MS. COADY:
We will be working with
TCII, of course, on that plan and looking to have synergies with that
department.
TCII
does hold the responsibility for InnovateNL, and they do look to the mining
industry, they do look to the oil and gas industry for potential projects as
well.
MR. HUTCHINGS:
Okay. Thank you very much.
I just
wonder, Geological Survey, can we get maybe what projects are planned for this
year?
MR. CANNING:
There are a number of projects. In the Labrador Trough we are looking at some
regional mapping. If you look at the map, this is a part of the Labrador Trough
that's kind of north of Lab West.
MR. HUTCHINGS:
Yes.
MR. CANNING:
They are there looking for iron, nickel, copper, platinum group, some uranium
and gold formations in those sediments up there.
On the
Island – I don't know if you can see this map but it's kind of spotted across.
Central Newfoundland base metals focused on the Buchans-Robert's Arm group of
rocks. Newfoundland industrial minerals, we're focused here on fluorite
mineralization in the St. Lawrence area. Regional gold projects in Newfoundland
and Labrador: Gander Bay to Beaver Brook and the Hopedale area.
MR. HUTCHINGS:
Okay. And those would be new projects?
MR. CANNING:
They're a continuation because –
MR. HUTCHINGS:
Sure. Okay.
MR. CANNING:
– they continue to work on those areas and update their geological maps as they
spend more time in the field.
MR. HUTCHINGS:
Yes.
MS. COADY:
Could I add to that?
I think
it's important to note that we work very closely with the federal government. If
they're doing a geological survey of Canada, any time they're doing any work in
the province, and they do work with us, we work together to help offset some
costs and share data information.
MR. HUTCHINGS:
Sure.
MS. COADY:
Now we'll be working with Quebec, especially in the Labrador Trough. I just want
you to understand, because I think this is an important point, Quebec also does
a geological survey. Newfoundland and Labrador does a geological survey. You
know that the Labrador Trough is mostly on the Labrador side but a lot also on
the Quebec side. So sharing information and data so we can help advance
opportunities in that area I think is important.
MR. HUTCHINGS:
Okay.
Thank
you.
CHAIR:
Thank you, Mr. Hutchings.
Ms.
Michael.
MS. MICHAEL:
Thank you very much, Mr. Chair.
I'm
moving on to 2.1.02, Minister, Mineral Lands under Salaries. Can you explain
what's happened there? Because we've gone from the budget of $1,290,700 down to
$1,254,900.
MS. COADY:
Certainly. The revised budget for 2016-17 is due to vacancies within the
division during the year. As I said, we have vacancies occur and by the time you
recruit for them you have a little bit of shortfall there.
Coming
to 2018-2019, you'll see there's a slight decrease, lower salary costs for 2018,
that's because we're planning less overtime.
MS. MICHAEL:
Okay.
MS. COADY:
So that's what that is for,
'18-'19, it's just slightly less overtime.
MS. MICHAEL:
That is something you do
have control over?
MS. COADY:
It certainly is, and we're
trying to manage it a little bit better and save some money that way.
MS. MICHAEL:
Okay. Thank you very much.
Under
Supplies, it's not a lot, but the budget last year was $34,000, the revision was
$12,000 and this year $25,400. What are the supplies there? I guess this is a
real number for this year based on zero-based budgeting.
MS. COADY:
The difference between the
$34,000 and the $12,000 was lower than anticipated supply expenditures for
vehicles. Things like tires and bedliners, as well as the cold storage supplies,
trays and things of that nature. We didn't need them. The anticipated
expenditure wasn't there. So that's the difference between budget and the
revised budget.
The
$25,400 is really zero-based budgeting, right-sizing, making the reductions as
we see required.
MS. MICHAEL:
Okay, thank you.
Under
Professional Services, last year the budget was just $1,300 but $18,000, looks
like, was expended, and this year it's gone up. The estimate has gone up to
$8,600 from last year's estimate. So just an explanation, please.
MS. COADY:
Certainly. The difference
last year, which is fairly significant I guess between the budget and the
revised. We had to have the Mineral Rights Adjudication Board do a hearing last
year that we didn't anticipate, as there was a grievance filed under the
Mineral Act. It was between two
parties that shared a boundary from a mining and minerals perspective. So the
Mineral Rights Adjudication Board was assembled to make a ruling, and they did
do that, and we don't anticipate that occurring in this year as well.
If you
look at this year, we've put in $8,600 again. That's right-sizing. It's an
increase, just looking at where we think the requirements will be under
zero-based budgeting.
MS. MICHAEL:
Would the $18,000 have been
the expense of the actual hearing, or would there have been legal costs in there
as well?
MS. COADY:
I'm not sure about legal
costs. I'm going to turn to my – no, no legal costs. It's just the expense of
the hearing.
So as
you know, we go the Independent Appointments Commission to get the adjudicators,
which we did last year, pulled them together, and that hearing did take place
and resolve the issue that was required to be resolved.
MS. MICHAEL:
Thank you very much.
Coming
down to Purchased Services, again, the revision was quite higher than the
budget. The budget was $55,000 and the revision was actually twice as much:
$110,000. This year, it's down to $69,600. If we could have an explanation,
especially of the revision last year.
MS. COADY:
Certainly.
I
mentioned earlier about the core storage facility and we did the inspections.
MS. MICHAEL:
Uh-huh.
MS. COADY:
That's the expenditure for
those core storage facility inspections that were required. We also had higher
than anticipated Moneris fees associated with departments online claim-staking
system. The combination of the two increased the budget.
As I
mentioned to you, we had quite a lot of staking happening in '16 and '17 because
of the gold, I think, in Central Newfoundland, but that kind of drove a lot of
the staking that took place, so the Moneris fees were up. I think the majority
of it would have been with the core storage facility inspections that we carried
out.
MS. MICHAEL:
Okay, thank you.
With
the increase this year over last year's budget line, what are you anticipating
in your budgeting there?
MS. COADY:
Well, certainly that is
again for zero-based – when they went out and they looked at their budget and
looked at what the requirements were, it felt that $69,600 was a better
reflection than the $55,000. I don't know if I turned to the ADM if there's
anything in particular there that drove that price or that cost.
OFFICIAL:
It's Moneris.
MS. COADY:
The Moneris fees.
MS. MICHAEL:
The Moneris fees, okay.
MS. COADY:
Yeah, they're anticipating
that there will continue to be more Moneris fees because of the interest in the
mining industry.
MS. MICHAEL:
Okay, thank you very much.
Going
on to 2.1.03, here there's a big increase under Purchased Services. The budget
was $656,800, the revision was slightly up $665,800, so we need an explanation
there. This year in your zero-based budgeting, you've gone up to $1,153,800. If
we could have an explanation of that line.
MS. COADY:
Certainly.
That
was anticipated expenditures under orphaned and abandoned mines.
MS. MICHAEL:
Yes.
MS. COADY:
If you recall even last year
that we had a plan, we started in 2016-2017, we budgeted an additional $300,000
last year –sorry, '16-'17 we put in an additional $300,000; '17-'18 is an
additional $690,000. In '18-'19 it's $1.152 million, and that is all around the
requirements and commitments to ensure that we address the concerns around
orphaned and abandoned mines.
When we
came into government, I understood that there was a requirement to do a lot of
work around orphaned and abandoned mines. So we set out on a plan to do just
that because it is so essential to the environment. We don't want any risk, or
we want to eliminate as much risk as we possibly can on those.
MS. MICHAEL:
Are any of these orphaned and abandoned mines at a stable point or will there
always be expenses involved with them?
MS. COADY:
They're stable in that we're not anticipating any major disruption. But there is
a continuance. We set out a four-year plan, just to remind you, under this
orphaned and abandoned mines. Next year we're going to allocate another amount
of money to bring these up to a point where we think that we've addressed some
of the issues.
I'm
going to turn to the ADM because I think this is again one of those important
issues that we've got to continue to address.
MR. CANNING:
Thank you, Minister.
Thank
you for the question. One of the things we're doing with respect to the orphaned
and abandoned mines is developing a risk registry. We didn't have a risk
registry. We did not have a risk matrix. So we're working with our colleagues in
Environment to develop a risk matrix and then assess each one of these
facilities to understand what mitigations we require over a period of time and
how we hold ourselves accountable to achieve those mitigations.
For the
last number of months the teams have been developing – it's important to get the
process down to develop a risk matrix and all the questions that get you to what
risk you might feel is appropriate for each line item associated with these dams
and orphaned and abandoned sites.
We're
going to be doing that, and that would give us an overview and a clear picture
and we'd be able to go in then to our risk registry and say, if these are our
mitigations that we had planned upon are we doing the appropriate measures to
achieve that. So this would give clarity and I think some transparency to that
whole process.
The
other thing that we're doing is ensuring that when we have development
agreements, folks have to ensure that they have the funds available for
reclamation and closure so that the people of the province are not held
accountable for the financial costs associated with mining development. All the
great benefits that come from mining, and clearly there are many, the one thing
we want to make sure is that we are not assuming the risk.
MS. COADY:
I think, if I may, that is
critical as we move forward, and I think that the Province of Newfoundland and
Labrador, and I don't know under which administration, but the Province of
Newfoundland and Labrador in the Mining
Act has ensured that any mines that now operate in the province have to have
the funds to remediate, and the funds available to make sure that we are not, in
the future, facing some of these orphaned and abandoned mines issues.
So if
you're operating a mine in the Province of Newfoundland and Labrador, you have
to be able to remediate. You have to have the funds available to remediate.
These are orphaned, abandon mines from mines long gone, long history that the
people are no longer there to make sure those are remediated.
MS. MICHAEL:
If I can just make one
point, please.
I know
from the environmental assessment process that federally – so it sounds like
it's also provincial – that reclamation now is an essential part of any
approval.
MS. COADY:
Absolutely.
MS. MICHAEL:
Okay, and that's provincial as well.
Thank
you very much.
CHAIR:
Thank you, Ms. Michael.
Understanding that we only have three hours for Estimates this morning, and out
of respect for the time, with leave, I'd like to ask Mr. Lane if he had any
comments at this particular point in time.
Do we
have leave?
AN HON. MEMBER:
(Inaudible.)
CHAIR:
Ten minutes.
Ms.
Michael.
Mr.
Lane.
MR. LANE:
Thank you to my colleague
for that.
Minister, I'm not going to do the line-by-line thing, but I have some general
questions, I guess. I believe you said you have an attrition plan of 1 per cent
for the department. Is that just with your department, or is that consistent
across the board, do you know?
MS. COADY:
You'd have to check with
every department. I know in our department that is the requirement. I couldn't
answer your question for other departments, but I can say what it is for our
department. We don't have a tremendous number of people working in our
department. As I said, it's only 154 people. So we work very diligently to make
sure that we have the skill sets and the requirements that we need, but still
addressing some of the requirements to make sure that we're rightsized.
MR. LANE:
Okay.
I guess
it's not across the board, per se – and I can understand you don't have a lot of
people in your department – 1 per cent, given our financial circumstance and the
debt and so on, 1 per cent seems like a very –
MS. COADY:
Manageable.
MR. LANE:
– low number. A lot of
people would say we need to cut back a lot more than 1 per cent but, I guess,
based on your department and so on, it's not as simple as just picking a number
and going across the board in every department. I appreciate that.
MS. COADY:
Certainly, and that's why I
suggested you ask every department what their requirement is.
MR. LANE:
Sure, yeah.
MS. COADY:
As I say, we have vacancies.
We have current vacancies in the department now. We're looking to recruit and
we're making sure that every time – things are evolving in our industries and
things are evolving in the way we do business. We examine every position as it
becomes available to ensure that it is still required and whether or not it can
be reallocated.
MR. LANE:
Okay, thank you.
Minister, the flatter, leaner approach, I guess, the core management review, the
zero-based budget – I think, actually, you answered the zero-based budgeting –
attrition and so on, strategies that are being used in your department and used
across all departments. Is this same strategy being employed at Nalcor? Have you
given direction to Nalcor, for example, to do that same core management review,
to do that same flatter, leaner and so on, attrition? Do they have the same
mandate?
MS. COADY:
Yes, we've met on many
occasions with the senior executive of Nalcor and the board to ensure that they
understand – and they do, quite strongly, they're all entrepreneurs themselves,
they're all business people themselves – the requirements of zero-based
budgeting, which they have to do.
You
will understand, I guess, because they've helped me to understand, that there is
a transition taking place now at Nalcor, from the development of a project into
the operations of a project. So you're going to see over the next couple of
years, and you're starting to see it now with the Nalcor convergence of people
who are going to operate the project – and I'm turning to my ADM – and the
construction stopping. So there will be a changeover in some of the people and
the skillsets required within Nalcor.
So
there will be a convergence over the next couple of years, but they do
understand and are working diligently and have rightsized where they actually
have impacts and controls as well, to try and manage that convergence.
MR. LANE:
So have you provided them
with any targets, for example, or have you basically said try to become as
efficient as possible and so on, or have you said I want to see a certain
percentage cut in costs to Nalcor?
MS. COADY:
I'm going to say it's a
combination of the two.
So when
we sit down with Nalcor, we start with the conversation with zero-based
budgeting, rightsizing, the costs going up, and then sometime if they come
looking for a particular ask, we may have to say: We just can't fund that ask,
you'll have to fund it internally. They'll have to go in and make adjustments
within their budgeting.
MR. LANE:
Okay. Thank you.
Minister, I have a couple of questions now – I have several actually but I only
have so much time – about this division that's going to take place, which was
contained in the budget, dividing the oil and gas, creating it's own separate
corporation and so on.
You
indicated, I believe, that you said the rationale for this would be so that we
could focus more on oil and gas, I believe, was to some degree what you said, a
greater focus and so on.
I'm
just wondering if you can explain, whether somebody is in a separate building
under a separate name, I could be in this building – we already had a
vice-president of oil and gas development or whatever it's called, some title
like that, at Nalcor. So whether that person is in this building with Nalcor on
the shingle or he's in a different building under oil and gas division or
whatever, how does that really change anything in terms of, he has a job to do,
I assume he's focused now, I would hope he would be and all the people under
him. What's the rationale for making that change, if you will?
MS. COADY:
Over the last number of
years we've been putting a tremendous focus on: How do we increase the
exploration and development of our offshore? As you know, in 2016 I believe it
was, we started an Industry Development Council, we've worked through, in the
last while, developing what I think is a stellar plan for developing our
offshore, doubling it even more so than that, increasing, really increasing our
exploration.
I've
heard from operators around the world that talk about they feel that this is a
great place to invest because of the types of work that we're trying to achieve
in the province and the support of the
Advance 2030.
Nalcor
Oil and Gas is within the, what I'm going to call – it's a subsidiary of Nalcor
Energy. Nalcor Energy is very focused on electricity and the development of the
Muskrat Falls Project, energy marketing and the provision of energy to the
Province of Newfoundland and Labrador. They're really focused on that
electricity side of things.
Yes,
there's a division under that auspices called the Oil and Gas department, Oil
and Gas subsidiary and they have their own board of directors. They operate
within that corporate structure. We felt that to really – I hate to use the word
advance now – move on the Advance 2030,
to really focus on that, we wanted to take that division out from underneath the
work that's being done under the electricity sector of Nalcor and let it stand
alone.
It
physically stands alone at this point in time. It has a different office. It has
its own board of directors. We don't anticipate any costs of so doing. They're
already standalone, but this helps with transparency and accountability. The
reporting structures now don't go from their board to the board of Nalcor. It
goes from their board, direct to the province and we'll be working hand over
hand. There's only one focus of oil and gas and that is the development of the
oil and gas industry and management of the equity that we have under it.
So
that's kind of the thinking of it. We don't anticipate – and I'll say this again
– any major costs here at all, save for maybe a name change that we could
brainstorm and make a name change on, we don't anticipate any cost to this, but
it does give us that standalone Crown corporation that reports directly to
government, has its own accountability structures to the government and to the
people of the Province of Newfoundland and Labrador, instead of underneath the
auspices of Nalcor. Nalcor will then be very focused on electricity provision
and the sale of electricity in the province as well as outside.
MR. LANE:
Thank you, Minister.
I guess
it's a matter of opinion on whether it'll be any more focused, but anyway we'll
move on.
Minister, on the accountability piece that you just spoke to. This will be my
last question, my time is running out for now. What about the
Energy Corporation Act? You talked
about accountability and transparency. So given that statement, will this new
division fall under the Energy
Corporation Act or will you be removing them from that and simply place them
under ATIPPA, or have you thought about that?
MS. COADY:
Thank you for the question.
As
we've indicated when we announced that we will be making this move, we're going
to take some time now to look and see how that will be done. So, Justice and
Natural Resources and Finance and others are coming together to determine – I
mean the deputy minister is heavily involved in this – what the best avenues and
ways and means of doing these things are.
So that
is why we're taking our time to make sure that we do this correctly.
MR. LANE:
Thank you, Minister. I'm out of time.
CHAIR:
Thank you, Mr. Lane.
Thank
you, Minister.
Mr.
Hutchings, you can continue on.
MR. HUTCHINGS:
Thank you, Mr. Chair.
I just
want to go back and comment on or ask a question. Ms. Michael, or I'm not sure
who it was, the issue came up of the Labrador Trough and Geological Survey.
I
think, Minister, you mentioned in regard to a recent announcement by the Premier
of our province and the Premier of Quebec related to, I guess shared or a mutual
agreement in regard to exploration of the Labrador Trough and things that could
be mutually done together. I guess if you could just give me a general overview
from your perspective, from the Minister of Natural Resources, how you've seen
that and what exactly was agreed to.
The
second question I have, there was reference to sharing of data from the work we
do and some of the Geological Survey and some of things maybe Quebec has done in
their mining industry. How would that work in regard to sharing of that data and
those types of things?
MS. COADY:
Thank you. A most important
question I think.
The
memorandum of understanding with Quebec, that the Premier most recently signed,
I think is a good step forward with regard to – you know we share a border – how
do we maximize the opportunity of the Labrador Trough, especially as the
commodities are rising and we have more interest in the Labrador Trough.
As
commodities prices rise, you're seeing the reboot of Alderon. You're seeing
Tacora coming in and taking over the Wabush mine. You're seeing the expansion of
Tata, as well as IOC's expansion. Unfortunately, they're on strike at the
moment. You're seeing this, I guess, focus on the Labrador Trough.
What
we've done with the Province of Quebec is we're looking at a few areas that we
may be able to have some further dialogue on. One would be the information
around the Labrador Trough. Both the Province of Newfoundland and Labrador and
the Province of Quebec do their own independent geological surveys.
I'm
sure geologists would love to have a conversation as to what information you're
seeing on both sides of things. So we're going to allow the geologists to have
those kinds of conversations, and really looking at: where is Quebec looking?
You heard earlier the ADM talk about we're looking at the Northern part of the
Labrador Trough this year and perhaps – and I can't tell you where they are
looking, but Quebec is doing further work in another area I'm sure.
Also,
and I'll use infrastructure, in the Quebec side of things is where the port is,
where a lot of the railway is. How do we work together on those types of things
ensuring access, ensuring availability, ensuring growth of the opportunities in
the Labrador Trough? Things like skills and training of workers. We share a lot
of the workforce. They go back and forth between projects.
So
skills training, we're going to be talking about that. We're going to be talking
about telecommunications. How do we – items that are of mutual best interest.
That's what we're going to be working on.
I don't
know if the parliamentary secretary – you just walked in, sorry. You had to step
out for a moment, but we're talking about the Labrador Trough and the memorandum
of understanding between Quebec and Newfoundland and Labrador about things like
the geological survey, the infrastructure, skills training. Conversations about
how do maximize and leverage our best opportunities there.
MR. HUTCHINGS:
So in the second part, too,
just in terms of sharing of data: how would that work, and what sharing of data
would occur?
MS. COADY:
At this point, we haven't
moved to that level.
MR. HUTCHINGS:
Okay.
MS. COADY:
We are, I think, going to
see how our geological teams can come together and discuss what they're seeing
on both sides of this from an information gathering perspective. We would
probably share with them some of the information we put out publicly and early
so that they have it. Again, bringing geologists together to have those mutual
conversations is probably what we'll look at, at this point.
MR. HUTCHINGS:
Yeah. I'd ask for a comment;
I understand the rationale behind that, between sharing information between two
provinces. The other challenge is we each try to attract investments, and
investments from around the world, to develop and exploit what we have in our
jurisdiction.
How
does that fit with – I get the sharing of information, that piece, but we're
competitive in trying to attract to our jurisdiction particular industries and
investment. How do we balance that in terms of our relationship?
MS. COADY:
Most certainly. Anything
that is developed in the Labrador Trough, it would depend on where the resource
is itself.
You can
see, for example – and I'll use Tata. As an example, you can see Tata, the
resource is actually on the Labrador side. A lot of development has occurred on
the Labrador side, but you've seen the Government of Quebec, through Plan Nord,
actually make an investment in Tata.
MR. HUTCHINGS:
Mm-mmm.
MS. COADY:
So you can see because the
border is so close and because the development – and you have a lot of workers
from Quebec who actually go to Tata to work, and they go back and forth.
So
you're absolutely right. We'll continue to do a lot of our own investment
strategies, a lot of our own development with regard to promotion, but where
possible and where practical and where it is in our best interest from the
Province of Newfoundland and Labrador's perspective, we'll work together with
Quebec.
MR. HUTCHINGS:
Okay. Thanks very much.
2.1.03,
Mineral Development – I think you may have referenced, I'm not sure if we
covered it – under Purchased Services.
Last
year we asked about projected expenditures related to safety and dam
maintenance. I think you spoke to some of that a little earlier in regard to
questions. For '18-'19, last year I think there was $740,000 you had forecasted
to use. This year that's increased, but I think you referenced the point that
you want to look at meeting your plans that you had in regard to dealing with
some of these issues. I guess that's an increase to deal with additional dams or
safety that's required, and basically you just upped the budget to deal with
some of the capacity you need there to do a (inaudible).
MS. COADY:
Absolutely.
I'll
just look at '17-'18, the budget was $656,800 and we actually spent $665,000, a
slight increase of $10,000. That was the contract for dam repair that we did at
the old Rambler mine. So you can see that sometimes we hope to get it at the
price that we're getting and you see a bit of an increase, much the same – we
have a four-year plan and a commitment on orphaned and abandoned mines. We've
had to put some additional monies there because of some of the changes that are
required under that.
MR. HUTCHINGS:
Okay. Thank you.
Under
2.1.03, the same one, Grants and Subsidies, that's consistent at $1.7 million.
Last year we were told that's related to prospector assistance, junior
exploration, and I think there was some monies for the creation of the Matty
Mitchell room at the Department of Natural Resources. I think it's about
$50,000.
Is that
consistent in terms of the breakdown of that amount for Grants and Subsidies and
where that will be allocated this fiscal year?
MS. COADY:
You are correct.
MR. HUTCHINGS:
Okay.
MS. COADY:
The Prospector Assistance
Program is $350,000, and that's consistent with last year. Junior Company
Exploration Assistance Program is $1.3 million –
MR. HUTCHINGS:
Yes.
MS. COADY:
– that's consistent. We
increased those I think back in '16-'17. The Matty Mitchell room is $50,000 –
consistent.
MR. HUTCHINGS:
So everything is held there
in regard to budgeting for those?
MS. COADY:
Correct. But you will recall
that we did an increase in 2016-17.
MR. HUTCHINGS:
Okay.
MS. COADY:
Yes.
MR. HUTCHINGS:
The other issue – your
official mentioned earlier in regard to orphaned and abandoned mines, and I just
talked about safety and dam maintenance program. There's a four-year spending
forecast for that. Is everything on target with regard to dealing with those
that have been identified, in that four year-period? Just a comment I guess, in
terms of that plan, it's laid out, and are you meeting your targets.
MR. CANNING:
This year we're asking for
additional funds to manage the Consolidated Rambler site.
MR. HUTCHINGS:
Yeah.
MR. CANNING:
That's what that whole risk registry is about, really understanding more deeply
and more granularly about the future requirements of those sites.
So I
would say that our big focus this year is to deal with Consolidated Rambler, and
to continue, really, pursuing this whole notion of risk registry so we can
really identify every key component that we need to assess at these sites.
MR. HUTCHINGS:
Okay, if I just ask one more
to clue up.
So the
registry, I'm sorry – is that new, the registry?
MR. CANNING:
It is new. When I came into the role, as I'm sure our DM came into our roles –
when I saw these dams, I asked the question: Do we have a risk registry to
understand all the component parts of that?
MR. HUTCHINGS:
Right.
MR. CANNING:
The answer was no. It was never done here in this province. Something I would be
very familiar with in the private sector. So we need to go down that path to
ensure that we have a risk registry to clarify and understand every particular
issue with respect to abandoned sites.
MR. HUTCHINGS:
So you go out and do a risk
assessment, identify it, label it what it is, and then put it in your registry
and your work – from budgetary process, you'd work on them as you go, kind of
thing. That's open and transparent and people can see it.
MR. CANNING:
Right, so from here on out, you'd have your mitigations all laid out –
MR. HUTCHINGS:
Right.
MR. CANNING:
– to understand if you're
meeting those mitigations, and what additional costs – because these things have
a way of coming back at you in the future.
MR. HUTCHINGS:
Sure. Okay, great. Thank
you.
CHAIR:
Thank you, Mr. Hutchings.
MS. COADY:
If I may, very important,
the orphaned and abandoned mines – that four-year plan really did identify and
they are on track as they move through that plan.
MR. HUTCHINGS:
Okay, good.
MS. COADY:
And we have allocated
additional funds now – I think the ADM has covered that – under that four-year
plan as well.
MR. HUTCHINGS:
Okay, thank you.
CHAIR:
Thank you, Minister.
Ms.
Michael.
MS. MICHAEL:
Thank you very much, Mr.
Chair.
Minister, before I ask any more questions, I usually ask this one upfront: Can
we expect to be able to get the binder from your department after today?
MS. COADY:
Absolutely.
MS. MICHAEL:
So then we don't have to
worry about lists and stuff because all of that will be in the binder.
MS. COADY:
Correct.
MS. MICHAEL:
Thank you very much.
We
still may ask some information about lists, but we don't need –
MS. COADY:
Of course.
MS. MICHAEL:
– to copy it all down and
get it all. Thank you.
Just a
few more questions with regard to mining. Again, this has to do more with
updates on some of the different mining projects. Where are things with Vale and
the beginning of the underground mining operation?
MS. COADY:
Thank you for the question.
This is a very important topic, of course, for Newfoundland and Labrador. As you
know Vale Global, which is headquartered in Brazil, has done a global review of
their whole minerals division. Vale in Labrador certainly was part of that.
We have
had a number of discussions with Vale to encourage them to continue to go
underground; it is a good economic value. Vale has continued to review whether
or not they will be able to – it's a fairly significant investment on their
behalf to go underground; I think in the billions of dollars area for them to
maximize that.
We are
cautiously optimistic. They are looking to stream cobalt and that would be
helpful in the development of that underground mine. We're continuing to
encourage them to go underground and we're looking for their support to do so
hopefully in the near future.
MS. MICHAEL:
Sounds like it's not quite
as sure as it was about a year and a half ago.
MS. COADY:
Well certainly, there's been
change in the commodities pricing over that last year. What we are seeing,
though, is an increase in cobalt which is making that even more economic again.
That's a positive thing. We do know the economic value, we do know that there's
a huge cost to go underground, so we're continuing to work with Vale to
encourage them to do just that.
Over
the last year, you've seen a decline in the overall commodity pricing for Vale,
and that's problematic and that's why they've done a global review and they've
actually shut down some areas – not here. But things are continuing as they are
in Vale. Of course, in Labrador, really what we're talking about now is going
underground and we want to encourage them to do just that.
MS. MICHAEL:
As you know, I have a
special interest in this, having sat on the joint panel. I haven't read the
report in a while but I do remember one of our major points being that the thing
that would really make it of benefit to the people of Labrador would be going
into the underground mine. That was a very serious consideration that we made.
MS. COADY:
Absolutely.
MS. MICHAEL:
Knowing the fluctuation in commodity prices, I'm going to hope that this is a
temporary slowdown.
MS. COADY:
It is encouraging to see the increase in cobalt, I have to say, and the fact
that Vale has gone out to start streaming I see that as very positive, but we'll
see as they move forward.
MS. MICHAEL:
Right.
I can't
remember, and I should, but if the underground doesn't happen, when is the end
date for the open pit?
MS. COADY:
2022. I was going to say '21-'22.
MS. MICHAEL:
It's pretty soon. Great. Thank you.
MS. COADY:
That's why it's important for us to continue to encourage it.
MS. MICHAEL:
Yes, absolutely, for the people of the Labrador because we all know how many are
employed there, especially from the North Coast.
Can we
get an update on the fluorspar mining project in St. Lawrence, please?
MS. COADY:
Certainly.
As you
know, we were pleased to see the fluorspar mine reactivate. They are moving
through I think very diligently and well in their processes of developing, and
I'm going to turn to the ADM to see – their latest shipment has gone. So maybe
you can just give them a quick update on where they are today.
MR. CANNING:
Thank you, Minister.
The
facility is moving forward. They went through their commissioning and start-up
and all the time during commissioning – and I've done a little bit of that – you
find issues of a technical nature, you work your way through and they did a good
job on that and kept us informed. We really believe this is a strong opportunity
for the long term for that region and we're just delighted to see this moving
along as well as it is.
MS. MICHAEL:
Thank you.
Minister, you did speak a lot when responding to Mr. Hutchings with regard to
Lab West, but there were some projects that you didn't mention such as the
Julienne Lake iron ore deposit, the Quest Rare Minerals and the Strange Lake
rare earth project, not really a project I guess, and also the Scully Mine.
Could
you give us some details on those projects?
MS. COADY:
Let me start with Scully Mine.
As you
know, last year Tacora purchased the assets of Wabush Mines.
MS. MICHAEL:
Yes.
MS. COADY:
We saw that as a positive
thing, going forward. They have done their feasibility study and are out raising
funds to restart the mine. I can't tell you the day when that is anticipated.
They're out raising funds at the present time but they've moved through the
processes quite diligently, so we're cautiously optimistic that they will be
able to raise the funds there.
Quest
is now out raising money for another tranche and, I believe, they have put in
their environmental assessment. I'm turning to my assistant deputy minister to
see if I'm correct there.
MR. CANNING:
I'm not so sure they've put in their environmental assessment papers, just yet.
MS. COADY:
Okay, so –
MR. CANNING:
That's Search.
MS. COADY:
That's Search, sorry. I said
Quest, it's Search.
MR. CANNING:
This Sunday, Search is on the lower coast of Labrador.
MS. COADY:
Correct. I got my names mixed up, so Search has done that, Quest has not, at
this point.
You
asked about Julienne Lake, I have nothing new to report.
MS. MICHAEL:
Okay.
MS. COADY:
I don't know if you – I'm looking around to see if there's anything new to
report on Julienne Lake, at this point.
MR. CANNING:
It's interesting, there has been questions about Julienne Lake at some of our
conferences when we have gone there to talk to folks. We continue assessing that
opportunity and, obviously, iron ore is a higher value; the commodity prices has
shifted upwards, so that's good.
You see
it in Labrador West with respect to Tacora, Alderon and IOC has increased their
production. Also, Champion just across the border has started up and they ship
their ore straight down through the QNS&L to the port of Sept-Îles. So there are
a lot of potential log jams, I guess, in Sept-Îles, in that port, but we're
hopeful that we can continue perusing this as we have with Tacora and Alderon.
MS. MICHAEL:
Okay, thank you very much.
I'm
going to move on now, I think I've covered the questions I have on mining, and
move into section 3.1.01, Energy Policy.
Could
we have an explanation of the Salaries line, please, because it has gone down
significantly from last year's budget? Oh no, it's not significant. I'm sorry.
It's fairly insignificant.
MS. COADY:
It's just lower than
anticipated salary cost and vacancies within the division. Some vacancies, while
we're waiting to hire someone, we have these opportunities for some budget
savings here and there's also some severance that we had to add back in. That's
the different between $1,189,000 and the $1,120,000.
We are
also looking at the Salaries line for 2018-19. Instead of it being – it's gone
down a little bit, but that's because the vacant positions budgeted and
anticipated will be filled at a lower step.
MS. MICHAEL:
Okay.
MS. COADY:
So some of the people that
have left were at a different step level then the people that we're now hiring.
MS. MICHAEL:
Okay, thank you very much.
MS. COADY:
It's hard when you lose corporate memory out of your department.
MS. MICHAEL:
It is.
MS. COADY:
It is challenging, but people are – they work very hard to bring their knowledge
up, very quickly.
MS. MICHAEL:
Right. Since you've mention
that, do you have a lot of that happening, because it is a concern, the loss of
corporate memory?
MS. COADY:
Well, certainly, as people
retire, you're seeing that, and we have seen quite a lot of change in the
Department of Natural Resources, but you're seeing that in society.
MS. MICHAEL:
Right.
MS. COADY:
As the baby boomer generation now is starting to move into retirement, you're
seeing some major changes.
So,
yes, we're seeing loss of corporate memory and that's difficult, but we're also
very focused on attrition management so that people who report to more senior
people within the department are trying to gain that knowledge before people go
out the door. So we're really working to manage that transition.
MS. MICHAEL:
Okay, thank you.
CHAIR:
Ms. Michael, I just wonder
if I could ask you to hold your thoughts here, and I'll turn it over to Mr.
Hutchings.
MS. MICHAEL:
Sure.
MS. COADY:
My deputy minister just
pointed out, I'm going to just draw your attention to – the eligible numbers of
retirements in the Department of Natural Resources – and I told you we have 154
people – is 36. So it is significant.
MS. MICHAEL:
Yes.
MS. COADY:
But it is a lot of people who are just eligible for retirement, moving through
their life cycle. So it is something that we manage almost every day.
MS. MICHAEL:
Thank you.
CHAIR:
Thank you, Minister.
Mr.
Hutchings.
MR. HUTCHINGS:
Thank you, Mr. Chair.
If I
could, Minister, I just want to go back, your official mentioned the Fluorspar
mine. So is the commissioning all completed on the mine itself, in terms of
operations?
MR. CANNING:
My understanding is yes.
MR. HUTCHINGS:
Okay.
MR. CANNING:
They had some issues with a filter and I think they resolved that. That's my
understanding.
MR. HUTCHINGS:
Okay, fair enough.
What
about the actual export of material, has that started?
MR. CANNING:
My understanding is – and I'll confirm it for you – that load is due.
MR. HUTCHINGS:
Okay.
So for
all intents and purposes, your understanding is it is operational now.
MR. CANNING:
That's my understanding.
MR. HUTCHINGS:
Okay.
Ms.
Michael spoke of Voisey's Bay and the underground mining and we've asked some
questions over the past couple of years, Minister, in regard to that. Originally
you advised us that there were some issues in regard to engineering and
procurement and they wanted to get a handle on that. Then I think there was
maybe a business assessment or analysis being done by Vale and would be
concluded in the fall of 2017, if I remember correctly.
When we
look at some of the other discussions that have gone on, iron ore has started to
bounce back a little bit, we got the cobalt issue and the significant price
that's garnering around the world and what it's needed for.
So at
this point in time, can you give us some insight into what exactly the holdup is
because there was an amendment done to this agreement to have them go
underground? Is there a timeline here? Are there penalties that we're looking at
here? Where are we and where are we going, I guess, in a broader sense?
MS. COADY:
Thank you for the question,
it's an important one.
I know
over the last number of years you've asked some very good questions about Vale
and where their future lies. They did originally do a really – I think it's to
the positive benefit for our future – tremendous task of making sure they
aligned what they were doing, their engineering and procurement stages, which
will help secure costs. They did that originally and then they moved into Vale
Global with a new CEO, did a worldwide review of their minerals division and
that took place, and now Vale is assessing whether or not they can move
underground.
I feel,
again I'll say, with the value of cobalt being so high, I think it works in our
favour that they are out there streaming cobalt, so they'll have to supply that
cobalt. That's a positive development.
Global
pricing on copper is still a challenge. The commodity pricing is quite low so
that is a concern.
With
regard to the development agreement, at this point until we know exactly how and
when Vale will move forward with their underground mine, I'll leave that to the
time in which they move forward. I'm not anticipating any changes at this point,
but we haven't gotten clearance – Vale hasn't made any public statements that
they will be moving forward at this point, so we'd have to wait until that.
We
continue to work to ensure that they understand the value of the mine,
understand the impacts and we'll continue to do that.
As you
know, under the previous administration there was some changes to the milestones
that were given and that were allowed, some milestone changes and that was done
previously. So we'll wait and see how Vale moves forward, but I am, as I've
said, cautiously optimistic because of the streaming of the cobalt, the value of
the cobalt and the economic value of the underground mine.
MR. HUTCHINGS:
Thank you.
My
final question on that: When asked in the House of Assembly, you indicated there
was no desire or consideration of making any changes to the amendment. Has Vale
made any offers or requested any changes? Are you still –
MS. COADY:
To the Development Agreement?
MR. HUTCHINGS:
Yeah.
MS. COADY:
Not at this point.
MR. HUTCHINGS:
Okay.
Is
there any consideration now to make any changes to that?
MS. COADY:
Not at this point to the Development Agreement.
I had a
thought a minute ago; it's gone from my head. I wanted to say something but it
left me. I'll come back to it if I regain it.
MR. HUTCHINGS:
Okay.
MS. COADY:
We do know – this is the
point – the remedies that are available under that Development Agreement. Should
things not progress, we do know there are remedies available to us and we'll
keep that in mind as this moves forward. Right now we are encouraging the
underground mine development.
MR. HUTCHINGS:
Okay. Thank you.
I'll
move on to 3.1.01. I wonder if you could just comment. I know it was mentioned
earlier in regard to the Oil and Gas division being removed from Nalcor and
stand alone. Do you foresee any transfer of employees from the line department
that you have now into this new entity?
MS. COADY:
The line department being Natural Resources?
MR. HUTCHINGS:
Natural Resources.
MS. COADY:
No, not at this point.
MR. HUTCHINGS:
Okay.
MS. COADY:
That hasn't been considered
or contemplated. What it would be is that the Oil and Gas division would remain
– what they're tasked with is doing, really, two things; one is managing the
equity that we have in our offshore. The second thing that they really do is a
lot around prospectivity, the seismic, the geology around the prospectivity and
the promotion side of that.
That
will remain. That's the consideration at this point, so no transference of
skills.
MR. HUTCHINGS:
No, that's what I was
suggesting, if it was required.
MS. COADY:
No.
MR. HUTCHINGS:
Okay.
Under
Professional Services, the Estimate was $181,200, the revised was $86,200 and
now it's gone back up again from what the original Estimate was. I'm just
wondering about that change there and the Estimate back up to $191,200.
MS. COADY:
Certainly.
Last
year some of the planned studies that we wanted to do didn't take place. We went
from $181,000, which is what I'm going to call the normalized budget, down to
$86,000 because there were other things happening.
This
year we plan to do a number of market analyses on capacity markets. We have to
do peak demand reduction strategies and mandatory reliability standards. We've
got some money there for some offshore for some work on FORRI, which is the –
help me out here, Gordon, what does FORRI stand for – Frontier and Offshore
regulations. I staggered it but it was there.
There's
some additional funding available for Professional Services. The $191,000, the
$10,000 increase, is the zero-based budget review.
MR. HUTCHINGS:
Okay.
You
said the term “peak demand.” Is that related to electricity in general in the
province?
MS. COADY:
Correct.
MR. HUTCHINGS:
So you'd be doing something
separate than Nalcor would be doing under peak demand.
MS. COADY:
Correct.
The
province, obviously, from a policy perspective and the policy of the
requirements under electricity, would be looking at some of these peak demand
reduction strategies. I don't know if the ADM wants to add anything to that?
MR. COWAN:
The first study the minister mentioned was capacity market. The province is
interested in understanding how we can maximize our market opportunities. If we
have some further insight in capacity markets, that would be very beneficial in
terms of revenue streams. If we look at our peak and our load, then we can
understand how people use their power.
We
already have some insight, but if there are opportunities there as well to shave
that peak, that also presents a marketing opportunity related to capacity
markets because that's a capacity product that we could use. Again, that would
provide us with the ability to generate additional revenue.
MS. COADY:
Just on that, the department
is really tasked with the policies.
MR. HUTCHINGS:
Sure.
MS. COADY:
Doing your own studies and
making sure you have the information you require for policy development is
critical. The budget is rightsized at $191,000 but it is pretty much equivalent
to the budget that is normalized over the years.
MR. HUTCHINGS:
Yeah, so the capacity market
and the peak demand, as examples, would you have done those in the last two
years? When were they last done departmentally?
MR. COWAN:
I'm not aware of those studies being in the past. They would be new areas that
we would use, as the minister said, to support policy development within
government.
MR. HUTCHINGS:
Okay. Thank you.
CHAIR:
Thank you, Mr. Hutchings.
Ms.
Michael.
MS. MICHAEL:
Thank you very much.
Thank
you, Mr. Chair.
Coming
back to 3.1.01, Minister, under Professional Services, last year the budget was
$181,200, but only $86,200 was spent. I'd like an explanation of what didn't
happen that was expected. This year, the rightsizing has gone up from the budget
of last year by $10,000. What is the expectation there as well?
MS. COADY:
We've had some vacancies in
that division and some of the studies that we had hoped to undertake didn't go
forward. Now they will go forward. It's a timing issue I guess.
MS. MICHAEL:
Okay.
MS. COADY:
We've had a number of
vacancies in that division so we're now pretty much, I think, on track again.
I'm looking at my ADM to make sure nothing has happened in the last little short
while. We have a full complement and we'll be moving forward in some of these
studies.
When we
do zero-based budgeting we really have to go out and look at everything that
you're doing again. For the $181,000, it was felt that the $191,000 was
required, that additional $10,000, to help fund some of those studies and some
of that work that we're doing. That's why zero-based budgeting sometimes goes up
and lots of times it goes down.
MS. MICHAEL:
Yes. Thank you.
Coming
down to the Grants and Subsidies, last year the budget was $2,900,000 and it was
revised downwards by $500,000. This year it's even below that revised number as
well, so now we're down to $2,300,000.
Could
we get an idea of these grants and subsidies? Why the variance? I think we do
know some of them.
MS. COADY:
Certainly.
$2.9
million was budgeted and we spent $2.4 million. It was because we had a
lower-than-anticipated cost associated with the NSP diesel subsidy program last
year. That was a $500,000 savings right there; $1.8 million versus $2.3 million.
MS. MICHAEL:
What caused that, Minister?
Why was it down that much?
MS. COADY:
I think just usage.
MS. MICHAEL:
Usage.
MS. COADY:
It was just usage, a little
less requirement.
MS. MICHAEL:
Okay.
MS. COADY:
This year, in 2018-19,
you'll see there's $2.3 million. The difference between the budget last year and
the budget this year is the removal for funding. We no longer require the
funding for CF(L)Co trust.
Remember there was $600,000 – I see nodding heads – for CF(L)Co trust that was
put in last year because were moving through the court system.
MS. MICHAEL:
Right.
MS. COADY:
Now we anticipate the
Supreme Court, of course, will make some kind of ruling by June so we won't have
that expense.
MS. MICHAEL:
Okay.
MS. COADY:
If we do have to do
something further, it may have to go into contingency, but at this point with
the CF(L)Co trust we felt that covered off what was required.
MS. MICHAEL:
Okay. Thank you.
You've
answered another question I had written here.
This of
course does bring up once again, which we do every year, the Ramea project
because obviously we all have the hope that eventually what's happening down
there could end up replacing the use of diesel on the coastline in Labrador. Can
we have an update on what's happening with the fuel-cell technology?
MS. COADY:
There have been some
challenges, unfortunately, with the conversion – and I'll turn this over to the
assistant deputy minister who will be more fulsome in his reply. There have been
some challenges in the Ramea project with that conversion, the fuel-cell
conversion.
Just
for those who may be listening, there was a source of wind power being converted
into hydrogen, to be used and stored, and there was some proprietary technology
that Nalcor was developing, but there have been technical difficulties, I'll use
that. So it hasn't moved as smoothly as one would hope.
On the
bigger issue – and I think this is a huge issue for Canada, not just for
Newfoundland and Labrador, and I speak to my colleagues and to the federal
government about this regularly – we have 20 communities in the Province of
Newfoundland and Labrador that use diesel as a source of electricity. They're
off the main grid, they're stand alone and they use diesel.
We
really think there's an opportunity to move to some type of renewable
technology; we have to have backup, obviously, and that may be diesel because
that is most cost effective. But we're trying to find a solution and we're
working very much with our colleagues across the country, because I think this
is a national issue, for remote and rural communities. We're also looking at
maybe there is some wind or solar or hydrogen technology, or whatever type of
technology we can use.
So we
have a person who is really working towards that; I think you'll hear some more
things coming. We certainly want to move forward. We have a team of people that
are really working on this issue because if we can get 20 communities in the
Province of Newfoundland and Labrador off diesel, it would be a very good thing
from two perspectives. One, from greenhouse gas perspective – and I think this
is important to the federal government, it's important to the people of the
Province of Newfoundland and Labrador, so there should be some funding available
from the federal government to help us do that.
Secondly, we want to move to a system that gives a good robust opportunity for
electricity in these besides diesel, right. Diesel's very expensive.
MS. MICHAEL:
Yes, and the greenhouse gas
issue is a serious one, and you're right. I mean, I think if this technology can
be made to work, it's important not just for us here in this province.
And you
may not have this figure, Minister – if not we can seek it from Environment.
What is the percentage of our greenhouse gas emissions that comes from the 20
communities using diesel?
MS. COADY:
I don't have that specifically from diesel, but I can tell you it would have to
be significant; 20 communities, all in rural and remote communities. I think
it's an opportunity – and I speak regularly to my federal colleagues and
provincial colleagues to ensure this. As a matter of fact, at the federal,
provincial and territorial meetings this is a key issue and we'll be having
another meeting this summer and again looking for solutions and opportunity and
sharing information back and forth as to what's happening in other
jurisdictions.
But I
think this is the one place the country could really drive forward.
MS. MICHAEL:
If it looks like your officials might be able to come up with that figure, could
you get it to us? I think it looks like you might be able to.
OFFICIAL:
(Inaudible.)
MS. COADY:
Okay, I'm getting some figures. The remote and diesel communities I've been told
is less than 5 per cent of greenhouse gas. Transportation overall is about 40.
MS. MICHAEL:
Okay, so transportation is the big figure.
MS. COADY:
Transportation continues to be the big issue.
MS. MICHAEL:
Okay, thank you very much.
Okay,
that's all the questions I have I think. Oh, the net metering program – where
are things with that?
MS. COADY:
You're testing memory. It's going well. There have been a number of
applications. You submit your application of course to either Newfoundland Power
or Newfoundland and Labrador Hydro. There have been a number of applications
approved. I don't know if you have that number off the top of your head, to the
ADM?
MR. COWAN:
The numbers are fairly small. We did meet with Newfoundland Power a number of
weeks ago to ask where they were, and they had I think it was two or three, so
it's a fairly small number of applications in the queue right now. I believe
Newfoundland and Labrador Hydro had maybe one.
MS. COADY:
If memory serves me, I think there were five and they were approved, but we're
looking for more take-up on that program for people to be able to use and
supplement wind or solar in their own homes and –
MICHAEL:
And would those applications
be residential or commercial?
MS. COADY:
I think they're all residential if memory serves, yeah.
MS. MICHAEL:
Okay.
There's
really not a lot of advertising being done about it, though, for people to know
about it.
MS. COADY:
Good point.
MS. MICHAEL:
I'll make that point.
MS. COADY:
So noted.
MS. MICHAEL:
Okay, thank you very much.
I only
have 35 seconds, so I'll stop at the moment because (inaudible) –
CHAIR:
Thank you.
Mr.
Lane, I'm just trying to gauge the time so I'm just going to have to go back to
Mr. Hutchings and we'll see where we go.
MR. LANE:
Yes, fine.
CHAIR:
Mr. Hutchings.
MR. HUTCHINGS:
Thank you, Mr. Chair.
Just a
follow-up to Ms. Michael's question with regard to those 20 communities and the
greenhouse gas emissions, you said it was less than 5 per cent. Is that 5 per
cent of the provincial greenhouse gas emission?
MS. COADY:
Correct.
MR. HUTCHINGS:
I think us as a province in
regard to the percentage of the national amount, we're a bit under 2 per cent,
is that correct, somewhere around there?
MS. COADY:
I wouldn't comment.
MR. COWAN:
(Inaudible) Climate Change
when I go back.
MR. HUTCHINGS:
Okay.
MS. COADY:
Climate Change would be able
to assist you with that.
MR. HUTCHINGS:
Sure. Thank you.
We know
we discussed legislation here in regard to the Newfoundland system operator and
the open-access piece, just give us a rundown on – I know that will be a
separate entity that's going to be set up. Is there money budgeted for that, or
do we know what the annual operating budget would be?
MS. COADY:
Thank you.
Just
for those that are listening, the Member opposite is referring to the
independent system operator that will be housed within Hydro and ring-fenced,
and the question is: What's the budget for that? That's within the Hydro budget,
and I don't have that figure off the top of my head. I don't know if you do,
ADM.
MR. COWAN:
No, Minister. Largely, the
staff that form the system operator, as the minister has indicated, is
ring-fenced, so those people would have already existed at Hydro.
MR. HUTCHINGS:
Yeah.
MR. COWAN:
So that operation centre is now part of the system operators. The only
additional position that I would see, and I'm not sure, would be the actual
Newfoundland and Labrador system operator, the person who is in that position.
MR. HUTCHINGS:
So we wouldn't see a huge
cost to that, as we've talked about before because most resources are already
there.
MS. COADY:
Correct; they are
ring-fenced within Hydro itself.
MR. HUTCHINGS:
Okay, good.
MS. COADY:
That is the difference
between – going back to the legislation, there was a question as to whether or
not we'd have an independent, stand-alone organization –
MR. HUTCHINGS:
Right.
MS. COADY:
– or one within Hydro, and
really the consideration was the cost and the usage. We are at the end of the
line, we'll say, so we don't anticipate a whole lot of usage of our transmission
assets by outside entities.
MR. HUTCHINGS:
Right, yes, indeed. Thank
you.
I'll
move to 3.1.02, Petroleum Development. I just want to ask a question in regard
to Salaries. Under 3.1.02, there was a salary savings there last year of
$83,200. I'm just wondering, was that a vacant position or what exactly that
was?
MS. COADY:
That is correct. The
variance is due to vacancies within the division during the year and for parts
of the year. We had a director's position and a marketing and promotion position
that was vacant.
If you
look at 2018-19, it was $1,216,000 last year and $1,209,000 this year. Small
variances because a lower step again. Somebody came in at a lower step than the
person that left.
MR. HUTCHINGS:
Okay, thank you.
If we
drop down to Revenue - Provincial, there's a line item of $81,000. Can you just
explain to me what that would be?
MS. COADY:
Yes, that's the delegate
fees for the Offshore Technology Conference.
MR. HUTCHINGS:
Okay.
Maybe
here would be a good time to just give me an overview of the upcoming seismic
program for this year. I think last year it was two 3D vessels and one 2D vessel
– I think, if I remember correctly, from some of the things you talked about.
What can we expect this year?
I know
we had some discussion in regard to the budget, and some of that would be used
to correlate or review the data that already exists and then there would be a
portion that would be looked at for further seismic work. Could you give me an
idea of the future seismic work, what's going to happen this year?
MS. COADY:
Certainly. Seismic work usually correlates to upcoming license rounds.
MR. HUTCHINGS:
Yeah.
MS. COADY:
I don't have, off the top of my head, exactly the locations. I'll search the
memory banks as I'm speaking.
This
year we're going to spend approximately $28 million; $20 million of it which
will be new exploration, which is normalized to say '16-'17 year expenditures.
Last
year there was a big bump because of the 3D. As you noted, last year there was a
big emphasis on 3D in one particular area that was being done and that's because
those license rounds were underway and there are indications of great
prospectivity in those areas.
This
year there will be the $20 million new, $8 million in looking at and analyzing
past data, which is normalized amount. A big investment $28 million, probably
one of the largest investments in 2D and 3D seismic, but it's more tied to the
license round.
I don't
know if you want to comment, Gordon, at all.
MR. MCINTOSH:
In terms of the discussions going forward, the final program isn't in place, but
I think it will be at least two vessels doing the seismic programs this year.
MR. HUTCHINGS:
Okay.
MR. MCINTOSH:
And clearly, there are private sector programs as well as our own program.
MR. HUTCHINGS:
Okay.
MS. COADY:
That's a very good point that the Deputy Minister just made. This is only for
the Province of Newfoundland and Labrador. There's more seismic being done and
more exploration work being done by other organizations, right – other groups.
MR. HUTCHINGS:
Sure. For the private sector, right?
MS. COADY:
Correct.
MR. HUTCHINGS:
Yeah.
I just
want to go back to the budget issue, and we talked about it before here in
regard to the $28 million.
From
your direction to Nalcor, did you ask them to reduce their budget by a certain
figure? Was it $20 million, or what actually transpired there? What was your
expectation for Nalcor going into Budget
2018 in reducing cost? Was it a figure? Was it, you know, have a look and
see what you could do? What was that direction?
MS. COADY:
Certainly, the budget this year for Nalcor – I can grab it for you in a moment.
I just got to find the right piece of paper.
Nalcor
capital this year is $723,900,000 which is the amount of money that is required
for the Muskrat Falls Project and energy marketing and so on. The direction to
Nalcor, as the direction to every agency, board and commission and every entity
within government, is to keep your costs as low as you possibly can.
When we
had the conversation, the board of directors obviously is responsible for the
development with the senior executive of Nalcor. They came forward with a budget
that they required. We asked them to ensure that everything they're doing is as
cost effective and as low cost as possible, because the people of the province –
we are borrowing a tremendous amount of money and our fiscal situation in the
province continues to be quite problematic.
We did
ask the board and we did ask senior management to come forward with a budget as
low as they possibly could make it. They came forward with their budgets. They
were fine-tuning. They were looking at where they could find savings. They did
zero-based budgeting. They knew where some of the costs – there were some
convergence costs, what I'm going to call this transition.
I think
this is a key point; this transition from construction to operations is starting
to happen. Especially where you see, for example, the transmission lines are now
completed. Nalcor is still working, of course, on the building of the Muskrat
Falls dam.
So no,
there was no specific dollar amount given to Nalcor to find. It was more, make
sure your budget is as fine-tuned, as low, as reviewed – they did come in
with their zero-based budgeting. We did review that. We asked for, to make sure
they fine-tuned absolutely everything they possibly can to make it as low as
they possibly can.
MR. HUTCHINGS:
Okay, thank you.
Just a final question on that. The board and the CEO came
forward with – my understanding – a $20 million reduction, and that would be in
the seismic program or the exploration program. Subsequent to that, I think it
was on the day of the budget, there was an OC that directed $20 million back as
a grant to Nalcor to replace that $20 million suggestion.
At the end of the day, were there any savings from Nalcor?
Did they cut any in their administration costs, because that $20 million was put
back in?
MS. COADY:
Nalcor, basically, I think
their core budget is flat to last year, which is a decrease considering this
transition. There have been a lot of what I'm going to call budget reviews and
analysis within Nalcor to get their budget as low as they possibly can.
So to
answer your question on the $20 million, the board of directors took a decision,
they felt they could pause the exploration program this year; do the analysis,
but pause new exploration. We felt, because of
Advance 2030, it was very important
for that to continue. We said we wanted that to continue, and that's what the
direction to the board has been.
How
that will be funded; we believe there will be some extra revenues through the
Oil and Gas division of Nalcor to help offset that increased cost – sorry, not
increased cost, that $20 million investment in new exploration. If we have to
supplement that, then we'll have to do that, but we believe there will be some
additional revenues through the Oil and Gas division this year that will help
offset that $20 million investment in new exploration. We felt that it's very
important that we continue to do new exploration.
MR. HUTCHINGS:
Sure. I just have a final
comment, if I could.
Just on
that note; the $20 million is not in the overall budget of the province or in
your department. Your expectation is that $20 million grant will be replaced to
Nalcor based on revenue increases in oil production or other areas that during
the year you can transfer over to them. Is that the general –?
OFFICIAL:
(Inaudible.)
MS. COADY:
Pardon me?
OFFICIAL:
(Inaudible.)
MS. COADY:
Okay.
I just
wanted to confirm what I was about to say.
MR. HUTCHINGS:
Yes.
MS. COADY:
That is correct.
MR. HUTCHINGS:
Okay.
MS. COADY:
If we do have to help fund
that, we'd have to find it from other savings or other opportunities to help
make that investment. I feel that we will be able to see some increases; we're
already seeing some increases. As you saw this week, the price of oil has gone
up.
MR. HUTCHINGS:
The exchange rate is good.
MS. COADY:
The exchange rate, so we're hopeful they will be able to fund that program.
MR. HUTCHINGS:
Okay. Thank you.
CHAIR:
Thank you, Mr. Hutchings.
Ms.
Michael.
MS. MICHAEL:
Thank you very much, Mr.
Chair.
Coming
to 3.1.03, Minister; this covers the money that goes from the provincial
government to the C-NLOPB to cover the provincial share of their operating costs
I understand.
This
year the money is going up. The Grants and Subsidies, the money that will go
from the provincial government to them is going up. What is the reason for that?
Has the federal government share gone up as well?
MS. COADY:
Thank you for that.
I will
let you know that C-NLOPB is at no cost to government. While their budget line
item is here, it is at no cost to government. It is completely recovered. It's
100 per cent cost recovered.
MS. MICHAEL:
By government? The
government receives the money back or …?
MS. COADY:
It's 100 per cent cost
recovered from the industry.
MS. MICHAEL:
Right.
MS. COADY:
There's no cost to
government at all. While there is a Grants and Subsidies line to be voted on
here it is completely cost recoverable.
MS. MICHAEL:
Okay.
MS. COADY:
Let me just explain why
there are increases in their operating budget, because I think it's important
that they be held accountable nonetheless. They have some personnel costs, they
have step increases that have gone up and their premises have gone up. They have
investments in computer hardware and software and they also have a number of
consultants that are required. What you're seeing is there is an increase from
last year to this year due to those reasons.
MS. MICHAEL:
Okay.
I'm
trying to get a handle, then, on how things do work. We probably have asked
different questions before.
When it
comes, for example, to the sale of parcels of land in the offshore by C-NLOPB –
and there is revenue from that; you also have revenue from penalties for time
extensions, that kind of thing – does that money go to C-NLOPB or does it come
to the Provincial Treasury?
MS. COADY:
On the land tenure – and
correct me if I'm wrong here – that is more a commitment for exploration, it's
not revenue. If someone bids – and I will use a million dollars – on a
particular piece of our offshore, they commit to making a million dollars
investment.
MS. MICHAEL:
Right.
MS. COADY:
It's not revenue generation
but they have –
MS. MICHAEL:
Right, but the penalties are
revenues.
MS. COADY:
The penalties are revenues.
That would go to C-NLOPB as part of their budget, correct?
MS. MICHAEL:
Okay. Thank you very much.
Coming to 3.1.04, under
Professional Services, last year it was $170,000 budgeted, revised down to
$115,000 and this year it's $155,400. What exactly are those professional
services and why the differentiation?
MS. COADY:
This is where efficiencies
and staff complement really help. If you look at the Professional Services, the
variance from $170,000 last year to $115,000 is really related to royalties and
having to hire external audit services.
This year, because we had a
full staff complement, because we had expanded software, we didn't have to hire
those consultants which we would normally have had to do. That's a benefit
there. When they considered Professional Services for 2018-19, because of the
zero-based budgeting that we've done, we were able to see some cost reductions
there over last year.
MS. MICHAEL:
Okay. Thank you.
Coming up to the Salaries in
the same section, there's a slight variation in salary from last year's budget
to this year's Estimate. There was a revision downwards as well there last year.
MS. COADY:
Last year was because we had
vacancies within the division. This year, the difference is lower salary costs
because a temporary position is no longer required; there was a temporary clerk
position. We're moving through the temporaries and either making them permanent
or – temporary should be by nature temporary.
MS. MICHAEL:
Right.
MS. COADY:
A temporary position is no
longer required there in that department.
MS. MICHAEL:
Okay. Thank you very much.
Coming over to 3.1.05,
Innovation and Business Development Fund, “appropriations provide for
expenditures under the Innovation and Business Development Fund, which focuses
on strategic investments for the future growth and development of the oil and
gas industry in the Province.” It's a $6-million grant or subsidy.
Could you explain this? I
think this is a new section, actually.
MS. COADY:
It is a whole new section.
You recall when Husky was moving forward with the White Rose expansion project,
the West White Rose?
MS. MICHAEL:
Yes.
MS. COADY:
We were able to negotiate
with them the opportunity to have a $60-million fund over 10 years. They will be
giving government $6 million for government to work with industry to develop the
supply and service development, if we have any infrastructure requirements;
really, the development of the industry. That was all part of the West White
Rose development project. Over the next 10 years you'll see the growth of a
fund, $6 million every year, to really develop the industry.
MS. MICHAEL:
But the $6 million is not
coming from government per se.
MS. COADY:
No, it's 100 per cent from
Husky as part of the benefits under that project.
MS. MICHAEL:
Okay.
This is
the second time now, in C-NLOPB, for example. Where else in government's
bookkeeping really does it show that money really doesn't come out of
government, it's cost recoverable because it's coming from outside?
MS. COADY:
I'm going to turn that over
to the very capable accounting department.
MR. IVIMEY:
You would see it reflected
right here underneath. You see the vote of $6 million in the Grants and
Subsidies subhead.
MS. MICHAEL:
Yes.
MR. IVIMEY:
Then you see just down below
the provincial revenue that would come in for $6 million, we see the net cost of
the fund being zero. The provincial revenue is reflected right here. As we
receive the money from Husky, it goes into the Department of Natural Resources
and goes into our provincial accounts. As we spend the money from here, the two
of them are offset. At the end of the day it's zero within our budget.
MS. MICHAEL:
Okay. Good enough. Thank you
very much.
I'm not
a bookkeeper and the person who does my taxes – it's not a big deal to do my
taxes, but I still have to get somebody to do it.
I have
a couple of more questions, more general ones I guess. I know this has been
asked by Mr. Hutchings and I try not to repeat questions, but I'm still trying
to get a handle on how you're going to do the division of the Oil and Gas
division into its own separate entity.
The
question attached to that, because your mandate letter still has you – they have
to be responsible to the minister, I would assume. Can you just give us a little
bit more detail? Maybe there's no more to give but ….
MS. COADY:
Certainly, all these details
are being worked out as we speak. Things are evolving and that's why we said
we're going to study it and make sure this is done correctly. Nalcor Oil and Gas
will be reporting into the Department of Natural Resources directly. So they'll
have their separate board of directors. That board of directors will report to
the Department of Natural Resources, much like Nalcor reports to the Department
of Natural Resources now so we have oversight. That'll be the same.
MS. MICHAEL:
Right.
MS. COADY:
So that really does give us
transparency and accountability for you and the people of the province of
understanding the expenditures and the revenues of the department, rather than
having them embedded in Nalcor, as it is today.
MS. MICHAEL:
Right.
MS. COADY:
The Department of Natural
Resources will be working very closely with the Nalcor Oil and Gas. I don't know
what to call it. The new Crown corporation for oil and gas, I'll use that. The
new Crown corporation for oil and gas will be working very closely, obviously,
on promotion because they do the whole piece on prospectivity and exploration.
So we'll be working closely, as we do now, but probably even more so as we move
forward with Advance 2030.
MS. MICHAEL:
Okay. Thank you very much.
I
suspect, and it's probably what you mean, it would seem to me that where they're
going to be their own separate Crown corporation, that in and of itself would
mean for more direct connection to them than with the mother corporation that
they were part of.
MS. COADY:
Absolutely.
MS. MICHAEL:
Okay. Thank you.
Your
mandate letter also tasks you with pursuing options for the exploration and
development of offshore natural gas.
Is this
something that's high on the agenda or where are things with that?
MS. COADY:
It certainly is part of Advance 2030.
So, as
you know, natural gas at the present time, the price is very, very low, so a
whole lot of development is unlikely, but if we're not prepared for a resurgence
in gas, if we're not prepared to utilize our gas, then we never will be. So in
Advance 2030 it clearly outlines a
plan and a process for us to be prepared for the development.
MS. MICHAEL:
Yes.
MS. COADY:
In fact, it certainly even goes bold enough to say that in 12 years we would
have natural gas development offshore Newfoundland and Labrador.
We
certainly are seeing some gas opportunities in the prospectivity and the
exploration that's being done offshore Newfoundland and Labrador. There is
already discoveries of gas and we think there is an opportunity for development
as we move forward, but, of course, that is dependent on pricing and that.
MS. MICHAEL:
Yeah.
MS. COADY:
But if we are not
prepared to encourage development, then we'll miss the opportunity when it
becomes available.
MS. MICHAEL:
Thank you. I think my time is up.
CHAIR:
Thank you, Ms. Michael.
Mr.
Hutchings.
MR. HUTCHINGS:
Thank you.
Minister, could you just give me an update on the incident, Husky and the
SeaRose and the near collision with an iceberg about a year ago?
In
questioning in the House, I asked you about it and there was an indication that
there was an investigation ongoing and at the conclusion, some decisions may be
made from a provincial perspective and what the expectations would be on Husky
going forward.
I'm
just wondering if you could give me an update on that, please.
MS. COADY:
Certainly.
As you
know, C-NLOPB is tasked with the requirements of ensuring safety in our
offshore. They take that very seriously and that's why they've made some of the
moves they have. I understand that they are still finalizing the report into the
investigation that occurred in that incident. That has not been finalized. I
don't think it's been made public at this point in time. I don't think it's been
finalized, I haven't seen a final copy for sure.
As you
know, they did do an interim step of saying that Husky had to, once they had the
interim report, they did make Husky – they did shut down Husky, made Husky come
forward with new plans. I understand that Husky has done that. They've made
significant changes at their management level and significant changes to their
processes to ensure compliance.
We've
been reassured, I can tell you, as a department, by not just Husky but all the
entities in our offshore of how serious they take this incident and how they'll
make sure that this does not occur again. I can't tell you when the final report
or even what the outcomes of the final report will be. C-NLOPB is still doing
that.
MR. HUTCHINGS:
Okay. Just in a general
sense, Minister, do you have concerns in regard to the amount of time it's taken
for the C-NLOPB to complete this report, to release some of the information in
particular to what had happened because I had gotten a briefing from the C-NLOPB
and went down and they went through the protocol for the ice management plan for
the offshore operators and as well for the exploration.
This is
very strict, very stringent. There's a threshold here that needs to be met in
regard to what they encounter, in regard to ice and other things. It seems here,
this is going on for a prolonged period of time.
Do you
have concerns in regard to the timeline that this is taking to get this out in
public of what actually transpired and the confidence that we all could be
assured that there's no chance of this happening again?
MS. COADY:
Thank you, that's a very
important question.
When
the incident occurred – and I don't have my notes in front of me as to the date,
the end of March, I'll say, of last year – the chief safety officer and C-NLOPB
did call immediately, call Husky in, the day after the incident occurred. They
made sure that there was compliance. They made a ruling on compliance that the
ice management plan had to be followed. Husky knew the concerns around
non-compliance and what could happen if they are non-compliant.
The
chief safety officer, following that meeting, was comforted enough, and with the
enacting of the compliance order, knew that Husky was required to comply. He
felt, at that point in time, that safety was paramount and that continuance of
work – work could continue in the offshore for Husky.
Husky
did initiate, then, a full review. Once that report was made available to
C-NLOPB, the C-NLOPB launched their own full review, based on some of the
information they were given. So they have been following through, and following
through on the processes of this quite substantively and significantly over the
last year.
I think
there is a process that has to be followed. In the first instance, safety is
paramount for all of us, not just for C-NLOPB, not just for the chief safety
officer, but I think indeed for all of us in the Province of Newfoundland and
Labrador, is understanding that safety is paramount.
So I
think this is a process of it, and C-NLOPB is following a process. I think part
of that process you saw was when the chief safety officer, the day after the
incident, issued the compliance order. I think you're seeing a process with
Husky having to do their own internal investigation, then C-NLOPB not being
fully satisfied, launching their own investigation and following through. You
saw what happened to Husky when that investigation – the interim report came
out.
So I
think the process is being followed. I think everyone is ensuring that they're
being held to account, that Husky is being held to account and all operators are
being held to account on that safety issue.
MR. HUTCHINGS:
Okay, thank you.
3.1.04,
Royalties and Benefits. Just a general question in regard to – I know there's
oversight in regard to us receiving our royalties and there's an auditing
process that goes on in regard to ensuring that we get what we're entitled to.
Can you
give me an update on the auditing process, where it is and is it up to date?
I know
a few years back we had to go through a process of going back in time and
auditing a number of years to make sure it was accurate. Just give me a general
sense of where we are with that program today.
MS. COADY:
Thank you for that.
I can
report to the House that the division has been working very diligently to ensure
an effective process there. In the past year, I know they have worked to bring
forward – I'm just looking at my notes here now.
In
'17-'18, they completed and issued the 2010 year and completed the 2011 year. So
'10 and '11 have been completed. They're currently working on '12, and audit
work is ongoing for '13 and '14.
If you
look at the plan that was communicated to the Auditor General back in 2014-2015,
they will be on par. They'll be on that track by the end of the year. So that is
the track they're following.
In the
last year, there was significant time and effort addressing some of the backlogs
of, what I'm going to call, old disputes, issues with a number of operators.
That took up a considerable amount of time, but it actually was very helpful in
allowing us, the department, to close audit years. When you're in arbitration
you can close an audit year. Last year we put a significant effort to make sure
that we could settle these disputes to close the audit year as well.
So work
is currently ongoing. I think by the end of '18-'19 we should be completed and
issued up to what we said we would be.
MR. HUTCHINGS:
Okay, thank you.
I move
to 3.1.05, Innovation and Business Development Fund. Ms. Michael asked about the
$60 million you referenced over a 10-year period, $6 million a year.
My
understanding is the operator, Husky, and the partners can recover that $60
million through capital costs of the project. Is that correct?
MS. COADY:
You're asking whether or not that is recoverable?
MR. HUTCHINGS:
Yes.
MS. COADY:
It is.
MR. HUTCHINGS:
Okay.
MS. COADY:
Right?
MR. HUTCHINGS:
So, in reality, that $60 million is kind of like a loan to the province; $6
million a year for 10 years. Then the operators will use that in their actual
capital costs recovered from the overall royalties from the field.
MS. COADY:
As with any investments, or in general – I won't use the word. In a general
sense, when offshore operators make investments in the province they can recover
them through their royalty program. That is correct.
MR. HUTCHINGS:
Yeah, I understand, but I guess in terms –
MS. COADY:
Just one second, I'm going to ask my ADM to comment.
MR. HUTCHINGS:
Yeah.
MR. TRASK:
It's not a capital expenditure, so it'll be deductible against royalty.
MR. HUTCHINGS:
Pardon me?
MR. TRASK:
It's not a capital
expenditure but will be deductible against royalty.
MR. HUTCHINGS:
Yeah.
My
point is we negotiated $60 million but it's recoverable by the partners, that
$60 million they're going to get through the royalties, which is if that $60
million wasn't recovered from the royalties it would be disbursed through those
(inaudible) equity and come back to those partners.
MR. TRASK:
It would be retained by
(inaudible). Correct.
MR. HUTCHINGS:
Anyway, it was just a
comment. Okay.
Yes,
thank you.
MR. TRASK:
But only a portion is to
(inaudible.)
MS. COADY:
I'm just checking to make
sure that was clear, because it's not the full $60 million – it's not a capital
expenditure but I knew what you meant.
MR. HUTCHINGS:
Yes.
MS. COADY:
I think your question was
whether not that is eligible under the royalty expense, and it is eligible under
royalty expenses.
MR. HUTCHINGS:
Yes, to be recovered.
MS. COADY:
To be recovered.
MR. HUTCHINGS:
Yes, okay.
Thank
you.
CHAIR:
Thank you, Mr. Hutchings.
Ms.
Michael.
MS. MICHAEL:
Thank you very much, Mr.
Chair.
Just a
few more questions from me, Minister.
Under
3.1.06, which is pretty straightforward because it's the appropriations that go
to Nalcor Energy. My first question has to do with the Revenue - Provincial line
where last year the budget was $225 million and it was revised to $226,240,500
and this year the line is empty. Is this the repayment from Nalcor to
government?
MS. COADY:
That is a loan –
MS. MICHAEL:
For the loan?
MS. COADY:
You are correct. It's a loan
to Hydro –
MS. MICHAEL:
Yes.
MS. COADY:
– and it was repaid with
interest.
MS. MICHAEL:
So it's been fully repaid.
MS. COADY:
Correct.
MS. MICHAEL:
Well, that's good news.
MS. COADY:
Okay. I just want to make
sure there's nothing else outstanding.
MS. MICHAEL:
No. Great, thank you very
much.
Now
when it comes to the appropriations to Nalcor – and that money, of course, goes
to Nalcor and they use it for all of their operations. I know we usually have to
wait for their report to get the report on how that money is spent.
Would
Nalcor Energy be getting any of that money? And, if so, would they be expecting
when they become a Crown corporation to get money directly from government?
MS. COADY:
Are you talking about Nalcor
Oil and Gas which is Nalcor Energy?
MS. MICHAEL:
Nalcor Oil and Gas, yes.
MS. COADY:
Okay.
MS. MICHAEL:
Sorry.
MS. COADY:
Nalcor Oil and Gas – and I'm
looking for confirmation – are self funded because of the equity and the revenue
they get. I would anticipate – I don't want to say this will happen because of
course we haven't separated them out at this point.
MS. MICHAEL:
That's right, I realize,
yes.
MS. COADY:
I would anticipate they
would be self funding and actually providing dividends to the Government of
Newfoundland and Labrador.
MS. MICHAEL:
Mm-mmm.
MS. COADY:
That's what I would
anticipate. Right now, as you probably know, Nalcor Oil and Gas accepts revenue
and it would go to Nalcor Energy.
MS. MICHAEL:
Exactly.
MS. COADY:
Correct.
Now
when you have Nalcor Oil and Gas, if it's a separate Crown corporation it would
be paying dividends to the province.
MS. MICHAEL:
That's what I would assume.
MS. COADY:
Direct.
MS. MICHAEL:
Okay, all right.
You're
saying you're hoping that's – you expect that's the way it will be.
MS. COADY:
I am anticipating that's the
way –
MS. MICHAEL:
Anticipating, okay.
MS. COADY:
– the way it would be. The work is still ongoing as to how we're going to pull
that division as a standalone Crown corporation, but you can anticipate that the
revenues that – I'm just reading a note there, if there's a project. So you can
anticipate it would be self funded because the Oil and Gas division –
MS. MICHAEL:
That's right.
MS. COADY:
– would take in the equities
from offshore oil and gas, right.
MS. MICHAEL:
Right, yes.
MS. COADY:
Yeah.
MS. MICHAEL:
Okay, thank you.
Well
I'll be looking forward, obviously, to seeing how all this pans out.
MS. COADY:
Yeah. When I talk about
accountability and transparency, I think that would allow that to happen. That
will allow people to understand how much is being taken in in revenue from our
equity investments and how much is going out, and what's the dividend to the
province.
MS. MICHAEL:
Right. Thank you.
A
couple of other issues arising, actually, from your mandate letter.
MS. COADY:
Mm-mmm.
MS. MICHAEL:
Your letter does refer to
fracking. Are there still talks and developments going on in the area of
fracking?
MS. COADY:
You will recall that under
the former administration they set up a panel on –
MS. MICHAEL:
Yes.
MS. COADY:
– West Coast of Newfoundland
and Labrador to consider fracking onshore. There was a detailed, a very thorough
report. What would need to happen, they had it done in green, yellow and red
light as to whether or not you can move forward on fracking onshore in
Newfoundland and Labrador.
So we
set up in the Department of Natural Resources, basically, a task force to look
at that report, to review it to see if you can move from red lights and yellow
lights and green lights, and that work is continuing. There's no application to
do onshore fracking. There's no big push to do it – as you know, there's a
moratorium on – until we get all the green lights that are required, and work is
continuing on that.
MS. MICHAEL:
Great, okay. Thank you very
much.
Minister, I think your mandate letter does also refer to this as well – I'm
going by memory now, whether it's Nalcor or oil and gas – but Nalcor in
particular is still supposed to be looking at potential with regard to alternate
energy sources and I think that's something that you're mandated to be aware of
as well, as minister.
Do you
have regular communications with Nalcor on this whole issue of alternative
sources of energy?
MS. COADY:
Absolutely, and we have
people dedicated in the department from a policy perspective and Nalcor, of
course, is very involved in that as well, this alternate energy.
I mean,
we have some great energy sources in the province: wind; I dare say some solar
as well – the Big Land has solar – there are tidal opportunities. I know the
deputy minister has been in discussions with some people with tidal
opportunities. There are a lot of renewable energy sources within the province
and we have dedicated people in Natural Resources to look at this and even
electrification of vehicles, for example, and how we move forward on that.
I don't
know if there's anything either the deputy minister or the assistant deputy
minister wants to add. Work is moving along very, very well in these areas.
You've seen us talk about wind energy with regard to offshore Newfoundland and
Labrador. Electrification of vehicles is something that is being worked on and
how do we ensure that we're ready for that. How do we maximize our wind
opportunities in the province? All those things are under active pursuit.
MR. MCINTOSH:
Just to say that yes, we're working proactively with both Nalcor and interested
businesses. We're looking at the opportunity to invest in the province, to
invest in offshore wind. There are a number challenges around that and that are
being addressed, and we do see a big future in other alternative energies here
in the province.
MS. MICHAEL:
Okay, thank you.
I think
that covers my questions, Mr. Chair.
CHAIR:
Thank you, Ms. Michael.
Mr.
Hutchings.
MR. HUTCHINGS:
Thank you, Mr. Chair.
Minister, 3.1.05, the Innovation and Business Development Fund, you got $6
million per year for 10 years. Who administrates that in terms of applications
and being selected, and would there be a tie-in with InnovateNL?
MS. COADY:
Thank you for the question.
That
has not been finalized at this point, but work is underway as to do just that –
MR. HUTCHINGS:
Okay, so right now –
MS. COADY:
– to finalize the program, to finalize what's eligible, how it's going to be
administered. It hasn't been finalized at this point.
MR. HUTCHINGS:
Okay, thank you.
I just
want to ask about outside the 200-mile limit, we talk about it in regard to
Statoil and some of the findings that they've made that, looking forward, it's a
huge opportunity. I forget the official terms, United Nations there's –
MS. COADY:
Law of the Sea – UNCLOS.
MR. HUTCHINGS:
Right, there you go. And it
can go up to 7 per cent in regard to production value, and there are
discussions, I know in our time, with the federal government in regard to if
proposed developments would go forward, who would pay that amount or that tax I
guess or whatever you want to call it.
Have
there been any discussions on that? And I guess in that breadth as well, could
you just give maybe an update on Statoil and what their intentions are as we
move forward? Has anything happened on that?
MS. COADY:
Wide-ranging discussion this morning.
The
federal government is a signatory to UNCLOS –
MR. HUTCHINGS:
Right.
MS. COADY:
– United Nations Convention on the Law of the Sea –
MR. HUTCHINGS:
Law of the Sea.
MS. COADY:
– and the requirements. As you know, I think this would be the first time in the
world, should Statoil become developed, it'd be the first time that it would be
ever used. So there is work being done by the federal government. I know that
some of the provincial people have been involved with the review of how do you
administer and develop the UNCLOS requirements.
However, I'm going to say this: there has been no discussion at this point as to
who's responsible for the payment of same.
MR. HUTCHINGS:
Okay.
MS. COADY:
The way I consider it it's the federal government's responsibility. They're the
signatories. That's the way I consider it, but we haven't had any formal
discussions because of course they're still looking at the program themselves
and figuring it out. Just for the people of the province to understand, there is
a set program under the United Nations Convention on the Law of the Sea. I think
it goes from 1 per cent to 7 per cent over – I'm getting nods – over a period of
years, and that is all part of the ball of value.
When I
talk about the ball of value, it's everything that the value of a particular
development, and that would include things like benefits and taxation and
royalties and any other taxes that they may have to apply, such as UNCLOS. But I
believe that UNCLOS, the federal government is a signatory to it so the
responsibility rests with them. So I'll leave that.
You
asked about where Statoil is. Statoil has been doing an awful lot of work, I
think, on reviewing what their opportunity is in the offshore. In the Flemish
Pass, as you know, they've done a lot of exploration work. They had one major
discovery, or small – less than 300-million barrel discovery. I think that was
their latest, around 300 barrel; I think that was the latest amount that they
said. They've announced some other things they have around.
They're
still reviewing their opportunity there. It would be a fabulous development for
the Province of Newfoundland and Labrador because it opens up another basin –
MR. HUTCHINGS:
Sure, yes.
MS. COADY:
So we're hopeful, but they
will make decisions as they move forward and move forward with their exploration
work.
I will
say this, we have Jeanne d'Arc Basin – this is more for people to understand –
and we have four projects in the Jeanne d'Arc Basin. You're talking about the
Flemish Pass, which is a little bit further out to sea and more on the slope of
the Grand Bank and, as people of the province know, Statoil has been looking at
that particular area, that would open up another basin. But there are 18 more
basins offshore Newfoundland and Labrador. So there's tremendous potential and
we're hopeful for more development.
That's
why Advance 2030 really does focus on
more exploration and more production offshore.
MR. HUTCHINGS:
Good, thank you.
I just
had a question in regard to 3.1.06, the Loans, Advances and Investments. That
amount there, is there a breakout for that in regard to equity in offshore
projects or is all related to Muskrat Falls? Do you have a breakout for that
number?
MS. COADY:
You're talking about the
$723,9 –
MR. HUTCHINGS:
Yes.
MS. COADY:
Okay.
So what
the question is, the amount that we're giving to Nalcor, can you have a breakout
of what's given to the –
MR. HUTCHINGS:
Yes.
MS. COADY:
Oil and Gas division is a
net contributor to the funds of Nalcor. And that's another good reason to have
it separated out; it doesn't get rolled up. But Nalcor Oil and Gas division
would provide funding to Nalcor, not have equity investments, particularly, I
don't think, from this province.
Correct?
OFFICIAL:
(Inaudible.)
MS. COADY:
Okay.
MR. HUTCHINGS:
Yes, I'm just wondering –
MS. COADY:
I don't have a breakdown
here, I don't know if we can –
MR. HUTCHINGS:
Okay, maybe we could get a
breakdown of what that represents.
OFFICIAL:
Yes.
MR. HUTCHINGS:
Okay, thank you.
MS. COADY:
I don't think I can –
MR. HUTCHINGS:
I have a quick – just
another –
MS. COADY:
I don't want to promise
something that I can't deliver to you.
MR. HUTCHINGS:
Okay.
MS. COADY:
So let me take it under
advisement that that breakdown can be made available to you. I'm assuming we
can, but I don't want to promise you something that I don't know if I can
deliver.
MR. HUTCHINGS:
Okay.
MS. COADY:
Okay, so we'll see if I can get you some – what you're specifically asking for
is what the Oil and Gas division, what their revenues are this year, right?
MR. HUTCHINGS:
No, no. In prior years, we
have a number of what's put into Nalcor.
MS. COADY:
Right.
MR. HUTCHINGS:
And that's often broke out
to Muskrat Falls Project –
MS. COADY:
Okay, so you have had it previously?
MR. HUTCHINGS:
– our equity share that we're putting into another oil project.
MS. COADY:
Okay.
MR. HUTCHINGS:
I'm just wondering what that number is and what the break out is. Where is it
going for what project?
MS. COADY:
Perfect.
Excellent, we'll endeavour to provide that to you.
MR. HUTCHINGS:
Okay. Thank you.
MS. COADY:
I just didn't know if Finance had it broken out like that.
MR. HUTCHINGS:
Yeah.
MS. COADY:
But you said you had it before. You can get it again.
MR. HUTCHINGS:
Yeah, I think before, maybe in the documents.
I just
have a final question for you. Minister, before I end, I just wanted to thank
you for your participation, your staff, and the far-reaching discussion on a
whole range of topics. While some may not be tied to a particular line item, I
think it's very important that we have that discussion. I thank you and your
staff for allowing us to have that discussion.
My
final one is related to Holyrood, the refinery and the bill we passed here in
the House some time ago related to monitoring. It was five different operators
in the province in regard to greenhouse gas emissions. Holyrood wasn't involved
with that because the expectation was when Muskrat comes, Holyrood would be
phased out.
We're
now looking at a carbon tax from the federal government. Has there been any
analysis done of what the greenhouse gas emissions are from Holyrood and how
that would affect – and what Nalcor would pay on an initial proposed carbon tax
of, I think, $10 a ton and how that proceed over the next couple of years? I
don't know if it's been definitively stated when Holyrood was shut down but,
obviously, in that intervening period it would be greenhouse gas emissions and,
I assume, would be subject to a carbon tax.
MS. COADY:
A very interesting question and I think one that is better directed towards the
Climate Change office and the Department of Environment, to be quite frank. I
will said this: I would anticipate that Holyrood would be part of the Muskrat
Falls Project development and would be considered in that vein, that it's
actually a part of the Muskrat Falls development and it would be lowering, over
time, our emissions in this province as Holyrood winds up.
MR. HUTCHINGS:
Indeed.
MS. COADY:
I would think it would be part of that consideration and, therefore, may be
exempt. But I think the question is better directed to the Climate Change office
and how they're developing the whole program.
MR. HUTCHINGS:
Yeah, I understand that. I guess my issue is that someone needs to pay the bill
when the carbon tax comes. If Holyrood is still operating – we expect it will
for a few years – it's going to emit. So those emissions are going to have to
pay a carbon tax and that would have to come from Nalcor. It has to come from
somebody, so I'm just wondering what analysis has been done or if some thought
has been given to that, but that's fine.
MS. COADY:
I think it really would depend on how the program rolls out.
MR. HUTCHINGS:
Fair enough.
MS. COADY:
I'm anticipating the Department of Environment would be able to answer that
question for you, as they determine how that program will roll out in the near
future.
MR. HUTCHINGS:
Thank you.
CHAIR:
Thank you, Mr. Hutchings.
Ms.
Michael, any closing remarks for the minister or her staff?
MS. MICHAEL:
Yes, for sure.
I want
to thank the minister and her staff. I found the discussion today very helpful.
The answers were very, very clear and direct.
I do
look forward to our getting the binders. I assume, as always, that if we have
any questions based on that, your people are there to answer those questions for
us.
MS. COADY:
Happy to do so.
MS. MICHAEL:
Thank you once again.
CHAIR:
Thank you, Ms. Michael.
Mr.
Lane.
MR. LANE:
Thank you.
I
assume we have a little bit of time left, if I can ask a couple questions,
seeing as how my colleagues are finished.
Minister, the first question I had related to the Vale question that was asked
earlier and the underground mine. I'm just wondering: Has there been a review of
policy, or will there be, in terms of how we move forward with these types of
developments?
What
I'm getting at, I suppose, is that one could argue that if you have a resource
there, then when the thing was negotiated from the very beginning it should take
into account the cream and then the more difficult stuff. Because what will end
up happening in this case, perhaps, is the company comes in, they take the top
layer; they take the easy stuff, the good stuff, so to speak. They benefit
tremendously from it and then they can sort of walk away, or we're left trying
to renegotiate the underground.
Whereas
one could argue, if you want access to the easy stuff and the good stuff, you
have to take all of it, the good and the bad, so to speak. And at the end of the
day there's hopefully a business case that makes sense for you and makes sense
for the province so that we're not into this situation with Vale of having to
try to negotiate with them, or renegotiate or whatever, the underground. If it
had been done from the beginning – you want the top, you take the bottom, so to
speak. I'm just wondering how that scenario works from a negotiation point of
view and a policy point of view.
It's a
big question, I know, but –
MS. COADY:
It is a big question,
especially –
MR. LANE:
You know what I'm getting
at, right?
MS. COADY:
Absolutely, I do. I wasn't
involved with the negotiation of Vale, but I will say there are remedies under
the Development Agreement. If, for example, Vale determines that it will not go
underground, there are stipulations within the Development Agreement of
penalties they have to pay; significant penalties, hundreds of millions of
dollars in penalties.
MR. LANE:
Oh really? Okay.
MS. COADY:
That is under the
Development Agreement. When I answered the question previously to Member of the
House of Assembly Hutchings, I did indicate that we are considering remedies
under the Development Agreement, should they become necessary.
MR. LANE:
Okay, so that is there.
MS. COADY:
There is provision within
the Development Agreement that if they do not go underground, they would have to
pay a significant penalty.
MR. LANE:
Okay, so they are obligated
to go there or pay it down.
MS. COADY:
They are obligated to pay
the penalty if they do not go there, yes.
MR. LANE:
Okay, that's good enough. I
appreciate that.
My next
question, the $20 million that my colleague asked about to Nalcor, I just want
clarification for myself. Nalcor, in budgeting, saved $20 million by cutting a
program which you wanted reinstated and they're going to find that $20 million
through other revenues, oil and gas or whatever the case might be. If they spend
$20 million in revenues, then that's $20 million that we don't get back in
dividends or revenues, so at the end of the day I just want clarification.
They
saved $20 million but they're going to spend $20 million, or they're going to
find revenues to pay $20 million which means, in essence, they've saved nothing.
Am I correct in that? Nalcor's actual budget, in terms of looking at salaries
and potentially eliminating some positions through attrition, cutting expenses,
whatever, have they lowered their budget or are they just basically status quo?
MS. COADY:
Thank you for the question.
I believe the question is: Is Nalcor's budget the same as last year – their core
budget meaning their operations budget of the entity – or greater or less than?
I believe it's pretty much on par with last year.
The
difference is, as I said to you earlier, this convergence of now moving from
construction of an entity called Muskrat Falls to the operations of that entity.
You're coming to that convergence. Nalcor will be hiring people, for example,
who will have the experts in DC to AC conversion which they did not have prior
to because they were operating an AD to DC line.
They
have to absorb all those new transitions costs within their existing budgets so
they really have taken a decrease. Do you understand what I mean by that?
Because they are transitioning to this operations phases, they're having to hire
different skill sets, but they still have the construction underway of Muskrat
Falls. While their budget may be flat to last year, in terms of operations, they
really are taking more out of their operations to help fund some of these new
people and new requirements of this change in operations.
The $20
million is for new exploration this year.
MR. LANE:
Yeah.
MS. COADY:
We felt and I believe the people of the province feel – I can tell you the 150
people who helped us with the Advanced
2030 felt – it was important to continue with investments in new
explorations so that we can maximize our opportunity offshore.
We're
hopeful that oil and gas will be able to fund that this year with no real
impact, but if they can't, the Government of Newfoundland and Labrador will have
to find the money somewhere.
MR. LANE:
Okay, thank you for that,
Minister.
MS. COADY:
I do know that, if I may and
I don't want to interrupt you.
MR. LANE:
Yeah.
MS. COADY:
Before today ends, I know
that the ADM would like to update you on St. Lawrence. So I'll just leave a
second or two at the end with indulgence. Not right now.
MR. LANE:
Oh, okay.
MS. COADY:
We'll continue to allow you
to ask your questions.
MR. LANE:
Okay, sure. I thank you for
that.
I agree
with the investment in the offshore, that's not my question. I guess my concern
is more around: Is Nalcor doing their part to reduce positions through
attrition, to cut out costs and so on because of our financial situation in the
province, that the less money they spend, the more revenues or royalties or
whatever you want to call it, dividends, that come back to us?
MS. COADY:
Listen, we're all seized
with that –
MR. LANE:
Yeah.
MS. COADY:
– because I think that is
incredibly important.
MR. LANE:
Yeah.
MS. COADY:
I know that we've had multiple conversations and discussions with the CEO who
understands it, who really does try and drive that into the organization. I can
tell you I've spoken with – as has the Minister of Finance – the board of
directors and they completely understand that and are working diligently towards
reducing their costs.
MR. LANE:
Okay. Thank you, Minister, I
appreciate it.
Minister, when this division of Nalcor with this new standalone Crown
corporation, when that happens, I'm anticipating, I guess the CEO of Nalcor – I
realize the individual in place now would obviously have a contract. I
understand he's made some public comments that he plans on retiring at some
point in the not-too-distant future when Muskrat is online. I would assume that
that big CEO salary is going to go down because, obviously, the responsibilities
are going be – if you're dividing it up into two corporations, you can't argue
that you need the same salaries and so on because the responsibilities are going
to be cut in half, I would assume.
So I
guess that salary goes down and I guess, at the same time, the person who's in
charge of the new entity, maybe that salary is going to go up from the current
person in place at Nalcor doing that kind of work now. Is that how it's going to
work, do you anticipate?
MS. COADY:
I'll speak to the first,
which is the CEO of Nalcor Energy. You said, cut in half because 25 people have
left the organization. There are about 1,700 people at Nalcor Energy in total
and we're taking 25 of those people out of the entity. So that's the impact that
we're having on Nalcor overall, is taking 25 people and saying that now reports
as a direct entity to Natural Resources.
As we
move forward with the Muskrat Falls Project and the evolution of the Muskrat
Falls Project and the evolution of Nalcor, the salary will be considered as we
move forward with the entity itself, but all we're moving is 25 people out of
1,700.
So I
don't want you to think it's 50 per cent of –
MR. LANE:
No, no.
MS. COADY:
The impact is very small. While there's a great deal of regard for those 25
people within Nalcor, the impact is pretty small with the regard to the
organization.
MR. LANE:
No, I appreciate that, Minister.
I was
using it, I guess, as just an example just to make the point, I suppose.
MS. COADY:
Yeah.
MR. LANE:
I understand it's not going to be cut in half.
MS. COADY:
No.
MR. LANE:
And I know you can say 25
people, but it's the responsibility of what that person – regardless if it's 25
people or 125 people or 1,000 people, depending on the type of work that's going
on and so on, and the knowledge you need to have and what you're responsible
for, you can't simply say because it's only 25 people that means it's
insignificant because, I think, it's very significant in terms of the
responsibility versus the reporting piece.
MS. COADY:
Uh-huh.
MR. LANE:
There are lots of people
working in other industries and jobs that have lots of people reporting to them
that don't make anywhere near that kind of salary.
So I
guess the point I was trying to make is that the responsibilities goes down in
that regard of what they're responsible for, I would think that perhaps there
could be some savings there.
Conversely, do you anticipate that the new person that's going to be in charge
of a new Crown corporation, that salary is going to end up going up, I guess,
was the other side of it?
MS. COADY:
I don't anticipate that at all.
MR. LANE:
No, okay.
MS. COADY:
I really don't anticipate it. My direction is we need to find savings –
MR. LANE:
Mm-hmm.
MS. COADY:
– really within the oil and gas side of things and making sure that the
compensation is similar to what other people in government make and then where
possible, except for experts or whatever, but, really, I do anticipate that we
would be working very closely with the Oil and Gas division to make sure that
the compensation levels are rightly adjusted.
With
regard to the CEO of Nalcor in the future – because I think that's what you're
asking for – as we move forward with Muskrat Falls construction coming to an end
and the development of power coming online, and as you alluded to, Mr. Marshall
has been very clear that he's there for the construction of the project.
I mean,
we'll look at the skills, responsibilities, requirements of the CEO of Nalcor
and make the composition accordingly so.
CHAIR:
Thank you, Minister.
Thank
you, Mr. Lane.
I would
just like to turn the meeting over to Mr. Canning for a few remarks.
MR. CANNING:
Thank you, Mr. Chair.
I would
like to update hon. Members with respect to St. Lawrence. You may recall that
when I spoke, I referenced a commissioning issue that was ongoing, and that was
resolved. That is correct, that was resolved.
That
was a slurry vacuum that extracts moisture from the feed and they did produce
concentrate. But they're not officially, currently in production. They're doing
additional commissioning of some other issues. They did mine late in 2017-18 and
they do have ore stockpiled to complete that additional commissioning.
I was
quite pleased to know that they had managed their way through the filter issue
and they were able to produce some concentrate based on that issue being
resolved.
But I
just wanted to make sure everybody understood: They're not officially into
production just yet. I will follow up with CFI for additional information.
CHAIR:
Thank you.
I would
like to ask the Clerk to recall the subheads, please.
CLERK:
1.1.01.
CHAIR:
1.1.01.
Shall
the subhead carry?
All
those in favour?
SOME HON. MEMBERS:
Aye.
CHAIR:
All those against?
Carried.
On
motion, subhead 1.1.01 carried.
CLERK:
1.2.01 to 3.1.06 inclusive.
CHAIR:
1.2.01 to 3.1.06 inclusive.
Shall
those subheads carry?
All
those in favour?
SOME HON. MEMBERS:
Aye.
CHAIR:
All those against?
Carried.
On
motion, subheads 1.2.01 through 3.1.06 carried.
CLERK:
The total.
CHAIR:
Shall the total carry?
All
those in favour?
SOME HON. MEMBERS:
Aye.
CHAIR:
All those against?
Carried.
On
motion, Department of Natural Resources, total heads, carried.
CHAIR:
Shall I report the Estimates
of the Department of Natural Resources carried without amendment?
All
those in favour?
SOME HON. MEMBERS:
Aye.
CHAIR:
All those against?
Carried.
On
motion, Estimates of the Department of Natural Resources carried without
amendment.
CHAIR:
We need to adopt the minutes
of the April 16 meeting and that was with the Department of Fisheries and Land
Resources.
I would
ask for a mover of those minutes, please?
MR. BRAGG:
So moved.
CHAIR:
Moved by Mr. Bragg.
All
those in favour?
SOME HON. MEMBERS:
Aye.
CHAIR:
All those against?
Carried.
On
motion, minutes adopted as circulated.
CHAIR:
Just a reminder of the next
meeting will be this evening at 6 p.m. to review the Estimates of the Department
of Advanced Education, Skills and Labour.
With
that, before I close off I would certainly like to – Minister, do you want to
have a –?
MS. COADY:
I just want to thank my
exceptional team in Natural Resources, the parliamentary secretary, MHA for
Labrador West. I just wanted to make sure I got that right – the Member for
Labrador West. We are very lucky and fortunate in this province to have such
dedicated people looking after our resources.
Thank
you.
CHAIR:
Thank you, Minister, and it
was a pleasure to have your department here this morning. A great meeting, and
I'd certainly like to say thank you to the Table Clerk as well.
And
with that, I'd ask for a motion to adjourn.
MR. HUTCHINGS:
So moved.
CHAIR:
Mr. Hutchings.
Thank
you.
On
motion, the Committee adjourned.