Resource Committee — Department of Mines and Energy, with Minister Matthews and his staff. The Committee reviewed and approved without amendment the estimates of expenditure of the department. On a motion by Mr. Andersen, the Committee adjourned at 6:00 p.m. On motion, minutes adopted as circulated. — 9 April 2001

2001-04-09

Newfoundland and Labrador — Committees

April 9,

2001 RESOURCE

ESTIMATES COMMITTEE

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

CHAIR (Mr. Walsh): Order, please!

Good morning everyone, and welcome to the Resource

Estimates Committee. There are a couple of housekeeping duties before we start.

In order to speak, you have to press the talk button in front of you and do the

same when you are finished. For the record, as some of the voices may not be

recognized by the Hansard staff, I would ask you to identify yourselves,

especially staff, and we will begin.

I will ask the Committee members to introduce

themselves. Then, Minister, we will go to you and if you have an opening

statement, by all means. At the same time you may wish to introduce your staff

or you may just wish to acknowledge that they are all here. I am not sure if

Hansard can cover the excess paper required to list the staff.

We will start by saying hello to the members first.

Ross, we will begin with you.

MR. ROSS WISEMAN: Rose Wiseman, MHA for Trinity

North.

MR. ANDERSEN: Wally Andersen, MHA for Torngat

Mountains.

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

au Clair.

MR. OTTENHEIMER: John Ottenheimer, MHA for St.

John's East.

MR. FITZGERALD: Roger Fitzgerald, MHA for

Bonavista South.

CHAIR: Minister?

MR. TULK: I am Beaton Tulk, Minister of Industry,

Trade and Rural Development.

I am going to start on my left and ask each one of the

officials who are in the room to identify themselves and tell you who they are.

I haven't yet figured it out.

MR. SCOTT: John Scott, Deputy Minister of the

department.

MR. McCARTHY: Phil McCarthy, Assistant Deputy

Minister, Strategic Industries and Regional Development.

MR. STIRLING: Bill Stirling, Executive Director,

Regional Economic Development.

MR. CURTIS: Ken Curtis, Manager of Budgeting.

MR. TOBIN: Pierre Tobin, Assistant Deputy

Minister, Industrial Benefits, Research and Advanced Technology.

MR. GUINCHARD: Larry Guinchard, Assistant Deputy

Minister, Regional Operations.

MR. BLUNDON: Mac Blundon, Manager of Financial

Operations.

MR. HEALEY: Keith Healey, Assistant Deputy

Minister, Investment, Prospecting and Export Development.

CHAIR: Thank you very much.

Before we start, there is one other housekeeping duty.

I want to move the minutes of the last meeting. The meetings read as: Here are

the members who attended. It was the Department of Mines and Energy, with

Minister Matthews and his staff. The Committee reviewed and approved without

amendment the estimates of expenditure of the department. On a motion by Mr.

Andersen, the Committee adjourned at 6:00 p.m.

On motion, minutes adopted as circulated.

CHAIR: Minister, our format in this Committee in

particular has been somewhat relaxed in the sense that there is an opening

statement from the minister. We then move to questions from our colleagues in

the Opposition. The normal time would be five or ten minutes each. We have

allowed them to go longer if they so desired. Stay reasonably close to the

Estimates themselves, although some questions and comments, I am sure, will

range outside of that. Hopefully we will conclude at a reasonable time. With

that, Minister, if you have an opening statement, go ahead.

MR. TULK: I will not be too long, Mr. Chairman,

with my opening statement. The Estimates are in front of people, and if there

are questions to be asked, I hope I have the resources here to answer them for

you.

Let me just say that it is a pleasure to be before the

Committee. As you know, this year we are looking at the creation or the

amalgamation, if you want, of two departments: the former Department of

Development and Rural Renewal, and the Department of Industry, Trade and

Technology. The creation of the new Department of Industry, Trade and Rural

Development brings together all of - and this is the reason for doing it -

government's core economic and business development tools into a single

organization.

If you read the Jobs and Growth report, which is a

result of the presentation of some 300 briefs to us by people from around the

Province, consulting with eleven sectoral parts of the Newfoundland economy, you

will note that was one of the recommendations to government. People felt that we

were probably a little too dispersed in the way we organize government to look

after development in the Province, and that we should bring it back together

into one department.

As a result of that, as a result of the Jobs and

Growth report, that is where the new department is going to find its mandate.

That is where its mandate is. I would encourage all members of the House, on

both sides of the House, to read it, because it does represent the views of the

people of this Province in some year-and-a-half of study, looking at those views

and trying to consolidate them into an overall economic agenda for the Province,

not necessarily a prescriptive economic agenda. That is the mandate of the

department, to implement that report and to see that economic development is

carried out in the way that report suggests it should be.

In relation to that - and I will clue up here very

quickly, Mr. Chairman - one of the moves that we felt was necessary was to make

the Minister of Industry, Trade and Rural Development also Chairman of the

Economic Policy Committee of Cabinet. We will be taking that report, taking it

department by department, going through it with the departments, and saying:

From here, we would like for you to focus on what it is that is in that report

that affects your department.

We believe that we have established some momentum over

the past four years and we want to be far more aggressive in moving the economy

forward. That is especially true in rural Newfoundland and Labrador. In actual

fact, the Province has recovered somewhat but there are areas of the Province -

and there are areas that are not easy to deal with - that have not recovered

from the shutdown of the groundfish industry. We could name four or five areas

in particular. The Member for Bonavista South will know what I am talking about.

The Bonavista Peninsula had a large number of people who were engaged in the

groundfish industry. We had a plant in Catalina. Was it Catalina-Port Union,

Roger?

MR. FITZGERALD: Port Union.

MR. TULK: In Port Union that employed, I think, at

peak, some 1,200 people year-round. Bonavista itself was a big fishing town,

primarily inshore. When you shut down that kind of momentum, as we did - I am

not laying blame here; it had to be done. I don't think there was any choice, as

there was nothing there to catch anyway, because the groundfish industry, in

actual fact, shut down years before it was officially announced. When you do

that, the problems of recovery with that large number of people engaged in a

particular industry, I think it is safe to say that at that point in time places

like the Bonavista Peninsula were one-industry communities, if you look at the

whole of the Peninsula.

There are areas like that. There are areas on the

Great Northern Peninsula, as all of us would know just recently from the

by-election, Englee for example. If you establish St. Anthony as a regional

centre of development, I think it is somewhat difficult to believe, in my mind,

that people in Englee are going to drive to work in St. Anthony, because of the

distances, because of the kinds of roads in winter and so on. We have to take a

look at those places and see just exactly what it is that can be done.

Let me give you another example. Burgeo, Ramea and

Trepassey, those are areas that are out of the main stream, so to speak, when it

comes to the geography of the Province. They are off the Trans-Canada and it is

extremely difficult to find things that can be done, but hopefully we will keep

making some progress.

At the present time we are currently working to

restructure the department, to get it together and focus our attention. In that

regard, I think somewhere around the next week or so, or two weeks, we will be

taking a couple of days, all of us, with all those people and our regional

people and saying: Alright, we have to focus here. We have to focus on certain

areas of this Province in particular and move along.

Also, and I don't believe he is here this morning,

George Sweeney as been appointed, as you know, as the Parliamentary Secretary to

the minister. In that regard, I have asked him to concentrate on the IT sector,

to push and see what can be done in that regard for any part of the Province

that we can help in overcoming their economic challenges.

Having said that, Mr. Chairman, giving that general

overview of where we hope to go, I throw the floor open to questions.

CHAIR: Before I go to John or Roger, I, on behalf

of the Clerk, will move 1.1.01. The Clerk does not have a microphone, but I

acknowledge that the Clerk moves that.

George Sweeney is chairing another committee this

morning in the attempt to conclude as many as possible today, with an attempt to

go to concurrence before we take the Easter break.

John or Roger. Microphone, please, and identify.

MR. OTTENHEIMER: Thank you, Mr. Chairman.

I think, with the Chair's permission, we may change

our approach somewhat this morning. We are pleased that the critic for this

department is present, my colleague, the Member for Bonavista South. I know Mr.

Fitzgerald has a few questions and, with the Chair's permission, I am going to

ask Mr. Fitzgerald to lead in the questioning.

Thank you.

CHAIR: Roger.

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

minister and staff.

Minister, I am glad you touched on a few real

problems. If there are any sore spots, I think you probably touched on them in

your opening statement. I know my area, I guess, better than others that you

named, but I am also aware of other places like Ramea and Burgeo and those

places.

I do not know what your department is looking at for

places like the Bonavista Peninsula. Some people think that the Bonavista

Peninsula today is doing alright because there are two active processing plants

there, but when you look at a plant that employed in excess of 1,200 people

year-round, now versus a new, modern plant that employs less than 135 people for

sixteen to twenty weeks of the year, it is a vast difference.

I do not think this problem is going to go away. The

people who are living in those areas now, with the programs that we have gone

through, the NCARP, the TAGS program, the mobility program of each, I think the

people who are there today are people who are going to stay. We have to do

something. I do not know what it is. I do not have the answer to what we can put

down in Bonavista or Port Union in order to create some economic activity there

so that the people might be allowed to continue to live there.

The upper part of the district, the Lethbridge area,

feeds off Clarenville with the economic things that are happening there.

MR. TULK: Close enough to do it.

MR. FITZGERALD: Sure. A lot of the people make the

drive every morning and come home every night. With the agricultural industry

and the logging operation there, it has provided some stability. From Charleston

down, I say to the minister, we have a major problem.

I am a little bit disappointed in the functioning of

the RED board, especially in that particular area. I am not a little bit

comfortable with it. I am certainly highly disappointed with it. I know that

this board operates under the umbrella of your department, and I know that your

department funds it, and it causes me great concern. I brought this up at their

annual meeting as well, when I see them now getting involved in real estate. I

drive down through Clarenville and I see a major amount of money being spent on

a building. By God, we should have learned our lessons when it comes to allowing

development associations to get involved in real estates and buying property

rather than to focus their attention on creating economic opportunity.

I can probably go back to the Sprung Greenhouse. If

the Sprung Greenhouse were built down in Bonavista or out in Deer Lake

somewhere, we probably could have justified why we spent some of that money,

because we would have tried to reach out to help an area; but, for the RED board

to try and convince me or your department that they are looking at bringing in

new people to the Clarenville area, and that is the reason why they had to buy

this building and go after your department and HRDC in order to pretty well

construct a new building to create economic activity, it might have been

justified if they had put it down in Spillars Cove somewhere. I do not think it

is justified in Clarenville. I know lots of businesspeople in Clarenville who

were willing to create space and allow them - and I do not believe they are

paying any rent up until now - to generate economic activity there. I do not

know where you stand on that. I do not know what your thoughts are, or who

approved the money for it, but I would like to know.

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

CHAIR: Is your microphone on, Minister?

MR. TULK: Oh, I am sorry.

CHAIR: I am not sure if you will get feedback or

not from these. We can leave some of them on and take a chance.

MR. TULK: It has the appropriate color. It turns

bright red when you turn it on.

MR. FITZGERALD: But the red is getting weaker all

the time.

MR. TULK: Actually, I will tell you something. I

just met your leader on the way up and I said to him: Did you write that speech

out of my Jobs and Growth report or what? I think he admitted that he did. I

believe he did but I am not sure. Anyway, the mike is on again.

Let me just say to you that we believe that the

importance of RED boards is not to get into projects. We believe that their

importance is in working to develop, along with people in the area, to point

them in the direction, and there are some very successful ones in the Province.

The Discovery Board is working, so I put that in that context, but to be open

and say this to you: We have not approved any funding for that piece of real

estate because we do not believe that should be the primary focus. Having said

that, those people are somewhat independent themselves, and get elected in their

regions.

In regard to your own area, I think in November when I

was in the Premier's office, I met the Mayor of Bonavista - Fitzgerald.

MR. FITZGERALD: I am sorry?

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

MR. FITZGERALD: The mayor?

MR. TULK: Yes.

MR. FITZGERALD: Yes.

MR. TULK: Two of you.

- and suggested to her that we do want to concentrate

on that particular area of the Bonavista Peninsula because we recognize that it

is somewhat off the end of the area. I believe - well, I hope we have - that we

have approved an economic development officer to work in conjunction with the

towns down there to see what it is, in particular, that we can get in Bonavista;

what it is that they would like to see us go after, as a government. If there is

some infrastructure that is necessary, then we would go after that kind of

infrastructure for them.

There are some interesting concepts that are

developing in regard to how you can get the information highway in the people's

hands. One of the things that we have been looking at with the Discovery Board,

for example, is the satellite type, wireless type, of movement into areas such

as the Bonavista Peninsula so that people get connected to e-commerce through

maybe a call centre; because while the wages, perhaps, are not as high as some

people would like to see them in call centres, they do provide employment,

especially if you live in your own home, you own your own home, and that kind of

thing.

We have recently moved - and I would hope that the

letter has gone out to approve that position - to say to the REDB that we need a

particular focus on those regions. Hopefully, in the coming months, we will be

able to get down into Bonavista and bring some of the prosperity that is

happening in places like Clarenville, like Gander, like Grand Falls. If the U.S.

economy does not go bottom up, and the Canadian economy go bottom up and

consequently affect our economy, then there is a real opportunity for us to do

some things in Newfoundland and Labrador that were formerly done in other

economies; because, the truth of the matter is that the U.S. today are finding

that labour rates are on par but the amount of labour that you can find in the

U.S. today is rather insignificant, with people finding jobs. What happens to

the U.S. economy, I do not know.

We are determined, as a department, to now start

focusing our attention on those - I don't even know what kind of name to stick

on them. I don't want to say anything degrading about them, because you

shouldn't, but I will have to call them, I guess, the outlying areas of the

Province that you have to concentrate on. The truth of the matter is that, as a

Province and as a people, we are going to have to come to some decisions. If we

can't find work for those people, then I don't know what the hell you do, to be

frank with you. There are some areas of the Province that we have to try and

concentrate on. Burgeo is one of them, Ramea is one of them and Trepassey. I can

go through the names again. They have one thing in common: they were all big

groundfish communities or areas, big groundfish communities.

Some areas of the Province have come out of it very

well. I know areas that have come out of it very well, with Beothic Fish and so

on. One of the problems that you have, obviously, in the Bonavista area is: you

have fish plants there that are specialized in crab or in shrimp.

Whereas in the

case of Beothic Fish, for example, I think they doing some twenty-one species at

this point. I think they are now doing some crab from Greenland. That is the

kind of initiative that I think you need from some of those communities. You

need to be more community oriented, get in there and do the kind of work that

needs to be done.

I would hope that over the next little while we can

concentrate - there is another area of the Province, for example, that has come

out of it very well, the (inaudible) area. They have come out of the groundfish

shutdown very well. They have a booming - I was going to say a booming economy,

but I suppose that is a bit of a stretch, is it?

WITNESS: They are doing relatively well.

MR. TULK: They are doing relatively well. They

have done that over the last three or four years by becoming engaged themselves,

by engaging their members.

There are success stories out there that you can take

some feed off and go to work on. To be frank with you, over the next year we

will do it on the Bonavista Peninsula.

MR. FITZGERALD: While I welcome the idea of an

economic development officer, and I think that is something that has been

identified by some of the communities there, I have seen community development

officers here before, as well, Minister, but if we are not going to give them

the tools to do the job then we are only going through the motions. There is no

point in having an economic development officer and say: Here is your fax

machine and here is your telephone. Now submit your telephone calls. We want a

list of your telephone calls at the end of the month.

MR. TULK: No, I agree with you.

MR. FITZGERALD: This is the mentality that we have

had up until now when we have put those people out trying to look at economic

activity. It doesn't work that way. Those people have to have leverage to follow

up whatever ideas, or to go and try to flush out - or whomever they might take

around and show them what we have to offer.

MR. TULK: We have put some money in the budget of

the new department, that has that kind of flexibility, that is not tied to a

specific program. We do believe that with private enterprise people are going to

develop. The Department of Industry, Trade and Rural Development no longer does

loans. We do not do loans. We make equity investments, up to a maximum of

$50,000, if you are prepared to put up $25,000 of your money. We are prepared to

put up $25,000 of the public taxpayers' money once we both agree that the

business program you have put in place is good.

In terms of marketing, we have said: Alright, up to

$25,000 if you have a project that both of us approve. You just cannot have

anybody going off doing their own market, but we will put in up to a maximum of

$25,000; 50-50, for marketing. We have set in place a tax credit program which

is geared towards rural Newfoundland. If you invest in rural Newfoundland, you

can get a return on your taxes - not on your taxable income - of up to 35 per

cent, up to a maximum of $30,000 a year. Am I correct?

WITNESS: Individually.

MR. TULK: Individually. If you invest - I am sorry

about this, John - on the Northeast Avalon, you get a tax break of 20 per cent.

So, we are using those kinds of things. I will be frank with you: I think one of

the things that we started last year, the program got pretty well taken up; but,

as a government, we will not limit ourselves. If we spend $1 million and it is

gone by July, and Treasury Board approves it, I would not hesitate at all to go

back to government and say: We have had great success with this program. We did

last year. It was late getting off the ground, it was August month, but the

take-up on it was good. The equity program did not use all of its money, but I

think we transferred some of that to the marketing side because there was a

great deal more interest in the marketing side - and that is as it should be -

of the program than there was in the equity side of the program. There is a lot

of work to be done, but I sincerely believe that if we follow what people have

told us here on a broad based sense, over a period of time we could overcome the

disparities that are there.

MR. FITZGERALD: The goat farm on the Bonavista

Peninsula -

MR. TULK: In trouble.

MR. FITZGERALD: - were there eight farms in the

beginning, eight or ten or something?

MR. TULK: Yes.

MR. FITZGERALD: Now there are two. What is the

latest story on those? The last time, I know, when I got involved, or was asked

to be involved, they were looking for feed that needed - I think, John, I

chatted with you - to look after them for a couple of months. Then we were

talking about providing them with some expertise to look at markets which they

said they had identified but did not have them signed and sealed. Where are we

going with that?

MR. SCOTT: That process is continuing. We have

engaged the remaining farmers in looking at the markets that they have tapped

and sizing up the extent to which those are feasible opportunities to sustain

the entities. Suffice it to say right now, they are going to have to approach

their business differently if they are going to have a long-term future. We are

probably about a month away, Larry, in terms of developing a new business plan

that will take it forward on a reasonable basis. There will not be eight

separate entities, as you know, but for a core of two enterprises it looks, on a

preliminary basis, that there may be some room for optimism there. It is tough

slogging and they are the first to acknowledge it as well. Right now we are

trying to restructure and hopefully come out of that with a long-term

sustainable plan of action.

MR. TULK: I believe, if I could just add one

thing, that one of the problems - I actually had my picture taken with one of

those goats, and it was not a bison by the way.

MR. FITZGERALD: I was talking to somebody and they

did not know who was who.

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

looking: the goat was.

In any case, I think one of the problems that we

identified there and I think is there is the availability of feed. I think it is

one of the biggest problems that is there. If you have to import feed today for

anything, it causes you the difference between bankruptcy and - that is my own

personal view of what I saw there: a good system, but I detected right away that

one of the problems -

MR. FITZGERALD: Their big problem, I think, was in

the beginning when the fear of Q fever hit. That was the end of the local market

as they knew it. I do not know how they could have survived anyway, having a

milk truck going around with cartons of milk in the back, knocking on somebody's

door and picking up what was outdated and bringing it back again. Sometimes what

was coming back was just as much as what was going out.

Marketing seems to be a big problem there, if you

listen to them. I do not know anything about it but, if you listen to them, they

talk about all the markets that they have identified for cheese and the monies

that would be returned to the farmers here, if it is that simple - I think it is

much more than that.

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

MR. FITZGERALD: That is still a work in process,

John, if I understand correctly.

MR. SCOTT: About a month away before we will have

a good solid team plan that is reasonable, that is focused on some opportunity

that makes sense and deals with issues such as feed, such as markets, such as

the capacity of the local people - which are former fishermen from TAGS days -

to really adapt to the business environment.

MR. FITZGERALD: Friede Goldman, Minister, what is

the situation there right now as it relates to the possibility of some new work

coming to that facility there? I think it is criminal, and I have said this

before and I know you were not part of the situation when it happened, that we

go and allow a facility worth in excess of $100 million to be given to somebody

for a dollar. I have no problem with that, if it is going to create some

economic activity and get people working, because that is what it is all about,

but to learn that we did not have the assets secured there and that there is a

possibility of those assets now being - probably have to go and have people come

out and surround them, to stop something from being taken from there in order to

secure assets and commitments made in other parts, outside of this country

altogether. That is criminal, that we allowed that to happen.

MR. TULK: I think, in fairness to that decision, I

would have to say that the people who made that decision made an attempt to get

government out of the shipbuilding industry. Obviously, if you own the asset

then you are still part of the business. I think that was the approach that was

taken.

In regard to what is happening at the present time

with Friede Goldman Halter, who owns the facility, I noticed your press release

this morning saying that the minister did not answer the question. I think it is

a question of what projects we are trying to do down there. The truth of the

matter is that Friede Goldman found themselves, in the last couple of weeks, in

less than a desirable situation on the stock market in terms of the amount of

capital that they had. It is my understanding that they have now negotiated in

principle - Perry is the guy who works at it more than anybody, but the people

in my department tell me that they believe the structure of the company is

sound, Friede Goldman, in terms of its structure. It is sound. They believe it

is a fairly good company. They have now negotiated in principle with a group

called Pegasus, a $100 million loan to get them out of the present cash crunch

that they find themselves in. A lot of their difficulties came about as a result

of the building of two rigs called Ocean -

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

MR. TULK: Ocean Rig, out of Norway. I think they

have resolved those issues. We had meetings all weekend with the union from

Marystown and decided, where do we go from here? I can tell you that the

government is not getting back in the shipbuilding business. We are working with

them to do anything that we can to attract projects to Marystown. There is a

downturn in the shipbuilding industry. I just read over the weekend - and I say

to all members of the Legislature that I think we should all read the report on

the shipbuilding industry that came from the committee that was established on

the shipbuilding forum, because one of the difficulties that you have in

attracting shipbuilding to this Province, for example, is that in Korea, it

subsidizes its shipbuilding industry by approximately 40 per cent. If you look

at the European communities, they have been subsidizing their shipbuilding

industry to the tune of about 20 per cent, and they have committed themselves to

do away with that this year; but, in view of what is happening in Korea, I

understand they are even talking about increasing their subsidies, and Canada

has not done it. The Jones Act in the U.S. requires anybody who is doing

commercial work - any bottoms, as they call it - in the U.S., that they be built

in the U.S. Canada has not been subsidizing, at least on a federal level, its

shipbuilding industry.

I notice that in P.E.I. there was a considerable

subsidy given by the provincial government, I think, and maybe HRDC, too - so

there might have been a bit of back-door stuff - but the provincial government,

certainly, in P.E.I., and we believe that the provincial government in Quebec,

in terms of Davie, has been subsidizing the shipbuilding industry. I am not at

liberty to say exactly what we will do but I can say this to you - now, let me

come back to the report first. The report shows us how, by using the tax system,

we can be put on a level playing field with the subsidies that are in place, so

I would commend it to every - is it a public document yet?

WITNESS: Yes.

MR. TULK: I would commend it to every member of

the House to read. I think it lays out that it is done by a group of people who

are in the business and who are independent of government. Do you have it read

yet?

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

MR. TULK: That is right.

It lays out a very good policy direction for the

point in time, because of the kind of stuff that I am trying to do, and I do not

think you would want me to - you are great with politics, but in final analysis

I do not think you would want me to - put in danger anything that we are trying

to do with Marystown by making a public statement. We are trying to do some

things. We are working with the union, and we are working with the company, but

I think it is a conscious decision of all of us that we will not get back in the

shipbuilding industry.

In regard to the assets, the assets have not been put

up as collateral but they are owned by Friede Goldman Canada. I think two-thirds

of their shares have been pledged as security for loans.

WITNESS: That is for Friede Goldman Halter?

MR. TULK: For Friede Goldman Halter. In that case,

Friede Goldman Halter has not yet - there is a long process here to be gone

through if anything is going to happen. Friede Goldman Halter, as you know,

could apply for

Chapter 11 protection in the U.S., which would stop their

creditors from coming in and putting them into receivership for a period of

time. The best example that is known in North America about

Chapter 11, I guess,

is Chrysler, before Lee Iacocca took it over. It was in business for years while

it was in

Chapter 11 - that depends on the courts - and then, of course, there

is receivership. We will pursue whatever angles are available to us at the

present time to see that the assets are protected, if it should go into

receivership. To be frank, at this point, I am trying to concentrate on working

with Friede Goldman. I believe that in the next little while, as soon as we can

arrange it, we will be meeting with, hopefully, the top officials in Friede

Goldman Halter to see just exactly where they intend to take this and to review

their whole financial and whole structural base.

MR. FITZGERALD: I know you have recently met with

the Atlantic Lumber Producers Association.

MR. TULK: Yes.

MR. FITZGERALD: My question is in relation to

softwood lumber exports into the United States. Right now, as you know, the

Atlantic Provinces have had a free trip to be able to ship whatever lumber is

produced in the Atlantic Provinces south of the border. In fact, I think more

than half the amount of lumber exported from this Province goes to the United

States. Some fear now that may be included in the general softwood lumber

agreement, should a new one be signed, and restrictions put on it. Is there any

indication that might happen?

MR. TULK: Last weekend, I represented the Premier

at the Conference of the Atlantic Premiers in P.E.I. One of the concerns, one of

the issues, on the agenda among the four Atlantic Premiers was the softwood

lumber business, and there was a presentation by the Maritime Lumber Bureau. We

conveyed again to the Prime Minister and Pierre Pettigrew our strong stance that

we believe there is no subsidy being put on Maritime lumber. We are not like

Quebec or British Columbia where the Americans are claiming, at least, that

there is a large amount of subsidy going on it and that it is not private land.

The stumpage is not up to where it should be. We conveyed to the Prime Minister

and Pierre Pettigrew our strong belief that we should sign the agreement, the

Accord, again.

There was one thing of interest: we were able, through

the Maritime Lumber Bureau primary, because they have done a great job on this,

to convince the organized lobby group in the U.S. that, when they filed their

petition, Atlantic Canada was not included for countervailing. So I do not

anticipate that there will be any countervail put on Maritime lumber. The lobby

group in the U.S. is not seeking that. For the purposes of anti-dumping and

export tariffs, we still said to the federal government, Pierre Pettigrew, that

we want them to sign that Accord.

The effort has been made by the four Atlantic Premiers

to convince the federal government to do that, and we will be conveying that to

the federal government in other meetings that we will be having with them in the

next two or three weeks.

MR. FITZGERALD: That was an indication just last

week, according to the story that was in The Telegram, that some of our

lumber was stopped at the border and was not allowed to cross. Was that

accurate?

MR. TULK: I never heard that. I do not have any

information that tells me that is the case.

MR. FITZGERALD: I thought I read it in The

Telegram , in fact just either Wednesday or Thursday of last week.

MR. TULK: I will certainly check to see. The

Premiers' meeting was on Monday of the week past. I wasn't up in the House, in

Ottawa House.

MR. FITZGERALD: I understand (inaudible) after.

There was not need for you going back there to -

MR. TULK: No, it was done before.

MR. FITZGERALD: I just have a couple of more quick

questions and then I will be through. I will pass it on and you will not have to

come back to me. It is hard to ask questions on Estimates here because when you

look at the figures - I understand that this is a combination now of two

departments. I guess some of the figures, like the salaries and that kind of

thing, the budget would have been one thing and the revision would have been

something else to reflect what has happened when you combined both departments,

Industry, Trade and Rural Development. Would that be accurate?

MR. TULK: In some cases.

MR. FITZGERALD: Okay. The one that I want to ask

is on page 133, heading 4.1.02., Comprehensive Economic Development. This would

be one area where I would see that we would access from -

MR. TULK: What number is it?

MR. FITZGERALD: Under 4.1.02., page 133.

MR. TULK: Okay.

MR. FITZGERALD: This would be one area that I

would see where places like the Bonavista Peninsula would be able to access

funding in order to be able to reach forward and look for some economic

development or to provide funding in order to attract somebody there to provide

employment.

When I look at 01., Amount to be Voted, Federal, the

budget was $4,418,000 and we actually spent $2,981,000 of federal money, why

would we have not used that particular budget when those problems were just as

prevalent, if not greater, six months ago as they are today?

MR. TULK: Let me just give you the truth. Cash

flows were down due to some staff turnover; and, besides that, the projects did

not proceed as fast as we had anticipated they would.

MR. FITZGERALD: Were they some projects that we

had identified and later changed our mind? There must be something that would

give you what money you would need to (inaudible).

MR. TULK: No. It just didn't get through the

system as fast as you would have wanted it to get through.

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

MR. TULK: No.

MR. FITZGERALD: That would then be transferred to

$8,852,000 for this year?

MR. TULK: I would think so. It was committed, but

not spent.

MR. FITZGERALD: Okay, so that money is there for

us to spend now and we can access that?

MR. TULK: As long as you have finished it by the

time that the agreement expires, the money is there.

MR. FITZGERALD: Is that the amount of money that

is left in that particular agreement?

MR. TULK: As I understand it, when Minister Tobin

and myself signed the agreement on, I guess it was February 2, the last day that

I was Premier, I think the amount that was left in that program at that time,

John, in the total, over a two or three year extension -

MR. SCOTT: Two years.

MR. TULK: - a two-year extension, would have been

$42 million, including our input and theirs, thirty-one (inaudible).

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

MR. TULK: It is 70-30.

MR. FITZGERALD: It is 70-30?

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

thirteen.

MR. FITZGERALD: So, we do have our money committed

for that as well?

Do you have any second thoughts, or have any concerns,

about the present possible takeover of Fishery Products International by a

dissident board of directors, of what the repercussions might be to at least

nine communities of rural Newfoundland and Labrador, two that we have already

mentioned, and maybe the whole fishing industry?

MR. TULK: Of course there are concerns as to what

is going to happen to the communities in any takeover. Let me just say this to

you: I remember meeting with the president of FPI - I think it was the morning

before or the morning after the news broke - and his only request to us, at that

point, was to not get involved in it in any way. They felt that they could

handle this whole thing, but not to get involved in it in any way.

I think our concern has to come from the point of view

that we will do whatever is necessary to protect the economies of those

communities. I am not sure, and I don't believe, there is a role for us to play

in terms of who sits on the board, but I think there is a role for us, there is

going to have to be a role for us at some point in time, to keep a close guard

on just what goes on. Who knows? This may never happen. There is some indication

that this is going to end up in court, that the whole procedure will end up in

court. There is some suggestion, and John would know this probably better than I

would, to be frank with you - I am talking about John Ottenheimer - we have seen

it in the papers, that the present board of directors of FPI are presently

saying that this is not legal, it does not fit under the Corporations Act, they

did not give enough notice for appointing their board of directors.

The truth is that, at this point in time, you wait. I

don't know if you can do anything except wait, but you have to start looking at

what happens if, and how do we combat that. I think, in all fairness, that is

the mode that I am in at this point as the Minister of Industry for the

Province. Certainly there is a commitment there.

I want to say something else to you. One of the things

that I would like to see happen in your own area, for example, is for FPI to

become more diversified. As you know, last year FPI did not supply the amount of

employment that we would have liked to have seen on the Bonavista Peninsula, the

same way as, say, Beothic Fish did in Bonavista North. I think it is important

that FPI become aggressive and that they move in that direction. I think we have

to, at some point in time, say to the community: You have to keep it as a tenet,

that you will try to protect the economy of some of those communities. I mean,

FPI has closed out fish plants in this Province too, and some of those

communities are now taking the lead again.

I believe the fish plant in Englee was owned by FPI.

In Twillingate the fish plant was owned by FPI, and it is shut down. So, it is

not that FPI has not shut down fish plants. Maybe we went a little too far with

them at that point, and I say we, as a total government, as people, not as a

Liberal party or anything. I think in the case of some of them, your party was

in power when that was done. I am not being political, I am just saying that

maybe we should have taken a closer look at the situation at that point and

said: Look, diversify those plants, don't lock the doors on them too quickly,

slow up here a bit.

We have forwarded our concerns about quotas and where

they go to the federal fisheries minister and said: If there are quotas to be

processed, they have to be processed in Newfoundland. Then you will reach the

point where you say: Okay, the truth of the matter is, that purely from an

economic and cost-effectiveness point of view - if I can be totally frank with

this Committee - in Newfoundland, if you are going to operate totally on a

business model, there is probably only need for one fish plant; but you can't do

that. We have to make up our minds what kind of Province we want. If you want to

keep the demographics in Newfoundland somewhat like they are now, then there is

a price to be paid for it, and I think it is a price well worth paying, to be

frank with you, in terms of cost-effectiveness, efficiencies of businesses and

so on. I suppose, if you wanted to carry it to it's extreme there is probably no

need for a fish plant in Newfoundland at all. You can do it all by factory

freezer trawler and ship it out of here. That is not the type of Province that

we want, as a people. I don't think it is. I would be surprised if it is.

The role of government, in my estimation, is,

regardless of who sits on the board of directors, we have to use whatever powers

are available to us to ensure that those communities survive.

MR. FITZGERALD: I think we should, as a Province -

there are thirty-six very privileged people in this Province today, and while we

don't control quotas and we don't control fishing seasons and that kind of

thing, there is one thing that we do control and that is processing licenses.

MR. TULK: Yes.

MR. FITZGERALD: You have thirty-six very

privileged people in this Province today who hold the most lucrative licenses of

all, the snow crab licenses. It seems like we sit back , allow them to tell us

what they are going to do, how many people they are going to hire, the products

that are going to reach the market, and in what state the product reaches the

market.

I have always maintained that what those companies

should do with that resource is they should have to file for a license. Why

should somebody hold a license in perpetuity because they happen to have gotten

a license from government? Let them file a five-year plan.

MR. TULK: If I could, just for a moment. If you

will recall, in the four months that I spent as Premier I took one license away

from them.

MR. FITZGERALD: Let them file a five-year plan.

Let them tell government what they intend to do. I say five years because there

is a major financial investment to get involved in that. You can't say one year,

but let them file a five-year plan and if that is not what government feels

should be done, or doesn't provide the greatest return to the people and to this

Province, let somebody else do it who might want to do it in that kind of a way.

CHAIR: Order, please!

Roger, I appreciate the comments, but they are

probably better directly to the minister who would be responsible for the

license themselves. I understand from the economic point of view exactly where

we are, but licenses will be controlled by -

MR. FITZGERALD: It is just an observation.

CHAIR: I understand the observation.

Are we prepared to move the actual numbers, bearing in

mind it is a brand new department and we have rolled in two departments into

one? As was stated by, I think, Roger, yourself, it is pretty hard to pursue the

numbers. I am only asking that because I understand that there are a number of

other meetings taking place this morning that all members might want to -

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

Mr. Chairman?

CHAIR: Yes.

MR. OTTENHEIMER: It gets back to the Friede

Goldman issue. My guess is, that perhaps right now one of the biggest challenges

facing the department is in terms of what the repercussions and consequences,

depending on what happens in the U.S. courts, would be to the this facility and

the people of the Province, generally.

It was confirmed last week, in the House, by the

Premier in response to questions, and, of course, it is public knowledge, that

the company has taken steps, certainly in their filing under the securities

legislation in Washington, to give notice that there are concerns. The schedules

that were attached to the filing, as I understand it, make it quite clear that

the company's obligation in Marystown would be difficult to meet and to satisfy

in terms of its obligation to the people of the Province at this time.

Therefore, Minister, really, where are we with that?

Has the government even considered taking the drastic step of initiating

legislation that would preserve and protect these assets? Granted, it is

an act

that will perhaps easily be challenged, and I am sure in all likelihood would be

challenged. Nevertheless, it is a step that could be taken to protect the

assets, and it would show the people of the Province that the government is

doing whatever it can do to protect the interests of the citizens of our

Province. It is a drastic step, but is it something that government is prepared

to consider?

MR. TULK: At this point it has not been

considered.

MR. OTTENHEIMER: Why not, Minister?

MR. TULK: Well, it is very simple why not. We are

still working with the company to see: Can we work our way through this, can you

work your way through this. As I said, probably within the next two weeks, as a

result of the meetings that we have had with the union over the weekend, you

will see just where you intend to go and what your capabilities are. It also

depends very clearly on what FGN is - Pegasus has signed off in principle. I

think Pegasus is a venture capital group.

WITNESS: A substantial industry.

MR. TULK: A substantial fund. Will they sign off

and bring Friede Goldman around to the place where they do not need to file for

Chapter 11, and they do not need to go through the bankruptcy proceedings, and

maybe they can get into doing some of the things that we want them to do in

Marystown?

MR. OTTENHEIMER: But, of course, we would lose

control though, because I mean it is other people who will dictate and control

what is going to happen.

MR. TULK: We would lose control, as I understand

it, once they go into receivership.

MR. OTTENHEIMER: Creditors will have all control

and will dictate what we do as a Province. We lose our authority once that

proceeds -

MR. TULK: Once it goes into receivership.

MR. OTTENHEIMER: Right.

MR. TULK: So the decision has to be made as to

what the government is going to do before you go into receivership.

MR. OTTENHEIMER: Can't we take somewhat drastic

steps at this point?

MR. TULK: No. I think that would just push the

sense of panic that you can develop in those situations. I think you have to be

looking at it. We are looking at it with the Department of Justice seeing what

is possible there, what should we do, what should be our options and so on. At

this point in time, I think you might be pushing a panic button that you do not

need to push.

MR. OTTENHEIMER: I hope you are right.

MR. TULK: Well, I hope I am right too, because we

all hope, to be frank with you, that what we do is in the best interest of

Marystown, and will keep that company whole and keep it functioning. I do not

want to do anything to jeopardize that at this point. That is where I am.

CHAIR: The Chair would like to move 1.1.01.

through to, and including, 5.1.02.

MR. FITZGERALD: Are there any more questions

before we move, Mr. Chairman? There may be other people who want to ask

questions. We should not be guided by a time frame of one hour. We have three

hours for an estimates committee meeting.

CHAIR: Indeed we do.

MR. FITZGERALD: I think we should ask if there are

other people to ask questions before we start moving heads on these topics.

CHAIR: I asked the other members prior to and they

told me that, no, they could speak directly, if they wished, to the minister and

cover off their questions at that point in time. So the Chair is simply

responding to what other members have said.

So moved?

MR. FITZGERALD: No, I have another question to

ask.

Minister, you indicated a couple of initiatives that

your department had put forward. One of them was that your government would

match dollar for dollar, up to $50,000, if somebody was involved in a new

opportunity that was recognized and identified as something being positive. The

other one was a reduction in allowable income tax - 35 per cent, 25 per cent -

depending where the opportunity was or the company that you invested in. Is that

for market trade on the stock exchange as well? Is that for companies that trade

on the stock exchange?

MR. TULK: No. I don't think we have ever come

across it, and I don't believe, with that kind of money, that we will.

The other thing that we have tried to do for people

who want to invest is the creation of a venture capital fund. John, you probably

know better than I do where we are with that, because I have not had a chance to

ask you, but I think we are now in the stages of putting out the ads for people

who want to get involved in the creation of a venture capital fund, to build a

pool of capital that we believe is - for example, if you look at Newfoundland,

if you look at the Maritime provinces, generally, a lot of our RRSP money and a

lot of our tax rebates and so on end up in pension funds, and our pension funds

end up in pension funds on mainland, Canada and, I suppose, some of it in the

US.

So what we have basically said here is: Look, invest

your money in a venture capital fund for Newfoundland, and we will provide you

certain breaks in that as well. We are hoping to work that in with Labour to see

that this is done in the Province. We have put together what we call a Labour

Sponsored Venture Capital Fund that again uses that tool of saying: Alright, if

you invest outside of the Northeast Avalon, you will get a better tax break when

you do invest. I think it is a good opportunity, and I think we need to

publicize it and we will be publicizing it. I think it is a good opportunity for

Newfoundlanders and Labradorians to get involved in investing in their own

Province. I think the key to understanding it is that we are not saying, take

money off your taxable income, we are saying, if you pay taxes this year, if you

pay $20,000 in taxes and you invest $30,000 in a company, if you live outside

St. John's we will give you 35 per cent of that, which will be $10,500. In

actual fact, your tax bill for this year will probably be $9,500. So it lessens

your exposure as a person and puts you into higher risk. But, no, we have not

run into anything from the stock exchange.

I have to say this to you, that there have been some

people who have approached us recently to look at establishing a certain kind of

stock market in Newfoundland. If you look at the Icelandic people, for example,

there are 260,000 of them - I know their country and all that kind of stuff, so

there is a difference - but they have their own stock exchange in Iceland. I

think there are approximately fifty-seven listings on their stock exchange.

MR. FITZGERALD: It was only a few years ago, I

think, that we allowed people to look at it as a income tax reduction with

Newfoundland Power.

MR. TULK: That is right.

MR. FITZGERALD: This initiative is not for

companies to trade on the stock exchange.

MR. TULK: No. We have not reached that point and I

do not think we will. It is for smaller businesses. I have to tell you this and

confess to you that it is designed primarily for rural Newfoundland.

MR. FITZGERALD: Are you interested or are you

looking at moving parts of your department to rural areas? The name of your

department is Industry, Trade, and Rural Development. Are you looking at

transferring part of your department to a rural area?

MR. TULK: Yes, we have done part of that. We just

moved some people down to Marystown.

MR. FITZGERALD: I am talking about rural areas,

minister.

MR. TULK: Marystown not rural?

I have to say to you, and I understand -

MR. FITZGERALD: I don't consider places like

Gander and Grand Falls rural areas, to be honest with you. I don't think because

it is outside of St. John's that it is necessarily rural.

MR. TULK: Can I interest you in a concept with

development in the Province called regional development? Let me just say to you,

that in the movement, for example, of air services to Gander, at least four of

the people who are moving will come from an hour's drive from Gander and they

will live in their own communities. So, in that sense, I do not believe that you

can put jobs in every small place in this Province, but I believe you can

develop regional economies. Now I think there are areas of the Province that

have to - and I do not want to use this phrase, but smaller regions. Some people

use sub-regions, but I like to use smaller regions. Your own is a case in point.

I think Englee, for example, is a case in point. I think Burgeo is a case in

point. Let me just say this to you, that the people of Grand Falls and the

people of Gander have no trouble today being called rural. In my lexicon,

anything outside the Northeast Avalon - and there are some rural areas on the

Northeast Avalon - but certainly anything outside the greater metropolitan St.

John's area, I consider to be somewhat -

MR. FITZGERALD: Rural?

MR. TULK: Well, it depends on how you define the

term. Obviously there is rural and there is more rural, but, yes, there is. If I

can develop a regional economy in Clarenville so that the people of Musgravetown

and Lethbridge can drive to work there within forty-five minutes, thirty

minutes, then I really do not think that is too bad. If I can develop a regional

economy in Gander so that somebody can drive from Carmanville or Gander Bay or

Musgrave Harbour, as they have done all their life, then I do not believe that

is that bad. Because, do you know what? They will be back home in the evening

living the type of lifestyle that they -

MR. FITZGERALD: I know exactly what you are

saying, but it bothers me when we see opportunities where we can build in some

of those rural areas and we take them and put them in not-so-rural areas.

I refer back to the Department of Fisheries and

Oceans, and I know it is not your department, but here is a prime example. On

the one hand we are talking about renewing rural areas and revitalizing rural

areas, and what are we doing? Closing offices that relate to activity in rural

areas and moving them further away from the area where they have been present

for the last fifty years.

MR. TULK: In the case of our own department, you

will note that we have twenty regions around the Province and we do put people

in the - I mean, I am not adverse at all. If you are prepared to put forward the

motion in the House that we move more in the department of development and rural

renewal outside of the Northeast Avalon, I am not opposed to it.

MR. FITZGERALD: It depends on where you put them.

I certainly would not be opposed to it either.

MR. TULK: If you have the nerve to do it, I might

have the nerve to follow. Mr. Wangersky, I think, wrote a comment this fall:

Unless you put the department of development and rural renewal in Buchans - he

does not know how close he was to the truth.

MR. OTTENHEIMER: One quick question, and then we

can adjourn, if that is okay.

Research and Development - Offshore Fund, and under

Special Initiatives - Offshore Fund. This is a general question, so you do not

need the detail.

Obviously there is emphasis on the marine petroleum

industry when we talk about these largely federally funded programs. My question

is this: What is the relationship within this department and these offshore fund

programs with the provincial Department of Mines and Energy and/or C-NOPB? Is

there a day-to-day working relationship with these offices or is it somewhat

limited to what its role is within this department?

MR. TULK: The officials can answer this better

than I can because they have been around. That was in ITT. If it was the old

Department of Development and Rural Renewal, I could flick it off at you.

I think it is fair to say that the industrial benefits

side of offshore lies with this department. I have to say this to you: We are

presently looking at - I don't know where it will go, I will be frank with you

again - what the industrial benefits are that we are getting from the offshore

and whether indeed they are what we would want. Well, not what we would want, we

would want the whole damn works to be done here, if we could , but just what is

available for us to become engaged in.

If I could go back to the shipbuilding recommendations

that came out of the shipbuilding forum and - what did they call themselves? -

National Partnerships Project Committee, One of the things that came out of

there is that Canada has to push to see that the offshore resources are used to

get more shipbuilding carried on in Canada.

So our side of the equation, we work closely with the

C-NOPB in terms of industrial benefits and we coordinate that with the

Department of Mines and Energy. There was a discussion on this, as to whether we

should move the industrial benefits all over to Mines and Energy, but we felt

that it was necessary to keep it within the Department of Industry, Trade and

Rural Development so that you concentrate, perhaps, more on the industrial

benefits from an industry point of view, from an economic point of view, than if

you moved it over into a department that is primarily concerned with the

physical side of, shall we say, development, the nuts and bolts of mining and

oil drilling and so on. So, that is the reason we made the decision to keep it

where it is.

CHAIR: The Chair has already moved Estimates

1.1.01 through to and including 5.1.02.

On motion, subheads 1.1.01 through 5.1.02 carried.

On motion, Department of Industry, Trade and Rural

Development, total heads, carried.

CHAIR: I do not know if there might be a couple of

other things, Roger, that you might like to cover? You are welcome to -

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

MR. TULK: No, he showed you, boy, who was the

boss, and that is all he wanted to do.

MR. OTTENHEIMER: We will save the rest for the

House, Mr. Chairman. It is more interesting.

CHAIR: Thank you very much.

On motion, the Committee adjourned.

Document details

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Citation	2001-04-09
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