April 28, 2003 RESOURCE COMMITTEE

Pursuant to Standing Order 68, Sandra Kelly, MHA for Gander, replaces Roland

Butler, MHA for Port de Grave, and Ernie McLean, MHA for Lake Melville, replaces

Lloyd Matthews, MHA for St. John's North.

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

CHAIR (Aylward): Order, please!

On this beautiful Monday evening we welcome you to the hon. House of Assembly

for the Resource Committee Estimates for the Department of Mines and Energy. I

would like to welcome the minister and his officials, and also the Committee

members. If we could ask the Committee members to introduce themselves into the

microphone so that Hansard can record that they are here, I would appreciate

that to start off.

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

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

MS KELLY: Sandra Kelly, MHA for Gander.

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

CHAIR: For the record, I am Kevin Aylward, Chairman and the Member for

St. George's-Stephenville East.

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

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

With me tonight are: Brian Maynard, Deputy Minister of the department;

Allister Taylor, Assistant Deputy Minister; Darrell Mercer, Director of

Communications; Charlie Lester, Director of Policy and Strategic Planning; and

Leonard Clarke, Director of Financial Operations.

CHAIR: Thank you, Sir.

Before we get started, please identify yourself at the microphone as much you

can for Hansard. That would be very helpful. If it is okay, we will have the

minster do the opening remarks of your department, the mandate and so on. Then

we will have the Opposition critic speak to their comments and questions that

they may have.

Also, if we can, we will open up the subhead for 1.1.01., if the Committee is

okay with that. We will leave it open for the duration, towards the end, Mr.

Minister.

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

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

It is a great pleasure to be appearing before this Committee as the Province's

Minister of Mines and Energy.

The mandate of the Department of Mines and Energy is to promote and

facilitate the sustainable development of the Province's mineral and energy

resources through resource

assessment, management, and development activities. Through these activities,

we strive to ensure that the Province's mineral and energy resources are

developed in the best interest of all Newfoundlanders and Labradorians.

As minister, I am responsible for the supervision, control and direction of

all matters relating to mines, minerals, quarries, quarry materials and beaches,

onshore and offshore petroleum resources, royalty matters, maintaining and

developing electrical resources, monitoring industrial and employment benefits

from our major resource development projects, and the administration of numerous

pieces of legislation, eleven of which were included in the Province's

consolidated statutes.

Our department is also responsible for Newfoundland and Labrador Hydro

Corporation, Churchill Falls Labrador (Corporation) Limited, Gull Island Power

Company Limited, Lower Churchill Development Corporation Limited, Twin Falls

Power Corporation Limited and the Bull Arm Site Corporation. We share

responsibility with the federal minister of Natural Resources Canada for the

Canada-Newfoundland Offshore Petroleum Board.

Effective leadership by the department is required to ensure the Province

realizes the full potential and benefit from our substantial energy and mineral

resources. Over the next couple of years the department will face many exciting

challenges that will advance our long-term goals. Our primary challenge is to

ensure that we are competitively positioned to attract exploration and

development investments essential to exploit our mineral and energy resources

for the maximum benefit of our people.

Over the past six years Mines and Energy has become one of the most

well-known publicized departments within government. The citizens of our

Province increasingly recognize potential for our natural resource base and want

appropriate development in our best interest.

Our mining and energy sectors, including electricity, are currently worth $2

billion, representing 17.9 per cent of provincial Gross Domestic Product. These

sectors also generate approximately 6,800 annual person years of direct

employment, with indirect employment estimated at 10,800 person years. Our

people realize the importance of these industries and want to see further

development.

Our petroleum industry continues to generate new opportunities as this sector

of our economy matures. Hibernia, the first and largest Canadian offshore

oilfield, is currently producing approximately 200,000 barrels of oil a day.

Terra Nova, the Province's second oil project, commenced production in January

of last year and is currently producing approximately 150,000 barrels per day.

Our third offshore project, White Rose, received regulatory approval on December

19, 2001 and was sanctioned by the project's proponents, Husky and Petro-Canada,

on March 28, 2002. Over the ten to fifteen year life of the White Rose field

over 1,000 direct and indirect jobs will be created, and $500 million in

royalties will be paid to the Province. Production is targeted for the second

half of 2005 and will average 92,000 barrels a day.

There are currently in excess of 350 people working on the White Rose Project

at AMKC's facilities in Marystown, and upwards to 300 people working at AMKC's

engineering office in St. John's. The number in Marystown is expected to peak

at over 700 as fabrication integration work advances.

Most recently, a local partnership comprising of M&M Engineering Limited

and G.J. Cahill & Company Limited was awarded a White Rose contract and has

entered into a lease to utilize the Bull Arm Site during their fabrication

activities. This work is expected to create over 130,000 person-hours of

employment and will have a peak workforce of 150 people. The work will take some

twelve months to complete.

This is very positive news for our industry. We now produce more than

one-third of Canada's conventional light crude oil. This year we will continue

to grow as more projects are developed. We have had twenty-three significant

offshore oil and gas discoveries, as well as one discovery in our Western

Newfoundland onshore area.

Since the first exploration expenditures in 1966, over $14 billion has been

spent in exploration, delineation and development in our petroleum industry.

Significant discoveries have been made, which include: 2.1 billion barrels of

oil, 9.9 trillion cubic feet of natural gas, and 432 million barrels of natural

gas liquids. Industry is committed to spending some $471 million in exploration

expenditures over the next five years.

Petro-Canada and partners, Encana and Norsk Hydro, will drill two deep water

prospects in the Flemish Pass Basin this year. These are the first wells to be

drilled in this area since the mid-1980s. A discovery in this basin will lead to

increased exploration activities.

The C-NOPB announced on April 15 that fourteen offshore land parcels will be

up for bids this year, comprising a total of 3,167,445 hectares of land.

Interested parties now have until December 17 to submit their bids.

New interest has been shown in our deep water areas such as the Orphan Basin

and the Flemish Pass which hold great promise for new discoveries. The Orphan

Basin is considered the largest basin offshore Newfoundland, but very little

exploration has been completed in the area. Seismic surveys indicate that this

area may contain large prospects, and we are hopeful that new exploration could

yield future discoveries.

The Newfoundland and Labrador and Nova Scotia offshore boundary dispute was

also resolved last year. On April 2, 2002 the arbitration tribunal established

to settle this dispute released its decision. The line established by the

tribunal is close to what we thought fair. The tribunal's decision provides

the Province with almost 70 per cent of the area which was in dispute. Work is

now underway to convert old federal government exploration permits into

exploration licences. We are anticipating the gazetting of federal regulations

shortly. Once this has been completed, new exploration seismic work will begin

in this new frontier of our offshore. Government will aggressively promote the

potential of this new area.

The Province joined the Energy Council of America as an international

affiliate in December, 2001. This will give us another avenue to promote the

Province's potential as an energy producer. Northeastern natural gas supplies

and electric transmission constraints are two major examples of energy

infrastructure concerns being raised throughout New England and the Mid-Atlantic

Regions.

The energy concerns of the Northeast, one of the biggest energy consumer

markets in the United States, are of interest to anyone involved with domestic

energy issues, and particularly to Newfoundland and Labrador as we are poised to

become a major energy supplier to that portion of the United States.

Our electrical power industry is also promising exciting developments. Last

year, the department carried out a consultation process in government's

Electricity Policy Review document. This initiative, conducted by Mr. Wallace

Read, sought input from the public and stakeholders on the future policy

direction of the Province's electricity industry. On April 11, I released Mr.

Read's report summarizing submissions made during these consultations.

I will now hold a series of public forums across the Province to provide

Newfoundlanders and Labradorians with another opportunity to discuss this

important issue. The first forum will be held here in St. John's on Wednesday

night at the Holiday Inn. After these consultations, I will make recommendations

to Cabinet which should provide clearer direction for electricity policy to our

Province.

To ensure the continued adequacy of the electricity supplied for the Island

interconnected system, Newfoundland and Labrador Hydro has been moving forward

with the Granite Canal hydroelectric development in Central Newfoundland. This

project will produce forty megawatts of electricity starting later this year.

Hydro also entered into an agreement with Corner Brook Pulp and Paper Limited

for a cogeneration project which began operation in January, 2002, adding an

additional fifteen megawatts of electricity to the grid. An agreement with

Abitibi Consolidated to upgrade infrastructure at their operations in Grand

Falls-Windsor and Bishop's Falls will add another 32.5 megawatts of

electricity to the Province's system once completed this summer.

Hydro's current forecast indicates that no more generation will be required

until 2009-2010; however, part of our power supply includes burning oil at the

Holyrood facility, which emits between one million and two million tons of

greenhouse gases annually. It is also very expensive to fuel during periods of

high oil prices.

We have examined other technologies. At government's request, a feasibility

study was commissioned by Hydro to examine the viability of wind power. This

study has been completed and we are now examining the results to determine if

wind power projects are feasible in this Province. If successful, this project

could move forward next year creating a new energy source for the Province,

reducing our greenhouse gas emissions by over 70,000 tons.

The potential development of the Lower Churchill River, with an estimated

capital investment of approximately $4 billion in Labrador and production

capacity of approximately 2,000 megawatts, remains under discussion. This

renewable energy development has the potential to contribute significantly to

the provincial economy and be a major component of Canada's effort to meet its

commitments under the Kyoto Protocol.

Our mineral sector is just as exciting. This Province produces over a dozen

mineral commodities including iron ore, gold, dolomites, limestone, gypsum,

peat, dimension stone, sand and gravel. Western Labrador produces approximately

55 per cent of Canada's iron ore products. The total value of mineral

shipments is forecast to increase from an estimated $792 million in 2002 to $826

million this year. The average number of people directly employed in the mining

industry is forecast to increase from approximately 2,600 in 2002 to 2,700 in

2003. This is primarily a result of increased activity at the Voisey's Bay

site.

We are also witnessing new developments in our mineral exploration sector.

Exploration expenditure levels for 2003 are forecast at $19 million and could

reach $25 million before the year is out. It is estimated that approximately

20,000 claims will be staked in 2003: 15,000 in Newfoundland and 5,000 in

Labrador. Last year, over 33,000 claims were staked. This represents the highest

number of claims staked in the Province since the Voisey's Bay staking rush.

Of this number, over 27,000 claims were staked on the Island portion of the

Province, breaking the previous record established in 1988.

The majority of exploration activity in 2003 will be in an area stretching

from Gander Bay to St. Alban's and from Badger to Gander, including the

Botwood Basin and an area of the Golden Promise gold discovery. Other areas of

the Province, such as the Baie Verte, Bonavista and Burin Peninsulas, as well as

Southern Labrador, are also seeing interest in exploration for gold, nickel and

copper.

The big announcement in our mineral sector over the past twelve months was

the commencement of the Voisey's Bay project. Government and Inco announced

agreement on a Statement of Principles for the development of Voisey's Bay on

June 11, 2002. On October 7, 2002, the final legal binding contracts were

signed. Over the life of the project, the total capital investment in the

Province will exceed $2.9 billion. Total employment benefits are estimated to be

76,000 direct and indirect person years.

Provincial Gross Domestic Product impact over the thirty year period is

estimated to be approximately $11 billion. Inco and VBNC have already spent over

$55 million in the Province and created over 250 jobs last year. This number is

expected to increase to around 500 this work season.

The construction of the mine and mill concentrator will begin this year and

take three years to complete. This will require an investment by Inco of

approximately $710 million. Five hundred and fifty jobs will be created during

the construction phase. Another 400 jobs will be created during the operations

phase.

An underground exploration program, the development of an underground mine,

and an expansion of the mine and mill concentrator are also expected to take

place in the future. Capital costs for these activities are estimated at $750

million and could create an additional 800 jobs at peak.

Inco is committed to following the adjacency principle for employment at the

Voisey's Bay site. This will ensure that our Aboriginal people get first

consideration for jobs, qualified Labradorians get second consideration, with

qualified residents of the Island getting third consideration.

We shall soon witness one of the biggest research and development projects

ever to take place in Atlantic Canada, constructed at Argentia. Employment and

spinoff benefits will be worth millions of dollars to the Province. The $130

million R and D program will be an integral

part in developing Inco's new

hydromet technology. The main aspect of this program will be the demonstration

plant to be built at Argentia, which will establish the commercial, technical

and economical feasibility of using hydromet technology for Voisey's Bay

Nickel concentrate.

Site preparation has already begun with design engineering and construction

commencing in 2004 and the plant being operational in 2006. This component of

the Voisey's Bay project will create 200 jobs in the area.

A commercial processing facility will be constructed in 2008 at a cost of

$800 million and employing upwards of 1,000 people. Once in operation, this

facility will continue to employ 400 people for the long term.

With these new hydromet capabilities, Newfoundland and Labrador is expected

to become a centre of excellence for the hydromet technology. We will have the

skilled labour force, the infrastructure and the training facilities to ensure

that we are leaders in the transfer of technology.

Construction of the Inco Innovation Centre is expected to be completed by

2004. This will ensure the academic related commitments negotiated as part of

this project can move forward. This Centre will establish world-class education

and research opportunities for fifty to sixty students per year engaged in

bachelors, masters and doctorate level programs here at Memorial University.

The construction of this Centre will cost $10 million, with Inco providing an

additional annual endowment of $1 million over a ten year period to cover

operational costs. This facility will ensure that our Province has the skilled

labour force needed to complete the technical requirements that will be

associated with the hydromet technology. This project will contribute enormously

to our economy for years to come.

As you can see, our mineral and energy resources are vital to the economy of

Newfoundland and Labrador. Within five years, 2,000 new direct mining petroleum

sector jobs could be created. Associated net spinoffs could double the number of

indirect jobs from these sectors. New projects will be developed. Current

projects will mature. We, as a Province, will grow with our industries. Our

economy will strengthen.

Every new project presents new challenges. Our department is committed to

managing these challenges successfully. It is the department's job to ensure

that these growing sectors are developed efficiently, responsibly, and in the

overall best interest of the people of the Province. This is the reason the

Industrial Benefits division of the Department of Industry, Trade and Rural

Development was transferred to the Department of Mines and Energy in September,

2002. The Industrial Benefits Branch is responsible for maximizing industrial

opportunities and benefits for the Province from offshore petroleum activities

in mining development. The branch's prime responsibility is negotiating with

petroleum and mining industries regarding the industrial and employment benefits

for the Province from major resource based projects. The branch is also

responsible for the development and international promotion of the Province's

industrial research and development and supply capabilities. In addition, it

administers industrial benefits agreements, monitors benefits achieved from

major project developments.

The total gross budget for the Department of Mines and Energy for 2003-2004

is $24,435,400. This is a decrease of $1.2 million over the 2002-2003 budget.

Two point four million in additional funds was allocated for the reclamation of

the former Hope Brook gold mine; $292,500 in additional funding has been

allocated for the Canada-Newfoundland Offshore Petroleum Board. We remain a

department that generates money for the Province, while we have one of the

smallest budgets in government.

Mr. Chairman, the Department of Mines and Energy has responsibility for many

activities that are diverse in nature. The department's policies are designed

to meet the requirements of our industry and client groups as well as provide

for the effective management of the Province's mineral and energy resources.

The department has a total approved staff complement of 126 permanent

positions. Our Mines Branch is responsible for the department's mineral

resource management program. This branch is divided into three divisions:

Geological Survey, Mineral Lands, and Mineral Development.

The Geological Survey division is responsible for mapping describing the

geological formations of the Province in order to identify and record the

mineral occurrences and the mineral potential of the various regions. Provision

of this data is a fundamental service provided by all jurisdictions in Canada

and is one of the key ways that Newfoundland and Labrador remains competitive

for national and international dollars.

The Mineral Lands division is responsible for the administration of the

Province's mineral land and tenure system, regulating mineral exploration

activity, managing quarry material resources and preserving drill core from

exploration drilling activity undertaken by the private sector within the

Province.

The Mineral Development division is responsible for the implementation of the

regulatory requirements of the Mining Act, which include the development,

operation and termination phases of mining operations. This division also

oversees and administers the mineral exploration program that provides funding

to provincial prospectors, junior companies that wish to start new exploration

programs, and dimension stone companies that wish to establish new operations

within the Province.

Our Energy Branch is also a very vital part of petroleum and energy resource

development in Newfoundland and Labrador. This branch is responsible for the

petroleum resource management, electricity industry development programs within

the Province. The branch is divided into four divisions: Petroleum Resource

Development, Petroleum Projects Monitoring, Electricity Industry Development,

and Policy and Strategic Planning.

The Petroleum Resource Development division promotes, regulates and

facilities the identification, exploration, development and management of our

provincial petroleum resources.

Petroleum Projects Monitoring is responsible for the promotion, monitoring

and implementation of relevant petroleum sector policies and a maximization of

provincial fiscal benefits.

The Electricity Industry Development division develops and implements policy

to ensure fair and reasonable rates to provincial consumers, fair benefits

through the development of publicly controlled electricity resources, and rates

which support provincial goals for economic development.

The Policy and Strategic Planning division develops, co-ordinates, evaluates

and facilitates energy policies, strategic planning and program frameworks for

energy resource development and management.

As I previously mentioned, our Industrial Benefits Branch monitors industrial

opportunities and benefits for the Province from offshore petroleum activities

in mining development to ensure Newfoundlanders and Labradorians are receiving

maximum benefits.

As the committee can see, the Department of Mines and Energy is responsible

for many challenging and technical aspects for our mineral and energy resource

sectors. I would like to restate that the Department of Mines and Energy is a

growing department essential to ensuring that our mineral and energy resources

are developed in a responsible manner in the best interest of the people of our

Province. As more projects are discovered and developed, we will see the

department expand even further. I am hopeful that we will see significant

projects developed in the near future. Our department will do everything

reasonable to help make that happen.

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

CHAIR: Mr. Minister, that was quite a nice outline of the department.

There is a lot there to be talking about actually.

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

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

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

a -

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

MR. SHELLEY: I know you do.

- lengthy and detailed report and opening.

As far as the mines and energy part of it goes, I am pretty familiar with the

mines sector, especially growing up in a mining region of the Province. There

are some exciting times with mining, there is no doubt, and also with the

offshore, as you have mentioned.

The Basin, I could not remember it until you mentioned it in your report -

but the Orphan Basin recently, and the interest that is there. That is, I

understand, the largest parcel of unexplored off our coast. Isn't that right?

MR. NOEL: Yes, my understanding.

MR. SHELLEY: That is the largest sector. That is interesting. I might

have a question on that later.

What I probably will do, to try to keep this going as quickly as possible

today, is just stick with the specifics on the Estimates numbers. Then I have a

list of three or four questions for comments. As the minister knows, in these

types of discussions we save the controversial ones for the House of Assembly.

These are more for information and clarification and so on.

MR. TAYLOR: Except for last spring.

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

I do not think it will take a long time because the department is, as the

minister has already said, a small department when it comes to the Budget, but

big when it comes to the potential, and, of course, the return to the Province

when it comes to offshore mining and hydro electricity, which are huge for this

Province.

I will start off with just specific numbers. I will skip the Minister's

Office, which seems to be pretty tight and consistent on its numbers. There is

always a salary question, and you have to ask it. In 1.2.01.01, Executive

Support, Salaries, there seems to be an increase of $85,000. Whenever I ask this

question, I am just curious to find out if there is a new position added to

that.

Under Executive Support, 1.2.01, the first one, it was budgeted for $445,000

and Revised to $530,000. So there was approximately an $85,000 increase in

Salaries. Can the minister tell us where that salary is, or is that a new salary

or a new position in that office?

MR. NOEL: Yes, that was increased funding to cover the position of a

solicitor to this activity from March 1, 2004, Petroleum Projects Monitoring.

MR. SHELLEY: A solicitor for?

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

does it?

MR. MAYNARD: Mr. Shelley, we had a solicitor who permanently resides in

the department. He was in the Petroleum Projects Monitoring Division. This is

simply a transfer from the Petroleum Projects Monitoring Division to the

Executive, because he is providing broader support for the department as opposed

to justice.

MR. SHELLEY: So really it is not a new salary within the department. It

was a transferred one. We would see a decrease in the salary. Where did you say

he came from?

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

side, 3.1.02.

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

though.

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

Salaries.

WITNESS: (Inaudible) Professional Services.

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

WITNESS: Yes.

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

MR. SHELLEY: Professional Services, okay. Eighty thousand, $85,000? That

is the difference there, is it? Because that is a question for later. So, that

was really just somebody who moved around within the Department of Mines from

there.

In Transportation and Communications, under Executive Support also, it went

from $145,000 to $225,000 revised.

MR. MAYNARD: That was travel associated with some of the larger project

files. The White Rose file and the Voisey's Bay file, in particular.

MR. SHELLEY: So that was travel?

MR. MAYNARD: That was travel.

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

MR. MAYNARD: Yes.

MR. SHELLEY: Okay.

On to subhead 1.2.02. Major Projects Benefits Office. It is an interesting

office. I am going to start right at the top again, with 01. Salaries. Lots of

times we look at why there are increases, but you are also curious when you see

decreases. You went from $454,700 to $195,000. Why would you see such a major

drop?

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

were vacated.

MR. SHELLEY: Vacant chairperson?

MR. NOEL: There is a substantial saving there.

MR. MAYNARD: The Bull Arm Site Corporation and the Voisey's Bay group

were in this subhead. The CEO and president of the Bull Arm Site Corporation, it

was previously a full-time person who was doing that. Some time ago that was

assigned to the Deputy Minister of Mines and Energy, so the deputy is an unpaid

chair, CEO and president of the Bull Arm Site Corporation.

MR. SHELLEY: Okay.

Who was the chair of the Bull Arm Site?

MR. MAYNARD: Me.

MR. SHELLEY: Was?

MR. MAYNARD: Previously, it was Gordon Gosse.

MR. SHELLEY: Gordon Gosse?

MR. MAYNARD: Yes. He retired and, upon his retirement, they thought I did

not have enough to do so they gave that to me to do as well.

MR. SHELLEY: Very good.

Is that the way it is going to stay?

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

do something about that.

MR. SHELLEY: Is that the way you plan to leave it, like that, and not put

a chairperson there for the Bull Arm Site?

MR. MAYNARD: I will continue to act as the chair, president and CEO. As

you are aware, on Friday past there was a vice-president appointed to pick up

some of the marketing and promotion (inaudible).

MR. SHELLEY: That is what I thought I heard. That is why I asked you.

There was a vice-president?

MR. MAYNARD: Yes.

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

- was it?

MR. MAYNARD: That was Friday.

MR. SHELLEY: Who was that?

MR. MAYNARD: That was Carl Cooper.

MR. SHELLEY: Yes.

MR. MAYNARD: Mr. Shelley, the remaining was, there were some vacancies in

the Voisey's Bay project office that were not filled. Some of those duties

now, with the Voisey's Bay project proceeding, have been transferred to the

normal workings of the department, in mineral lands and mineral development.

MR. SHELLEY: You, as the deputy minister, will remain the chairperson,

CEO, of Bull Arm, and now you have a vice-chairperson?

MR. MAYNARD: I have a vice-president.

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

MR. MAYNARD: Yes. I am only presuming I am staying. I leave that up to

government. That is not my decision.

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

WITNESS: (Inaudible).

MR. SHELLEY: Minister, in that particular case then, if the deputy

minister does not stay in that position then Mr. Cooper, the vice-president,

will move to vice-chair?

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

time.

MR. SHELLEY: Okay.

In 03. Transportation and Communications, it is always interesting, $65,000

to $213,000 revised. Why the increase there?

MR. MAYNARD: This is staff people who were working on the Voisey's Bay

project in the negotiations, and that is the travel associated with concluding

the agreement on the Voisey's Bay project.

MR. SHELLEY: Travel for staff?

MR. MAYNARD: Yes. The previous was travel for the executive, which was

basically myself and Allister.

MR. SHELLEY: Okay.

In 05. Professional Services, what were those professional services that

increased quite a bit - $130,000?

MR. MAYNARD: That was, again, professional services required to complete

the project, the Voisey's Bay project negotiations. We had a substantially

utilized one, two, three, four, consulting firms.

MR. SHELLEY: Could you repeat that?

MR. MAYNARD: I am sorry. That is professional advice, consultants

utilized in the negotiation of the Voisey's Bay project agreements.

MR. SHELLEY: Consultants. Consultants in Newfoundland?

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

the mining industry.

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

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

MR. SHELLEY: I am going to go back to 01. again for a second, $454,700

was Salaries. That is a difference of - well, I am not too quick on that - about

$260,000. I am not far off, right?

MR. MAYNARD: Yes.

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

MR. MAYNARD: No, Mr. Gosse's salary was roughly $110,000 and there were

salaries provided for the Voisey's Bay project office for staff salaries.

There were vacancies in - I think the staff complement was five or six and there

were two people on for the year. A lot of the other duties were undertaken by

regular staff members in Mineral Development and Mineral Lands.

MR. SHELLEY: Then it was revised down to $195,000, and that is with the

change with Mr. Gosse's file, but this year it is budgeted for $378,000. So

that would now include Mr. Cooper's salary? Is Mr. Cooper's salary set yet

as the Vice-President?

MR. MAYNARD: I have not seen the note but the budgeting was provided for

the position in case - for the President and the CEO. As well, there was funding

provided for these other positions which were going to be transferred into

Mineral Lands and Mineral Development. I recognize it is a tangly answer but -

MR. SHELLEY: Well, right now it is, yes, but this position was planned

for, for a vice-president?

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

for. What was planned for was -

MR. SHELLEY: The salary.

MR. MAYNARD: The salary was left there, recognizing that at some point in

time it would probably be appropriate to appoint somebody else.

MR. SHELLEY: In Purchased Services, that certainly begs a question, from

$15,000 to $460,000. What were those purchased services for under Major Projects

Benefits?

MR. MAYNARD: Those were the costs associated with the announcements,

presentations and the rollout of the Voisey's Bay project announcement in

June.

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

MR. MAYNARD: Yes. Public relations and all the travel, the road show, and

everything else that went with it.

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

Under 2.1.01, Geological Survey, and we will start again with Salaries at

$2,429,800. Is that another position again in Geological Survey? Is that a new

position? Approximately $55,000.

MR. MAYNARD: That was some students on some of the field programs. Are we

talking now the $2.429 million to $2.486 million?

MR. SHELLEY: Right.

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

MR. SHELLEY: Temporary staff and students?

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

savings in some other areas.

MR. SHELLEY: Okay.

The next one would be in 12., Information Technology. You set it at $82,000,

and estimated it for that too, but it was revised to more than double that. What

was the information technology for?

MR. MAYNARD: Most of the information technology requirements of the

department were funded through this account and not allocated to the other

specific activities.

MR. SHELLEY: Could you repeat that again?

MR. MAYNARD: Most of the IT requirements for the full department were

paid through this activity. Again, it is savings and they were allocated to

here.

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

MR. MAYNARD: No.

MR. SHELLEY: Back to Salaries for a second. The Budget and Revised, but

this year Estimates are for - are you saying that is all temporary staff and

students in that additional approximately $200,000?

MR. MAYNARD: No, that is the salary increases and step progression costs,

as well as one or two additional temporary staff for part of the year.

MR. SHELLEY: Under Mineral Lands, another additional $40,000 or $42,000.

Is that temporary and students as well? In 2.1.02.01, Salaries, under Mineral

Lands.

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

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

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

additional staff there.

MR. SHELLEY: Mineral development, the incentive programs for exploration

and development, that is an interesting department and certainly an important

one. I think it is one of the most important when it comes to incentives for

exploration. Growing up in a mining industry, and being around people, the

bottom line is, if you don't look for it you will never find it. It is a risky

business and it takes investment. I understand that very well and I have dealt

with people. I was around Baie Verte in the mid-1980s when the flow- through

shares were coming through Ottawa. I say activity in that little part of the

Province. As a matter of fact, why we see Nugget Pond, the only gold mine in the

Province today, is because of that program and the activity that was going on.

It just boomed the entire area, there was so much activity going on. Now, of

course, you see the core (inaudible) full of core throughout the area and so on.

It is definitely a good program, and I can see some day that the federal

government might come in again with those flow-through shares. I do not know how

likely that is. It is not very likely, the way they are treating us with

everything else, but that was certainly a good incentive program for

exploration. It really worked.

MR. NOEL: The industry really appreciated the -

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

MR. MAYNARD: The federal government are eliminating flow-through shares

next year and they are replacing it with a permanent 10 per cent cost reduction

for exploration from corporate income tax.

MR. SHELLEY: Is that right?

MR. MAYNARD: Yes.

MR. SHELLEY: Ten per cent?

WITNESS: (Inaudible).

MR. SHELLEY: Ten per cent?

MR. MAYNARD: Yes.

The only ones it will help are existing companies. It will not be for juniors

any more. It will actually be for producing mines.

MR. SHELLEY: Okay.

On the incentive program, in the specific sections in Purchased Services

again, there is quite a bit of money we talk about there. I assume that has to

do with exploration, but first of all in the budgeted and revised it jumped $2.7

million. Could you comment on that first and then also comment on the estimate

for this year which is down to $6 million?

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

MR. SHELLEY: Is that Hope Brook?

MR. NOEL: Yes.

MR. SHELLEY: Can you give us an update on Hope Brook, and the situation

on the cleanup with Hope Brook right now?

MR. MAYNARD: We have finished all the earth works last year, as well as

the damming. This year we are currently reviewing all of our costs, but the main

contracts this year will be the demolition of the buildings, the removal of the

equipment, and the reclamation of the total site. We are hoping to be able to

walk away from that project by March of 2004, with minimum monitoring over the

next two years.

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

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

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

is it, right?

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

WITNESS: (Inaudible) before, basically.

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

spent?

MR. MAYNARD: Yes.

MR. SHELLEY: Again with that, under Mineral Development, before I leave

that one, in 01., the salaries reduction from budgeted to revised, then back up

to the regular again for the estimates for this year, why was that drop of

almost $200,000, or $180,000?

MR. MAYNARD: It was basically one or two vacant positions. In particular,

the previous year, the Director of Mineral Development passed away, Ferd

Morrissey. You know how difficult it was to replace Ferd.

MR. SHELLEY: Yes, I certainly understand that; but he will be replaced

this year, it looks like, in the estimates?

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

MR. SHELLEY: Who is in there?

MR. MAYNARD: Charles Bown.

MR. SHELLEY: He is temporary?

MR. MAYNARD: Until it goes on the board.

MR. SHELLEY: Okay.

Subhead 3.1.01. Policy and Strategic Planning, there is a small change in

salaries but we will leave that for now. In subhead 10. Grants and Subsidies,

the amount is $85,700, which is the same estimate for this year, but when

revised for 2003 there was an additional $80,000.

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

Atlantic Canada.

MR. SHELLEY: That was an additional grant?

MR. MAYNARD: That was a grant. That is a new organization that has just

recently been established. It is, again, transfers of savings from other program

areas in order to pay this grant.

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

MR. MAYNARD: Petroleum Research Atlantic Canada.

MR. SHELLEY: Which is where?

MR. MAYNARD: Which is headquartered - it has virtual offices. There is an

office here. There is an office in Halifax as well. It is currently led - the

Executive Director is a Newfoundlander and Labradorian, G. Lee Shinkle.

MR. SHELLEY: Okay. I know Lee Shinkle.

MR. MAYNARD: This PRAC was previously Atlantic Canada Petroleum

Institute, which was solely a Halifax based organization. Through a considerable

measure of effort on the part of Memorial University and the department we have

been able to establish a far greater Newfoundland and Labrador presence in that

organization and to make a larger focus on Newfoundland and Labrador based

issues.

MR. SHELLEY: Which is good, but that is Atlantic group. I assume the

other three provinces, then, also supply grants to that group?

MR. MAYNARD: Funding is provided. It is called Atlantic Canada, but 99

per cent of it is Nova Scotia and Newfoundland and Labrador. Funding is provided

by both provincial government, the federal government, and the oil companies

themselves contribute to this organization. The intent of the organization is to

focus on research and development of offshore related issues. They, in turn,

take the money that we provide them and leverage additional research and

development money out of that.

MR. SHELLEY: Okay.

Do they help also in preparation for offshore development companies on land,

like preparing for offshore, preparing for natural - I know Nova Scotia is doing

a lot of preparation for natural gas and so on. Are they involved in that?

MR. MAYNARD: They will take on specific research projects. It is run by a

board of directors, a fourteen member board of directors. Actually, their first

board meeting is here in the city tomorrow.

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

MR. MAYNARD: Lee Shinkle is the executive director.

What happens is, people make proposals to do the research programs. If it

meets the approval of the board, these programs will go ahead. Like I said, this

is an organization that basically leverages funding and co-ordinates the

research efforts.

MR. SHELLEY: Okay, that is the additional money. The $85,700 that was

budgeted for last year, and the same for this year, where is that going? Is that

a set group that it goes to, or is it different groups every year? Where is that

$85,700 going?

MR. MAYNARD: It generally goes to the same groups year over year. The

membership fee for the U.S. Energy Council that the minister referred to was

$48,000. We have a membership in the Canadian Energy Research Institute of

$25,000. That accounts for $73,000. Then you have things like the national

climate change process of $7,000, the national response to Kyoto. Most of the

remainder is climate change, environmental and energy issues. These are smaller

amounts, like: $1,000, $2,000, $3,000 amounts.

MR. SHELLEY: 3.1.02, Petroleum Resource Development, just a small

question. In Transportation and Communications, is that travel again from

$57,500 to $117,400?

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

MR. SHELLEY: In Transportation and Communications.

MR. MAYNARD: Transportation and Communications. Yes, this is travel.

There are some costs of relocation expenses here. I think a couple of new staff

were hired on and there were some costs associated with the development and the

natural gas strategy.

Oh, sorry, Mr. Shelley. There are also additional costs associated with

amendments to the Accord to provide for an occupational health and safety

legislative regime and some costs associated with the boundary dispute between

us and Nova Scotia included there as well.

MR. SHELLEY: I will leave C-NOPB alone for now because that is just

strictly Grants and Subsidies which they control.

Under 3.1.04. Petroleum Projects Monitoring, could you just comment on that

division for a few minutes? It says: ...analysis of relevant petroleum product

markets and the provision of related policy recommendations and advice to

Government; but especially on the petroleum product markets. How is that

division involved? What do they do?

MR. MAYNARD: This is effectively the royalty administration development

and policy group. These are the people who develop the regulations and policies

with respect to the administration of royalty regimes in the offshore and

onshore, and who do the auditing of the oil companies and whatnot.

MR. SHELLEY: They do the auditing also?

MR. MAYNARD: Yes. The division is broken down into two sides. One is an

audit side and the other is a research and policy side.

MR. SHELLEY: There will be an additional $100,000, approximately, in

Salaries. Is that an additional position?

MR. MAYNARD: Yes.

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

MR. MAYNARD: Salary increases, step progression costs, and a couple of

temporary assignments associated again with - one of the issues that the

department has on its plate this year is the finalization of a royalty regime

for natural gas and we have seconded a person to that division to do that. So

the salaries have moved over.

MR. SHELLEY: Still with 3.1.04, under Professional Services, it was

$250,000 and you revised it to $130,000. So it is $120,000 less. What are the

professional services in that division? Why was it $120,000 less?

MR. MAYNARD: I will take the second question, first if I could. The

$120,000 less was, there was $100,000 transferred to Petroleum Resource

Development for the natural gas strategy, that I referred to earlier, and

$20,000 transferred to Information Technology for a file management system. So

that was the decrease.

The consultants that we would be engaging, in this instance, would be

economists, accountants, accounting firms, people with experience with

international royalty regimes and whatnot.

MR. SHELLEY: Okay.

The next section, 3.1.05., there has been some debate lately with

Newfoundland Power, Hydro and so on, on the nationalization of Hydro,

Newfoundland Power. Minister, would you like to make some comments as to where

you are with that, what discussions are going on, and where you are going with

this?

MR. NOEL: As I said in the introduction, we have been trying to develop

an appropriate electricity policy for the Province for the foreseeable future.

It has been a process that has been underway for several years. Last year the

department issued a discussion paper and hired Mr. Read to hear submissions. We

published that paper a little while ago.

I am in the process now of developing a Cabinet paper to advise government on

where I think we should go in this regard, and we are looking at all

possibilities to function. Our responsibility, as we see it, is to provide for

the generation and distribution of electricity in the Province at the lowest

possible cost for ratepayers. We have to look at all the options for doing that.

We are looking at whether any changes can be made in the Newfoundland and

Labrador Hydro to help control costs and how to operate more efficiently. We are

looking at whether any changes may need to be made in the regulatory system. We

are listening to what people have to say.

As I indicated in my opening statement, I am going to hold a series of public

meetings across the Province, beginning this Wednesday night. One of the issues

being proposed is the consideration of integration of Newfoundland and Labrador

Hydro and Newfoundland Power. That idea has been floating around for many years.

I remember when we had the Hydro privatization issue a decade ago. There were a

number of people in the Province who thought that this was the way to go,

opposite to what the government, at the time, was proposing, but many people

felt that there was a good case to be made for that. That has been considered

and proposed various times over the years. As a matter of fact, it was included

as an option in the paper that government issued about a year ago; March, I

think it was, of last year. Not that government was suggesting it, but it was

laid out as an option that people could look at. As you know, it has become a

higher profile suggestion in recent weeks. The Consumer Advocate and other

people appearing before the recent hearings of the Public Utilities Board have

suggested that is something, to them, that seems to make sense. My view is that

we should look at everything that people are suggesting and everything that we

think, ourselves, could help generate and distribute electricity as efficiently

as possible in the Province.

We will look at the case we made for integrating the two companies. It is our

government's position that we would not consider selling Newfoundland and

Labrador Hydro. We are committed to maintaining that as a Crown-owned

corporation. So, if there is going to be integration, as far as we are

concerned, it would have to be the other way around, and that means Hydro would

have to take over Newfoundland Power. I think that our responsibility in this

regard is to look at whether there is a business case to be made for combining

the two companies. If that appears to be the case, and if we are prepared to

consider trying to acquire Newfoundland Power, we would have to look at what the

economics would be, whether it would be in the public interest to do so. If an

economic case, a feasibility case could be demonstrated for that, then

government would have to make a public policy decision about whether they feel

this is the right direction to go in. So that is where we are with that right

now.

There are things to be said to lead people to believe that it could help

control electricity rates, because Newfoundland Power has been a very successful

and profitable company over the years, a very successful company for its

shareholders. I guess if it is profitable and beneficial for them, it could also

be that for the people of the Province, if they own it, but it would depend on

what price it could be acquired at. I do not think the present owners would be

inclined to put it on sale at this point.

MR. SHELLEY: Have you done any work on the numbers on that? That is what

it all comes down to, the price tag on Newfoundland Power.

MR. NOEL: I think the head of Fortis has indicated they value it at

something like $1.2 billion.

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

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

million or so.

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

MR. NOEL: Oh, it is very realistic to look at anything, but what might be

realistic to do might be a different question. For government to do that, we

would have to borrow a significant sum of money and pay interest on that over a

period of time. So you would have to do the economic analysis, and I think that

is what I would recommend doing in the near future.

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

it.

I will move right along to the last one, 4.1.02. Research and Development -

Offshore Fund, just so that is explained. I understand the heading, but last

year it was budgeted in 10. Grants and Subsidies. Is that to do with the federal

government revenue, $800,000 to $370,000 and then back up to $830,000 for this

year's budget?

MR. MAYNARD: The research and development fund under the Offshore

Development Fund is the remnant of the $300 million Offshore Development Fund

that we received when we signed the Atlantic Accord. There is roughly $1 million

left in there. The decrease in 2002-2003 Revised from Budget was less uptake on

some of the projects. We had been anticipating certain projects to be submitted

for approval and funding. They did not come in and we are expecting those to

come in, in the new year.

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

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

MR. SHELLEY: Another program dried up.

(Inaudible) in the budget. Now I just have a few questions or comments or

clarifications, whichever way the minister wants to look at it. As I said, we

saved the other questions for the House.

First of all, I will just make a comment on Voisey's Bay. Of course, there

are discussions even over this weekend, the past weekend and so on, on problems

that people in Labrador see with the adjacency principle being adhered to.

Does the minister feel that the adjacency principle will be adhered to and

that it is strong enough to hold the company to the adjacency principle, that

the agreements that are in place now are strong enough to hold the company to

that principle?

MR. NOEL: Absolutely.

The adjacency principle was, I think, first enunciated during the

environmental assessment process, and in that process the company committed to

abiding by the adjacency principle, as I outlined in my opening comments, that

the people in the area and the Aboriginal people, qualified people, would be

offered jobs first, then residents of Labrador, and then residents of the

Island, before going outside of our Province.

That principle is part of the development agreement our Province has with the

corporation. The corporation has said that they are committed to that agreement

and intend to enforce it throughout the construction of the project. We will

hold them to that commitment.

Last fall, as everybody knows, there were a number of people hired for

positions from outside the Province, which we feel could have been filled by

people within the Province. The company's explanation was that in the rush to

try and get work going before the season closed in, and because new companies

were coming in who had core people they wanted to bring along with them, some

people were hired to do jobs that Newfoundlanders and Labradorians could have

been qualified for. At the same time, over 90 per cent of the 250 people who

were employed up there last year were Newfoundlanders and Labradorians. The

company says that they are going to abide by that principle and they are going

to require all of their contractors to abide by it.

We think that we can force that under the development agreement, so we are

confident that this is not going to be a problem. From time to time there is

going to be some differences of opinion as to whether or not somebody met

qualifications, I suppose, and that sort of thing, so I imagine we will have

ongoing discussions. Some people will be dissatisfied, maybe, who do not get

jobs with the project, but we think there is no question that there is a

commitment on the company's prior to it and we intend to hold them to it.

MR. SHELLEY: Okay.

The next one, Hydro's annual report. Isn't that about to be ready for

this year and it is supposed to be -

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

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

MR. NOEL: Yes.

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

MR. NOEL: Yes, it will be.

MR. SHELLEY: The next one, on White Rose, the 80 per cent of the

workforce, are you still comfortable with that, Minister, in that 80 per cent of

the entire work that will be done will be -

MR. NOEL: We are up to about 83 per cent now. We have no doubt that we

are going to get a minimum of 80 per cent. As I said when the Bull Arm contract

was announced a little while ago, that should bring us up to around 83 per cent.

We are hoping to get more work for Bull Arm. There is no question that Marystown

is going to do all the work that it is capable of doing. It was always the

company's option to have up to 20 per cent done outside the Province. The

company has told me that they are going to try to do as much of that 20 per cent

as they can within the Province. There is no question about the 80 per cent. The

only question is about how much they can go over that.

There are some constraints, because Marystown and all of the facilities in

the Province have limited capacities. We have great capacities, and there are

lots of people in the Province who still do not have jobs and will not have jobs

even if 100 per cent of the work was done in the Province. There would still be

lots pipefitters and other tradespeople who would not get jobs on the project.

We are quite confident that we are going to exceed the 80 per cent and we are

going to make every effort we can to go as high above that as we can.

MR. SHELLEY: Another one quickly, Minister. I am not sure if it was you

or the previous minister who suggested that the Province do some updated work on

Kyoto and how it applies to this Province. Has the department been doing any

work on that particular agreement?

MR. NOEL: We have been having meetings amongst our own people and amongst

various interests within the community here, people at the university and that

sort of thing. We have been trying to determine just where the federal

government was going with this. Several federal deputy ministers were in the

Province recently for discussions pertaining to this. We do not think that there

is a lot of federal money committed. So far, I think it is something like $2

billion over five years. It is not a lot to go around the country. The federal

government is still in the process of determining what it is going to be

endeavoring to do and consulting with the Provinces.

We are looking at what we need to do ourselves, as a Province, but this could

be significantly costly if we were to undertake projects on our own so we are

really interested in knowing what kind of financing commitments will be

available from Ottawa, but we are doing work on our own and we hope to have some

definitive indication of where we will be going perhaps later this year.

MR. SHELLEY: I am just going to wind it up with a couple of local ones,

but they are mining so they are related to your department, of course.

Hammerdown is doing quite well; and, of course, Nugget Pond was the example not

just for the Province, I guess, but for the country, that a small mine could do

it. For that reason, I think, they have attracted more exploration in the area

and so on. Probably the deputy minister can update us on that. I am hearing

different things from different groups, that there is some more exploration

intended for that Green Bay-White Bay area this year and that could be all

connected with more mining continuing at the Nugget Pond site.

MR. NOEL: If I could just make a general comment first, one of the first

things I did as minister was go to the PDAC convention in Toronto a month ago, I

guess it was, and, as somebody who is new to this particular area, I was really

impressed by the interest amongst the mining industry across the country. There

were something like 8,000 delegates at this convention, all the major players in

the country. Boy, there is tremendous interest in our Province, particularly in

relation to gold exploration but in other areas as well. We are expecting a

great year in exploration activity here this year, and I was really impressed

and surprised, because I was not aware of this in the past, by how well our

department is regarded by the industry right across the country and in our own

Province.

The government is regarded as being helpful with our incentive programs, but

the people who work for the department have done a tremendous job of learning

about what we have and how it should be marketed. They know how to deal with the

industry people, and the industry people just think that we are doing a great

job. We are going to have a staking on-line, I think, the end of this summer. We

have one of the best, and the people who are responsible for developing the

federal government Web site told me that, as far as they are concerned, we have

the best Web site in the whole country, and that is very helpful to people who

are trying to get information and that sort of thing.

I am very optimistic about what is happening to the mining industry in the

Province. I think we are going to see a lot of exploration and, hopefully, some

interesting discoveries over the next little period.

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

MR. MAYNARD: Yes, sure.

Mr. Shelley, as you are well aware, the interest in gold, and the gold prices

where they are today, gold is certainly a very hot commodity and interest in the

sector is very good at the current time.

Newfoundland is considered one of two hot spots in Canada for gold,

particularly - you know the history of the Baie Verte Peninsula quite well, and

the experience in the outcrops and the showings in Baie Verte.

I was speaking to representatives from the company just last week and they

did say that they have approval to do some fairly extensive exploration work

this year in and around the Nugget Pond deposit. I think we were all a little

bit surprised when that one came to an end as quickly as it did. We were hopeful

for a couple of more years out of that mine. That is encouraging.

I would expect to see some fairly significant levels of exploration activity

on the Peninsula beyond just the Nugget Pond area. There are some very nice

prospects. Some of the local prospectors have some very, very interesting

properties and some nice showings, so I am hopeful. Whenever exploration numbers

are going that way, we are always encouraged. That is the trick to all of this.

The minister knows full well our mantra is exploration first, exploration

second, and exploration third. Those are our top three priorities, and that is

what it is all about.

MR. SHELLEY: I will close on that one because I have said it for years,

and the minister and the deputy have heard me too, that mining can get pretty

exciting but unless you have somebody to take that high risk, go underground and

find it, then you are not going to find it.

MR. MAYNARD: That is one of the things that a lot of people fail to

recognize, not only in the mining sector but in the petroleum sector as well.

This is high risk, high risk cost. Exploration, when you look at what they are

targeting, the size, I don't know how anybody ever finds anything when you see

- the Hammerdown deposit, what is it, three or four feet across? - that seam

that they are mining out. I don't know how you find this in the first

instance.

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

MR. MAYNARD: Exactly. The cost of exploration and offshore exploratory

wealth for the offshore oil and gas industry, $60 million, minimum; $100 million

if it is an expensive well. These guys, their success ratio is one in six. So

they spend $600 million on exploration and they expect to get one discovery.

Then they spend a couple of hundred million to see if it is economical to

produce. You have to have pretty deep pockets to be into a business of $800

million and not see a penny of cash flow, and risk not seeing any pennies of

cash flow. That is not something I have my RRSPs in.

MR. SHELLEY: That is why those junior companies are so important to us.

They are the ones still after it.

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

CHAIR: Thank you, sir.

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

MS KELLY: I just wanted to ask a question about antimony and what is

going on in that area. My understanding is there was a terrible problem in China

with their mill and now they are not able to export the amount they did. I am

wondering if the price is going up and we might expect to see antimony being

mined again?

WITNESS: The price right now is about $2,100 a ton U.S. To break even for

Beaver Brook, which is what it is now called, is about $1,500 a ton U.S. The

owners have, and are at the current time, undertaking three feasibility studies

to see if they can reclaim the operation. They tell us that once those studies

are done it will take between three to six months to get it up and running

because, as you know, it is an underground mine. So they had to pump it all out.

Basically, they are doing their due diligence and they are hoping to get

partners that will come in and assist them with the reclamation costs.

They are hoping that if the price stays high for at least - I think they need

a price within that vicinity for about two to two-and-a-half years, because that

was the problem before when they opened. The price basically collapsed at $800 a

ton. So, right now, if the Chinese can hold local production, cut down on the

smuggling - and, as you know, there is a major collapse of a mine over there.

That is what has driven the price up. The Chinese government is somewhat leery

about opening the big mines again. As long as the price remains high, it means

that their demand restrains are working within China.

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

studies?

WITNESS: They have been at it since late fall, and they have been looking

at a whole variety of options to restart the mine. As you remember, they were

looking before at producing another product as opposed to just concentrate. That

would cost some $20 million to $25 million. I do not think they have written it

off yet, but if you remember, it was a commitment they made the government when

they first opened, that they would look at the possibility of doing more than

just producing a concentrate. They would do another higher value-added product.

So, right now that is what they are doing. They have been in to visit

government, I think, several times in the past four to five months. I think they

really are interested in opening it.

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

WITNESS: I think they are looking now at between sixty and eighty. It

will be a lot less than what was proposed before. They will try to bring it on

with lower costs than what they had before.

MS KELLY: The other question I wanted to ask was about wind energy. Just

to get an update on where we are in the Province with a few pilot projects that

were being looked at. I have not asked a question in the past, with the high

cost in some parts of Labrador on the coast in little small communities. Is

there any hope that if the pilot projects work that we could find lower cost

energy up there?

MR. NOEL: The deputy just reminded me that we had that discussion on

Friday. There is one project that we have asked Newfoundland and Labrador Hydro

to look at. They have done an assessment and made some recommendations to the

department, and we are now assessing that. We will be making some

recommendations to government over the next very short period. There are some

other projects that are being looked at. There were a couple up on the - one

anyway, up on the Southern Shore of Labrador.

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

to you.

MR. MAYNARD: There is another company examining some smaller wind

generation projects for potential replacement, or replacement of some energy on

the isolated diesel systems. They are currently doing some feasibility work,

looking at some options and trying to avail of some federal funding for such

initiatives as well. For the isolated diesel systems in rural areas, that one is

a little bit further behind than the larger demonstration project that

government is now considering.

MR. NOEL: It still remains a higher cost source of power than we have

been used to. It depends, of course, on what happens with fuel prices and that

sort of thing in the future, whether or not it will become more or less

competitive. I guess government will have to decide whether or not we would be

prepared to pay higher prices for some power in order to get a few of these

projects going, in order to diversify our sources of generation, in order to

determine just how successful this type of generation can be in our Province,

and in order to contribute to requirements of the Kyoto protocol. Whether or not

the federal government may have some funding available to make projects like

this desirable for the Province, and whether or not we are prepared to make some

additional financial commitment in order to get some projects like this off the

ground, we will be making decisions about in the very near future.

MS KELLY: No more questions.

CHAIR: Thank you.

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

Harvey Hodder.

Mr. McLean.

MR. McLEAN: I just have a couple of questions, or perhaps a comment and

then a question. I find it hard to sit here and not ask about Voisey's Bay, so

I will ask the question but I will make a comment about it first.

With the latest special projects order,

section 6 includes the adjacency

principle, and the Voisey's Bay mine-mill undertaking in

section 15

accommodated the adjacency principle as well. My understanding is that what is

precipitating all of the discontent, I guess, in Labrador is basically

contributed by two unions, of the whole group of unions involved in that. One is

the teamsters, and my understanding is that the other is the caterers or

hoteliers, or whatever they call it, and that other unions are complying with

the adjacency principle.

My question is, I guess, in that regard, if there are only two unions that

are causing all the uproar up there - and it is causing a lot of uproar because

what is happening is when people call the unions they are basically told to get

lost. They have their own people and that is the way they are going to work it.

That is what precipitates meetings like were held last Friday and Saturday.

I just want to ask the question as to who would be able to sit down with

these people to try to bring them into the fold and say: Here is what you have

to follow.

Is that the job of the company, or is that the job of the public or the

government? Who would have that task, to try to resolve this issue in that

regard, where it is already indicated and it is identified and it is firm in the

orders?

MR. NOEL: Our view is that the company is responsible for the whole

project. It is up to the company to get everything straight. It is up to them to

abide by the commitments they have made. We intend to ensure that they do. If

there are problems, they should be dealing with the unions, they should be

dealing with the people, and they should make sure that the whole situation is

clarified.

Now, we all have to be reasonable and understand that you are dealing with a

lot of people. You are dealing with people for whom these are very serious

issues. You are dealing with a number of unions, and it wouldn't be surprising

if you are going to have some people who are saying the wrong things and even

doing the wrong things from time to time. All we can do is identify these

incidents when they happen, find out what the source is, and make sure that it

is dealt with.

We have had many discussion with the company and there is just no question of

the company's commitment to the adjacency principle. Now, we hear stories

about representatives for various unions giving people information that are

causing them concern.

One case I heard, there was one union that did not even have an office in

Labrador and people were calling down to the office here in the city and, I

believe, getting receptionists on the line and getting information that, you

know, we question whether or not it represented the legitimate position of that

union, because we have the collection of unions together up there and together

they are committed to the conditions for developing the project, and the union

representatives have indicated, in their negotiation over the collective

agreement, that they support the adjacency principle.

I think there is no question that there is an overall commitment to ensuring

that the project develops in this way, but that does not mean to say that there

will not be individuals within unions, within different groups and within

companies. There may be some contractors hired to do things who may not

understand what the requirements are and may try to get around them from time to

time, or that sort of thing, and we will just deal with these things as they

come up. As I say, the basic responsibility is with the company. It is their

project. It is up to them to ensure that it is developed under the terms and

conditions that we have agreed to.

If we, at any time, have a concern that a company is not doing that, we will

take whatever action is necessary; but, in the meantime, we are in constant

contact with the company and with the unions and with the interest groups, and

we try to identify problems at the earliest possible phase and deal with them.

MR. McLEAN: Thanks.

Just one question on the wind power. I know we are doing a couple of

projects, but my understanding at the beginning of the wind power projects was

that the maximum they could do would be supplement current power supplies by 30

per cent in any given community in the isolated areas. That was my

understanding, in talking to this Dutch group that was (inaudible).

MR. NOEL: Well, you cannot rely on them entirely because you know that

you are not going to have constant wind available to generate the required

power, so they have to be developed in conjunction with other sources of power.

Whether or not the 30 per cent is relevant....

MR. McLEAN: That is roughly the figure they gave us as probably the

maximum that this kind of power could supplement the regular diesel generation

with, as it currently is.

I will just make a comment to conclude that, that is I think we have to look

at some other way to provide a greater power base for the isolated communities.

That will also give them some access power so that there is some opportunity for

them to develop things in those communities. I think that is the way we should

look, at a firm power base which will provide a cheaper rate but also an

opportunity to develop.

Just the examples we are seeing out there now - I met with a guy in Port Hope

Simpson three weeks ago. He has to call the powerhouse before he can start his

sawmill because the lack of power - he can only do it certain times of the day

because of the load factors. I think we have to understand that that is really a

detriment to developing and allowing those people to develop industry that will

be self-supporting in the end.

These kinds of examples are the things I think we really need to look at

seriously in terms of getting Hydro onside to take a more serious look at it.

MR. NOEL: I think Hydro has looked at a lot of these problems pretty

seriously over the years, but it is unfortunate and unacceptable that we have

these problems with power supply in particular areas of the Province. The

reality is that to get power into different locations can be very costly. In

order to make it economic is quite a challenge. Wind power is a great option but

it still appears to be more expensive than other sources of power, except in

some really extraordinary circumstances. Unless a case can be made that that is

a reasonable choice to make then government has a problem choosing that

particular option. Certainly, we are committed to doing what we can to ensure an

adequate supply of power at acceptable prices for as many people as we can.

MR. McLEAN: Thank you.

CHAIR: Thank you, sir.

Mr. Maynard.

MR. MAYNARD: If I could just to add to that, the people of Port Hope

Simpson are paying 26 per cent of the cost.

MR. McLEAN: That is right.

MR. MAYNARD: Somebody has to pay the costs. If you increase high cost

sources of electricity in Port Hope Simpson the remainder of the Province has to

pick up. Somebody has to subsidize it. So it is an issue, one we all recognize

and sympathize with but -

MR. McLEAN: Yes, I understand. If we did not subsidize they would not

have power, but there comes a time when I guess everybody in the Province would

- if we all had to pay what would make it economical right throughout the

Province we would be in trouble too.

MR. MAYNARD: Yes, understood.

MR. McLEAN: Thank you.

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

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

On motion, subheads 1.1.01 through 4.1.02 carried.

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

amendment.

CHAIR: Before we adjourn for this evening, we also have to move the

minutes of the April 10 meeting of the Resource Committee. If I could have a

motion to move those minutes.

On motion, minutes adopted as circulated.

CHAIR: I want to thank the Committee members for their questioning

tonight and their diligence in their questioning, and the minister for the very

wise and sage answers that he was able to provide, along with this officials

here tonight, and the Clerk of the Committee for a great job, and the Page.

Thank you very much for your help.

On motion, the Committee adjourned.