1996 Legislative Session: 1st Session, 36th Parliament

HANSARD

The following electronic version is for informational purposes only.

The printed version remains the official version.

Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)

THURSDAY, JULY 18, 1996

Afternoon

Volume 1, Number 23,

Part 1

[ Page 529 ]

The House met at 2:05 p.m.

M. de Jong: The member for Abbotsford and I are very pleased that there are five representatives from the Dasmesh Indo-Canadian Senior Citizens Association present in the gallery this afternoon: Hardev Singh Sidhu, Dalip Singh Gill, Sawa Singh Bariea, Gurmeet Singh Tiwana and Bhadat Singh Bhatti. I hope all members will join the member for Abbotsford and myself in making them welcome.

Hon. M. Sihota: Beaten to the punch by that cagey member for Matsqui. Let me also extend on behalf of our caucus, my colleague the Attorney General and the member for Yale-Lillooet, in particular, and of course the member for Okanagan West, a warm welcome to our colleagues from the Dasmesh Punjabi School in Matsqui.

M. Coell: In the House today are friends of mine, Buncy and Raj Pagely. They are cross-cultural consultants working on educational programs on heart disease with the South Asian and multicultural communities in British Columbia. Would the House please make them welcome.

Hon. S. Hammell: In the House are two people from the Surrey area. One gentleman's name is Amrik Sanghar and the other is Andy Aadmi. Would the House please make them welcome.

Introduction of Bills

BC FOREST RENEWAL

AMENDMENT ACT, 1996

Hon. D. Zirnhelt presented a message from His Honour the Lieutenant-Governor: a bill intituled BC Forest Renewal Amendment Act, 1996.

Hon. D. Zirnhelt: It's my pleasure to introduce Bill 12, the BC Forest Renewal Amendment Act, 1996. The government introduced the BC Forest Renewal Act in 1994, and it was to enhance the productive capacity and environmental value of forest lands, to create jobs, to provide training for forest workers and to strengthen communities.

The bill I am presenting today makes amendments to that legislation that will provide additional assistance and support to displaced or underemployed forest workers. Bill 12 will give displaced forest workers first-priority hiring on Forest Renewal B.C. projects. It also provides for the establishment of an agency to match eligible British Columbia forest workers with jobs on projects funded by Forest Renewal B.C. Bill 12 strengthens this government's commitment to forest workers and their families and communities, and it builds on our experience supporting forest workers in Forest Renewal B.C.'s first two years of operation.

In that time, Forest Renewal B.C. has spent some $200 million on a wide range of projects in every region of the province and on all the spending priorities in the forest renewal plan. These priorities are investing in the productive capacity and environmental values of our forests, in securing a good future for forest workers and creating new jobs, and ensuring stability for communities that rely on our forests. In each of these areas, Forest Renewal B.C. is continuing to develop and implement effective and innovative programs to renew the forest sector in partnerships with workers, industry, environmental groups, communities and first nations.

I move that Bill 12 be placed on orders of the day for second reading at the next sitting of the House after today.

Motion approved.

Bill 12 introduced, read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.

Oral Questions

USE OF FOREST RENEWAL REVENUES

G. Campbell: Last year the Minister of Finance reported to this House that it was understood in the first two years or so that more money would be coming into Forest Renewal B.C. than going out of it. The NDP bragged about a $2 billion trust that would be set aside as a kind of trust for forest-dependent communities and forest-dependent families across the province. Yesterday, the Premier announced: "It was never the intent. . .to have money in the bank." My question is to the Minister of Finance. Before the election, there was supposed to be a $2 billion trust built up in Forest Renewal.

Why is it that the minister is so intent today on pillaging the forest renewal fund, if not simply to cover up his own incompetence?

Hon. A. Petter: I very much appreciate the question. The purpose of the forest renewal plan always had been to establish a dedicated fund that would establish a constant flow of revenue over time and, yes, have a reserve fund that would enable it to do that during downturns in the economy. What has happened over the last number of years is that the rate of expenditure has been lower than anticipated and the revenues have been higher than anticipated in the original plans.

Those basic commitments of a dedicated revenue flow, of constant investment and of a reserve component are the key elements of the plan that this government remains committed to. They are the key elements that will ensure that we will build on the investment of $145 million that took place last year, increase that investment this year under Forest Renewal and build up to that constant flow of investment over the remaining term of this government, and hopefully beyond. [Applause.]

G. Campbell: I'm amazed at the members opposite for applauding that kind of a response. The members opposite do know what they campaigned on and what Forest Renewal was supposed to be about. In fact, the member for Skeena was really quite eloquent about the importance of Forest Renewal. The member for Skeena said specifically: "We'll take $2 billion over the next five years -- that's $2 billion of additional stumpage, so it's not tax money. . .so it can't be claimed or clawed back in future years just because there's an election call" -- just for political expedience. My question is to the Minister of Forests.

The member for Skeena and many members opposite speak for resource-dependent communities. When will the Minister of Forests stand up and speak for resource-dependent communities instead of selling them out?

Hon. D. Zirnhelt: This is the Leader of the Opposition that says: "Not only is Forest Renewal bad for business, it's bad for the workers of British Columbia."

[ Page 530 ]

The question is: will we honour the commitment to reinvest in the forest land base, the communities and the workers? I say to you that the business plan for Forest Renewal must do that.

[2:15]

G. Campbell: The Minister of Forests does not understand the question that people across the province and people in his own constituency are asking: when is he going to stand up for those communities instead of selling them out? That's the question the people are asking themselves. The Premier today has said that that's government money. It is not government money; it's money for the forest-dependent communities and the forest-dependent families -- for families in that minister's riding and in ridings across this province. When will the Minister of Forests stand up for those families and those communities and tell the Minister of Finance to keep his grubby hands off Forest Renewal funds?

Hon. D. Zirnhelt: If the hon. Leader of the Opposition had read the paper today, he would know that we expect forest jobs to grow in British Columbia. If he looked at the spending projections for Forest Renewal B.C., he would also know that in the forest-dependent community of West Vancouver-Garibaldi, last year's target was $300,000. This year -- '95-96 -- $2,200,000 was spent in that forest-dependent community; for '96-97, $4,427,000; and in Cariboo North. . . .

Interjection.

Hon. D. Zirnhelt: Sounds to me like the member from that riding doesn't want the money spent there.

This Minister of Forests is standing up for the forest communities by ensuring that there will be no cuts to the program funding of Forest Renewal B.C. In fact, every year until we reach the $400 million target, it will increase. But it will only increase as we can spend it wisely.

J. Wilson: My question is to the Minister of Forests. I am from a riding that depends on forestry. The people of the Cariboo have paid millions of their dollars into the Forest Renewal fund, and now Forest Renewal is being threatened by this government. The people in the Cariboo gave that money to be used to ensure the future of their community. Will the minister promise that the money that came out of their forests will go back into their forests?

Hon. D. Zirnhelt: I can assure the member, whose riding will be getting about $7 million this year and $8 million next year -- it's growing every year -- that the dollars will increase in that and every riding until we reach our target. There will be no money taken back. Further, that member must know that, independent of Forest Renewal but based on the confidence of the forest industry in this province, a new MDF plant has been created there, creating 110 jobs for the forest industry -- your riding.

Interjections.

The Speaker: Order, please.

J. Wilson: That money came from the Cariboo and was supposed to go back to the Cariboo. That money was given to this government by these people, to be held in trust. It is a trust fund for the future of the forest and forest communities. Will the Minister of Forests promise today that the money that came out of rural B.C. will go back to rural B.C.? Is this just one more broken promise, one more betrayal of trust?

Hon. D. Zirnhelt: There will be jobs created in the Cariboo this year -- hundreds of jobs -- and that member's riding will get its fair share. The money that is raised is going to go back -- as we can spend it appropriately. What the member fails to understand is that there is a program continuity fund -- a cushion, if you will -- that has been planned into the Forest Renewal business plan. It was in last year's business plan, and I trust it will be in this business plan this year to ensure that there is no drop-off -- in fact, a continued ramping-up -- of expenditures in Forest Renewal B.C.

That party over there has the gall to criticize this program. They voted against it when it was here in the House. They had their chance.

M. de Jong: My question is also to the Minister of Forests, who on Monday refused to answer some very specific questions relating to his government's designs on Forest Renewal dollars. He sat by silently, idly, while the Finance minister avoided, evaded and denied allegations for three days about his government's proposal to plunder Forest Renewal dollars -- allegations that the Forests minister himself admitted were true yesterday. He calls himself the straight shooter from the Cariboo. Let's have some straight answers from the minister.

The Speaker: Let's have a question.

M. de Jong: When was the issue of transferring Forest Renewal dollars to general revenues first discussed by the Forest Renewal board?

Hon. D. Zirnhelt: One of the problems is that when members from the other side. . . .

Interjections.

Hon. D. Zirnhelt: I'm not given to drama like the member on the other side is, so I'd like to calmly explain what happened. . . .

Interjections.

M. de Jong: The Forests minister admitted yesterday that he made the pitch for Forest Renewal dollars. He made that pitch. Presumably he didn't do it of his own volition; presumably someone suggested to him that that was what the government wanted to have happen. So my very straightforward question to the Minister of Forests is: who approached him from the Premier's Office or the Finance ministry with the suggestion that the government wanted access to those Forest Renewal revenues? Who approached him, and when was that approach made?

Hon. D. Zirnhelt: I want to explain in a very forthright way that sometimes the opposition probes with its questions and doesn't really get at the real issues. The real issue from yesterday's discussion. . . .

Interjection.

[ Page 531 ]

Hon. D. Zirnhelt: These members aren't taking this from what I said, but from what I was quoted to have said. I have never. . . .

Interjections.

The Speaker: Hon. members, the entire question period will disappear if we don't allow people to hear each other.

Hon. D. Zirnhelt: The board of Forest Renewal B.C. did discuss the matter of surpluses, and everything else I said they discussed, at its last meeting. They said that they have directed staff to come up with options as to what to do with the surplus funds.

WATER SUPPLY AND

FIRE PROTECTION IN WESTBANK AREA

G. Wilson: My question is to the Minister of Environment, Lands and Parks. The Sookinchute Utility Corporation is a licensed utility corporation in Westbank and Kelowna. Currently, it would appear that it has unauthorized use of water systems and that this is impeding the water that may be necessary for fire protection in that area. It is my understanding that the minister and his staff have made available information with respect to Sookinchute.

I wonder if the minister can tell us what steps this government is taking to act immediately to mitigate potential criminal liability that may be placed in the event fire takes place and no fire flows are available to fight those fires in the residential developments.

Hon. P. Ramsey: The water comptroller's office has advised me that the plans for the system indicate that it has sufficient capacity to provide for all residential requirements of those who are serviced by the system. There are more than adequate supplies to deal with any fire that might arise. I'd be pleased to have the member fully briefed by members of my staff.

The Speaker: The bell terminates question period.

The member for Alberni on a point of order.

G. Janssen: I didn't want to interrupt the lively proceedings at question period, but during question period the Leader of the Opposition made what we on this side of the House feel were offensive remarks to the Minister of Forests -- i.e., "grubby hands" -- and we would ask that he withdraw.

G. Farrell-Collins: If the member checks the record, he will see that that allegation was not made to the Minister of Forests.

Tabling Documents

Hon. D. Streifel: I have the honour today to present two reports: the Ministry of Social Services '93-94 annual report and the report of the Gove inquiry into child protection.

Hon. M. Sihota: I have the privilege to present to the Legislature the annual report of the Workers' Compensation Board of British Columbia for the year 1995. I also present the workers' compensation statistics. This is a supplement to the annual report for the year 1995.

Hon. D. Miller: It's a trifle early, but I have the honour to present the 1994-95 report of the Ministry of Small Business, Tourism and Culture.

Petitions

J. Kwan: I'd like to ask leave of the House to table a 2,693-name petition regarding the ward system in the city of Vancouver.

The Speaker: You've heard the intent of the petition. Shall leave be granted?

Leave granted.

Orders of the Day

Hon. J. MacPhail: In Committee A, I call Committee of Supply to hear the estimates of the Attorney General. In this chamber, I call Committee of the Whole to continue to debate Bill 2.

[2:30]

BUDGET MEASURES

IMPLEMENTATION ACT, 1996

(continued)

The House in committee on Bill 2; G. Brewin in the chair.

Section 4 approved.

section 5.

F. Gingell: As we are aware,

section 5 deals with the issue of transferring one more cent per litre on gasoline and fuel taxes from the consolidated revenue fund to the Transportation Financing Authority -- estimated, I believe, to produce about $60 million a year. Perhaps the minister could confirm that. The real issue that I'd like to ask the minister about is when it is intended that this will become effective.

Hon. A. Petter: I'm informed the amount is around $55 million a year. The intention is to make this effective at the time that it is necessary to make it effective. With our freeze on uncommitted capital, that may mean it will be later in the year, rather than earlier. Of course, one of the goals of that freeze, of this government and of myself as Finance minister is to try to reduce our capital expenditures and the associated costs of servicing that capital and debt. So we may be able, in this case, to delay the transfer until sometime later in this year.

I won't be able to give a clear answer until we have the outcome of the capital review and know a bit better what kinds of demands that will place upon the TFA.

F. Gingell: I must admit the response surprised me. I don't have with me a copy of the budget report. But in the budget reports, if you turn to the

schedule at the back, it will show the balance that was anticipated to be owing on the TFA for contracts presently under construction. There is a debt table there at the back. It's something like $382 million. You go to the column on the right-hand side.

Interjection.

F. Gingell: It's $590 million. That sounds right. So at the moment, with the projects that are on and the. . . . Sorry, I've got the wrong one. . . .

[ Page 532 ]

Hon. A. Petter: To assist the member, I am informed that it is the difference between these two numbers in table G7. I think that difference is $392 million, but in fact, they expect to spend in the range of $350 million before the freeze.

F. Gingell: But there are a whole series of projects that have already been started, like the Island Highway. You're not freezing the Island Highway project. In the parts where the contract has been given, the contract is carrying on. I remember the number of $390 million as being what you believed the debt would be at March 31, 1996. That's going to be back to $350 million. But it's clearly going to get above that.

At the moment, what you have is $55 million a year in revenue coming from the present one-cent-a-litre gas tax and roughly $15 million a year coming from the tax on short-term automobile rentals. I'd like to suggest to the minister that to suggest that you would delay putting this extra one cent a litre in to service this very large debt is a very weak excuse.

I'm concerned about the commitments that this government makes about specific issues -- and then, of course, they turn around and say that we were against them. Rightly or wrongly, you commit revenues to service these debts that are incurred and you play around with them.

If you intend to put an extra cent in, let's put it in. Make it effective April 1, at the beginning of the fiscal year. We get suspicious on this side of the House -- and I'm sure the people do -- that you're thinking of delaying putting this money in in an attempt to balance this year's budget. You've clearly got budget-balancing problems and to be able to add roughly $5 million a month for every month you delay is going to be helpful.

If you've got $350 million worth of debt, you've got all kinds of projects going on that are not affected by the freeze. You clearly need those additional funds in the TFA. I'm disappointed that you're waffling about the issue.

Hon. A. Petter: Well, I thought the member didn't believe in warehousing, but apparently he does. Let me assure the member that the moment the Transportation Financing Authority inform us that they require this revenue stream to fund their capital expenditures, it will be transferred. To transfer it earlier would be a form of warehousing, in a sense. Why do that when that revenue can assist in other laudable and important objectives? Indeed, I've always thought the member wanted us to reduce capital expenditures and debt in order to enable the province to lower debt-servicing charges.

In a sense, this is doing that by not requiring the transfer of this dedicated amount for covering debt until a later date than the member seems to suggest.

F. Gingell: Well, I was going to allow sections 5, 6, 7 and 8 to pass, but. . . .

Someone called Peter should know that there's this famous role about Peter and Paul: you must not rob Peter to pay Paul. And we certainly must not rob the TFA to give money to Peter. The important thing with your debt is to pay it off as reasonably and as quickly as you can. The more money you put into the TFA, the quicker you will retire that debt and the less amount of money you need to borrow there.

You've carefully pulled these highway infrastructure capital costs out of the consolidated revenue fund so that you don't have to include them in your calculation of the deficit. It seems to me that this is tax-supported debt. Let's get it paid off as quickly as we can.

Hon. A. Petter: I sure don't want to prolong this discussion for the member, but the period for retiring the debt is determined by the amortization period for the assets, not by how much money we give to the TFA from time to time. My name is not Peter, but if it were, I would not feel robbed in the slightest. All we're saying is that we're going to give this funding to Paul -- the Transportation Financing Authority -- just as soon as Paul requires it for the laudable purposes that Paul does. But in the meantime, let's not give it to Paul ahead of time and allow Paul to -- I don't want to say, it because the member may get agitated -- warehouse it.

Sections 5 to 8 inclusive approved.

F. Gingell: Just one comment. It seems to me that you have a clear idea at the moment of which properties you are going to prescribe to be allowed to be exempt from municipal taxation for the purposes of local airports. Rather than have these things prescribed by order-in-council, wouldn't it be better to describe them within the act? Then people on local airport authority boards and local municipal councils would clearly understand what the rules are, and they wouldn't be subject to change at the whim of the Lieutenant-Governor-in-Council.

Hon. A. Petter: I'm informed that the reason for this has to do with the fact that airport authorities have within their property holdings a variety of different kinds of property. Some may be what we would consider airport property. Others may be property that's developable for residential purposes and it would not be suitable or appropriate to impose this kind of dispensation upon. Each one is so different that the feeling is that if we try to anticipate every circumstance we would inevitably miss some.

So, the better course of action -- the purpose is clear here -- is to try to place these airport authorities and the local authorities that run them in the same kind of position, no worse position than they would have been under the federal regime. But we also want to make sure they're in no better position either, and that properties that should attract taxation do so. In this case, some latitude is thought necessary as we work through this with the various authorities to achieve the clearly desired and understood objective.

Sections 9 and 10 approved.

F. Gingell: Could the minister please give us some idea of the scope -- the size of the problem that has caused them to bring in these rather complex rules dealing with associated corporations and subsequent amalgamations for the purposes of avoiding property transfer tax?

Hon. A. Petter: I don't have an aggregate number, but I can tell the member that there was one transaction that was detected recently in the range of $900,000 and one close to $2 million. The concern here is that this is becoming a known and a growing form of tax avoidance, and we want to make sure we nip it in the bud.

Section 11 approved.

section 12.

F. Gingell: Every year as we gradually push these exemptions up, I take the opportunity to remind the minister -- now we have a new minister -- to look back at the original

[ Page 533 ]

provisions that created the property transfer tax exemptions. I think they were a better set of rules than you have now. They didn't impede the natural movement of young families early in their married life, quickly moving up from one. . . . They go and buy a condo which is a one-bedroom unit, and they get a little bit more money and maybe get a two-bedroom unit. Then they start a family, and they're moving up into bigger units. It was felt on this side of the House that the previous exemptions worked better than this set of rules does.

[2:45]

Hon. A. Petter: This is an issue that maybe the member and I could have a coffee over sometime, and he could tell me why, in more detail, he thinks the previous regime was preferable. This, obviously, was a commitment this government made in the 1991 election that we lived up to.

In terms of the dollar value, certainly it seems to provide a greater value, about twice the value -- from $12.7 million, I think, in the last year of the previous high-ratio-financing tax relief program the member opposite is referring to. . . . This year, as I understand it, the benefit or cost to government of this expenditure is about $25 million. Obviously the member has concerns about the distributional impacts, and I'm happy to pursue those with him and learn more about his concerns.

Sections 12 to 14 inclusive approved.

section 15.

F. Gingell: Perhaps we could deal with sections 15, 16, 17 and 18 all at the same time.

I spoke to the minister earlier about a concern I had when one single owner switched a prototype property from research and demonstration to commercial use. I would be interested in the answer to that conundrum.

Hon. A. Petter: We may have to discuss this one over coffee, too, hon. Chair.

As I understand it from staff, the situation is as follows. I think the first part will correspond with what I thought was the understanding I had of it earlier, and that is that where a prototype is sold from one individual to another, then the tax is payable on the purchase price -- the market value. I understand that as the bill is now crafted, where it is not sold and the prototype then becomes used for a commercial purpose and becomes therefore taxable, the tax is on the value of the component parts.

The member and I had an interesting discussion about this, and I guess the question was: would the market price be the fair result? I think the member and I were both assuming that the market price might be lower than the value of the component parts. In fact, I think I recall the member suggesting that might be case. Staff inform me that it is their expectation, based on their understanding, that for the most part that will not be the case. The value of labour will not be accommodated in this price.

In other words, the components of the parts attach a value which excludes the value of the applied labour and intellectual knowledge, etc., that brought those parts into a prototype. For that reason the choice was for the parts, assuming that would tend to be a lower, fairer and more equitable value. That, as I understand it, is the legislation as now drafted.

F. Gingell: No transfer of ownership has taken place. So if this was not a demonstration plant that had been built as a commercial plant by the company to start with, there wouldn't be any tax on the labour anyway.

Hon. A. Petter: In the situation the member posits, the tax would have been paid initially on the parts that were acquired. Once those parts were built into a component asset with the applied labour, that asset with the incremental value of that labour would then become subject to other forms of taxation.

F. Gingell: I've been out of the business for 25 years. Things have changed. I'm surprised things have now become such that if a company builds its own particular process equipment that will be used in manufacturing, it pays tax on other than the tangible personal property. . . .

Hon. A. Petter: And it sells the asset.

F. Gingell: No, no. When it's building it for itself. I'm not talking about transfers; we've already dealt with transfers.

Hon. A. Petter: The second tax I was referring to is when that asset goes into the marketplace and gets sold. The value at which it is sold will include the incremental value of the labour that enhanced the value of that asset in the marketplace. That's the only point I was trying to make.

F. Gingell: I see. I take it the minister is saying that the fact is that we may charge tax on a whole series of parts or equipment that got worn out and are now clearly second-hand. Under these circumstances, that will be -- and you're probably right -- more than compensated by the fact that the labour component will not be included.

Hon. A. Petter: That seems to be the expectation, yes.

F. Gingell: I'd like to suggest that that may well be a very difficult calculation. I have my own experience of dealing with prototypes. When we built the used-oil re-refining plant in North Vancouver, we bought all kinds of bits and pieces, and they didn't work. We wore them out, we burned them out, pumps blew, we had to get bigger pumps and different things happened. Really, the product at the end, which became a commercial plant, was very difficult to recognize from what we had started with.

I'd like to suggest to the minister -- and I appreciate that it won't be appropriate to make an amendment here -- that your policy group may try and think this thing through again and perhaps talk to people like MacMillan Bloedel, who have done a great deal of work on their demonstration plant for the Nexgen operation in Port Alberni.

Moving from that to

section 16(3.6), does the minister have a briefing note that will tell the House what that means?

Hon. A. Petter: I think the intention of this subsection is to extend the exemption to circumstances where a prototype is being demonstrated and there is a return being provided to the person demonstrating the prototype to cover the costs of the demonstration, to guard against an

interpretation that would regard that income for demonstration as evidence of a transaction that would move this into a taxable category. Provided the return to the demonstrator is no greater than the cost of covering the demonstration, they remain safe in terms of their tax exemption.

[ Page 534 ]

F. Gingell: Excuse me for a moment before we move on. I'd just like to re-read subsection (3.5).

Sections 15 to 18 inclusive approved.

section 19.

F. Gingell: During second reading debate, I talked about dedicated revenues, which this government seems to get into problems with -- or maybe the opposition does. But it's your government and they're your policies, and when it suits me, I argue against dedicated revenues. I think it takes away much of the role of government. In this particular circumstance, as I understand it, you are planning on setting up a separate trust fund, and it's only going to be about $5 million, unless you anticipate increasing many of the revenues that flow into this.

Has the minister thought about. . . . Have you set up any governance organization for this trust fund? Who is going to make the decisions? Who is going to have control of the fund?

Hon. A. Petter: The intention, as I understand it, is that the current board of the previous fund will continue, but they will not be under the thumb of Treasury Board guidelines in the same way because of the change in the nature of the fund, which gives them greater autonomy in terms of doing what the purposes of the fund provide with respect to this $5 million source of revenue. The member is correct.

F. Gingell: Can the minister advise us if all the directors, governors, trustees -- or whatever their position is -- are appointed by the government, or whether they reach that position through being officers of other organizations?

Hon. A. Petter: What I do know, based upon staff advice, is that the members of the board are broadly representative of various groups and organizations. How they come to be appointed, and the role of the organizations in making those appointments, I will have to find out for the member, or perhaps another member might find out on my behalf. If not, I will find out for the member.

F. Gingell: Perhaps the reason behind the question is the key to it. If you lose control of the money -- the money goes directly in and you don't appoint the board of governors. . . . I'm wondering whether the government has lost control of the fund. It would not be included in the

summary of financial statements. The Minister of Environment has something to add to this, I think, but there are very few cases where tax revenues -- which is what these are, in their own form -- are sort of automatically allocated to some independent third party. I'm interested to know how independent that third party might be.

Hon. P. Ramsey: I think we'll do a tag team. As far as who appoints the board is concerned, it is government-appointed. It consists of really respected wildlife biologists with high expertise in the field. The current chair, who has been the chair since its establishment in 1981, is Dr. Ian McTaggart-Cowan -- you probably know him -- and the rest of the board have equal credentials. It's a very highly respected body. As for the fiscal controls, I'll leave that to my colleague the Minister of Finance.

Hon. A. Petter: As to the concern around how accountability is maintained with these circumstances, my

interpretation of the question is that the legislation provides that this trust fund is subject to certain conditions within legislation. That's provided for in the legislation here -- the various purposes. The Ministry of Environment, as I understand it, is the trustee for the fund and is therefore bound to determine that the fund is expended with those purposes in mind. If it were not expended with those purposes in mind, the public would also be able to take whatever action. . . through normal judicial review, I assume. But this is speculation in an area where I don't expect we'll have to tread, particularly given the credentials referenced by my colleague.

[3:00]

Hon. P. Ramsey: I did not have the opportunity to comment on this bill in second reading. I want to very briefly comment on the establishment of this trust fund and reflect on the continuation of our partnership with the province's anglers and hunters in their desire to protect and enhance fish, wildlife and the habitat on which they depend. It was on their initiative that we agreed to levy surcharges on licences, which were put into a trust.

It is by the measures we are enacting here today that we will be establishing a trust fund which will set all of those funds aside, make sure that they're not subject to Treasury Board freezes or other clawbacks, and ensure that all moneys that anglers and hunters contribute to habitat conservation are spent on those objects.

Sections 19 to 26 inclusive approved.

Title approved.

Hon. A. Petter: I move the committee rise and report the bill complete without amendment.

Motion approved.

The House resumed; G. Brewin in the chair.

Bill 2, Budget Measures Implementation Act, 1996, reported complete without amendment, read a third time and passed.

Hon. J. MacPhail: I call committee on Bill 3.

TAX AND CONSUMER RATE FREEZE ACT

The House in committee on Bill 3; G. Brewin in the chair.

section 1.

F. Gingell: The first

section of this bill deals with

definitions, and it deals, of course, with the

definitions of post-secondary institutions, new taxes, residential electricity rates, etc. The

schedule lists certain taxes, premiums and other items. I think it would be appropriate if, during the course of this committee debate on this bill, we assure ourselves which taxes are included in this and which aren't. I have a list of particular taxes that I'd like to question the minister on. It seems to me that this is the most appropriate place to deal with them.

My first question to the minister is: does this include liquor distribution branch markups?

Hon. A. Petter: No.

[ Page 535 ]

F. Gingell: Does this include school property taxes? You'll know that

section 7 deals with the provincial property freeze, but the province collects two different types: property taxes for rural areas and property taxes for school purposes. So my second question is: does this bill include school property taxes?

Hon. A. Petter: The answer is yes, in the aggregate. By that, I mean, of course, that assessments will continue to go up and down, but the amount of tax levied for provincial school property taxes is frozen by this measure.

F. Gingell: I think I will leave discussion on that until we get to. . . .

Hon. A. Petter: I apologize. I just want to add something to be absolutely clear, and I appreciate the member's indulgence in letting me do this. The average is frozen. The reason I want to add that is that where there are new improvements, they can contribute to additional tax, but the average is frozen in a way that ensures that there is a freeze of tax. But obviously, if new improvements are created, they may contribute to additional tax revenues.

F. Gingell: I wasn't sure whether we should deal with this under

section 7, but let's deal with it now. I notice that you now say "average" rather than "aggregate." Does that mean that "aggregate" is out and "average" is in?

Hon. A. Petter: Yes. And that's what I was trying to clarify. The term "average" is used in the legislation because the aggregate would remain unchanged if there were no new improvements, but given that there are new improvements, they can add and become part of the contribution. The idea is not to reduce the existing tax paid by existing improvements because of the introduction of new improvements; the idea is to prevent those existing improvements from going up in tax in total, and that's why the term "average" is used.

F. Gingell: At the moment, the way it's determined what each property owner pays in the way of the basic school tax levy, or whatever it's called, is by applying a specific mill rate to a specific assessed value. That mill rate, I believe, is the same in each school district but not necessarily the same in every school district in the province. Is that correct?

Hon. A. Petter: I'm informed that different mill rates in different districts reflect other parts of the financing formula.

F. Gingell: Those differences would apply only to capital debt cost-sharing, wouldn't they?

Hon. A. Petter: As I understand it, it is not just a question of debt. The mill rate is set in a way that tries to achieve equity in terms of balancing population against assessed values across the province so that there is equity in the way the school tax is collected as between areas that might have very high assessed values but low populations and those that may have high populations and low assessed values.

F. Gingell: In the old days we used to share debt service costs between the province and the local school district 50-50 for the first six mills, 75-25 for the next six mills, and 90-10 for everything over that. So I presume that those cost-sharing arrangements on debt service are still included in the determination of each school district's mill rate.

Hon. A. Petter: The advice I'm receiving is that we think that is calculated separately, but it's probably an issue that I should look into and get back to the member on definitively.

F. Gingell: Don't bother with that. I don't want you to spend time doing something that isn't necessary.

What concerns me, first of all, is the fact that there are different mill rates, and we have discussed why there are. The next thing is that assessed values change. The B.C. Assessment Authority has responsibility for reassessing every property every year. But what I understand is happening is that from this point on, for the purposes of provincial property taxes only, not for the purposes of municipal taxes. . . . If I do not improve my property, my taxes won't go up. But if I do improve my property, the value of those assessments will cause my taxes to go up. So the B.C.

Assessment Authority is going to have to start to keep records on each piece of property as to construction prior to this bill and construction after this bill. You're going to have to do that separately, I would imagine, for provincial property tax purposes -- that appears on our municipal tax notices. The taxes that the municipality charge are not affected by this. I'd be interested in the minister's comment.

Hon. A. Petter: I am assured that the administrative complications which the member envisages are not going to occur. The kinds of minor improvements he's talking about are not going to affect the changes in the mill rate or in this formula. It's only major new improvements. The idea here is that where assessed values in aggregate don't change, and where there has been no new construction, then the mill rate will stay the same. When assessed value goes up, the mill rate would come down, but it would reflect the freeze.

It's only where there's a wholly new capital construction or a new assessment on a new structure that it will be taken into account as contributing an additional component to the overall tax pie, if I can put it that way.

F. Gingell: So you're not planning on allowing the taxes to increase in a case where you add an extra wing to your house -- you put a new kitchen on the back with all the latest appliances, etc.?

Hon. A. Petter: As always, the answers are more complex. That is correct in the sense that the addition of that wing will not move the overall tax contribution up within that school district or that taxable area. But it may well move the value of that property up relative to other properties. Therefore that individual property owner may pay a higher amount, but not as part of a contribution to a larger tax burden in aggregate.

F. Gingell: The minister has brought back the word "aggregate." I had envisaged that if more houses were built in the community where I live, my taxes would go down. I understood from the discussion that that wouldn't happen and that the average would stay the same. I think that's going to be terribly difficult to calculate.

I can just see that you're literally going to have to break the assessment roll down into all kinds of portions that are pre-Bill 3 and post-Bill 3, because you've got to determine what the averages are first and make sure that the averages stay the same, and then add on those that are post-Bill 3 so that they don't affect them. I'd like to suggest to the minister that this was an election promise somebody made without thinking about how you would actually do it. The administrative operation is going to be a nightmare.

[ Page 536 ]

Hon. A. Petter: I should have reassured the member off the top by simply telling him that this freeze has already been in place since 1994 and that the administrative mechanism has been ticking along just fine for the last three years. There's no change envisaged, so I don't think it does pose the nightmare the member suggests. I've heard of no one having any apparitions as a result of it.

F. Gingell: Mr. Minister, the issue is this: the freeze before wasn't legislated.

Interjection.

[3:15]

F. Gingell: Ah! The freeze before was not legislated. I had no right to go and wave Bill 3 in front of a magistrate's nose or an appeal board's nose and say: "The government's breaking the law." Yes, I agree that within your Treasury Board decisions, you made some policy decisions about what was going to happen to property taxes. However, the fact of the matter is that they were not legislated. We were all just pleased that as you increased every other level of tax you could think of -- a whole list of which I have here -- you seemed not to increase those quite as quickly.

It will be interesting. I'll go back to my files at home and look at all my tax notices. Well, actually, '93, '94 and '95 for my house, which has had no improvements since I became a poor MLA. My basic school levy -- the top line on the tax notice -- should be the same in the number of dollars for each period, or relatively the same. But I think you've got a different problem now.

Hon. A. Petter: First of all, I understand that while this is now being legislated, it's being legislated on the basis of the same policy-- a workable policy -- that has existed for the last three years. There's no intention to change. The individual tax notice of the member may have gone up or down, depending upon. . . . If everyone in the member's neighbourhood suddenly made improvements and the member didn't, it might have gone down relatively. If the member's neighbourhood suddenly rose in value relative to other neighbourhoods, it might have gone up or, conversely, down.

It would not have gone up or down because of government policy driving it up or down, but because of the position of the member's property relative to other individuals' property. Since he's a poor MLA, presumably he didn't make the same investments; perhaps others' went up and his went down. But that would be the reason.

F. Gingell: They never went down, I can assure you, even though I didn't spend any money on the property. I wonder whether health inspection fees are included.

Hon. A. Petter: Are these rhetorical questions, hon. Chair?

F. Gingell: Yes.

Hon. A. Petter: I thought they were!

F. Gingell: Hon. Chair, I wonder if marriage licence fees have been frozen.

Hon. A. Petter: No. I might encourage the member to read out the entire list of fees and licence increases that he already knows are not included, so as to compound the rhetorical effect into a single presentation. Of course, that is the member's choice.

F. Gingell: Having got the choice, I shall take it. You know, there's all this. . . . There is a

section in the

definitions

section that talks about "new taxes." If you go back and read Hansard from when this government was in opposition -- where they shall shortly be, we all hope and pray -- they used to continually criticize the previous administration for what they called new taxes and what the previous administration called user fees or some such thing. I understand that motor vehicle licence fees and driver test fees are now being moved to ICBC. I was wondering whether there was any freeze on what ICBC can do.

Hon. A. Petter: In terms of motor vehicle licence fees, no. Let me just say, if the member is trying to make a point, that I'm quite happy to acknowledge that it's not the intent of this legislation to freeze user fees in a broad fashion. The government believes that those who benefit from direct use of a specific government service should help to pay for those direct costs. Gosh! That's a market principle that probably the member opposite might even have some empathy for in his non-oppositional days or moments.

Changes in fees will therefore be considered through the normal procedures on a case-by-case basis, with recognition given to the user's ability to pay but also with a recognition of the impact of those fees upon users.

In particular categories -- the member is, I think, going to jump up and talk about these now -- we have recognized, because of the particular significance of certain fees in respect of ICBC, student fees, etc. . . . We have made a particular commitment to freeze those. In other areas, we'll continue to monitor and consider the impacts, as we have in the past.

F. Gingell: I'm really pleased to hear the minister talk about a competitive marketplace. What the minister must do, of course, is to allow competition to take place first. These are all monopolies we're dealing with.

The minister intends to freeze auto insurance premiums. Does that include insurance premium taxes?

Hon. A. Petter: I understand that such taxes are paid by corporations, and for that reason they are not included within this list.

F. Gingell: I guess that answers the next one on my list, which was the corporation capital tax. Is that intended to be frozen?

Hon. A. Petter: It's not intended to be frozen by this legislation, but let me just remind the member that simply because something isn't frozen doesn't mean it is going to be increased, either.

What we're looking at here is legislation that reflects a particular commitment this government made to provide reassurance over time, particularly to middle-income earners, to parents in respect of tuition fees, and to drivers. There's a legal maxim that covers this, but I won't bore him with it. The fact that we have specified certain fees and licences that are frozen should in no way imply that it is our intention to increase others; they are simply not covered by this legislation.

[ Page 537 ]

F. Gingell: In no way would I want to suggest that you were going to do that.

It's interesting that we freeze domestic electricity rates. I don't think the government has the power to put a freeze on natural gas rates. But, of course, petroleum and natural gas pipeline taxes and royalties will affect the price that consumers pay, for those who happen to heat and cook by natural gas rather than electricity. Do you intend to freeze petroleum and natural gas pipeline taxes and royalties?

Hon. A. Petter: I don't know if the member realizes it, but he inadvertently came forward with a terrible pun when he said the government didn't have the power to freeze non-hydro rates. I should have let that pass. Yes, all fuel taxes are frozen, but royalties would not be frozen.

F. Gingell: Would that include natural gas pipeline taxes? There are also taxes on the natural gas used to run the compressors in the pipelines. Are those taxes frozen, all of which will reflect through to consumers?

Hon. A. Petter: They are frozen. The compressors are not frozen, but the taxes are.

F. Gingell: Logging tax?

Hon. A. Petter: No.

F. Gingell: Sport fishing licences?

Hon. A. Petter: No. If you'd like to give the whole list at the same time, I encourage the member.

F. Gingell: Game hunting fees?

Hon. A. Petter: No.

F. Gingell: Name registry costs -- costs of registering?

Hon. A. Petter: A rose by any other name is going to be excluded from the freeze, for the member's information.

F. Gingell: Corporate registry fees?

Hon. A. Petter: No.

F. Gingell: B.C. Rail fares for citizens and consumers?

Hon. A. Petter: Obviously the member didn't get the adequate briefing he required, because he could easily have got these answers earlier. No.

F. Gingell: If we would have all briefings recorded by Hansard , to get them into the record, we wouldn't have to go through these exercises. To the minister: B.C. Ferry rates?

Hon. A. Petter: Their status in respect of freezes or non-freezes remains unchanged.

F. Gingell: Coquihalla Highway tolls?

Hon. A. Petter: The status remains unchanged.

F. Gingell: Vital statistics agency fees?

Hon. A. Petter: Not affected by this legislation.

F. Gingell: Safety inspection fees?

Hon. A. Petter: Not affected by this legislation.

F. Gingell: Waste management fees?

Hon. A. Petter: Not affected by this legislation.

The Chair: It's like a tennis match.

F. Gingell: Public gaming licences and permits?

Hon. A. Petter: Outside the scope of this legislation.

F. Gingell: Child care facilities and licences?

Hon. A. Petter: Those are not covered by the legislation. If the member wants me to, I could read the things that are covered; it would be so much easier.

F. Gingell: Land title branch registration fees?

Hon. A. Petter: Not covered by the legislation.

R. Thorpe: Will products sold through the LDB -- the markup on the taxes. . .?

The Chair: Hon. member, that has already been asked and handled.

Section 1 approved.

section 2.

[3:30]

F. Gingell: During second reading debate we had an opportunity to briefly voice our concerns to the minister with respect to the hydro rate freeze. I know the minister is going to say that I want taxes to go up -- and he knows that's a load of nonsense -- but I do want to stress that this government appoints people into positions as directors of these Crown corporations, and they have the responsibility to determine things. This government is calling for Hydro to pay a $214 million dividend this year -- the biggest dividend in many years and far greater than its anticipated income.

Every time we open the newspaper B.C. Hydro has all kinds of problems: they have holes in the dams, and they have problems with water in the Campbell River. They have a whole series of issues, and we mustn't put them in the position where they have only two alternatives: not do things that should be done and endanger the safety of our citizens or push up other rates that are not frozen to a point where businesses close down and people lose their jobs.

I know I'm going to be told that I'm against freezes. We're all for the lowest possible thing, but darn it, B.C. Hydro has problems -- problems which happen to be particularly apparent this year. They've had to borrow more money recently. You want this huge dividend out of them, and I am concerned that you are constricting their options in an unreasonable way, one that is not appropriate for you to do.

[ Page 538 ]

Hon. A. Petter: The member is sensitive on this issue. I will not accuse him of what he says; I'll accuse him of something else. During the election campaign this member ridiculed this freeze on the basis that there was going to be no increase in any event, and he said therefore it was going to have no impact and no constraint upon the Hydro board. Now he rises in the House and criticizes on the basis that it will have a constraint and an impact on the Hydro board. It strikes me that you can't have it both ways, so I'll choose that criticism instead.

Having said that, let me assure the member that the dividend that he refers to was predicated upon there being no rate increase and that Hydro has pursued, and will continue to pursue, measures to achieve administrative efficiencies, which I'm sure my colleague the Minister of Employment and Investment could expand upon. Of course, this is an important commitment to British Columbians to give them some assurance that this charge that so many pay will not be increased for the period of the next three fiscal years.

Section 2 approved.

section 3.

F. Gingell:

Section 3 deals with automobile insurance. I take it from this particular wording that it covers everybody. It's not just individuals; it's corporations, trucking companies -- everybody. Is that correct?

Hon. A. Petter: Well, we may have to get more information for the member, because I can't seem to get as precise an answer as I feel comfortable with. The note I have here suggests compulsory insurance, which is what is frozen as the basic package mandatory for all British Columbia vehicle owners, including accident benefits and $200,000 of third-party liability coverage, among other things. It does not include basic premiums for optional insurance, which are fixed by ICBC.

However, while not supported by legislation, these premiums have also been frozen for two years. Optional insurance coverage above and beyond the compulsory package, such as collision, comprehensive and excess third-party liability. . . . Therefore the net effect of the freeze is that a person's premiums will not increase over the 1995 level unless they have had a change of circumstances, such as an at-fault accident, a change of vehicle or a move to a different rating territory.

Now, the specific question on truckers and things is the

part I can't seem to get nailed down as specifically as I would like for the member, but I'll try to do so in the next few minutes, and if not, in the next day or so.

F. Gingell: I'm sure that the minister appreciates and understands that the concerns about the possibility of no-fault being legislated into the automobile insurance environment in British Columbia is something that all members of this Legislature are hearing about from their constituents. Does the minister see any connection between the consideration of no-fault at this time and the decision to freeze basic automobile insurance rates?

Hon. A. Petter: No direct connection, no. I think what this freeze represents is an understanding by this government that the kinds of increases that have sometimes occurred in the past around automobile insurance are not going to be acceptable, at least in the immediate future, and I suspect they will not be acceptable beyond that.

We must find ways to have the Insurance Corporation work to find efficiencies and improve its ability to provide good insurance at reasonable rates. The Insurance Corporation has a challenge that will require it to review administrative costs and any number of different matters -- safety initiatives, photo radar and those kinds of things -- to try to ensure that insurance in the future does not entail the kinds of increases we have sometimes seen in the past.

In reviewing that general concern, not related specifically to this freeze, I am sure they will look at a range of issues including product, fault versus no-fault and all sorts of other schemes, but I don't see that as a necessary outcome of this initiative. I see that review and the outcome that will come forward, and the debate we will have around whatever changes may be made in administration or whatever at ICBC, as part and parcel of a general concern by the public, reflected in this legislation, that rates cannot continue to rise in the way they have in the past and in other jurisdictions.

F. Gingell: This government has been in office for five years and three months to the day. During that period of time, you have had control and jurisdiction over ICBC, and we have continually heard about efforts and energies being directed to ICBC. You have changed presidents quite a few times. One of them could have solved your problem with photo radar. You got all your salary back, by the sound of things, with one particular person you chose.

But is this auto insurance premium freeze an admission of defeat? Have your efforts to this point in bringing ICBC to heel all failed, and now you can't trust them anymore to keep insurance premiums low? They operate primarily without any competition, and, as most monopolies do, they tend to be a pass-on-costs industry. So you brought this in to bring them to heel?

Hon. A. Petter: Quite the opposite. This is indicative of our confidence in the ability of ICBC -- which, through a number of administrative measures and very aggressive safety programs, has reduced the potential increase that would otherwise have occurred in premiums and costs -- to now go further and live up to our commitment to the electorate in the last election to freeze premiums for the next two years. It is my hope to keep premiums down as much as possible beyond that period.

F. Gingell: Does the minister believe that such things as auto insurance premiums and hydro rates being frozen are an appropriate election promise, in view of all the statements made by members of the NDP on such shenanigans carried on by previous administrations?

Hon. A. Petter: This legislation reflects the view of this government that we believe this to be an appropriate way of responding to the concerns of British Columbians. I daresay it would not be appropriate if it were not a serious commitment and if it were not one that we believe can be delivered upon. In this case, we believe that these commitments are ones that can be delivered upon and ones the electorate wants to hear. The electorate has suffered increases of various kinds over a number of years, not only under this administration but under others.

[ Page 539 ]

F. Gingell: I'd like to record in Hansard my support for your keeping ICBC premiums low. I know that if I don't say that, I won't be able to quote it back to the minister at some subsequent point.

As I'm sure the minister knows, I have a two-pronged issue. I'm concerned that ICBC may be forced to take actions that none of us are comfortable with, to meet the requirements, and I do have concerns about good governance. I think good governance requires this government to appoint people they can trust -- who are competent, capable and experienced -- into positions as directors of ICBC, Hydro and other such organizations. You have to give them the freedom and the ability to do what they believe is in the best interests of all our citizens.

Hon. A. Petter: And give them good guidance, which is what this legislation does.

Section 3 approved.

section 4.

F. Gingell: I would just like to record that all the things I said about

section 3 I think about

section

Section 4 approved.

section 5.

[3:45]

F. Gingell: On June 27, during the interim supply debate, the member for Okanagan-Penticton asked the Attorney General this question: "Will the minister confirm to this committee that there will be no markup fees or tax increases with respect to the products sold by the LDB to the citizens of British Columbia?" The Attorney General responded, on page 64 of the British Columbia debates: "Of course, there is legislation coming to the effect that there will be no tax increases." That statement by the Attorney General is in direct conflict with my first question that I asked the minister today, on section, 1 about liquor distribution branch markups.

Hon. A. Petter: I think I've got to resolve this confusion. There is a freeze on the social service tax that applies to liquor, which is within this legislation. There is not a freeze on markups with respect to liquor. I think that may help resolve the confusion that the member has.

F. Gingell: I was going to stand up and say: "Well, that's not what the Attorney General said." The question he was asked was two-pronged: markups and taxes. He responded: "There will be no tax increases."

The only point I'd like to make is that it's only in question period that you're not supposed to answer the questions; in committee stage you normally do answer them. These members have referred for many years to liquor control board markups as taxes. You made a great point of it when you were in opposition. Every time the price of a bottle of whisky or a case of beer went up, the government was accused of increasing taxes. I find the response by the Attorney General to be a little unclear and, of course, at variance with the minister.

Perhaps the minister will consider, as he has the right under this bill, subsequently bringing something in through order-in-council onto the schedule. To make sure that the Attorney General is not considered to have made an incorrect answer, he might now decide to include liquor distribution branch markups.

Hon. A. Petter: Perhaps the member can advise his colleagues not to ask two-part questions that create confusion. As I understood the Attorney General's answer, it was an accurate answer as he read it.

Section 5 approved.

section 6.

F. Gingell:

Section 6, of course, deals with the requirement that there shall not be any new taxes. If you go back to the

definitions in

section 1, new taxes "means taxes payable to the government on income or on the acquisition, use or consumption of property, rights or services. . . ." I'm wondering whether a reasonable

interpretation of that -- the minister is a lawyer and I'm not -- would consider some new service that was to be delivered by government, for which there would be a fee to recover the cost, to be included in this, because it talks about the acquisition, use or consumption of rights or services. This could be interpreted to mean only those services provided by a third party -- i.e., you won't bring in a sales tax on food. You're taxing legal fees; you're not going to put a social service tax on architectural services or accounting services or physiotherapy services.

I presume this clearly excludes not the new tax but the expansion of what's included in the present tax. But does it also intend to mean the charging of a fee for some new service being delivered by government?

Hon. A. Petter: The member was correct in his characterization of the intention until he reached his question. The answer to the question is no, it's not intended to apply to a fee for a service provided by government.

Sections 6 to 11 inclusive approved.

On the schedule.

F. Gingell: I presume that by order-in-council the Lieutenant-Governor can add items to the schedule. I'm quickly looking, but I can't see it immediately. It talks about making regulations.

Hon. A. Petter:

Section 8(2).

F. Gingell: Yes, but does that allow regulations?

Interjection.

F. Gingell: Oh, for amending. . . . Yes, (c). Thank you.

Schedule approved.

Preamble approved.

Title approved.

Hon. A. Petter: I move that the committee rise and report the bill complete without amendment.

Motion approved.

The House resumed; the Speaker in the chair.

[ Page 540 ]

Bill 3, Tax and Consumer Rate Freeze Act, reported complete without amendment, read a third time and passed.

Hon. A. Petter: I call committee stage on Bill 7.

FORESTS STATUTES AMENDMENT ACT, 1996

The House in committee on Bill 7; G. Brewin in the chair.

Hon. D. Zirnhelt: Let me begin by introducing staff that are with me here: Michael Grist, Jim Langridge and Richard Grieve. They'll be assisting me today.

Sections 1 to 3 inclusive approved.

section 4.

T. Nebbeling: In

section 4 -- actually sections 4 and 5 apply to the same issue -- what I'm looking for is an explanation. Does the ownership of a timber-processing facility exclude a lease status for a wood licence, and if so, why?

Hon. D. Zirnhelt: Yes, it does, but there was some lack of clarity with respect to control. The effective word here is "control" of a corporation that owns a timber-processing facility. It has to be a majority interest. When the woodlot program was established, it was clear that it was to provide wood to other primary breakdown facilities. The program was not designed to provide wood to new primary breakdown facilities. This just clarifies the definition of control.

T. Nebbeling: Just to clarify, then: have owners of facilities in the past been able to operate wood licences, and are there still wood licences today operated by owners of wood-processing facilities?

Hon. D. Zirnhelt: No, they were not allowed to before, but we are adding leasing, so if they control through leasing, they now cannot circumvent the intent of the original law. The idea was that they shouldn't be able to control through leasing or ownership any primary processing facility.

T. Nebbeling: Then are there today wood-processing facilities that have leased wood licences and are operating these wood licences? And if so, what is the impact of this amendment on these operations?

[4:00]

Hon. D. Zirnhelt: To our knowledge no one who owns a wood-processing facility also has a woodlot licence, but there may be some who lease. It's a very few in number. This isn't a major amendment; it's just tightening up a requirement that we feel has already been there.

T. Nebbeling: I understand this is a minor amendment, but still, if it does have impact on certain operators today, I think we should know that. If there is an impact, how are you going to deal with these operators? Are you just going to put them on notice that they'll lose their timber licences, or are you going to give them compensation? How will you deal with these few licence holders?

Hon. D. Zirnhelt: We couldn't do anything now under the existing licence terms until such point as the woodlot licence came up for renewal, and it wouldn't be renewed unless they got rid of their timber-processing facility.

Sections 4 and 5 approved.

section 6.

T. Nebbeling: In regard to the delegation of power -- or application of power; I don't know how you look at it, hon. minister -- and the consequences of the decision-making by a district manager, or whoever you have delegated to make decisions that fall within this section, is there any appeal mechanism in place so that parties affected by decisions have an opportunity to come back and not necessarily accept the decision made by your delegated agent?

Hon. D. Zirnhelt: The answer is that the appeal mechanism would be judicial review; there is no other appeal.

I'd like to point out that the reason this is here is that woodlots are minor licences in the scheme of things, as you know, and there is no reason why everything has to come to the minister's desk. It's our intention to have routine transfers, for which people qualify, administered at a much lower level. It reduces the number of bureaucratic steps that a licence transfer has to go through.

The answer on the appeal is that it would be a judicial review.

T. Nebbeling: The reason I am asking this question is that later on, in other sections, we are going to talk about the empowerment of officers working for the Ministry of Environment, and I will have questions about the seniority of decision-making in that area. At that time I may refer back to this section, because if the regional manager or district manager is given certain powers that, because of other sections, he has to share with other agencies such as an officer of the Ministry of Environment, then I think maybe we could walk into a problem. But we will come back to that section. That's my own observation.

Hon. D. Zirnhelt: I'd like to answer the member and maybe clear it up. In this act, there is no one else who has powers to determine on a licence. Under the Forest Practices Code of British Columbia Act, there are powers that other people have, but not in the licence transfer provisions of the Forest Act. So it would be only the regional manager who makes a decision here.

T. Nebbeling: Again, I am trying to find some clarification here, because when I read through the various sections I see some potential conflicts -- not necessarily of personalities, but of authority. I think the district manager's authority on decision-making may insert an aspect, be it under the Forest Practices Code or under any other part of this act, of a joint function with an appointed officer of the Ministry of Environment working within a forest district. We will get to that later on. I'll keep an eye on this when we discuss it further.

The Chair: I think some of the themes will show up again. I recognize the hon. member for Cariboo North.

J. Wilson: It's my understanding that at present woodlot licences are transferable only when they are held under the name of a company, and the shareholders can turn over in that company. When an individual holds a woodlot licence, it is virtually impossible to transfer it. If you sell your place, you cannot transfer your woodlot licence with your place, even

[ Page 541 ]

though you've tied up a lot of

schedule A land with it. Will this allow any individual to transfer a woodlot with his place if he sells out?

Hon. D. Zirnhelt: This

section won't have any effect on who can transfer -- what legal persons can transfer. This deals only with what level the decision is finally approved at, and we are saying that it's at the regional manager level.

J. Wilson: I believe, then, that there will be basically no change in the system with regard to transfer of woodlots from one individual to another.

Hon. D. Zirnhelt: That is correct; this act doesn't address that issue. I'd be happy to canvass it with the member at some point, but that was not one of the amendments that came through. A legal person is a legal person, whether it's a corporation or an individual. Quite frankly, I don't fundamentally understand. . . . I understand the problem; I don't understand the law. But I'd be happy to discuss it with you and get back to you on that matter.

J. Wilson: Maybe I can try to clarify this. I have seen instances where a woodlot could be transferred. Simply, when you have more than one shareholder, you can change shareholders. Many woodlots are not owned by companies; they are owned by individuals, and those individuals, at present, are not treated the same as a company.

Hon. D. Zirnhelt: There is nothing in this legislation that will affect, negatively or positively, the situation you describe. I acknowledge that I am aware of the problem, but this act doesn't do anything to help or hinder that situation, so it's not really part of this legislation. It's only at the level the decision is made. I would be happy to canvass it with you and get back to you on an

interpretation.

Sections 6 and 7 approved.

section 8.

T. Nebbeling: Again for clarification, Mr. Minister: does the extension apply to wood-cutting operations that fall under the small business forest enterprise program?

Hon. D. Zirnhelt: This

section does not apply to small business licences. These are major licences, which in this case are called non-replaceable forest licences or timber sale licences.

T. Nebbeling: Is it the practice that these majors actually subcontract to smaller operators, and if so, what size of logs do they contract out?

Hon. D. Zirnhelt: I am a little unclear on the question. Subcontracting out blocks of their licence? Is that what you said?

T. Nebbeling: Interfor has a certain area, and I think it uses subcontractors at times to take on certain portions of its licensed cuts.

Hon. D. Zirnhelt: That does happen, but it does not transfer any responsibilities under the licence. The licensee can't transfer legal responsibilities. Where there is an allowable annual cut reduction, this

section allows the same amount that they would have harvested under their non-replaceable licence, which is for a fixed term. That is what this

section is designed for. Say it were a ten-year licence. They could have a million cubic metres a year for ten years; if there's been a reduction, it allows this quantum of wood to be taken over a longer period of time. So they aren't penalized; they still get the same volume rather than being cut off prematurely. This is of benefit to licensees that would rather cut the same amount over a longer period of time than be chopped off at the end of their licence.

T. Nebbeling: That was the clarification I needed. I was concerned that smaller cutblocks would be affected by reducing the annual size of cut opportunities to the point where the financial viability wouldn't be there any longer for a person to go in on a yearly basis. So if that is not the case, then I'm content.

W. Hurd: I wonder if the minister could advise the committee of the typical circumstances in which the harvest would be reduced in a non-replaceable licence. What kind of scenarios are we dealing with -- timber supply reviews or environmental considerations that may come up? I wonder if the minister could take a minute to explain to the committee the determination that would be made to reduce the harvest level, which obviously is the intent for introducing this

section of the bill.

Hon. D. Zirnhelt: It has to be done under

section 7 of the act, where there's a TSA review and the chief forester makes a determination. So this includes all the reasons the chief forester might have to make a reduction. There may be land withdrawal; there may be an overestimation of volumes. His determination will possibly reduce the AAC, in which case the intent is to allow the same volume to be taken out, but over a longer period of time.

W. Hurd: Clearly, the intent of the

section is to confer on the regional manager some power which may or may not have existed previously under the act. From the explanatory notes in the bill, my understanding is that the regional manager will now have the designated authority to be able to negotiate a longer licence period. Is that what I'm to assume to be the intent of this section?

Hon. D. Zirnhelt: The power will lie with the regional manager. There is a formula that determines it, so he has no discretion.

W. Hurd: I think this is an important section. I wonder if the minister could advise the committee about the formula that is used. What type of communication are we dealing with in terms of the minister's office and the regional manager, in terms of the formula that would be used to extend the licence for an unspecified period, perhaps two or three years? Not to adjust the harvest level, but to extend it over a period of years. . . . I'm thinking of stumpage calculations and that type of thing that might impact the Crown in terms of a longer time frame for harvesting the same volume of wood.

Hon. D. Zirnhelt: I would point out subsection (2) of this section. The licence shall be extended according to the formula. The minister's office wouldn't get involved in this decision.

[ Page 542 ]

W. Hurd: For a point of clarification then, can the minister advise us whether the formula is determined by the chief forester, or is it part of the chief forester's mandate to set AAC levels? If the annual allowable harvest is extended over a longer period of time, does that formula emerge from his calculations, or is it internal to the operations of the ministry?

Hon. D. Zirnhelt: The chief forester will determine a cut level for an area. This act says that the regional manager must apply this formula to the licensed quantity and determine how many years, etc., that it takes to harvest. Just to remind you, the purpose of this

section is to allow somebody who has a non-replaceable licence to extend the term of the licence so that they can take the same volume out over a longer period of time. That's the purpose of the formula. This calculates it.

[4:15]

W. Hurd: Maybe I can try and simplify the discussion, and ask the minister for the compelling need that the ministry has seen for this change in the act. Did we have a situation previously where licensees were losing a portion of their harvest as a result of a land use decision or a recalculation by the chief forester? Were we seeing a situation where -- at the end of a ten-year replaceable licence, for example -- if the licensee hadn't been able to harvest all of the allocation, it was just lost? Is that the scenario that occurred previously?

Hon. D. Zirnhelt: This is dealing strictly with the non-replaceable licences. With an AAC reduction, they would lose a portion of their licence if this provision was not here to extend the term of the licence. These licences are often used to harvest problem forest types like beetle wood and so on. Reducing the AAC of these licences under present circumstances typically requires the ministry to issue new licences to ensure that the problem forest types are harvested. What we can do here is give some flexibility that benefits both the owner of the licence and the forest manager who still wants to deal with the problem for which the non-replaceable licence was created.

I can think of a perfect example that I know only too well. The beetle-kill lift in some areas sets an AAC -- a temporary AAC -- that's quite high. The chief forester sets it for a period of time. If at the end of that period he chooses to reduce the AAC -- the temporary lift -- a certain amount, he can extend out into the future to still harvest the problem forest type or the beetle-kill wood. It keeps whole the non-replaceable licence holder.

W. Hurd: Just to follow up briefly on a question that was posed by my colleague from West Vancouver-Garibaldi. These are timber sales that are outside the small business program -- the category 1,

section 16(1), the entire licence system under the small business program. Is that what I was to conclude from the minister's. . .?

Hon. D. Zirnhelt: That's correct. There are approximately 26 non-replaceable forest licences and two major non-replaceable timber sale licences. Forest licences and timber sale licences -- both non-replaceable -- total 28. So there's that special category of licence that I'm sure you're familiar with, and yes, I will confirm the information: it's not the small business program licences.

W. Hurd: Just one further clarification. In terms of a non-replaceable licence over a period of, say, five or ten years, where a determination is made that, for whatever reason, the targeted harvest level cannot be reached, could the minister just describe the way in which the licensee would approach the ministry to have the licence extended? Is there a procedure that the minister could describe for the committee that the licensee would have to follow? Would it be a direct appeal to the regional manager, and that's where the whole system would end? Or would it have to be vetted by any other ministry staff? Is it now just strictly consigned to the regional level of the Ministry of Forests?

Hon. D. Zirnhelt: I think the answer to your question is: if somebody can't harvest, they lose it. That's the way it is. This provision and the formula kick in where the chief forester has reduced the AAC, for whatever reason. Only then does this formula kick in. In the situation you describe, you'd lose it, and it probably would be readvertised. I'm not aware of any provision, but I'll look for one that might suit a person in those circumstances. I don't think there is any built-in safety valve for someone who underharvests. That's a cut-control issue, and those provisions around cut control apply.

W. Hurd: Where the AAC is reduced by an application of the Forest Practices Code, for example -- where, as a result of special geographic features or perhaps the need to extend protection to a watershed, and the AAC is therefore affected -- what would the procedure be for the applicant or the licensee?

Hon. D. Zirnhelt: This does refer back to the

section under timber supply review, where the AAC is determined by the chief forester. What he must take into account when making a determination are such things as land use plans, the Forest Practices Code, inventories, growth and yield, etc.

W. Hurd: Finally, hon. Chair, I wonder if the minister could just advise the committee of how prevalent a problem this has been. Has this initiative mainly been the result of the ongoing timber supply reviews and the land use plans of the ministry? Clearly, the minister has seen a need to bring in this amendment, and I just wonder if throughout the province we're seeing an increased incidence of these kinds of cut-control problems on non-replaceable licences.

Hon. D. Zirnhelt: These licensees have had this concern for four or five years, so it predates the current situation. But as I say, it refers back to where determinations are being made. As you know, the timber supply review has brought in a steady stream of determinations which are playing catch-up towards getting to sustainability. So I would say that these licensees have become more numerous. More short-term licences have been awarded, and a lot of them dealing with particular problem forest types. This gives more flexibility. I think it creates more security for the licensee as well as for the Crown.

J. Wilson: I'm a little slow on some of this stuff, so when I ask a stupid question I'd appreciate a good answer. I read this over, and perhaps the hon. minister could fill me in. Would woodlots fall under this category of non-replaceable tenure?

Hon. D. Zirnhelt: No, they don't. They are replaceable licences. There are only the 28 that I mentioned -- non-replaceable timber licences and non-replaceable forest licences.

[ Page 543 ]

J. Wilson: Then my second question would be: would a tree farm licence come under this category?

Hon. D. Zirnhelt: No.

J. Wilson: The extensions here can come in -- I presume as many as arise and as often as they arise -- and you could get several extensions, not just one or two? Could these things occur on a regular basis? I notice it says that the annual cut would be reduced on the last year. Now, if you extended the life of the cut by one year, would you harvest that volume in the first ten years if it were originally a ten-year cut, and then in the eleventh year there would be no harvest? Is that how this reads, or am I confused?

Hon. D. Zirnhelt: Let me try to answer it a different way. If you had a 15-year licence, in that period of time there could be three timber supply reviews, and each one might potentially affect your cut level. If there was a determination by the chief forester, then he would extend the licence enough years to take in the full volume.

If the original licence of 15 years said a million cubic metres, and if there was a reduction in the AAC and they planned to take it out at one-fifteenth a year, the regional manager could say that we will extend your licence to, say, 20 years -- enough years to take in and make up the volume that he would miss. The whole idea is to allow the non-replaceable licence holder to harvest the same amount, but over a longer period of time and therefore pay off their invested capital in a plan, or whatever they had. It might be paying off their roads and other obligations that they have undertaken.

J. Wilson: I would like to present a scenario to the minister, which, if it does exist, is something that could create some concern to me. In an area such as the Cariboo-Chilcotin where you have a land use plan. . . . We have zones there and there is the potential of a considerable reduction in, say, SRDZs, where mule deer winter range could severely impact the AAC in these areas. It is my understanding that when the interim strategy for mule deer habitat comes in, there are going to be recommendations that the cut in these old fir belts be reduced severely. Is this something that is going to deal with that and allow that to happen?

Hon. D. Zirnhelt: Yes. If the chief forester was to reduce the AAC in the timber supply area, and if there were non-replaceable licences affected in that area, then it would allow the regional manager to extend the licence so they can take the same volume over a shorter period of time. For the instance that you have given, I don't believe that in the drybelt fir area where there are mule deer prevalent, there's a non-replaceable licence. The ones I'm aware of, to make it easy for you. . . . There's the West Fraser licence, which is a cedar licence in the Cariboo mountains not affected by mule deer.

There's one in the Chezacut supply block held by Riverside Forest Products, which is non-replaceable as well. There's the West Chilcotin, the one held and operated under West Chilcotin Forest Products, the Yun Ka Why'Ten licence.

J. Wilson: Could you describe the boundaries of that one in the Chezacut area?

Hon. D. Zirnhelt: Very precisely: the Chezacut supply block. I can't tell you where it goes, but I can provide you a map. I don't know any local place-names to orient you, but it was generally considered the Chezacut area, the Chezacut supply block.

[4:30]

J. Wilson: I believe that's the hon. minister's riding. I could stand to be corrected here, but along the Chilcotin River there is some old-growth fir, and some of this is being looked at for mule deer winter habitat.

Hon. D. Zirnhelt: I do have to bring the member back to the legislation, and say, if the chief forester sometime in the future -- which would be approximately five years from now, or it could be sooner -- were to make a reduction, and that affected one of these non-replaceable forest licensees, then he would have to extend the term of the licence as per this formula to allow him to cut the same amount, albeit over a longer period of time.

Section 8 approved.

section 9.

T. Nebbeling: This

section will allow some addition to the annual allowable cut on a licence holder's place. Can the minister tell me: how will the additional timber be incorporated in the existing allowable cut? Will the allowable cut be increased for the whole timber supply area where this particular parcel of land is? How is that going to be handled?

Hon. D. Zirnhelt: What will happen is that a plan will be approved by the regional manager and the information submitted to the chief forester. The criteria set by the chief forester would ensure that any lift to the AAC was in accordance with his own criteria. In other words, if they provided new information on growth and yield or evidence that the results of fertilization or pruning created an increased yield, then a lift to the AAC could be given. But as to the particular lift on the licence, that decision would be something administered by the regional manager.

T. Nebbeling: The lift on that particular licence, I can see, is a step that will have to be taken. What I'd like to find out, however, is: how will the impact of that lift on that particular licence reflect on the other licences out there? Or is this a mechanism to actually go beyond what the chief forester has set for an annual allowable cut in that particular timber supply area where this licence is controlled?

Hon. D. Zirnhelt: The intent of the legislation is that the AAC for a particular licence can be raised, and it won't affect the cut levels of the AAC that has been apportioned to other licensees until the next determination, and then the chief forester is going to have to take everything into account again when he makes another determination. He does that anyway, but the idea is that within those areas covered by this agreement, the lift in the cut will be absorbed or utilized by the licensee of that area. So it really formalizes some of the chart areas and tries to bring a productivity focus to specific areas.

T. Nebbeling: I'm trying to get a grasp of this. If there's a timber supply area where a licence does not get an increase from the chief forester, and at the same time we see one particular licence being increased by a substantial amount of annual allowable cut, then somebody has to give somewhere. Either it is in a reduction in other cutblocks or the regional manager is actually going over the head of the chief forester by increasing the timber supply area's annual allowable cut as set by the chief forester. I'm trying to figure out how this works legally.

[ Page 544 ]

Hon. D. Zirnhelt: If none of the licensees did anything, there would be the same amount of AAC. What this provision says is that in response to specific applications of technology or methodology in management, if there's a justifiable increase according to the chief forester, then you can give a lift to that particular licence.

T. Nebbeling: So you're saying that the chief forester will increase the timber supply area's total annual allowable cut as a consequence of that lift and that particular licence. After that decision is made, that particular licence is such-and-such and could operate such that he could have an increased yield. Is that what you are saying?

Hon. D. Zirnhelt: The lift for the whole TSA would happen at the next timber supply. What this allows for is that if the chief forester is satisfied that there's enough volume within the area of operation to allow this increase, the AAC for this particular licence can be increased in between determinations. The future cutting would be offset against the increased volume that would be produced.

T. Nebbeling: Through this act, the regional manager of a certain timber supply area is allowed to overrule the quotas set by the chief forester for a period of time. The chief forester has agreed upfront to that overruling, if the regional manager finds cause through better harvesting methods on a certain licence. Is that what you're telling us?

Hon. D. Zirnhelt: Let me try to explain it this way. The regional manager will increase the AAC using methodologies that have been approved by the chief forester. It is expected that the regional manager's determination of any increases to the AAC for a licence will normally coincide with the chief forester's AAC determination for the TSA.

T. Nebbeling: So let's go beyond the point where the yield has been increased on one particular licence. Two years later three or four of these incidents have happened and there's another million cubic metres in that timber supply area. The point I'm trying to make is that the chief forester looks at exactly what has happened in the supply area over the past two years and sees that another million cubic metres of timber have been allocated in the tree supply area.

Is there a chance that the chief forester will readjust the other licences by a reduction to compensate for the extra timber that he has allowed to be harvested? Is there a provision in the act that this will not happen, that the chief forester during his following review will not reduce the timber supply areas and the allowable cuts because of the increases in the previous two years?

Hon. D. Zirnhelt: If, when the chief forester looks at it in the timber supply review, the lift was not justified, then the power is here to take it back. It would come back out of that licence, because the intent was clearly to lift that licence in response to the work done by that particular licensee. So we're talking about six of these on an experimental trial.

There is a theoretical possibility that at the same time that there is a reduction or a takeback, they might do a general reduction across the timber supply area, but not in response to this, because the intent of the act is clearly to add only in response to that increment that has been produced by superior methodology and management.

J. Wilson: Innovative forestry practice has got a real nice sound to it. It almost sounds as good as incrementality. Is there any connection here between the incrementality under the FRBC and this innovative forest practice program we're developing?

Hon. D. Zirnhelt: You're talking about incrementality. Under the forest renewal program they're supposed to fund those things that normally aren't done by basic provisions of the requirements of the licences, which is basic silviculture. The things that we expect to be done are things that are not now done by licensees, so yes, it could describe some of the same activity areas as are covered by FRBC.

J. Wilson: That's sort of what I had thought might happen here.

Hon. D. Zirnhelt: Sure. There is a broad definition of social and economic objectives. It might be to increase local employment. It might be to have additional jobs out of the timber. As you know, we have said that there is an objective to create more jobs out of a volume of timber. So if a proposal comes in to do that, the minister may well link that to a requirement to maintain or increase jobs.

J. Wilson: Could that also mean that when your coffers are empty, you can change the stumpage rate to meet the needs of the day?

Hon. D. Zirnhelt: This

section has nothing to do with stumpage.

J. Wilson: Under sub-subsection (4): "The Lieutenant-Governor-in-Council may make regulations specifying. . . ." Does this mean that we can expect orders-in-council to change this at any time they wish without bringing it to the floor of the Legislature?

Hon. D. Zirnhelt: Yes, the Lieutenant-Governor-in-Council will determine which types of practices qualify, and they'll do it by regulation rather than coming back to the Legislature for infinite detail and description of what practices qualify.

J. Wilson: Could the hon. minister be specific as to what could be changed within the Forest Act under this agreement?

Hon. D. Zirnhelt: There are two things that can be changed under this provision: what activities qualify, and which types of licence holders qualify. Those two can be changed. To be specific about what qualifies, we expect it will be things like fertilization, better growth and yield analysis, and perhaps better inventories. If a detailed inventory had been undertaken, or detailed growth and yield trials had been undertaken which showed that some sites were more productive, it's that kind of thing that we expect to qualify under this section.

[4:45]

[ Page 545 ]

W. Hurd: I've been following the debate on this

section with a great deal of interest. As I look back on my own tenure as critic of Forests, I can remember many times in Committee A -- a lonely vigil, indeed -- with the current Minister of Employment and Investment talking about the real advantages of value-added forestry and of investment in small licences to create incremental forestry advantages. I did hear the minister talk about terms like "experimental," and it only applying to four or five licences, I think he said, which causes me to believe that we haven't achieved the breakthrough with this

section that I thought we might have.

On the issue of licences, I wonder if the minister can advise whether the incremental forestry provisions would apply to things like tree farm licences, for example, and other types of area-based tenure licences that exist. Would this be across the board, a sweeping change within the ministry that would allow for an intensive forestry proposal to come forward that would encompass silviculture, growth and yield analysis -- the whole gambit of intensive forestry opportunities -- and allow the regional manager to take decisive action in raising the annual allowable harvest? If that's the effect of this section, I think it represents something of a breakthrough.

Hon. D. Zirnhelt: There is no need to have this under TFLs, because if there is a lift to the AAC that's a result of the investment or activities by the TFL holder, they're the only ones in that area and therefore they will get the lift. This is designed for volume-based licences. They then have to justify it within the management plan that we have, where there are many licensees on the land base. So there's going to have to be some specific management plans that say where the work is going to be and exactly what the productivity increase is going to be. So it's designed mainly for forest licences.

W. Hurd: Under this

section I wonder if the minister can advise the committee what protection there would be in place if the innovative forestry plan is approved and vetted through the ministry and becomes part of the licence agreement. Could it be lost as a result of a separate issue from the Ministry of Environment, for example? Or is it then part of a legally binding agreement between the Ministry of Forests and the licensee once the plan has been approved?

I'm just trying to explore with the minister the legal commitments or ramifications that would result from that plan being approved and the licensee proceeding on the basis of there being a lift or an increase in their annual allowable harvest for that licence.

Hon. D. Zirnhelt: We will interrupt proceedings here and pick them up later, but let me answer the member's question first.

There is no way to take back the increase that has been given for the time period for which it was given. At the time of the review of the allowable annual cut -- the timber supply review -- if the chief forester, on re-examining this lift, says it was a wrong decision or that five years of experience don't justify that level of increase, then it can be taken away. This only affects those licence holders who have agreements under this section; it won't affect people who hold licences under other sections.

Hon. J. MacPhail: I move that the committee rise, report progress and ask leave to sit again.

Motion approved.

The House resumed; the Speaker in the chair.

The committee, having reported progress, was granted leave to sit again.

W. Hartley: Committee A rises, reports resolutions and asks leave to sit again.

The Speaker: When shall the committee sit again?

Hon. J. MacPhail: In a few minutes, hon. Speaker.

Interjection.

Hon. J. MacPhail: Hon. Speaker, the response in the main House will be deferred until a later date. In the meantime, I call Committee of Supply A to hear the estimates of the Ministry of Women's Equality. I also call Committee of the Whole to continue debate on Bill 7.

FORESTS STATUTES AMENDMENT ACT, 1996

(continued)

The House in committee on Bill 7; G. Brewin in the chair.

section 9 (continued).

W. Hurd: I appreciate the minister's explanation of the intent of

section 9. I wonder, however, if the minister could comment on a concern that I have under this section. This has to do with the willingness of licensees to invest in innovative forest plans in light of what I believe I heard the minister advise the committee -- that some of these plans may not be as ironclad as we were led to believe -- in terms of the increased cut being protected in the event of a redetermination by the chief forester, for example, or perhaps an environmental initiative from the Ministry of Environment.

As the minister well knows, a licensee can invest considerable time and expense in a whole range of initiatives: growth and yield analysis, for example, or the analysis of the advantages of juvenile spacing over time, etc. I wonder if the minister is at all concerned that even though this provision would appear to invite innovative forestry projects to come forward, in fact some licensees may still be reluctant to incur the expense to approach the minister with an innovative forestry plan without any assurance that it would be accepted and whether that increased lift would have any security over time.

[ Page 546 ]

This is why we're not proceeding wholesale and trying to do this everywhere in every TSA. We want to try it, see how it works, and at the end of the first five-year period we may have a pretty good idea of whether these are working or not. There is a bit of risk on the part of both parties.

W. Hurd: I wonder if the minister can advise us how extensive this change is going to be. He's advised the committee that it will have limited application initially. I'm aware that one of the challenges the ministry has always faced is manpower as a resource issue to deal with these innovative forestry plans coming forward, and now the myriad requirements, from code requirements to land use decisions -- the whole gamut of things that ministry staff would have to access before they could vet and approve this innovative forestry plan.

I wonder if we are dealing with any shift in resources from within the ministry to deal with the fact that they may now be called upon to review a rather complex forestry plan and actually lift the AAC, based on their assessment of the plan's viability and the licensee's ability to carry it out.

Hon. D. Zirnhelt: There is incentive to have these in places where there are land use plans. We're trying to get one going in each region where there is a land use plan. The incentive is to try to increase the productivity, because in some parts of the land use plan there's a depressing effect on the AAC. In other areas, we want to lift it -- in those areas dedicated for intensive timber management. That's what is going to make the land use plans work.

There's no shift in resources. The resources involved in coming to one of these agreements would have to be allocated from the existing staffing of the region. If you're only talking about one agreement in a region, which is what we're talking about now, then it shouldn't be too onerous. They would do this instead of some other work. For example, there's less work taking place because we've just completed a timber supply review, so those same people aren't involved in that. We just completed a land use plan. There is a workload issue, but it isn't a big workload. There's been no indication that we can't handle it from the existing complement of staff.

W. Hurd: In terms of how this

section will dovetail with the provincial land use plans, is there an expectation that the ministry would give preference to innovative forestry proposals on land designated in the land use plans for intensive forest management? The minister will be aware that under the Cariboo and the Vancouver Island land use plans, there are areas that have been specifically designated for intensive forest management.

Would it be reasonable to infer that as a strategy the minister would apply the innovative forestry proposals to those areas first where, as a result of an extensive land use planning process, those specific areas have been identified as holding great potential for intensive forest management? Is there going to be a strategy to dovetail the requests with areas that already have great potential for growth and yield increases in the years ahead?

Hon. D. Zirnhelt: I would go one step further and say that I expect that in those areas where there's a higher cost-benefit ratio. Those areas are probably the ones that are zoned that way.

The answer to your question is that we haven't designated the area specifically. Suffice it to say that we fully expect that's where they will go. They will go in areas of either enhanced management. . . . Certainly, we should encourage people to be in the forest land reserve, which is those areas zoned that way.

[5:00]

The intent is to respond to increased production, an objective we set out under the forest renewal plan. It's essentially private sector investment which will be offset with a private sector benefit in the lift. Of course, we want to target those areas where there's no zoning problem, where the objectives of the zone are to give a lift and enhance management and productivity.

W. Hurd: So in terms of presenting an innovative or enhanced forestry plan to the region, would we be dealing with communities available to take advantage of this type of opportunity? Would they be individuals who might, say, apply for Forest Renewal funds to undertake this type of enhancement? Or is it just strictly limited to existing holders of licences, and a very narrow band of licences at that.

I wonder if the minister could just clarify for us whether communities, individuals -- and perhaps, while I'm on my feet, I could also ask about woodlot owners, who, as the minister knows, have a component of private and public land in one management unit. . . . Would they also be eligible to present an innovative forestry plan and have the AAC lifted on the portion of their licence which was under public domain?

Hon. D. Zirnhelt: It was a complex question, but let me try to answer it this way. It could go to the holder of a forest licence or another agreement entered into under

section 10, which specifies a range of types of licence holders. To answer another aspect of your question, they could apply for Forest Renewal dollars and then there would have to be an assessment of the viability of the project, the benefit of the project. If it's specific to this management agreement, then the AAC lift will be to that licensee's benefit.

W. Hurd: Having spent long hours reviewing the forest renewal plan in committee, I wasn't aware that the plan was accepting applicants who might be accessing Forest Renewal funds for an innovative forestry plan and a lift of their own AAC. I could stand corrected on that, but I wasn't aware that they could do that. That's interesting information, if that's indeed the case. The minister is saying that someone could make application to Forest Renewal B.C., acquire money under the plan, use it to offset the costs of an innovative forestry plan, then apply to the ministry to have the AAC lifted. Is that a scenario that could happen under

section 9, the

section we're dealing with here in committee?

Hon. D. Zirnhelt: I clarify it this way. Under the eligibility criteria on Forest Renewal funding, if the applicant is going to be the primary beneficiary, then that's taken into account. The objective here is to get private sector investment into the forest land base, and in exchange they get the return. That's the intent. I didn't want to be too categorical about saying that on part of the land base you might get an investment of Forest Renewal. The intent of Forest Renewal is to go on those parts of the land base and then the public benefits, and the government decides on the distribution of those benefits.

What we're trying to do here is encourage private sector investment. When I mentioned the forest renewal plan, if you go back to the original document, part of the renewal plan had

[ Page 547 ]

nothing to do with funding but said that we would take applications for innovative forestry trials. We had some applications in response to that, and we've been working with applicants. There's some six in the works -- three are almost ready to go. I think there are letters of intent trying to come to some agreement.

W. Hurd: I have a few more questions on this section. I am particularly interested in what mechanisms the ministry will have to audit the innovative forestry plan over time. Clearly, when the applicant presents an enhanced forestry regime, it may include a whole range of activities, all of which would lead to the lift in the AAC.

Does the minister or his staff see a need for the regional manager to designate resources to audit the performance of a licensee over time to ensure that the strategies that went into lifting the AAC are being met in a timely way and that the licensee is meeting the commitments that were made under the innovative forestry plan?

It seems to me that when the minister suggested earlier that he didn't see a real need for any increase in resources to deal with this program, we didn't really touch on whether there was any intention by the ministry to go back into the licensed area to review the innovative forestry plan as to its progress and timely completion.

Hon. D. Zirnhelt: District staff will take this on as a function, and of course a higher level of information will be provided to the ministry and then there would be spot checks. They will go out and do normal monitoring and auditing of those activities out there on the land base. There would be a special review at the five-year mark, and that will have to be part of the ministry's workload, but they'll of course let. . . . The methodology is known, because the chief forester agrees to a lift based on the methodology. They go back and do a check based on the methods set out in the agreement.

W. Hurd: Finally, I wonder if the minister can advise the committee of how many cubic metres we might be dealing with during this fiscal year, say. I'm trying to get a handle on the extent of the program. The minister talked about it being a trial program. In terms of size, perhaps he could advise the committee how many agreements he expects will be vetted and approved by the ministry under the provisions of this section, and how many cubic metres we might be dealing with in the province over the next year, which, I would assume, is the time period we would want to deal with.

Hon. D. Zirnhelt: The member will know that we won't be held to figures, but let me just say that I have heard discussions where there's an expectation that with better growth and yield information, there's sometimes a factor-of-three increase in productivity. But on average, over a larger land base, I've heard figures as high as a 40 percent increase on land base. So if we're expecting six across the province and they involve hundreds of thousands of hectares, you could compute the number of cubic metres. I haven't done that; I would be happy to try to get back to you with a rough, ballpark estimate just so you can scope it out.

But if you imagine six licensees, all of whom are cutting plus or minus 200,000 to 300,000, and they are looking on a part of that lift, we're talking about potentially millions of cubic metres. If we don't get that, it won't be worth the while, but I can't be specific.

W. Hurd: The minister has indicated that the enhanced forestry plan is still subject to the determination by the chief forester as to the AAC. Is he satisfied that the chief forester's determinations will in some way respect the work that's gone on with respect to the enhanced amount of cut that would be available under this type of plan?

As the minister knows, there is an appeal mechanism in place for determinations by the chief forester. Would one of those appeal mechanisms on the part of the licensee be that this enhanced forestry plan wasn't necessarily adhered to or respected by the chief forester in making his AAC determination? I'm wondering whether the minister feels that this innovative forestry plan would carry any additional weight with the chief forester in terms of his determination on an AAC for the specified region or perhaps for the licence in question.

Hon. D. Zirnhelt: Since the chief forester determines the criteria, and the decisions are based on those criteria, I would expect that he would honour his own commitment unless he could demonstrate otherwise. The next step of appeal after the chief forester would be judicial review, so I would expect that if there was a major disagreement, it would go there.

I did mention millions, potentially. I think that's what we're talking about across the province, ultimately, but within the term of six agreements, it would have to be. . . . My officials say thousands; they're very conservative. It has to be tens of thousands, or it wouldn't be worth doing. I know that we're looking at trying to get a major lift because of this investment.

You know the kinds of things that happened on Weyerhaeuser's cut, and Lignum Ltd. has done growth-and-yield. I'm sure you've probably seen some of the plots. They fully expect that there will be a dramatic increase, albeit on a smaller and confined timber base, but the expectation will be that we will more than make up over time for any dislocation that happens as a result of more sensitive management in those zones that are designated for sensitive management.

That's fully the intent, and I know that the applicants really believe that you can meet the code, meet the biodiversity guidelines and enhance the productivity. We're fairly optimistic about this. We're anxious to get on with these and give the protection in law that these sections give to those people who want to do the innovative trials.

W. Hurd: Am I to conclude that the minister is envisaging six of these types of agreements across the province? Is that the number we're dealing with?

Hon. D. Zirnhelt: Six is the number by the end of the year. We have three that are fairly advanced, and then there are more in the wings.

J. Wilson: Would the minister be willing to describe the six that are in progress and give us some detail on them?

Hon. D. Zirnhelt: The subject of the legislation is not the details of the particular ones, so what I can explain to you is the information I have on them. The three licensees whose proposals have been submitted are Interfor, Lignum and Weyerhaeuser. Interfor intends to operate in the Kamloops and Fraser TSAs, Lignum in the Williams Lake and 100 Mile TSAs and Weyerhaeuser in the Merritt TSA. Weyerhaeuser is being considered for a TSA-wide approach involving all the licensees in the TSA and the ministry, so there's a little variation in the types.

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As for the details, I can say only that I'll try to provide you with some level of detail that is known. I can't do it here, and it really isn't appropriate to this provision, but I would be happy to try to get you what information is available.

J. Wilson: When this all started to come into being, was anything put in place to allow all major licensees within a TSA to apply for these new supply areas, or were these innovative forest practice areas simply chosen -- how would I describe it -- through perhaps a good corporate citizen approach?

[S. Hawkins in the chair.]

Hon. D. Zirnhelt: I don't think I'd be too crude saying it's on a first come, first served basis. Three companies submitted proposals and they vary a little bit. As I indicated, one of them involves all the licensees and the two other ones don't. Everybody had access to the information, everybody could apply: some did and some didn't. The ones that did are at the front of the queue. The decision will be made by the minister, upon recommendations from the ministry, as to which ones go ahead. . . . Previous to my being the minister. . . . I believe that two letters of intent have been signed to this point in time. The negotiations agreement will proceed.

J. Wilson: I've had a considerable amount of query raised from people in regard to this one that's under progress with Lignum. It would appear that there is not very much information available to the public to actually know what is going on there. Would the minister please enlighten me somewhat as to the area within the Williams Lake TSA, and possibly some of the Horsefly TSA, as to the number of hectares of land, or percentage of that area that would be put into this innovative forest practices area?

[5:15]

Hon. D. Zirnhelt: I'll give a general answer to the member. It's the traditional operating areas of the company. If you look at their chart areas, which generally describe their operating areas, those would be the areas, but nothing has been finalized. I can't be any more specific than that. The intent of the legislation is to provide an assessment of which ones qualify. This is a case of people who are prepared to do the work and have submitted the work. The member said that there's not a lot of public information available.

I understand that the available information has been communicated publicly through the community resources board. As well, an information session was held with other licensees in the area. Suffice it to say that under the land use plan we are encouraging innovation and enhanced management. These fit with the goals of the land use plan, and the government's intent is to proceed with getting some innovative practices arranged under contract.

J. Wilson: This may be in an operating area, but once this goes into effect, am I wrong in assuming that it will then move from an operating area to an innovative forest practices area, which will exclude other users in there on that Crown land?

Hon. D. Zirnhelt: It does not turn the licence into an area-based tenure. It does not do that. There is nothing in this that would restrict the uses. Maybe other provisions of other legislation would restrict it. For example, if there's pesticides being applied in an area, that would be governed by other legislation, and if there was an intensive forestry practice that was dangerous, people might be excluded, but this does not convey the powers of an area-based tenure.

[G. Brewin in the chair.]

J. Wilson: Perhaps I should rephrase the question. Will the small business portion in this TSA carry on in that area? Will blocks be put on the small business program coming up in there? Or will they be shut down because of this new volume-based area?

Hon. D. Zirnhelt: There shouldn't be any effect on the small business program.

J. Wilson: I find it difficult to envision increasing the allowable cut by millions of cubic feet when business is going to be carried on as usual under the small business program and whatever else exists in there. It is confusing to me. Could the minister explain how they intend to achieve this additional cut and yet still allow the small business practice to exist and compete with this project?

Hon. D. Zirnhelt: There will be more wood produced by the agreement of the chief forester, and if there's more wood produced, then more can be harvested. I expect we get more off the same area. In other words, the increase in cut doesn't come from expanding the area. So you've got some small business operators, you might have some private land, you might have a whole lot of other land uses in the area, but the area that's designated for intensive timber production will yield more wood. I can answer simply by saying there has to be more wood produced on the same area; otherwise, they can't cut anymore.

The increased benefit will come down the road. You won't cut the benefit automatically right now, but more will be growing; therefore more of the mature or ready-to-cut forest in that area could be cut, based on the fact that more is growing on the areas that have been treated.

J. Wilson: The hon. minister is say