Alberta Hansard — 28 March 1985, Afternoon sitting (14:30) (Legislature 20, Session 3)

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Alberta — Debates (Hansard)

March 28, 1985 ALBERTA HANSARD 239 LEGISLATIVE ASSEMBLY OF ALBERTA Title: Thursday, March 28, 1985 2:30 p.m. [The House met at 2:30 p.m.] PRAYERS [Mr. Speaker in the Chair] head: INTRODUCTION OF SPECIAL GUESTS MRS. LeMESSURIER: Mr. Speaker, I am pleased to intro duce to you, and through you to members of this Assembly, 10 students from the Alberta Vocational Centre. They are taking the English as a Second Language course. Accom panied by their leaders Mr. Daniel and Mr. Penner, they are seated in the members' gallery. I ask that they rise, please, and receive the warm welcome of this Assembly. MR. NELSON: Mr.

Speaker, it gives me a great deal of pleasure today to introduce to you and members of the Assembly 52 grades 5 and 6 students from Cecil Swanson school in the community of Pineridge in the constituency of Calgary McCall. They are accompanied by their teachers Barb Flath, Christie Dutka, and Bardette Richardson, the principal, Don Royan, along with parents Mrs. Swatschina and Mr. Ramdin. The Cecil Swanson school is a relatively new school in our constituency. It has become a very great member of the community and certainly is doing a great job, and I give full credit to the principal and staff.

I would like to ask that they rise and receive the traditional welcome of the Assembly. MR. STEVENS: Mr. Speaker, I have the privilege today of introducing to you and members of the Assembly 66 grade 8 students from Manachaban junior high school in Cochrane, their teachers, and a parent. For the last five or six years the school has been sending grade 8 students to visit Edmonton, our capital city, and see our Legislature at work. All the funds are raised by the students themselves. They spend the entire day in Edmonton and travelling back and forth.

I'd like to mention that last year's class now comprises 31 students who this Friday, along with one of the teachers who is here today, are going to visit the Soviet Union and Finland. All the students are in the public gallery. They are accompanied by teachers Gaye Bonnett, Dick Broatch, Rick Winters, and Diane Webster, and parent Mrs. Kenyon. Would the students rise and receive the welcome of the Assembly? MRS. EMBURY: Mr. Speaker, I would like to beg the indulgence of the Assembly this afternoon to introduce a friend to many of us.

Although she isn't a member of my constituency, I know she has served Alberta in various capacities, primarily today as a member of the Alberta Mortgage and Housing Corporation board. I'd like the Assembly, through you, Mr. Speaker, to please welcome Mrs. Joyce Campbell. head: MINISTERIAL STATEMENTS Department of Energy and Natural Resources MR. ZAOZIRNY: Mr. Speaker, on this 28th day of March, 1985, one can't help but recall another 28th day, the 28th day of October, 1980. That date is indelibly etched in the minds of Albertans.

It was the day a national government unilaterally imposed the national energy program on Alberta and the west and on our oil and gas industry by way of a federal budget. The NEP was a clear and unacceptable intrusion on the ownership rights of Albertans in our petro leum resources and a devastating blow to our producing industry. From that day forward Alberta has never relented in its opposition to the NEP and commitment to its demise. A major step towards that goal took place on September 1, 1981, when an energy agreement was achieved which effectively pushed back the intrusion of the NEP.

That agreement provided for oil and gas prices in Canada much improved from those contained in the NEP and the significant commitment to no export tax on natural gas during the life of the agreement. As our Premier said at that time, we moved Ottawa out of our living room and onto the porch. And on June 30, 1983, further progress was achieved in the dismantling of the NEP in the signing of the amending agreement, which gave more of our oil market price and moved the natural gas and gas liquids tax to zero. Mr.

Speaker, as I rise in my place to announce the details of the energy understanding of March 26, 1985, and to now table copies with the Assembly, I am pleased to be able to report that with the support of our new federal government Ottawa has moved right off the porch. Over the past several months Alberta has participated in discussions with the other western producing provinces of British Columbia and Saskatchewan and the federal government with respect to the commitments the new federal government made during the election campaign.

These dis cussions were guided by two fundamental objectives: to improve Canada's energy policies in order to stimulate investment and job creation by the energy industry and to end the discriminatory and discredited remains of the NEP. More precisely, Mr. Speaker, three fundamental prin ciples, long advocated by our government, have now been achieved and are contained in the understanding being announced today from the respective capitals of the four governments. First, our crude oil production will receive market value for the first time since 1973.

No more of having to receive other than the fair value, the true value, of our natural resources. Second, our oil and gas industry is going to receive the same treatment for taxation purposes as other Canadian industries. It's going to be taxed on its profits, not its revenues, Mr. Speaker. The discriminatory taxation of the NEP is going to end. Third, any federal incentives offered to the Canadian oil and gas industry will apply right across Canada. No more discrimination based upon geography and location. The petroleum incentive program is going to go. As to some of the important details, Mr.

Speaker, on June 1, 1985, the pricing and marketing of crude oil in Canada will be deregulated. We're going to market prices and a market system for our oil on that day. And the associated export tax on crude oil and the petroleum com pensation charge will be removed at the same time, but

240 ALBERTA HANSARD March 28, 1985 there will be no special tax levied on the oil and gas industry to recoup the existing deficit in the petroleum compensation account. It has also been agreed by the parties to the understanding that a more market-oriented approach to domestic Canadian natural gas sales must be developed, and to that end a task force of senior government officials will work in consultation with industry to put in place such an improved system by November 1, 1985. Until such a system is implemented, the current Alberta border price will be maintained and will not change. As well, Mr.

Speaker, under the terms of this memo randum of understanding the federal government has com mitted itself to the immediate repeal of the natural gas and gas liquids tax, the natural gas export tax, the incremental oil revenue tax, the Canadian ownership special charge, as well as the oil export tax and the petroleum compensation charge. Mr. Speaker, during the course of the last several months, as we have continued our discussions with the new federal government on matters of energy policy, we have worked closely with our producing industry.

I would like to take this opportunity to recognize publicly the very substantial contribution the industry and its various associations have made through input to all the governments involved in these discussions. Our producing industry made it very clear to all the governments that one matter on which they were essentially unanimous in their view was that of the petroleum and gas revenue tax and its disposition.

While they recognized that the PGRT could not be eliminated immediately, given out standing commitments under the petroleum incentives pro gram and the financial circumstances of the federal government — we are all Canadians, Mr. Speaker — they insisted that a sunset clause must be put in place; in other words, the PGRT must come to an end and in a reasonable period of time. Throughout the discussions that has always been the consistent and unequivocal position of Alberta and the other producing provinces. The federal government is meeting its commitment of the election campaign: the PGRT is being eliminated.

And, Mr. Speaker, it's not going to be replaced by another tax. Our understanding provides for a step-wise phaseout of the PGRT within three and three-quarter years, commencing January 1, 1986, in annual percentage reductions of its effective rate from 10 to 8 to 6 to 0. For our synthetic oil the rates will be from 6 to 4 to 2 to 0. But very importantly, Mr. Speaker, effective April 1, 1985, there will be no PGRT whatsoever on any new oil and gas drilled or on any new oil sands projects in Alberta.

As well, those oil and gas companies currently not in a taxable position by virtue of their financial circumstances — and that is primarily Canadian-owned companies — will be able to deduct new exploration and development expenses from the amount of PGRT they would otherwise pay during the phaseout period. These immediate actions will provide a major stimulus for significant additional oil and gas development in Alberta. It means jobs for Albertans, Mr. Speaker.

I would be remiss in not making note of the joint effort of the western producing provinces which contributed so much to the successful conclusion of our discussions with the federal government, and I wish to underline the important contribution of my colleagues Paul Schoenhals, Minister of Energy and Mines for Saskatchewan; Stephen Rogers, Min ister of Energy, Mines and Petroleum Resources for British Columbia; and, of course, that of the new federal Minister of Energy, Mines and Resources, Pat Carney.

We and the energy committee of cabinet, chaired by the Premier, are also most grateful for the advice and support provided by our tremendously dedicated and able officials, led by Dr. Barry Mellon, Deputy Minister of Energy Resources; Tom Wood of our Ottawa office; and Dale Lucas, chairman of the Alberta Petroleum Marketing Com mission. But more than anything else I want to publicly recognize and applaud the consistent and unswerving support of the members of our government caucus. In conclusion, Mr.

Speaker, the understanding outlined to you and the Members of the Legislative Assembly today will be of major economic benefit to our province and will put an end to the unfair and discriminatory measures that were the national energy program. Mr. Premier, I think you'll agree that Ottawa has not only moved off the porch; it has moved right off the property. MR. MARTIN: Mr. Speaker, in response to the ministerial statement, it may not come as a great shock to the Minister of Energy and Natural Resources if I don't see it in quite the same optimistic way.

The Conservative governments in Ottawa and Alberta have given the farm away to the multinational energy sector. [interjections] Laugh all you like. It's the people of Alberta who will be laughing at them after the next election. The losers in this deal are many small Canadian energy companies, the government of Alberta, and the government of Canada. The winners — I say it again, and they are big winners — are the large, foreign-controlled majors. Just to put this response in context, Mr.

Speaker, I would like to note that the profit increase for Imperial Oil Limited for 1983-84 was 60 percent; for Shell, 55 percent; for Gulf, 41 percent; and for Texaco, 23 percent — an average 44 percent increase in profit. MR. SPEAKER: I have some difficulty with the remarks now being made by the hon. Leader of the Opposition, because we're really not in a debating period. There was little I could perceive of a debating nature in the statement made by the hon. minister. It would appear — looked at neutrally, I hope — as mainly a recitation of dates and facts. If the hon.

Leader of the Opposition wishes to debate the topic, I'm sure other hon. members would like to enter the debate, an opportunity which at the moment is not afforded to them. Consequently, I suggest that he temper the remainder of his statement, if there is a remainder, having regard that this is not a debating period, either for him or for any other member in the House. MR. MARTIN: Frankly, Mr. Speaker, your interfering here was totally out of order, because we're talking about . . . [interjections] MR. SPEAKER: Order please.

With great respect to the hon. leader, I regret to say that if he takes that position, which is grossly out of order, I must cease to recognize him. MR. MARTIN: Mr. Speaker, I'm trying to talk about the decontrol of oil, which is precisely what was in the min isterial announcement. I'll go on from there. As I was saying, Mr. Speaker, it's these companies that are the primary holders of old oil and that will reap major

March 28, 1985 ALBERTA HANSARD 241 windfalls from this agreement. In the ministerial announce ment today that price goes up as of June 1, I believe. The small Canadian companies, the primary explorers for and holders of new oil, will suffer a considerable reduction in their income as a consequence of decontrol. In addition, Mr. Speaker, I see that the orderly marketing approach has been abandoned and that the very successful efforts of the Alberta Petroleum Marketing Commission to market the Crown lessees' share have been thrown away.

I believe it is the small Canadian companies that have benefitted from their efforts. Mr. Speaker, the government of Canada has given away considerable revenue, but I believe it is the government of Alberta that has conceded the most. Not only have we allowed the PGRT to continue as an intrusion into provincial jurisdiction until January 1, 1989, but we have signed away some fundamental control over the power to set our royalties at a level which we deem best for the province. Mr. Speaker, we'll follow this up. The minister is shaking his head.

As I read them, clauses 9 and 10 of the understanding only allow us to give public dollars away to the oil industry, while forbidding us to change our royalty and incentives system so as to benefit the treasury of Alberta. We have not achieved federal tax deductibility of Crown royalties. We have not achieved any sort of quid pro quo on coal transport costs or on other outstanding impediments to our economic development. We have agreed to continue to subsidize eastern Canadian industrial users of our gas at a massive cost to Alberta taxpayers, but we still have no deal on gas pricing. Mr.

Speaker, there is no protection for Canadian con sumers against sharp price increases, nor for our industry against collapse of the world price. The champagne corks will be popping in Edmonton or Calgary or Ottawa tonight, but it will be in Houston and New York that there will be a real celebration. MR. R. SPEAKER: Mr. Speaker, I would like to comment on today's statement by the hon. Minister of Energy and Natural Resources. It was agreed in our discussions that I, as the leader of the Representative Party, would have that opportunity.

First of all, I believe industry in Alberta and certainly Albertans are getting back today what they lost through the national energy program and certainly through the champagne agreement, which was touted as a great agreement just a few years ago. We're getting back what is ours in the province of Alberta. In 1931 the Premier of the day in the UFA government secured the right to oil and gas resources for Albertans. Through the actions of the last federal government, we lost some of those rights. As I see it, in the agreement today we have again secured our legal rights to oil and gas in this part of Canada.

In terms of that I'd also like to say that what we witness here today is what can happen when an old government is changed. One of the best effects of an election can be to clean out a government and again listen to the people. There may be a lesson in that for the present government that sits here in Alberta. I'd like to say very clearly that when things are not done in response to the people of a province or of Canada, the government can change and we can revert to some sensible policies. When I talk of sensible policies, the good trend I see in this agreement is the return to the marketplace.

The marketplace will determine the prices of energy, and the free-market system can flourish not only in Alberta but across Canada. As I see it, the agreement moves in the direction of reducing discrimination in development of oil and gas in all parts of Canada. It takes government out of the industry. It takes government out of what is happening in terms of economic development not only in Alberta but the rest of Canada. Mr. Speaker, I see that as a good trend in the agreement.

I would like to reserve my total judgment of what was announced today, though, until we as the Representative Party have had the opportunity to discuss the matter with various industry officials, small companies, large companies, to see what the actual effects are. It will be my intention to raise concerns in this House with the minister of energy when those concerns are out there at the grass roots of Alberta, because that is our job in the opposition. The trends are proper and seem to be acceptable.

To the hon. minister who worked on this agreement, I certainly see advancement, and he should be credited with that advancement. But I want to reserve total judgment until I've had discussions with the industry and other people in Alberta. head: ORAL QUESTION PERIOD Energy Pricing Agreement MR. MARTIN: Mr. Speaker, we'll give the minister of energy a chance to make some explanations. I refer him to fiscal principles 9 and 10, so we can get some clarification of precisely what they mean.

One sentence of 9 says: The parties also agree that any net benefits resulting from crude oil price decontrol, as determined by their respective jurisdictions, shall flow through to the indus try. And 10 says: The parties to this understanding reserve the right, as resource owners, to establish and adjust from time to time their royalty and incentive systems . . . Then it concludes by saying: Such adjustments . . . shall be consistent with the objec tive expressed above of flowing through to industry the net benefits of the fiscal and price decontrol changes agreed to herein.

Could the minister clarify precisely what that means in terms of our ownership? MR. ZAOZIRNY: Certainly, Mr. Speaker, and I'm very pleased to do so. The question really raises one of the underlying premises of this set of discussions we've been conducting with Ottawa; namely, to get the industry going in the way it can, at an optimum level, to create jobs and economic activity in Canada.

Given the fact that the federal government is going to be forgoing significant amounts of revenue through these very major policy moves, they wanted it to be clearly understood and a commitment by the various producing provinces that we would not be moving in to capture some of those benefits from industry, because the whole exercise was about creating economic activity through the private sector. Mr. Speaker, that's really what these two provisions deal with. There is the very intriguing and complex question of what the overall net benefits of oil price decontrol would be.

Our judgment — and it depends very much on world oil prices, of course, and applies on June 1 and not before — is that the net result will likely be a marginal one in

242 ALBERTA HANSARD March 28, 1985 terms of the provincial circumstance. In any event, we were very happy to make the commitment that whatever benefit might accrue should flow to the industry, because that's what this exercise is all about. That's the same principle that's contained in clause 10 of the agreement. Obviously, with the termination of PIP federally — and we're going to be assessing our APIP here in Alberta — we've made it clear that we're not looking to grab dollars from the industry at a time when it's crucial that the private sector be encouraged to create even more jobs.

We've made it clear that it's our intention to keep the industry whole and that we are part and parcel of this process of getting the energy industry doing what it can for Canada. These provisions in no way impede the role of the province in the longer term in the establishment of royalties based on its ownership of the resource. As a matter of fact, Mr. Speaker, I might add that that was one position that was made crystal clear by all the provinces during the discussions, and one that was accepted by the federal minister. MR. MARTIN: A supplementary question, Mr.

Speaker, to follow up on that very important point of ownership. I'm still somewhat confused. Does the principle in 10 mean that during this agreement we cannot adjust our provincial royalties to collect more economic rent for the taxpayers of Alberta? MR. ZAOZIRNY: Mr. Speaker, the hon. member suggests he's confused; I must concur. It seems to me that the last time I checked the NDP policy, they said to get rid of the PGRT, bring in a one-royalty system, and give a bunch of it to Ottawa. That's been the position of the NDP in perpetuity. On his specific question, Mr.

Speaker, we are talking here in the context of the current changes that are being made to the regime. This in no way impedes in the longer term the ability of all three of the producing provinces to set their royalty rates as they normally would. That was very important in terms of our negotiations. MR. MARTIN: If the minister of energy is going to read our policies, Mr. Speaker, I hope he would read them correctly. A supplementary question. What would happen if there were a rapid increase in oil prices?

It's not a hypothetical question, because the world price will be at the market level after June 1, and I think the minister would agree that it could go up or down. Is the minister clearly saying that we could then adjust our economic rent to collect some of that money for the provincial coffers? MR. ZAOZIRNY: First of all, Mr. Speaker, it is very much a hypothetical question, and the answer I gave earlier prevails. I can't add more to it. MR. MARTIN: A supplementary question. It is my under standing that the PGRT will be cut in approximately two and a half years, 1988 to January 1, 1989.

Could the minister indicate why he agreed to continue with the PGRT at all when this government has made it clear — and we agree with them — that it's an intrusion into provincial rights? MR. ZAOZIRNY: Mr. Speaker, one of the realities is that it's a great deal easier to put in place various government programs and regulatory schemes than it is to dismantle them. I don't think there's a more complex, tangled web of taxation and regulation than is, or was, the NEP. Certainly it was long recognized by the industry.

Of course, the PGRT is not a tax on the province as such, or the government; it is a tax on the industry. The industry recognized that by virtue of both the outstanding commitments that will continue and wind down over time on the petroleum incentives payment program and the overall fiscal circumstances of the government, there would have to be a phasing out. As I said earlier, Mr. Speaker, we are all Canadians too.

What was critical to us was that there be a clear and specified date for the termination of the PGRT, that it occur well within the current mandate of the government in Ottawa, and that it be on a reasonable and fair basis. Mr. Speaker, all of that is contained in the agreement. MR. MARTIN: A supplementary question. We're nice Canadians now that we've got a Conservative government. The rhetoric was a little different before. My question to the minister has to do with the decontrol, specifically the NORP.

Can the minister assure this Assembly and the oil industry that provincial measures will be imple mented quickly to prevent a slowing of exploration activity due to a reduction in the value of NORP volumes? MR. ZAOZIRNY: Mr. Speaker, given the fact that from April 1 any new oil or gas well drilled in Alberta has no PGRT, one ought not to be fearful of a slowdown in activity in this province. On the subject of the NOR price, which by virtue of the regulated system has moved to something over the real price, I've said to industry that they've had an extended Christmas. That's the reality of it.

If there has been any modest windfall — and that doesn't speak to the other parts of the NEP, of course — that's where it lies. So we're simply moving to the market value. They recognize that. In terms of activity, just watch that rig count. MR. MARTIN: We will. We won't just go on the minister's word, if he doesn't mind. The minister is well aware that the price of that oil will drop, regardless of the PGRT. Some have already laid off people in anticipation of decontrol, as in Suncor.

Following up from that — and we're talking about drilling — my question is: can the minister advise why the two levels of government rejected the option of insisting on some sort of job exploration or performance guarantees from the holders of old oil in exchange for the huge benefits they will receive from this agreement? MR. ZAOZIRNY: First of all, Mr. Speaker, I don't accept the view that there is any moving away from activity by virtue of moving to market price.

In terms of Suncor, members will be aware that within the last 48 hours they achieved an agreement with the Dome organization and are going to be moving ahead with a new project in the Primrose area once fiscal terms have been arranged. That's the reality of it. In terms of this call for guarantees, Mr. Speaker, I view the call for a guarantee as the verbal equivalent of pounding your shoe on the table when you've got nothing else to ask for. Frankly, there are no guarantees in the world about anything.

I think back to 1982, the Alberta oil and gas activity plan, and there were those — and the hon. member's party was amongst that small number — who said: "You

March 28, 1985 ALBERTA HANSARD 243 know, you've got to tie strings to that royalty reduction. How can you be sure?" That's not the way this government thinks; that's not the philosophy of this government. We believe that if you give the private sector the opportunity and you give them the environment, they're going to get out there and invest. And, Mr. Speaker, they did. MR. MARTIN: Just like before. We throw a lot of money and hope they drill, Mr. Speaker. I can assure you that they don't do that in many other parts of the world. So the only answer he's giving is that it's hoped they'll do it.

I believe the minister said we will be reviewing our energy incentive system and making some decisions by midsummer. As part of that review, is he reviewing the notion of replacing our activity-based system with the success system, which provides royalty relief until after well payout, I believe similar to what the Saskatchewan government has done? MR. ZAOZIRNY: Yes. MR. MARTIN: A supplementary question, following from that. If that's the way the Alberta government is going to move, has he had any assessment? MR. ZAOZIRNY: Mr.

Speaker, we've taken no decision and, frankly, we're not going to take any decision until we've given the industry an opportunity for further specific input on this subject. We've requested that they provide that input by May 31, and we look forward to receiving it. MR. MARTIN: A supplementary question, Mr. Speaker, following up on the agreement. Can the minister assure this Assembly that during negotiation he did press for tax changes which would allow for deductibility of Crown royalties? It used to be a major issue with this government.

Can he advise what impediments prevented us from securing this important concession? MR. ZAOZIRNY: Mr. Speaker, it would be wrong for me to speak to the various dimensions of the rather extended and intensive negotiating process that we were involved in. I simply point out to the hon. member that in his reference to the nondeductibility of royalties, he should bear in mind the move to the resource allowance that was made some years ago by Ottawa, frankly at the insistence, if I may say so, of Alberta and the producing provinces.

That measure was intended to substantially make up for the nondeductibility of royalties, and I can advise the hon. member that the resource allowance will remain unchanged. MR. MARTIN: A supplementary question. Is the minister saying that the Alberta government was satisfied with the resource allowance and that they did not press for deduct ibility of Crown royalties? MR. ZAOZIRNY: Mr. Speaker, I'm saying that we're very satisfied with the deal. MR. MARTIN: Obviously we lost that one, Mr. Speaker. I'll move on to another one that has some consideration, the idea of complete decontrol.

The federal minister has alluded to it, but perhaps the provincial minister can update us. Is there any concrete floor-and-ceiling mechanism by which our industry is protected against sharp decreases and Canadian consumers against steep increases in the world price? MR. ZAOZIRNY: Well, Mr. Speaker, that suggestion has come forward from time to time in discussions about decon trol. That approach was rejected. What it raises, of course, is the spectre of bureaucrats huddling together on a periodic basis, cranking out the numbers, and again we find ourselves at the mercy and at the whim of government regulation.

We decided that wasn't the correct approach. Clearly, it was important that there be some indication in the agreement that in the event of some dramatic disturbance of the world oil price there would be some provision in the agreement that would enable that to be addressed.

The position the province of Alberta and the other producing provinces took to the discussions was this: yes, we can see that a provision of that nature in the agreement is appropriate, but if we're going to have a provision that talks about a sudden spike in the price that might affect the consumer, then we're going to have a provision in the agreement that applies equally if there's a drop, because of the important implications for the industry. If the hon. member refers to page 3 of the agreement, paragraph 9 makes it very clear.

In the event of international oil market disturbances that result in sharp changes to crude oil prices, with potentially negative impacts on Canada, the Government of Canada, following consultations with provincial governments, will take appropriate measures to protect Canadian interests. It cuts both ways, Mr. Speaker. MR. MARTIN: Mr. Speaker, to follow up on 9, I take it that it's vague because it's meant to be that way. Could the minister be more specific? We are told by people in the oil industry that they're extremely concerned, because of the spot market, that the world oil price could plummet this year.

What would cause the ministers of energy to get together? How far would it have to fall — $1, $2, $3? Could the minister be more specific? What would cause them to intervene under paragraph 9? MR. ZAOZIRNY: Mr. Speaker, as I indicated, the provision is a very general one. There was no discussion of any specific numbers, and I hasten to add that about the last thing our oil industry wants, I think, having finally achieved a market system in 1985, is to have the government back in the picture. MR. MARTIN: A supplementary question in terms of the negotiations. The Premier referred to this the other day.

During the negotiations was any attempt made to obtain benefits for Alberta in areas other than oil pricing? For example, did we make any attempt to get transportation cost concessions from the federal government or shipment of our coal to Ontario, which we've discussed? Was that sort of discussion attempted in these negotiations? MR. ZAOZIRNY: Mr. Speaker, as I've always understood it, one of the most dangerous approaches that can be taken in negotiations is the concept of linkage, because it can cut both ways.

The fact of the matter is that developing this very comprehensive agreement on oil and gas in Alberta and Canada was no modest undertaking. Certainly, we didn't pursue efforts beyond that, nor should we have.

244 ALBERTA HANSARD March 28, 1985 I would simply add, however, that the importance of the elimination of the Canadian ownership special charge should be recognized. That's a levy that has been generating upwards of $1 billion for the federal coffers per year. That is going to be eliminated. Where that tax applies is away from the wellhead; it's a tax that impacts upon our petro chemical industry.

And it's certainly not by virtue of any move toward linkage, which, as I said, is not the approach that one would take in these discussions, but that is one of the very significant benefits for our petrochemical industry that flows from this agreement. MR. MARTIN: Mr. Speaker, just one final supplementary, following from that. So this discussion was not held. The hon. Premier said in this House that he thought coal an important matter to look at. He said he followed up on one of my suggestions.

Will the minister of energy be having any negotiations with the federal government in the near future, dealing with Alberta coal and the possibility of Ontario Hydro using that coal? MR. ZAOZIRNY: Mr. Speaker, we've been involved in that very precise process. The fact of the matter is that the federal minister who is responsible on that subject is Mr. Robert Layton, the minister of Mines. The first meeting I had with Mr. Layton was shortly after his election to office and appointment to that portfolio, and I raised that matter squarely with him.

There is also a very, very significant amount of activity going on toward achieving that goal, including an Alberta/Ontario task force that we've been working with for some time. The Minister of the Environ ment could speak to the federal/provincial task force on emissions, which is looking at that very question. It continues to be a high priority with this government, and we intend to pursue it vigorously in that way. MR. LOUGHEED: Mr. Speaker, because of the observation made by the Leader of the Opposition, I believe I might clear up any misunderstanding he might have about the issue of linkage.

If he's referring to our discussion with regard to matters at the First Ministers' Conference in Regina, they were raised. Certainly, we raised matters such as the shipment of Alberta or western coal to Ontario, for Ontario Hydro. We raised issues regarding petrochemicals. We raised agri culture and transportation issues. But they were not raised in a sense of linkage. The only time I've been personally involved in any attempt to create a linkage was in the summer of 1980, when we knew the national energy program was coming.

We were trying everything we could to stop them moving, and at that time we brought in a linkage proposal because of the revenue situation that was involved relative to trans portation in western Canada. I believe that's the only time that we have gotten involved in a linkage of the energy discussions, difficult as they are, and as the minister has mentioned, in a specific way. Otherwise, it's a multifaceted approach to the federal government, but not linkage from an agreement point of view. MR. MARTIN: Just to follow up with one more question, if I may, because of the Premier's answer.

Could the Premier tell the Assembly why linkage, as he put it, was not considered? What was the strategy behind that? MR. LOUGHEED: Mr. Speaker, we had our objectives here. They were numerous, and they have been outlined in the ministerial statement by the minister of energy. They were crucial to a basic industry. They had some ancillary impact on the petrochemical industry but, basically, they were relative to the oil and gas industry. We had significant objectives in these negotiations, and they were met.

We didn't feel we could jeopardize those discussions and those objectives in any way by adding ancillary matters to them. If anything, we were concerned that if we brought in ancillary matters, ancillary matters could easily have been brought into the discussions by the federal government. MR. R. SPEAKER: Mr. Speaker, a supplementary question to the Minister of Energy and Natural Resources. It's with regard to the deregulation of the price of oil and the effect on independent, Canadian-owned companies, which to a large extent have depended on getting the new oil reference price for their oil and their operations.

Could the minister indicate what effect that will have and how he sees the present agreement relating to that situation? MR. ZAOZIRNY: Mr. Speaker, as I said earlier, I've been pretty candid on that point in my discussions with the industry. I said: "You've had an extended Christmas; enjoy it. But you fellows believe in the market system, and so do we. Of course, any abnormally high price is going to terminate." They recognize that, and they accept that very much.

From the standpoint of the small producers, one of the most major parts of this agreement has to be the fact that those small producers and explorers out there in the field know that from April 1 on, every oil and gas well is going to have no PGRT. That's got to be a big plus for those companies. We get oil discoveries on stream very quickly, and we think it will be very positive for the industry in the overall. MR. R. SPEAKER: Mr. Speaker, I certainly appreciate what the minister has said and have no argument with that. Was any consideration given in terms of an adjustment of the provincial royalty?

For example, the NOR price is somewhere in the vicinity of $41 at present and, deregulated, it would reduce significantly. I support the marketplace concept, but was any consideration given to a reduction of royalty on an interim, transition basis? MR. ZAOZIRNY: Mr. Speaker, I'd be somewhat concerned about an approach that had us affecting the ownership share of a resource to respond to specific circumstances like that. I believe the overall benefits of this agreement are so significant that any adjustments like that will certainly be taken in stride, and I think industry would accept that in the overall.

Industry will always advocate lower royalties. That comes with the territory. I've also always expressed the view that if we ever get to the day when the industry says, "Gee, Mr. Minister, they're just right," I'll know they're too low. MRS. CRIPPS: A supplementary, Mr. Speaker. On old oil fields and old oil play such as Drayton Valley, what effect will the new deductions have on the PGRT? MR. ZAOZIRNY: Mr. Speaker, I believe the hon. member is referring to the specific provision in the agreement whereby certain companies that are not currently in a taxable position will be able to achieve a PGRT offset.

What will in fact occur is that if those companies — and they are

March 28, 1985 ALBERTA HANSARD 245 primarily Canadian-owned — spend $10 million in a par ticular year on development and/or exploration, for example, they will be able to take 30 percent of that amount and use it to reduce the amount of PGRT they would otherwise pay, even during the phaseout period. That will be a very significant benefit and, of course, that applies across the board with the size of the producer.

I should have mentioned to the hon. member — and it applies to this question as well — that one of the most significant incentives for our small producers is the royalty tax credit, which dramatically lowers the royalties they would otherwise pay. That benefit will continue to be in place. DR. BUCK: Mr. Speaker, a supplementary question. In the minister's discussions with his federal counterpart and the other provincial ministers, was there any discussion of a target or a year for looking at Canadian oil self-sufficiency? Was that topic discussed? MR. ZAOZIRNY: In a general way, Mr.

Speaker, because it continues to be a goal for all of us to ensure that we have ample supplies of petroleum here in Canada, particularly given our natural resource endowment. I think it came down to this conclusion: a recognition, which regrettably wasn't the case with the former government, that the way you achieve maximum production and security is by encouraging more exploration and development. We've got lots of oil and gas in this country. What we have to provide is the climate to get out there and discover and develop it.

As we do that, we utilize our export market to be able to move production and generate additional cash flow. In that fashion Canada will ensure not only energy self-sufficiency but the marvellous opportunity we have on the export side as well. DR. BUCK: Mr. Speaker, on that line, can the minister indicate what the synthetic plants and synthetic fuels will provide in trying to achieve Canadian self-sufficiency? What role will Alberta and the synthetic plants play in that? MR. ZAOZIRNY: A very major role, Mr. Speaker.

Of course, over the last 12 or 18 months we've been so pleased with the number of in situ projects which have come on stream. In the context of this agreement, I should mention that it has been specifically agreed by the federal minister that the current expansion program Syncrude has embarked upon will be exempt from paying PGRT, so there is an obvious incentive there.

What it means in terms of new oil sands plants or further expansions, given the considerable time frame before such facilities come into production, is that they can now move ahead firm in the knowledge that there will be no PGRT whatsoever on them. Pork Exports MR. MARTIN: Mr. Speaker, I'd like to direct the second question to the Minister of Agriculture. It has to do with the recently announced hog tariffs.

Has the minister asked his officials or his federal counterpart for any assessment of whether or not his decision to pay out the $10 million loan guarantee commitment to the Crown for the pork producers market insurance plan had any effect on yester day's decision in the U.S. to impose a penalty duty on Canadian hogs, given that the Alberta decision meant that our producers no longer had to pay premiums into the plan and, hence, had their costs reduced? MR. FJORDBOTTEN: Mr.

Speaker, we definitely don't believe that the insurance program that was in place up to September 30, 1984, I think, had any impact on the decision by the U.S. government. As I stated yesterday, I am sending senior officials from my department to Ottawa to find out exactly what is in the rather lengthy decision handed down from the United States agency; in addition, because we do not have a subsidy program in effect in the province, by working with the other provinces, if we can't some way convince the U.S. government to reconsider.

Next week it will be my intention to petition the U.S. government to look at exempting Alberta from the countervail, because we certainly did nothing to contribute to the countervail action. MR. MARTIN: A supplementary question, flowing from his answer. Without revealing the advice to his officials, has the minister asked for advice on how realistic or possible this position would be, given federal constitutional power over regulation of international trade and commerce? MR. FJORDBOTTEN: Mr.

Speaker, that will be part of the assessment we'll do of the countervail action and the rather lengthy document that was handed down. Following that, we would assess options, and the option I just stated was one we would consider. MR. MARTIN: A supplementary question. I guess the minister is not aware of the 14 different subsidy programs they talk about in the United States. Before the decision to end producer premium payments altogether in December, did the minister review the option of merely holding producer premium payments in abeyance until hog prices rose again, so as to prevent U.S. retaliation? MR.

FJORDBOTTEN: Mr. Speaker, the way the question was phrased, I'm not quite sure how to answer it. The market insurance plan was put in place in 1981 with $10 million in seed money. At that time the producers made a 4 percent checkoff into the fund. They also asked for a guarantee of $10 million to be put in place in case the market insurance plan wasn't able to function. They did call on that guarantee. We put it into place, and when that money was used, the Pork Producers' Marketing Board informed me that it was virtually bankrupt.

At that time we paid out the guarantee by making a grant to them of just under $10 million. What that did was eliminate the necessity for producers to make a 4 percent checkoff and help their cash flow considerably. So that's all the con sideration that was given to that at that time. MR. MARTIN: My question basically was: was any thought given that the Americans might see that as a subsidy to Alberta producers, and was any assessment given that this might in fact cause them to retaliate against Alberta and Canada? MR. FJORDBOTTEN: Mr.

Speaker, there have been some concerns raised by the United States over the last number of months, of course, and I am aware that Alberta is named in the countervail. However, because we didn't have a subsidy program in place in the time frame they're concerned

246 ALBERTA HANSARD March 28, 1985 about, and since we didn't contribute to it, we feel we should be exempt. MR. MARTIN: A supplementary question, Mr. Speaker. Now that the Americans have gone ahead and imposed this penalty, although I recognize that it can be appealed until June, is the minister developing any sort of hog subsidy to compensate our producers for dropping prices, as well as to ensure that we gain a reasonable part of the Canadian market before a national red meat stabilization plan locks us where we are now? I point out that as the minister is well aware, we have lost a lot of the Canadian market.

I believe we had 22 percent in 1962, and that's down to 12 percent at this time. MR. FJORDBOTTEN: Mr. Speaker, for some time we have been pressing the federal government for a red meat stabilization program, and one of the bases on which we're working toward that program is to get rid of balkanization in this country. Really, if we were to put another program in place at this time, we would certainly be asking for more retaliation from our export markets. We are working hard on a national red meat stabilization plan.

If it were in place now, we feel we wouldn't be facing the countervail action from the United States. MR. MARTIN: A supplementary question, recognizing that the Americans have already gone ahead. I appreciate that we would like a national market, and I share the minister's concern there, but it seems movement is not being made in that direction. In the meantime, Alberta producers are being hurt, especially now that the Americans have retaliated. My question is: because of this most recent American move, what other arrangements is the minister looking at to keep our provincial industry alive? MR. FJORDBOTTEN: Mr.

Speaker, with respect to the countervail action, the hon. Leader of the Opposition is taking it as a fait accompli, that it will actually be put in place. Countervail actions have been considered before and have not been proceeded with. On this particular one, I understand that a final decision will be rendered on June 10 on whether or not there is injury. Following that, a final decision on this action would still have to be made by the President of the United States. So we have a number of steps to go through before we see it actually become a reality and have that negative effect on our producers.

I can assure the hon. Leader of the Opposition and all members that we will do all we can to help our producers. MR. LOUGHEED: Mr. Speaker, I just want to supplement the answer given by the Minister of Agriculture, because the question, if I understood it, had to do with action being taken by the Alberta government in regard to this situation. It certainly seems to me and to the government that this is a classic example of why we as a provincial government, hopefully as a provincial Legislature, and as a country should press for a comprehensive free trade arrangement with the United States. It's a classic. MR.

MARTIN: A supplementary question. I guess the point is that perhaps the Americans don't want it, and that's why they've gone into this. It probably has a big . . . MR. SPEAKER: Might this be the last supplementary on this topic. MR. MARTIN: My question as a result of this, though, is to come back to the Canadian market. The minister said that he is pressing for a national red meat stabilization program. As I pointed out and as the minister is well aware, we've dropped in terms of our market in Canada.

What percentage of the market would we accept for Alberta producers under a new national red meat stabilization plan? Would it be what we have now, or would we try to regain some of the markets we've lost because of the subsidy programs in Quebec? MR. FJORDBOTTEN: Mr. Speaker, as the Premier stated, what we are working toward is free trade. If we're going to have free trade, we must get rid of balkanization. A national red meat stabilization program would allow prov inces to phase into the new program and out of the programs they presently have, eliminating the balkanization that pres ently takes place.

The new program is voluntary on behalf of provinces and producers. It's also market neutral and actuarially sound and has no element of supply management, so that would be the producers' choice, working in a cleaner market. With the natural advantages we have in Alberta, I have no doubt that our production could increase signifi cantly. Private Adoptions MR. GURNETT: Mr. Speaker, I have a question related to private adoptions.

Would the Minister of Social Services and Community Health advise the Assembly what investi gations he has directed his department officials to conduct with regard to the concerns outlined in the submission regarding private adoptions received in December of last year from the Royal Alexandra hospital? DR. WEBBER: Mr. Speaker, we have in place a child welfare implementation team which is following up the development of regulations and policy associated with the new Child Welfare Act, which we hope to have proclaimed on July 1.

In that process a number of groups and organ izations have submitted briefs in response to the proposed regulations that were sent to them; we invited these groups to respond. As I mentioned yesterday, concern has been expressed to me in a variety of ways, including the presession meetings before coming into this Legislature, about the possibility of babies being sold if the Child Welfare Act is such that the assessment is done in the private sector without standards and without qualifications for those that are going to be doing the assessment.

Also, as I mentioned yesterday, we currently do in our department the assessments related to private adoptions, and with the new Child Welfare Act it is proposed that that assessment be done by the private sector. Because of the concerns that have been expressed, we are assessing whether or not we can put into place standards and qualifications for those who would be doing it that would alleviate the concerns that are out there. MR. GURNETT: A supplementary question, Mr. Speaker.

Will the minister of social services table copies of the Royal Alexandra hospital submission that was sent to him last December so all members can see what was expressed there? DR. WEBBER: Mr. Speaker, in view of the fact that we have a large number of agencies and groups that send us their briefs, I would hesitate to do that. If the hon. member

March 28, 1985 ALBERTA HANSARD 247 is interested, I'm sure he could approach any of these agencies to see if they're prepared to give him a copy. MR. GURNETT: A supplementary question, Mr. Speaker. I think it's a matter of whether the information is generally available to the people through the members of this Leg islature.

However, my question to the minister is: will he indicate whether or not he or his department officials have been made aware of any cases where pressure or encour agement to give up their newborns for private adoption is being brought to bear on vulnerable, single mothers while in a hospital? DR. WEBBER: Mr. Speaker, situations have been brought to my attention where there could be the possibility that abuse could occur. As I indicated yesterday there was no evidence in any of those cases that there had in fact been the sale of any newborn infants.

What had been brought to my attention were situations where the potential could be there. It was unknown whether or not anything had occurred, but no evidence that any sales had occurred. MR. GURNETT: A supplementary question, Mr. Speaker, to the minister. In view of the fact that in this matter, we're talking about very vulnerable people, especially little people, my question is: in view of the possibility that's mentioned, what measures is the minister considering that would prevent people from being able to pressure single mothers, while in hospital, to give up babies for private adoption? DR. WEBBER: Mr.

Speaker, I've already indicated that we are assessing the situation through our child welfare implementation committee, and in the near future they will be reporting back to me with recommendations on what we might be able to do. In this province and in this country, we had in the past a situation where extended family were involved in taking care of babies that had been born, and in many instances no formal legal process was taken. The youngster was simply placed with an aunt or another member of the extended family and was raised by that member of the family.

I guess one question that some have raised is: how far do we go in protecting people against possible abuses of the system? In this province our child welfare legislation is currently such that the possibility is there for this to occur, the same as it is in any other province in this country. I haven't had one single case where there is evidence that any abuse has occurred. As I mentioned, we are concerned about the possibility and will be addressing the matter to see what we can do. On the other hand, I want to point out: how far do we go in protecting people in this country? MR.

GURNETT: A supplementary question, Mr. Speaker. We're hearing a lot of concern mentioned here, yet an avoidance of any action or steps taken to protect either these young mothers or the babies involved. My question to the minister: in view of these matters with private adoption and the move to privatization in nonward adoption cases, given all these difficulties, is the minister reviewing the policy of provinces such as Prince Edward Island, where private or nonward adoptions are prohibited completely? DR. WEBBER: Mr. Speaker, I certainly don't agree with the comment that no action is being taken.

We are in the process of developing the regulations for the Child Welfare Act. We made the commitment in the past and have followed up on that commitment to have proposed regulations sent out to all interest groups and individuals who showed an interest in the Child Welfare Act, and we're getting that response. Some of that response is related to the concern the hon. member is raising today. As I already indicated, we are assessing all these regulations and, in my view, will have in place, overall, the best child welfare legislation in this country by July 1 this year. MR.

SPEAKER: The time for the question period has elapsed. We've had a very considerable number of supple- mentaries. If there are any topics hon. members wish to deal with, they might want to come back to them tomorrow morning. ORDERS OF THE DAY MR. SPEAKER: Might we revert to Introduction of Special Guests. HON. MEMBERS: Agreed. head: INTRODUCTION OF SPECIAL GUESTS (reversion) MRS. OSTERMAN: Thank you, Mr. Speaker and members of the Assembly. It gives me a great deal of pleasure today to introduce 25 students who are with the grade 8 class from Prairie junior high in Three Hills.

Unfortunately, our schedules didn't match, so I didn't get a chance to get my picture taken with that great looking class and can only say hello from here. Accompanying them today are Jake and Agnes Paetkau, and Glenn and Joyce Steeves. I ask them all to rise and receive the welcome of the House. head: MOTIONS OTHER THAN GOVERNMENT MOTIONS 214. Moved by Mr. R. Speaker:

Be it resolved that the Legislative Assembly urge the government to call a public inquiry into the operations of the Alberta Securities Commission. MR. R. SPEAKER: Mr. Speaker, I move Motion 214, which has been designated this afternoon, based on five reasons that I think are significant at this time and certainly should be considered by this Legislature.

The first reason is that the Alberta Securities Commission bungled the Dial investigation badly; secondly, the Securities Commission delayed laying charges against Dial officials; thirdly, the Alberta Securities Commission decided not to appeal the dismissal of the Dial case; fourthly, no government minister, including the Premier, will answer for the Alberta Securities Commission within the Assembly; and fifth, small investors in the province can't be confident of the Alberta Securities Commission until they're sure the Alberta Securities Com mission handled the Dial case properly.

In terms of the Public Inquiries Act, this inquiry is in order, and I'd like to review that in the next few moments. A matter that is within the jurisdiction of that Act must meet two qualifications: it must be either of public concern

248 ALBERTA HANSARD March 28, 1985 — and this issue is of public concern — or, secondly, connected with the good government of Alberta or the conduct of Alberta's public business. The matter certainly meets the requirement on that count as well. I'd like to look at the chronology of events since 1979. Each of these events gives good reason for a review and a public inquiry in terms of the actions of the Alberta Securities Commission. On December 11, 1969, the Secu rities Commission gave Dial Mortgage approval for a pro spectus without a 1978-79 financial statement. April 1981: Dial was declared bankrupt.

January 17, 1983: the Securities Commission received an information package from Jim Darwish, Assistant Deputy Minister of Consumer and Cor porate Affairs, which contained much of the information on which the Securities Commission based its charges 17 months later, including a letter from one Dial official, Wayne Barry, to another, Dennis Rowley, which detailed deficiencies in Dial's financial management procedures. March 12, 1983: the Alberta Securities Commission finally launched an investigation of Dial for financial non disclosure.

August 1983: Securities Commission investigators were instructed to defer further investigation pending the outcome of the RCMP investigation, which had been under way since late 1981. February 7, 1984: Securities Com mission investigators finally submitted a report on the Dial investigation, nearly a year after they began investigating. June 23, 1984: 17 months later the Securities Commission finally charged Dial officials with making false and mis leading statements in a company prospectus.

February 26, 1985: Provincial Court Judge Anton Demong dismissed the Dial case, ruling that the Alberta Securities Commission had waited longer than the statutory one-year limit to bring the former Dial officials to court. March 19, 1985: the Alberta Securities Commission decided not to appeal the dismissal of the Dial case, although an Alberta Securities Commission administrative hearing will proceed. I'll comment on that later.

March 19 and 20, 1985: the Minister of Consumer and Corporate Affairs refused in the Assembly to answer any questions about the Alberta Secu rities Commission or to consider investigation of the com mission. The minister maintained over and over again that the Securities Commission is a completely autonomous body. Mr. Speaker, all those events raise many questions and certainly should be aired in an inquiry so the public of Alberta knows what has happened. We raise this question about whether there should be an administrative hearing or an inquiry.

Why the difference, and why is the administrative hearing inadequate? The administrative hearing looks into the original charge against Dial officials; that is, filing a false and misleading prospectus. The inquiry would look into the operations of the Alberta Securities Commission, which means that they can look into all the details of what's going on.

When the inquiry is concluded, we will know with confidence that the Securities Commission either is or is not doing its job, and if changes are needed in procedures or accountability, they will be brought forward and, hope fully, dealt with by the respective people who are responsible. In the next few moments, Mr. Speaker, I'd like to elaborate on the five reasons I laid before the Assembly a few moments ago. The first reason: that the Alberta Secu rities Commission bungled the Dial investigation badly.

The Alberta Securities Commission didn't even begin investi gating Dial until 1983, although the company collapsed in 1981 and the Securities Commission knew by mid-1982 that the RCMP were investigating the company. The question is: why the delay? It's unanswered, and if we don't have a public inquiry, it will not be answered. Investigators never interviewed George de Rappard, one of the Dial officials who signed the company prospectus. Why not? Investigators suspended their probe in August 1983 pending the outcome of the RCMP investigation. Why did that happen?

No arrangement was made to exchange information with the RCMP, although that is supposed to be the normal procedure. Investigators turned in a report to their supervisor, Alfred Woo, deputy director of enforcement, almost a full year after the investigation began. Even though the other was reporting to Mr. Woo, Mr. Woo never specified a deadline for the report. In comments that we've read publicly, Woo described that there was a mix-up, and the mix-up was a miscrossing of communications. How can that happen in such an important case as this? If that isn't mismanagement, what is it? I raise some questions.

Why didn't the Alberta Securities Commission set up clearer guidelines for an efficient inves tigation of this matter? How many other cases have been mismanaged in the same way? How many can be mismanaged in the same way in the future? Have the Alberta Securities Commission and the Department of Consumer and Corporate Affairs taken any steps to discipline those officials involved in the bungling or to ensure that that performance is not repeated? Mr. Speaker, only a public inquiry that can look into the procedures and the internal operations of the Secu rities Commission would answer that.

The administrative hearing certainly will not. The second argument: the Alberta Securities Commission delayed laying charges against Dial officials. The Securities Commission argued that it didn't have all the facts it needed to lay charges until early in 1984, when the commission received the RCMP synopsis of the case. However, the provincial courts decided that the Securities Commission had enough information to lay charges as early as January 1983.

The question is: why did the Alberta Securities Commission wait so long to lay charges against Dial officials that the case was finally thrown out of court on a technicality? Why did that administrative neglect occur? Further, on April 18, 1984, the Minister of Consumer and Corporate Affairs was asked in the House if a certificate had been issued with respect to the time limit for prosecution for Dial. At that time, the minister was in effect forewarned of the possible expiry of the statutory time limit and should have warned the Alberta Securities Commission as well.

However, the minister said that based on advice given to her by officials in the Attorney General's department, she didn't believe the time limit was going to be a problem. We should find out why that reason was there. Who gave that kind of advice? I believe we must ask the question: why didn't the minister ensure that the Securities Com mission's time limit was not exceeded? If they wanted to be on the safe side, why wasn't that procedure always in place?

How can highly paid, efficient officials of a depart ment or a minister, who are to uphold credibility in our legal system, allow a technicality to take away from the rightful application of the law? I ask the question: was the delay in laying the charges another example of Securities Commission bungling, or were the Minister of Consumer and Corporate Affairs and the Attorney General guilty, for some reason — I don't know what it would be — of avoiding their responsibilities? That's the question that's raised in the public mind.

That's why I raise it in this Legislature, not to make any inferences, but on Main Street, Alberta, people who are concerned about how the laws are administered in this province raise

March 28, 1985 ALBERTA HANSARD 249 that very question with suspicion. An inquiry would certainly clear up any kind of concern or discussion on an item such as that, one way or another. The third argument: the Alberta Securities Commission decided not to appeal the dismissal of the case. The case was dismissed from the Provincial Court on the technicality of limitations. I say that a defence on limitations is not, as some would argue, as good as any another. The sub stantive questions raised in the investigation remain unan swered. The real issue at heart remains unanswered.

It's a question in my mind and the minds of many others, par ticularly those who lost thousands of dollars in the bankruptcy of this company. An administrative hearing is a poor substitute for a court trial, Mr. Speaker, especially considering that the Dial officials who were originally charged aren't even in the securities business. That means that if they're disbarred from dealing in securities — they weren't in the business anyway, so there's no penalty there. The administrative hearing has no effect and cannot take any steps in terms of the individuals who were involved in this case.

Why did the Alberta Securities Commission decide not to appeal the dismissal of the case? What reasons did the Alberta Securities Commission have for not appealing the dismissal? Why didn't the Alberta Securities Commission want the Dial case to go forward to the courts? Mr. Speaker, those questions need answering for the people of Alberta. The fourth reason for a public inquiry is that no one will answer for the Alberta Securities Commission in this Legislature, that it's an autonomous body that can do whatever it wants. If it doesn't fulfill its obligations, who is responsible in the end?

As I understand the democratic process of electing members to the Legislature and appointing persons to cabinet responsibilities, someone in an elected capacity is the final person responsible. In this House it doesn't seem that way. If that is true, we must go to the step of having a public inquiry so we can find out who is responsible and what went wrong, so that body becomes answerable to the public of Alberta. Mr. Speaker, that's most important to me.

As I said earlier, the Minister of Consumer and Corporate Affairs has divorced herself from the administrative responsibility of the Alberta Securities Commission. The Attorney General supports the Minister of Consumer and Corporate Affair's claim that there's a difference between the administrative and policy-setting affairs of that body. I don't agree with that. I believe there is a responsibility to this Legislature. The Premier, as well, has gone out of his way to ensure that the Minister of Consumer and Corporate Affairs did not have the answer to questions with regard to the Alberta Securities Commission.

To get the minister off the hook in answering some of these questions, he has drawn a clear line between administrative and policy responsibilities, and we've heard it in this House. I wonder about that kind of direction to a minister, when one of the people in question in this Dial case is an employee very actively involved in the political activity of the government. To me, there's a conflict of interest.

The Premier should open the door and say that he is prepared to have the matter before a public inquiry so he can clear himself, his ministers, and his employee, who's receiving a very healthy sum of money to do whatever in the province of Alberta. To me, that is a conflict that could be clarified by a public inquiry. I do not agree with that kind of approach by the Premier, with what seems to be protecting the employee and protecting the ministers from answering for a body that is expending public funds and has a public responsibility.

The fifth reason for the public inquiry is that small investors in this province can't be confident in the Alberta Securities Commission anymore. One of the hard facts about the Dial affair is that some 565 Albertans lost money and investments that they felt were secure in that organization. They have a lot of questions they feel should be answered. They're not going to be answered by the administrative review. They're not going to want to invest in Alberta again.

How can people who are going to make investments under the surveillance of the Alberta Securities Commission trust that body when they've been misled, as happened in the Dial case? The track record is not good. To me, there is a great need for that public inquiry to restore the public confidence that is necessary in the Alberta Securities Com mission. In summing this up, Mr. Speaker, I believe Albertans have a right to know exactly how the Alberta Securities Commission handled the Dial investigation, and why they handled it the way they did.

Why the confusion, why the delay, and why the lack of responsibility by officials who were supposed to implement the law and put it in place? Why wasn't there some chastisement? We have to wonder how much effect there was in this case because of the high profile of some of the players in the Dial affair. We wonder how much effect their presence had on the Minister of Consumer and Corporate Affairs, the Attorney General of this province, and the Alberta Securities Commission itself. That's a question that could be answered and clarified by a public inquiry. We've worked hard in this Legislature.

The Official Opposition has tried to raise questions to get information. It's just about as hard to get information out of the government on this matter as it was for the Americans to get the Nixon tapes. DR. BUCK: But we don't need freedom of information in this House, do we Neil? MR. R. SPEAKER: Just about the same kind of difficulty. Maybe what we're leading up to here is some kind of Watergate scandal. The question can be raised. But if we have a public inquiry, the details are clarified, the matter is clarified, the government is clean, and we do the job.

Albertans raised that question: what is the government trying to hide? If there's nothing there, then lay out the information before us in the Legislature or in a proper forum in a public inquiry, which is available through the Public Inquiries Act. Mr.

Speaker, there is enough concern, enough questions about the actions of the Alberta Securities Commission and this government, that a public inquiry is the only way to come up with the answers we need at this time, to clarify the matter and build confidence in that Securities Commission — a very important body in terms of investments, financial institutions, and surveillance of people's private properties and their money. A very important institution of government, and its credibility is being questioned.

As I see it, the only way, and my recommendation through this motion, which I urge members of this Assembly to pass, is to put that public inquiry in place and deal with the matter now, not leave it so it becomes a political issue, so government always has to duck their heads and pull back their necks. Issues like this, cleared in the public, can be clarified very

250 ALBERTA HANSARD March 28, 1985 quickly and are to the positive benefit of the public rather than the negative, as it is at the present time. MR. ALEXANDER: Mr. Speaker, I would like to have an opportunity to address the motion, which I find to be not only a bit curious but also extremely broad. It says:

Be it resolved that the Legislative Assembly urge the government to call a public inquiry into the operations of the Alberta Securities Commission. It does not, however, pinpoint the Dial matter, on which the hon. member who introduced the motion has just spent almost all of his time. Since the resolution doesn't suggest an inquiry into Dial specifically, I plan to confine my remarks to the motion itself and perhaps speak of a little background of my own experience with the commission and how it functions.

I have worked for some years in an industry which lives under the long and sometimes threatening shadow of the Alberta Securities Commission. In fact, within the financial industry there is — I hesitate to call it a fear, but it's certainly an apprehension of offending the enormously com plex regulations and procedures which the Alberta Securities Commission is charged with dispensing.

For example, in the matter of prospectuses, or offering memorandums, if that be the case, there are an incredible number of variations, variables which go into the matter of compliance with regulations having to do with valuations, time frames, audits,

interpretations, tax laws, differing opin ions, analyses of all kinds. The enormous costs to the industry to comply with the laws and regulations are, in fact, sometimes a barrier to doing business. They are particularly a barrier for small businesses. It has often struck me, Mr. Speaker, that the legalities of the Alberta Securities Commission stand as a symbol of what in my mind is a clear-cut plot by the lawyers to take over the world.

The investment industry is characterized by a tendency to freeze when the voice on the other end of the telephone says, "This is the Alberta Securities Commission calling." We don't freeze because there's any guilty conscience but more a sense of, "Oh, oh, what bizarre set of circumstances have I now inadvertently got myself into?" When it is determined that it's only a phone call to remind you that you have forgotten to renew your licence, your heart resumes beating.

The Alberta Securities Commission is known in the industries it regulates, if anything, for fairly strict adherence to the rules and disciplines and to discipline of offenders. My experience with the commission has many sides. As chairman of the Alberta Investment Dealers Association in 1981 and '82, my relationship with the commission took an interesting turn. I was asked to serve as the private-sector representative in the selection of a new chairman. Out of approximately 75 applicants and a great many interviews, our committee selected the present chairman and native Edmontonian, Bill Pidruchney. Mr.

Pidruchney was selected for a number of reasons: his knowledge of the securities field, his background in law, his openness to change as markets demand. He also brought with him a reputation as a relatively good administrator. One of the other roles I played with the Investment Dealers Association was a continuing dialogue with the Alberta Securities Commission about the matter of expediting the movement of prospectuses and rulings through the com mission.

In fact, in the mid and late '70s the commission had become known as a bit of a block, particularly in the way of small companies wishing to raise capital in our market. Much junior financing was in fact lost to Vancouver because of the perception that our commission did, if anything, too thorough a job in vetting such things as prospectuses and offering memoranda. Furthermore, the securities lawyers of the Canadian Bar Association had often reported some frustration with the complex, time-consuming procedures and with some of the strict

interpretations of the commission. When questioned, the commission seemed to reflect that this was a matter of workload. Mr. Speaker, I think it would be simple enough to see that. If hon. members can understand what's required to clear a preliminary prospectus, they may even better appre ciate that from the years 1977 through 1982 the commission cleared successively 107 preliminary prospectuses, jumping to 124, to 192 in 1979 and '80, to 270 in '80-81, and 283 in 1981-82. I might point out also that that's just a fraction of the work done by the Securities Commission.

But it's a substantial workload, it's very complex, and it's not that easy to do. Generally speaking, the commission established its reputation during those years for being very thorough. As a member of the board of the Investment Dealers Association of Canada, my other role was to be in almost constant dialogue with the Alberta Securities Commission on this matter of expediting the movement of prospectuses and obtaining rulings from the commission.

In the '70s it had been a bit of a block, as I already said, but we managed to engage in an ongoing dialogue with the commission, which took place on a monthly basis, proving to us that they were in fact open to discussion. I had some other experience as a onetime governor of the Alberta Stock Exchange. I participated in many meetings with the Alberta Securities Commission chairman and offi cials about ways to streamline the operations and to improve co-operation with the commission and with its regulated industries.

In an industry in which self-regulatory bodies govern, investment dealers and stock exchanges are interested in complying with the regulations because that's what protects the integrity and confidence of the capital markets, the objective also being to get the business done in a reasonably timely fashion. Given the virtually unlimited number of variables with which the commission and the industry must work, it is perhaps no small testament to both groups to get them passed through at all. One might look, for example, at an issue in process before the commission.

While the issuer and the broker awaited the clearance of the commission, because there's a hospitable market, one sentence from Henry Kaufman or, at times, Marc LaLonde could blow your issue out of the water. And when that happened, your attention naturally tended to focus on the commission. In short, in my fairly lengthy experience with the commission, it has not been known for its laxity. If anything, it has been known to have a very tough side. As I listen to the discussion, Mr. Speaker, I think it's also useful to make a distinction that I think is being missed.

Members ought to be clear about what the commission is doing when it clears a prospectus. The Securities Commission examines prospectuses and offering memoranda for their adherence to the rules and regulations within its Act. It should be clear, however, that it is not there to pass judgment on the merits of the investment. We must be careful when we use the term "ASC approval", so it is not misinterpreted to mean that the ASC is telling somebody that this is an okay investment. It simply isn't doing that.

We need to be clear that commission approval expresses no opinion on the investment merits described in the prospectus. It simply says that they meet the rules.

March 28, 1985 ALBERTA HANSARD 251 The good news is that both the past chairman, the Honourable Madam Justice Joanne Veit, and the present chairman, Mr. Pidruchney, have maintained an open-minded, flexible attitude toward their constituent industries. There have been dozens, if not hundreds, of meetings between the commission and the financial community in an attempt to clarify, redefine, expedite, and rationalize the rules and procedures of the commission. I have attended many such meetings.

I also say unequivocally that the common aim of the industry, including the commission, is to protect the integrity of financial markets; that is, we all try to maintain that fragile confidence in our ability to deal honestly with each other. That confidence and integrity have made the Canadian capital markets among the most efficient and respected systems in the world. The key formula on which all of our commissions and exchanges base this integrity is full, true, and plain disclosure. Industry members have all worked hard at the viability and the integrity of the industry and our system.

Penalties imposed by self-regulatory bodies, like the investment dealers and the stock exchanges, are severe for breaches of this trust. Moreover, the industry works hard because the alternative is to erect ever more complex, suffocating rules and red tape which can effectively put virtually all participants in a straitjacket from which it is very costly to escape. If hon. members could have but a few experiences with the American system under the Securities and Exchange Commission, they would find this point amply illustrated.

The question before us, I suppose, may be phrased: do more complex, tighter, rigid systems work better to protect the integrity of capital markets? Of course they don't. Complexity alone in those regulations suggests that there isn't any integrity and, in my view, acknowledges defeat in the beginning. That seems to bring us to another question about inves tigating the commission, about which there are clearly many questions to be asked and not easily answered. Which of the multiple functions of the commission would be inves- tigated or inquired into?

Is it the process of prospectus- clearing for securities or for franchises? Is it registrations? That doesn't appear to have been brought up. Is it enforce ment? Perhaps. Is it policy-making of the commissioners, or lack thereof? Administration? And what about this difficult relationship between the commission and the commercial crime squad, otherwise known as the fraud squad; the question of who should pursue an alleged offender first? Should the one who does not pursue hold off while the other proceeds? If the first fails to make the case after many months or years of investigation, what then happens?

Does the second one pursue the issue on a different front, under a different Act or a different set of rules? That question may well belong in this House and in another House, but I see that the answer is clearly not to be found in inquiring into the commission. My suggestion is that the ASC is one of the most thoroughly examined and inquired-into agencies in the whole country.

It could be said, I think, that the commission is in a constant state of inquiry by the financial industry participants, including Bar Association securities lawyers, accountants of all three types, brokers, dealers, issuers, and buyers of securities. Its chairman is in fact characterized by openness. He has expressed his frustration more than once when some of us have said to him: "Chairman, so- and-so tells me that your people are making judgment about investment merit again." His reply is usually one of some annoyance. He says: "Who said that? Why doesn't he come and tell me? My doors are open to the public.

If you have a complaint or problem with the commission, bring it here." Then he quotes Harry Truman and says, "The buck stops here." I think that's a good attitude. It also indicates that any information about the commission's operations are read ily available to the public. He's also realistic, Mr. Speaker, and I suggest we ought to be a little bit that way ourselves. Can the system be failure-proof? No, not while it's being run by humans, however competent. Can we blame someone for a mistake? Yes. How does that help? Could we spend a bunch of time and money on an inquiry? Yes.

But we wouldn't learn very much unless we knew what questions to ask of this very complex and difficult operation. Mr. Speaker, neither this motion nor what I've heard so far nor my own experience over many years with the commission seem to make it clear to me what the question is. I don't think the mover seems to have much of an idea either. That reminds me of a story about Gertrude Stein. After living a life in which she dabbled in existentialism to some extent, she lay on her deathbed.

As she was dying, she turned to one of her friends and asked, "What is the answer?" Receiving no reply from one, she turned to another and said, "What is the answer?" No answer. And yet a third time, she questioned one of her friends, "But what is the answer?" Silence. Turning then to another person, she said, "Well then, what's the question?" Getting no answer, she died. I suggest that's what this motion ought to do too. MR. MARTIN: Mr. Speaker, as usual, the Member for Edmonton Whitemud was very eloquent in trying to deflect the intention of this motion.

He went into a sort of general discussion about the Securities Commission and told us a very amusing story. But the point is that it simply says:

Be it resolved that the Legislative Assembly urge the government to call a public inquiry into the operations of the Alberta Securities Commission. Whether or not Dial was mentioned is irrelevant. As the member well knows, this has been in the news constantly and in this House. The hon. member knows full well why there is a need and why it was brought up. It has nothing to do with the overall part of the motion. Specifically, there's a serious screwup, and the fact remains that there could be others. That's what people want to know. Mr.

Speaker, I'm not going into the history of what happened; the Member for Little Bow did that quite ade quately. I would like to refer back to this whole matter. It was raised in this House a number of times. I remember the Attorney General sitting there the first time we tried to deal with the matter. It had to do with criminal charges and RCMP recommendations. At that time the hon. Attorney General said that there wasn't enough evidence to ensure there should be prosecution. "You'll have to take my word on that." He said that it's now appropriate for the Securities Commission to deal with this.

At the time, we called for a public inquiry into the judicial system. Something seemed to be going wrong, but we were at least told that the Securities Commission would delve into this in great detail. My hon. ex-colleague, Mr. Notley, suggested that there was a problem with that year limitation. It was brought to the Minister of Consumer and Corporate Affairs. At that time we asked the minister what she was doing to make sure this proceeded quickly enough so there could be prosecution by the Securities Commission. We were told, basically, that there was no worry, that things were going

252 ALBERTA HANSARD March 28, 1985 along swimmingly; don't worry. When the Securities Com mission finally laid the charge, we find that it's thrown out of court because the judge ruled that it wasn't laid within that year. We can say what we want, but people of Alberta perceive that it has been thrown out because of a technicality. There is a lot of frustration out there among the people about this. The government can say that justice was well served and all the rest of it, but the fact is that it is not the perception of ordinary Albertans that justice has been served well.

Certainly there seem to be problems in the Securities Commission. If there are no problems, as the hon. Member for Edmonton Whitemud says, why are we worried about having an inquiry. Why don't we get on with it, as the Member for Little Bow said? That will straighten matters out and we will understand that there are no problems. When I find that for some reason we don't want to do this, I'm concerned. It at least gives the perception of hiding, that certain things shouldn't come out. Mr. Speaker, we've raised this public inquiry in question period. Under

section 33 of the Act, the Minister of Consumer and Corporate Affairs could hold a public inquiry and investigation. The minister is well aware that that falls under her jurisdiction, no matter whether she claims that somehow it's somebody else's business or arm's length. The fact is that the regulations and the way the Securities Commission operates are under the perusal of this government and under the jurisdiction of the Minister of Consumer and Corporate Affairs; that is clear. The other major point that we've discussed — the justice system is broader. I think there are still concerns there.

Perhaps the Attorney General doesn't agree, but we certainly get people coming to us. Maybe he doesn't talk to the same people we do, who indicate that there are concerns there. There are people from his own profession. People do not have faith in the Securities Commission. I suggest that that can hurt the economy. There have been enough examples of things going wrong with various financial institutions in this province that are going to make people uneasy about investing.

The point is that if they do not feel the Securities Commission can operate quickly enough to make financial institutions follow the regulations that are already there, people are going to say: "Well, what's the point of investing? I'll take my money and put it into one of the major banks and just let it sit there at a lower interest rate. At least I know I'll have it after." I think we would all agree that that is not going to help the economy of Alberta. So it is extremely important that people have faith that the Securities Commission is operating aboveboard, as the Member for Edmonton Whitemud said.

But when people see something as important as Dial and feel that it's stonewalling and stonewalling, then they get nervous. [Mr. Appleby in the Chair] I can say to this Assembly: we know that certain people who have called us are advising people that before they invest in certain institutions — whether its approved by the Alberta Securities Commission or not, they're saying that's not good enough; check to make sure it's on the Ontario one, because we're just not sure about the Alberta Securities Commission. I know people who are giving that advice.

You can question it, and people can say perhaps they're not giving the proper advice, but the perception is just as important. I'm sure the Attorney General would agree that the perception is just as important. That's why we were trying the other day to raise the questions that the Minister of Consumer and Corporate Affairs did not want to reply to, about the Alberta Securities Commission and how the Ontario one tied into it. Mr.

Speaker, I know there's not a great deal of time on this matter, but the point remains that an inquiry into the operations of the Alberta Securities Commission would go a long way to helping us find out what went wrong. It seems an absolute tragedy that when the Attorney General told us the Securities Commission was going to deal with this matter, that it wasn't appropriate for criminal charges, we then find that after being warned in this Assembly, the Securities Commission failed to lay the charges within a year. I suggest that people wonder about it.

The only way we in the opposition have is to ask questions that it's hard to get straight answers to. But the point now is to come here and hope that we can prevail upon the government to call a public inquiry into the operations of the Alberta Securities Commission. That is frustrating, because the government is clearly not doing its duties under

section 33. If they suggest that it's not a serious problem — "Don't worry about it; justice is well served under the technicality" — there's not a heck of a lot we can do about it. I look around at the numbers; I recognize the votes as well as anybody else. But the fact remains that we are leaving a huge doubt out there in the public mind. That's important to this government and to Alberta. That's where people's perceptions are. If the government doesn't like those per ceptions, they should darn well do something about it. They should go right into Motion 214 and order a public inquiry. As I said, Mr. Speaker, it's not that difficult. I don't care what the hon. minister says; under

section 33 it is clear . . . MR. DEPUTY SPEAKER: I regret to interrupt the hon. leader, but the time for discussion of the resolution has now concluded. Of course, he is considered as having adjourned debate at this time. MR. MARTIN: Mr. Speaker, I beg leave to adjourn debate. head: PUBLIC BILLS AND ORDERS OTHER THAN GOVERNMENT BILLS AND ORDERS (Second Reading) Bill 202

An Act to Amend the Mortgage Brokers Regulation Act MR. ZIP: Mr. Speaker, it is my pleasure to move second reading of Bill 202,

An Act to Amend the Mortgage Brokers Regulation Act. The proposed amendments will be to

chapter M-I9 of the Revised Statutes of Alberta 1980,

section 8(l)(a), which will be repealed and replaced by a more explicit mortgage disclosure statement which will point toward the situation where people taking on mortgages will receive, in plain English, information on their pending mortgage obligation telling them the actual size of their mortgage obligation, the actual cost of setting up the mortgage, their actual interest rate, their period of amortization, under what con ditions their mortgage may not be renewed, and what prepayment penalties they may encounter at such time that they may decide to prepay their mortgage.

March 28, 1985 ALBERTA HANSARD 253 At this point, Mr. Speaker, I wish to relate to this honourable Assembly some of the experiences which moti vated me to introduce this Bill. This motivation has been around a long time. It arose out of the painful experiences of ordinary people, ordinary friends of mine, who were subjected to mortgages which they signed under varying degrees of misconception and misunderstanding.

Their prob lems were very seriously aggravated by the economic euphoria which surrounded Albertans for such a long time during the real estate price escalation that was associated with the rapid growth of the Alberta oil and gas industry during the 1970s and up to the time of the national energy policy at the end of 1980. The common wisdom at that time, Mr. Speaker, was this: you had better buy now, because next month it's going to cost you $1,000 or $1,500 more.

The other part of this wisdom was that runaway inflation is here to stay, and when you borrow today, you will be paying back with inflated and hence cheaper money in real terms over the life of the mortgage. The exemption from the capital gains tax on principle residences further encouraged speculation and buying of housing. Since the housing market was moving steadily upwards throughout the 1970s and into the 1980s, it was easy to get out from under housing mortgage obli gations by simply selling and letting someone else take over.

People simply said, "Where do I sign, and how fast do I get my money?" Caution towards the very serious long-term undertaking that a mortgage represents melted away under the heat of Alberta's rising housing market. Unscrupulous and incom petent people were able to move into the mortgage business as lenders and as brokers to lenders to the detriment of not only the buyers but also those in the business who were honestly striving to serve the public well and with competence.

When the hammer came down on the Alberta economy with Ottawa's national energy policy and devastated the housing market of this province, particularly in Calgary, the tide quickly went out on the fortunes of mortgage payers. This downshift in the provincial economy brought about a very significant change in the attitudes of both the mortgage payers and the mortgage lenders.

The mortgage payers are now very concerned about the fine print of their mortgages, while the mortgage lenders are suddenly very concerned about the value of the properties they lent money on so eagerly just a short time ago and the ability of people to pay them back. The legalese employed in the wording of mortgage documents makes it very difficult for the average person to understand. Their obligations and the conditions they have to live under during the life of their mortgage need to be explained to them in plain English, especially now that mortgagors are jittery about the financial health of their clients.

In some cases they're very jittery. The high rates of interest presently prevailing in this country, plus the high principal amounts of present-day mortgages, add up to the high monthly payments today and create a lot of real economic pain to these people. I remember one pathetic case in particular which pulled at my heartstrings back in 1972. A family in east Calgary took out a second mortgage on their, at that time, relatively debt-free home. After interest bonuses were incorporated into the terms of their mortgage, the real interest rate to them rose to almost 30 percent.

When I asked them why they signed such a document when they could have obtained a much better deal with half a dozen other institutions, their reply was simply, "We needed the money and didn't realize that the terms of the agreement we signed were so bad until we listed our house and found out from our realtor how bad they were." Needless to say, Mr. Speaker, that particular mortgage was a very costly experience which left that family much poorer financially and with a bitter feeling towards our financial system.

I can cite many more cases of very unhappy experiences on the part of mortgage payers, such as this one, all stemming from a lack of knowledge of the terms of their mortgages. Hardly a month goes by without the press or other media coming up with some new twist to the pain emanating from some mortgage payers' difficulties with their mortgages. Regulations under the present Mortgage Brokers Regu lation Act require more disclosure than that suggested under the present subsection 1(a), which merely reads, "the repay ment terms of each mortgage." However, they do not really do their job.

While present regulations require a description of the terms of a mortgage loan, they do not require the borrower to be informed of the total repayment cost of his loan or how much of the loan over its term is repaid on principal and how much is payment of interest. Regulations with respect to renewal conditions are not sufficiently explicit. First, borrowers may be under the misperception that mortgages are automatically renewable at term if payments have been made faithfully and on time. Unfortunately, Mr.

Speaker, this is not the case, and great hardship is often inflicted on the mortgage payer if it is not renewed. It would be far better to tell the mortgage payer that his mortgage may not be renewed at the end of one, two, three, or five years of his term, even if he pays diligently and faithfully, so he can be prepared for this eventuality. Some examples of how changes in interest rates or term would affect monthly payments and the total cost of his mortgage would also be more meaningful.

Further, despite the 24-hour cooling-off period a customer has after signing the mortgage, during which time he can void the deal, nowhere do regulations clearly require that mortgage brokers disclose that they will still be entitled to their fees in any aborted mortgage deals, and these fees can be very costly. In one case that came to my attention, the fee was over $1,000. The man didn't have $1,000 set aside for that eventuality. Furthermore, these people took him to small debts court, and he had to defend himself there twice.

He had to make two appearances, and these fly-by-nights never even bothered to show up. The thing was dismissed. This is the infliction that people out there receive at the hands of these people. In any case, the matter of disclosure to the mortgage holder is of such importance to him that it should not be left to mere regulation but should be enshrined in statute. Further, this requirement should go beyond mortgage brokers to other lenders.

For example, some serious abuses have stemmed from new home salespeople who have set up a substantial number of present-day mortgages under very inadequate competency in so many cases. Mr. Speaker, presently the Act does not apply to quite a number of lending institutions: This Act does not apply to (

a) a bank; (

b) a treasury branch; (

c) a credit union; (

d) a trust company; (

e) an insurer to which the Insurance Act applies;

254 ALBERTA HANSARD March 28, 1985 (

f) an issuer within the meaning of the Investment Contracts Act; (

g) an agent or employee of any person referred to in clauses (

a) to (f) [which are the ones I've just read] in his capacity as agent or employee; (

h) a person who does not participate in the negotiations of a mortgage transaction with the mortgagor; (

i) a corporation registered as a loan corporation or as a loaning land corporation under the Loan and Trust Corporations Act (Ontario); (

j) a loan company to which

Part I of the Loan Companies Act (Canada) applies or a British loan company to which

Part II of the Loan Companies Act (Canada) applies; (

k) a member of The Law Society of Alberta in the course of his practice as a barrister and solicitor; (

l) any person acting for the Crown or for a Crown corporation; Many mortgages are placed by these people. (

m) any person or class of persons exempted by the regulations. In other words, the existing legislation is specific to a single category of lender, namely mortgage brokers, and the requirement for a mortgage broker's disclosure statement applies only to mortgages arranged by brokers. Mortgages obtained from all other lenders excluded from the Act are not subject to this disclosure requirement. The reason that mortgage brokers were singled but for regulation is based strictly on past experience.

This past experience has shown that there was a need for more stringent regulation despite the fact that the majority of them, especially those in business now are very credible. Their records raise questions, and the questions are in the statistics themselves. For example, the number of cases investigated by the Superintendent of Real Estate increased from 38 in 1981-82 to 138 in 1982-83, 168 in 1983-84, and 126 in 1984 to date. In conclusion, Mr. Speaker, a start on improving con sumer protection has to be made somewhere.

The need is greatest where large sums of money are being arranged by third parties and clients are not dealing directly with lenders. Similar legislation could and should be enacted for mortgages arranged by any other lenders. Thank you, Mr. Speaker. [Mr. Speaker in the Chair] MR. NELSON: Mr. Speaker, it gives me a great deal of pleasure to speak for a few moments on Bill 202,

An Act to Amend the Mortgage Brokers Regulation Act. At the outset, I would like to congratulate the member for Calgary Mountain View for bringing this issue forward but at the same time suggest that maybe we are not examining this whole issue of mortgage lending far enough. I also support the view that information to our consuming public must be given fully, freely, and without prejudice, so at least they know in some way, shape, or form that they are able to make decisions based on information given. Mr. Speaker, there's a word I've learned to use when dealing with mortgages.

I guess I learned this when I commenced my examination of the Guarantees Acknowl edgment Act when I was dealing with bank guarantees that small-business men have to sign. That word is "uncon scionable". A mortgage is an unconscionable document. As defined in Black's Law Dictionary, the basic test of uncons- cionability of contract is whether, under circumstances exist ing at the time of making of contract and in light of general commercial background and commercial needs of particular trade or case, clauses involved are so one-sided as to oppress or unfairly surprise a party.

It continues: unconscionability is generally recognized to include an absence of meaningful choice on the part of one of the parties to a contract together with contract terms which are unreasonably favourable to the other party. In short, it is gross one-sidedness. Webster's dictionary refers to unconscionable as having no conscience or contrary to the dictates of conscience, not right or reasonable, or unreasonably excessive. That is how we can define a mortgage, Mr. Speaker. A mortgage is not a document negotiable by the average consumer, whether it is negotiated by a broker or otherwise.

What does a broker really do? If you are having difficulty obtaining a mortgage and you must use a broker — I know many real estate agents, not that they are actually brokers, can and do seek mortgages for people, or they can go to a broker to find mortgage money on behalf of people they are working with on the sale of a property. Mr. Speaker, the ability of our consuming public to negotiate mortgages is nonexistent. The terms of mortgages are preset by a lending institution.

I dare anyone to go to a lending institution where they have a fixed document and try to encourage that lending institution to alter that document that may benefit the lender. That is why I suggest that a mortgage, in general terms, is an unconscionable document. Let's consider some of the options that could be available to a person requiring a mortgage and whether or not these options are placed before that [borrower] by a broker or lending institution. First of all, the interest rate. When we borrow money, most of us have an idea of what that interest rate may be. Are we getting an open or closed mortgage?

How many people know what an open or closed mortgage is? I'll guarantee you, Mr. Speaker, that not too many people know. Is that discussed with the person? No, not at all. Is the frequency of interest payments or mortgage payments discussed with them? Usually the mortgage pay ment is discussed with the borrower, in that you have to pay every month. But how is the interest calculated? Is it calculated on a monthly basis? Is it calculated on an annual basis or a six-month basis? How many people know? I suggest none. How many people know what the term "amortization period" is?

How many people really know what the term "term" is? Even though we borrow money over a period of a term, we amortize the mortgage over a longer period of time. The average person does not understand that. How many people understand that there's a realty tax account? Certainly, most people get a fixed figure when they have to pay their mortgage each month. I guess most of us, giving due credit, know that we have to pay our taxes, and we normally end up paying those on a monthly basis with our mortgage payment. They refer to that as PIT: principal, interest, tax.

How many people understand terms such as "closing costs", "legal fees", and terms of this nature? I don't know that too many people really understand the term "closing costs". They certainly understand the term "legal fees", because we know that if we enter into an arrangement with a lawyer to do certain work for us, there is a fee. Usually the fee ends up considerably higher than we might expect, unless that is also addressed at the time we negotiate a contract, be it verbal or otherwise, with a lawyer.

March 28, 1985 ALBERTA HANSARD 255 How many people realize whether a mortgage is assumable by a new purchaser should they determine to sell their property? How many people account for the assumability of a second, third, or fourth mortgage they may have on their property? Whether these are dealt with by mortgage brokers, a lending institution, or, in many cases, the legal profession, I would say that most people, when they finish the purchase of a home, do not even understand what they've signed. To give an example, people might have signed a mortgage document and possibly have a land lease with that document.

They may understand that the document infers that ultimately they would be purchasing a piece of land, when, in essence, it doesn't mean that at all. It means the opposite; it means they're paying rent. When we talk about disclosure by mortgage brokers or any other person dealing with the issue of lending money, be it for mortgages or other things — and I know we're addressing the area of mortgages here today, which I'm quite happy to do — not only do we need to examine the changes of Acts, policies, and regulations from within government.

Possibly and probably the best way to go is to educate our people in the community to be more aware of the many misgivings they should have when they go out to sign a document, especially a document that I suggest is unconscionable. I hate like heck to pick on banks or lending institutions as such all the time, but these institutions have developed an attitude of unconscionability in many of the documents they try to offer to the public. Let's face it: if you've got a mortgage on your home or are trying to get a mortgage for a property, they've got you.

You're not going to go to them and say, "This is the mortgage document I want to use to borrow your money." They're going to tell you to go fly a kite. You can do that day in and day out, week in and week out, and you'll never achieve what you feel is fair on your behalf. You may be desirous of paying your mortgage off on a biweekly basis, which will probably save you about seven or eight years of payments on a $50,000 mortgage, which I believe is something on the order of about $73,000 if my figures are correct, over the amortization period of that mortgage. What about dealing with a mortgage broker?

Does he tell you up-front what it's going to cost you as a fee for him to obtain a mortgage for you? Is he going to indicate to you that the mortgage he is getting for you is short- term and that possibly in one year's time you're going to be back looking for another one? Is he going to indicate to you that the mortgage you got is an open or closed mortgage, as I've already indicated? Mr. Speaker, it's quite possible that he will, but on the other hand it's quite possible that he will not. I don't wish to suggest, and I'm sure the hon.

Member for Calgary Mountain View is not suggesting, that there are not honourable people in the communities, making their best effort to satisfy the needs of the people in those communities. Certainly, I believe there are. Unfor tunately, the one or two bad apples in the barrel always seem to make it hurtful for our citizens and also for other people in the industry. We use a term, particularly through the Securities Com mission, called "unsophisticated investor". What is an unso phisticated investor? Basically, it's a person who wishes to invest and really doesn't know a lot about the investment climate.

So we say you've got to put out a prospectus and give full disclosure of that prospectus so that unsophisticated investor, hopefully at least, will be able to know what he's getting into. Again, there are agents in the field of invest ment, investment brokers, who are able to fully explain the material a person wishes to have or invest in. We have a similar situation with people obtaining mort gages. We have an unsophisticated investor.

Really, there is no difference between investing in securities and investing in a piece of property, especially the way the market has been going up and down in the last few years — more down than up. A person is unsophisticated in dealing with a mortgage, and it's certainly incumbent upon us to ensure in some way, shape, or form that that person is able to receive full knowledge.

It might be fruitful for the Depart ment of Consumer and Corporate Affairs to examine the area of issuing material, on a door-to-door basis if necessary or making it available in various public buildings, that will make our consuming public aware of the pitfalls of mort gages, mortgage-lending institutions, or brokers. It might also be fruitful — and I've mentioned this prior to my standing today in this Assembly — to examine making our Acts and laws English rather than legalese.

It might be fruitful for our consuming public, including me, so I would better understand what I'm reading in legalese, which I'm not trained to do. It's very difficult when you have to spend hours, or even days, examining a particular document to determine what it really means. When it takes you two or three days to go through a document word by word, line by line, paragraph by paragraph, and try to compare it back and forth to the various sections it might refer to, it's a very, very difficult and lengthy process.

The net results are that you end up with a document the dictionaries define as unconscionable, and I've already explained what unconscionable is. Mr. Speaker, in speaking to this particular Bill, I urge members to give it their fullest support. Possibly the member who introduced it may even examine further the introduction of amendments that may improve the atmosphere for our consuming public with not only brokers but also our other lending institutions. I don't want to let the agencies of the government, such as Alberta Home Mortgage, off the hook.

Lately I've been known to be pretty critical of them, and I will continue to be so until such time as they show some feeling in their attitudes towards some of the hardships they've put on innocent victims they've placed in various difficulties in the marketplace. It's unfortunate I have to stand in my place and make comments of that nature; that may be disparaging, but it is the truth. I do not intend to compromise myself or my constituents in dealing with issues of that nature. Mr.

Speaker, I fully support the manner in which our member has presented his case today, and I urge other members to also give support, especially when considering that mortgages are usually the largest expenditure in a person's life. As such they need to be protected in the obtaining of the mortgage, the content of that mortgage, and in the future renewal of that mortgage, especially considering that most people pay their obligations on a regular basis rather than have an institution blackball them, in many cases for no good reason. As I said before, I urge support of Bill 202. Thank you. MR. SHRAKE: Mr.

Speaker, I want to congratulate the hon. Member for Calgary Mountain View for bringing this Bill forward. This Bill has created more havoc, heartache, and real horror stories throughout the city of Calgary in the last couple of years, ever since the economic turndown.

256 ALBERTA HANSARD March 28, 1985 The main thrust of this Bill is basically to get information to the people who sign these mortgages. It's sad. Probably the biggest thing any couple ever buys, their major lifetime investment, is a home. The wife will look at the kitchen and make sure it's the way she wants it. The husband will maybe check the construction and see if it's got crossbracing. But he doesn't pay any attention to the legal documents he signs. It's tragic. Instead of this we should almost have, every time you sign a mortgage, a skull and crossbones and a huge sign on top of it: "Buyer Beware".

It's tragic. I think of one young couple who saved in 1980, '81, and '82 and finally had almost $10,000. They found the home they wanted, bought the home, and assumed a 17.75 percent mortgage. As things rolled by, times got a little tougher and, unfortunately, the wife had twins. They had two kids already. She couldn't really go back to work with the twins; they had a lot of medical problems. There went $20,000 of the income which they had counted on to pay their mortgage. It didn't matter; he was still working and making a living. But with 17.75 percent interest, it was $1,100 a month.

When the province of Alberta's mortgage reduction plan took its last turn, he didn't quite qualify. Suddenly the $1,100 a month was a big payment and he couldn't handle it. Each month he fell a little further behind. But no problem. He thought he had good credit, and he'd go and get it remortgaged. No sir. With the mortgage company he's with, there is no provision; you cannot remortgage, not even if you pay the three-month penalty clause. He phoned me; I'm the MLA.

I told him, "I don't know; let's go talk to these people." I met with the manager of this company, which I won't mention — their initials were Credit Foncier, but I won't mention their name. We went over it, and we explained to him that this home had a $70,000 mortgage. It was only worth $55,000. In fact, there was a house down the street with the same floor plan and the same square footage but a bigger lot. It had been dumped back, and they were trying to unload it at $53,000. This guy's got honour; he's going to honour his com mitments. He isn't going to walk out on the house, but he's hurting.

He can't carry on. He says, "I'll pay the $70,000; I'll get another mortgage over here." But they say, "Sorry, we do not allow you to pay out your mort gage." He says, "Well, I didn't know that." Of course he didn't know it; he'd never been told. When he was buying it, the documents were beyond his ability. Dear little Sharon and Bruce got enough money to buy a used home. They went to a mortgage company and got an open mortgage. This open mortgage didn't mean a lot to them, and it was only 10.75 percent interest. They later found out what an open mortgage was.

When the interest rates went up to 20, they had a 20 percent interest mortgage. Their payments went from $500 and something — they hit the $1,100 mark. I think their income was only a little over the $1,100 mark, and it got grim for them. They struggled through, and due to the mortgage reduction plan the province put in, thank goodness they still have their place. They're hanging in, but they did not know. I don't think it's quite fair to blame this type of problem all on the mortgage brokers. The hon. Member for Calgary Mountain View really hit the nail on the head.

He identified the problem; it goes beyond just the mortgage brokers. In fact, I have a copy of the mortgage broker's regulation disclosure. Maybe the page would be kind enough to pass these out to members. If you follow it close enough and you're wise enough and have a good head for figures and this type of thing, it actually does show the rate of interest. You can find it; you have to look a little bit. It shows your amortization period and the repayment terms. It lists whether you have any prepayment option or for short: if you got a little money ahead, could you pay a little money toward it?

Or could you pay the darned thing out and remortgage it somewhere over here? For short, if this guy gets you up to a 20 percent mortgage, could you go down the street and pick up that nice 12 percent? It does call for that, but the form is vague. In fact, the Bill is very vague. If you ever tried to read the existing Act — I won't bother trying to read it to you — it's very vague on what it calls for. It doesn't address the problem. Mr. Speaker, I think our hon. member has brought a problem which should be dealt with. We should deal with this; we should handle it.

I don't think the Act at present gives the help or assistance people need. I think we first have to take a look at the number of institutions and organizations involved and not just go after the old mortgage broker. Frankly, we should fine the individual broker if they do not follow the Act, if they do not sit down with this thing. Perhaps they could fill the thing out, and the average person, unless they have some knowledge regarding financial terms and how to handle contracts and things, wouldn't follow it that well anyway.

I really believe that our hon. member should take a hard look at getting some members of the financial insti tutions, perhaps a few guys in the banks — I don't know if they really want to deal with this, because the

Document details

Collection	Alberta — Debates (Hansard)
Citation	19850328
Type	hansard
Volume / chapter	L20 S3 19850328 1430 01 han.pdf
Language	en
Format	json
Source	PROVINCIAL
Identifier	1cfa380eb1d9ee7701f18ecd9b10bbd57ec618de

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