May 9,

1994 RESOURCE

ESTIMATES COMMITTEE

Pursuant to Standing Order 87, Ms. Lynn Verge,

M.H.A. (Humber East) substitutes for Rick Woodford, M.H.A. (Humber Valley).

The Committee met at 9:00 a.m. in the House of

Assembly.

MR. CHAIRMAN (Penney): Order, please!

Welcome to the continuation of the meeting to study

the estimates of the Department of Mines and Energy. I welcome the minister the

hon. Rex Gibbons and his officials.

I will introduce the members of the Committee; my

name is Melvin Penney, I am the Member for Lewisporte and the Chairman of the

Committee. To my left is Ms. Lynn Verge, the Member for Humber East who will be

the vice-chairman for today. She is sitting in for and replacing Mr. Rick

Woodford, the Member for Humber Valley. Further to my left is Mr. Paul Shelley,

the Member for Baie Verte -White Bay and Dr. Bud Hulan, the Member for St.

George's. Other members of the committee should be arriving shortly.

Since we have gone through the procedures that

normally occupy the first forty-five minutes or so of proceedings we need not

waste any more time going back and redoing that. Mr. Whelan has just walked in,

Mr. Don Whelan the Member for Harbour Main.

I will now go to where we left off on April 27. At

12 noon we were in the process of questioning the minister and each member is

given ten minutes, so I will turn the questioning over to Ms. Verge.

MS. VERGE: Thank you. I would like to resume my

questioning about Hydro, one of the responsibilities of the Minister of Mines

and Energy. Two years ago this Province had an opportunity to make a deal with

Hydro Quebec for redress on the Upper Churchill and development of the Lower

Churchill. I would like to ask the minister to comment on the amount of revenue

that would be flowing to the government in this fiscal year had that agreement

been entered into. I am referring particularly to the provision in the offer

from Hydro Quebec of payment of additional royalties and revenues on the Upper

Churchill, payments which would have started by now.

DR. GIBBONS: Mr. Chair and Madam Vice-Chair, we

did not reach an agreement with Hydro Quebec on the development of the Lower

Churchill. We reached an intermediate stage and we did not reach an agreement.

So I cannot speak about revenues that might or might not have started flowing by

now relative to that. We did not reach an agreement on the Lower Churchill. The

Lower Churchill development would have taken several years to conclude and I

know there would have been a lot of components in the contract but I do not see

any point in speculating about what might or might not be in something that we

did not reach an agreement on. We did not reach it, there is no agreement and

there is no development.

MS. VERGE: Well sadly the government did not

reach an agreement but the point is, the government could have, two years of

work went into negotiations. Isn't it a fact that the minister and people

working on the negotiations in analyzing Hydro Quebec's offer did a breakdown

year by year of the impact on the Province's economy as a whole and in

particular on the cash flow to the provincial government?

DR. GIBBONS: Well certainly I am not able to

talk about any details like that. I just do not know the details of what might

or might not have been in a possible agreement that was not reached. We did not

reach an agreement and we concluded the negotiations because of what is

happening with the economy of areas that would be using the power that would be

developed from the Lower Churchill and the negotiations are still in a waiting

mode. So until we reach an agreement there is no point at all in speculating

about what might have been. Certainly we would not reach an agreement unless we

could get an agreement that would be in the best interest of the people of

Newfoundland and Labrador.

Government gets lots of criticism, about the former

agreement that was signed on the Upper Churchill, because an agreement was

signed that did have basically one item missing, did not have the escalator

clause, and we are not going to sign any agreement today until we have reached a

final agreement on all outstanding items, and there is not going to be any

agreement anyway unless there is a need for the power. That is the number one

priority. There has to be a need for the power; otherwise it doesn't get

developed and there is no agreement. That is the essence of what happened. There

is no need for the power - the need for the power has been deferred for several

years - so we did not conclude an agreement. We have sort of set it aside, and

that is the way it will sit until there is a reason to restart negotiations.

Then I would think that we would be able to reach an agreement, if we could

continue to negotiate in good faith on all the issues that are outstanding, but

we had not reached a final agreement.

MS. VERGE: You didn't negotiate in good faith,

though, did you?

DR. GIBBONS: We sure did negotiate in good

faith.

MS. VERGE: You might have, but the Premier

didn't, and he was the one who dictated the outcome.

In the course of the two years of negotiations, you

and your people did an analysis of Hydro-Quebec's offer, the last offer in late

1991, and while you may not recall the figures, while you might not have the

details in your head, surely you can provide the committee with copies of those

documents?

DR. GIBBONS: No, Madam Verge, I cannot provide

the committee with copies of the documents. We had not reached any final

agreement. We had an agreement with the other side that we would not be making a

lot of the details public until we reached an agreement that we could all

acknowledge would be put forward for full public debate. We were still in the

midst of negotiations, and I don't remember the details right now of what was

included in some of these negotiations.

MS. VERGE: But it is all in the records at

Hydro, isn't it?

DR. GIBBONS: Oh, I would think that it is all

in the records, sure.

MS. VERGE: And you are withholding those

details from the people of the Province, yet you are embarking on selling Hydro

with the result that somebody in the private sector who will end up controlling

Hydro will inherit all of those documents and records.

DR. GIBBONS: No, far from it. Anything dealing

with the Churchill is not part of this deal. Any of the documents associated

with Churchill negotiations are not part of the deal. All of that information

will remain with government. We will be holding all of that information. The

proposed new Hydro would not be holding that information, would not be keeping

it. It would remain with us.

MS. VERGE: How can you say that, because the

senior executives and professionals at Hydro, according to what the government

has said about the intention of privatizing Hydro, will continue to be employed

by the new privatized corporation, and they are the ones with the expertise.

They are the ones who were on the negotiating team and did the analysis.

DR. GIBBONS: There is no question that some of

them were on the negotiating team. One of them has retired and is no longer

there. Two or three others - two in particular - were on the negotiating team.

Others who were on the negotiating team are in government. Three of the members

of the negotiating team were over here in government, not at Hydro at all, and

there were various people involved in doing analysis.

Sure there are documents, and these documents will

remain with government. They will not go with the proposed new Hydro. They would

not be with that corporation. They would be with us.

MS. VERGE: But all of those documents are at

Hydro now.

DR. GIBBONS: They are stored. I acknowledge

they are stored at Hydro right now, but they would not be remaining with Hydro

after a privatization. If Hydro is privatized, all of these documents related to

the Lower Churchill would come to us.

Right now we have an integration of information

storage like that, but we are going to continue to keep our share of the Upper

Churchill. If privatization proceeds, we are going to continue to keep our share

of the Lower Churchill Development Corporation, and all undeveloped water rights

in Labrador remain with us, so everything dealing with Labrador development,

Lower Churchill development, that may be in the form of various documents at

Hydro, would be coming to government.

MS. VERGE: What you will be losing is your

electricity division of government. You will be losing your expertise and your

financial strength that you would need to develop the Lower Churchill.

DR. GIBBONS: No.

MS. VERGE: So you can't say that privatizing

Hydro won't have an extremely negative affect on this Province's chance to

benefit from future Labrador development.

DR. GIBBONS: I don't believe it would have any

affect at all on the future development of the Lower Churchill. In terms of

people, people can be replaced. People are normally replaced. I don't know how

many years we will have to wait. We could have to wait a decade. It may be five

years, it may be two years, before we start some further discussions. I don't

know the timing.

MS. VERGE: If we go to court again as the

Premier is proposing for sure we will have to wait another decade.

DR. GIBBONS: (Inaudible) -

MS. VERGE: Can the minister imagine Hydro

Quebec resuming negotiations when Newfoundland is threatening or is embarking on

another court action to try to break the Upper Churchill contract?

DR. GIBBONS: I'm not going to speculate on

that. The negotiations were discontinued because of the decreasing demand for

electricity in the Quebec market and in the market that Quebec has for its

surplus power, in the northeast United States. When things change in these areas

then we will see what happens. At this time there is nothing ongoing. In due

course we will go ahead.

MS. VERGE: How long has it been since

negotiations ended? A bit more than two years?

DR. GIBBONS: It is about two years ago.

MS. VERGE: Yes.

DR. GIBBONS: It was in March of 1992, the last

meeting, and we said: Let's lay it aside for now, let's see what is going on.

MS. VERGE: So everything has been dead for two

years yet the minister is still withholding from the people of this Province the

details of Hydro Quebec's offer.

DR. GIBBONS: When the negotiating teams stopped

having their active meetings they didn't say everything is off. They said: Let's

lay it aside for now, it looks like we have to wait a little longer before we

are going to need to get the power. We laid things aside. We still have our

agreement in place between the two parties that we are not going to go out

laying out all the details of the negotiations until we've reached an

appropriate point that it would be right to make it public, and then have a

public debate on it.

We've always said -

MS. VERGE: What would be an appropriate point?

DR. GIBBONS: We have always said that we,

before we finalize any agreement, would make it public and would have a public

debate on it. We've said that dating way back to when the negotiations got

started, when we were being asked questions in this Legislature and elsewhere.

Right now I'm not about to say: Yes, I'm going to go out and open it all up

today of every meeting that we had for the twenty-nine meetings that we had over

the three-year period.

MS. VERGE: (Inaudible)?

DR. GIBBONS: I don't think that would be right.

MS. VERGE: What would be an appropriate time

which would prompt the minister to disclose to the people of the Province what

really did happen?

DR. GIBBONS: I don't know, but the point of the

matter is that we did not reach an agreement. We did not reach the stage where

we had an agreement that we could consider acceptable for the people of this

Province, and it (inaudible) -

MS. VERGE: But you considered it acceptable,

and the negotiating team considered it acceptable.

MR. CHAIRMAN: Order, please!

MS. VERGE: It was just the Premier who balked

and -

DR. GIBBONS: No ma'am.

MS. VERGE: - directed that the negotiating team

take back agreements that had been reached on a number of issues. Isn't that

what really happened?

DR. GIBBONS: No ma'am.

MR. CHAIRMAN: Order, please!

The hon. member's time is up. I will turn the

questioning over to another member of the Committee. Before I do that, I had

overlooked the possibility that maybe there was an official here today who was

not at the earlier meeting we had. If that is the case (inaudible) -

DR. GIBBONS: (Inaudible) all the same.

MR. CHAIRMAN: The same officials as you had

before?

DR. GIBBONS: (Inaudible).

MR. CHAIRMAN: Very well.

The other thing is, you have a copy of the minutes

of the May 2 meeting, the estimates of the Department of Forestry and

Agriculture. Could we have a motion to adopt these minutes?

On motion, minutes adopted as circulated.

MR. CHAIRMAN: Dr. Hulan.

DR. HULAN: There is an error in the minutes. I

just noticed that it should be Forestry and Agriculture and not Development.

MR. CHAIRMAN: Item No. 2.

DR. HULAN: Indeed it should be Agriculture and

Forestry but I will not argue that point right now.

MR. CHAIRMAN: Item No. 2.

Appearing were Hon. Graham Flight, MHA, Minister of

Department of Forestry and Development. That should be Department of Forestry

and Agriculture, duly noted. Now, then do we have a motion to adopt the minutes

as amended?

MR. SHELLEY: So moved.

MR. CHAIRMAN: Seconded.

DR. HULAN: Seconded.

MR. CHAIRMAN: Carried. The minutes are adopted

as amended.

If there are any members of the Committee, or

members of the minister's delegation, who wish to have a copy brought into the

legislative chamber just notify the Page and he will get a copy and bring it in

for you, or if you want tea we have the kettle plugged in for you as well.

Dr. Hulan.

DR. HULAN: Thank you, Mr. Chairman.

Good morning, Mr. Minister and your associates.

I want to commend you, Mr. Minister, on the good

job you are doing in the department under those very difficult times, with so

many issues you have to deal with, and especially with the sale of Newfoundland

Hydro. I think you are doing a commendable job. I want to make that comment so

that it is recorded here this morning.

I have just a few questions. A one line item

question only and that will be very easy to answer, Page 159. What I am looking

at is Grants and Subsidies. If you look at 3.1.03, Number 10, the $500,000. I

notice that in the revised Budget last year it had $500,000, and again now. What

is that $500,000 for may I ask?

DR. GIBBONS: Dr. Hulan, part way through last

year the government approved a mineral exploration assistance program to cost

share advanced exploration projects in the mineral sector. That would be things

like drilling of prospects or other similar advanced projects. We put $500,000

in last year's budget and we have done the same again this year. We found this

to be a great stimulus to some exploration in advanced projects. The $500,000 we

put in last year probably leveraged about another $1.5 million extra dollars

that got spent on drilling projects.

We have the numbers here. Total exploration

expenditures related to this last year, ours plus industry, total $l,951,900

which had private sector contributions of $1,527,688. And our own total, out of

the $500,000 we spent $424,212. We did not spent it all, so we are continuing a

similar project this year. There were twelve drilling projects in all, related

to drilling in various parts of the Province, helping advance some projects that

had been discovered by particularly the junior mining sector.

DR. HULAN: Some general questions as they

pertain to the District of St. George's and the west coast. Would you share with

us what is happening on the Port au Port Peninsula as far as offshore drilling

on land is concerned?

DR. GIBBONS: The exploration in that area last

year was quite active. There were seismic programs concluded last year in the

Parsons Pond area, I think it was, last winter, and this past fall and this

winter seismic programs were concluded on the Port au Port Peninsula. Also last

year - I believe it was last year - an aero-magnetic study was concluded on the

Port au Port as well as the offshore areas around the Port au Port Peninsula.

Marathon in particular identified exploration

targets that they considered to be worthy of drilling. Marathon identified a

target and announced that they plan to drill a well from the Port au Port into

the offshore, into one structure. Hunt indicated that they had a target that

they would like to drill as well and they said that they had a 70 per cent

chance that they would do a well this year on land on the Port au Port

Peninsula. We haven't yet got a final decision from Hunt about that well, but

I'm still optimistic about both wells and that they will both be done in 1994.

DR. HULAN: What about the - there was also some

talk about the possibility behind Fischells - Flat Bay area.

DR. GIBBONS: Yes. There is a licence that was

taken for oil exploration in that area by a company called - I believe it was

Canadian Roxana, Calgary. They have that licence. To date, to the best of my

knowledge, they haven't done any particular work on the ground, in the field, on

that. I don't know what their plans are for 1994.

DR. HULAN: Would one speculate that they may be

waiting to see what happens in the offshore and the Port au Port area before

they start, maybe?

DR. GIBBONS: It's possible that that may be the

case, that they see what happens with Hunt and Marathon in adjacent areas. You

may see some further action there. The licence is good for five years from the

time of issue so they still have some time to spend the dollars that they

committed in that particular area.

DR. HULAN: Again, because of the importance of

the co-generation project and peat burning to the District of St. George's and

employment generation, and the end result being after this project is completed

the availability of some fairly large acreage of good peat soil for agricultural

and food production purposes, would you very briefly, without going into too

many details, tell us - I know you've been quite occupied in meetings and

negotiations with the consortium from the U.S. on that proposal, and it has

taken up quite a bit of time over the last year or so. What is the status of

that right now?

DR. GIBBONS: To date there has been no final

decision made on that particular project, but the project has to be put in the

context of what is happening in the Province relative to electricity demand.

Hydro a couple of years ago initiated a call for proposals for up to fifty

megawatts from small hydro generators. Eventually last fall and December they

made a decision to short-list four projects that totalled thirty-eight, less

than the fifty, and have told those four proponents that they will not get a

decision, whether it is a go ahead or not, until they complete their assessment

of electricity demand for the future within the next month or so. They said they

would give them a decision by June.

We've been going through a period of flat

electricity demand, and actually in the last twelve months there was a bit of a

decrease in sales by Hydro. You have to put the co-generation project and

whether or not that would come on stream in the context of that and see whether

or not you could do both or just one or the other. If it is one or the other,

which one. But at this time Hydro doesn't know for sure whether it is going to

need anything to come on stream before 1998-1999. Even the small hydros have

been told they wouldn't need them until the fall of 1998 at the earliest. They

will know that later on. The whole question of that project is still up in the

air.

DR. HULAN: Misery loves company, and so on. The

District of St. George's has a very high chronic employment problem. Our forest

industry is decimated and gone. We have probably two more years of wood supply

there for the Stephenville mill, and then we will have a lot of loggers and

truckers and so on out of jobs. Now thrown into that milieu is the closure of

the Flat Bay gypsum quarry.

At this stage are we any further ahead in finding a

possible buyer for the quarry, or a better sale, or a more solid sale for the

product that comes out of that?

DR. GIBBONS: At this time, no, but in a moment

I will ask Paul Dean to speak to this one because he may well be more up to date

on this than I am. It appears that the present operator will be moving out of

the operation by October of this year, and this year they will only be producing

for Corner Brook, for the gyproc wallboard plant in Corner Brook, not for their

own plants in the United States.

Some licences are reverting to government. Some

licences where mining has been active are being rehabilitated this year, and I

understand that there is some interest in the active licence, but I don't know

quite what has happened to it in the last few weeks.

We are going to promote the properties that have

not been developed. There is a large gypsum deposit in the Fischells area that

we are going to be trying to sell around the world, looking at the companies

that may be interested in doing some development there. At this time I would not

want to raise hopes; it is just that a big deposit needs promotion and we will

be promoting it.

Maybe I should ask Paul Dean if there is anything

further.

MR. DEAN: Thank you, Minister.

To be fair, I don't think there is a party

interested in purchasing the operation and operating it at the present time. The

remaining reserves at Flat Bay are not that great. There are probably about 4

million tons or so, or maybe less, at the quarries at Flat Bay, so our future

focus, as the minister said, will be on the large on-line deposit at Fischells,

and Domtar has surrendered that deposit to the Crown already, so we are doing

some preliminary work on Fischells just to see if it is feasible and what the

cost might be of bringing that deposit into production. When we have some idea

of what that cost is going to look like then, as the minister said, we will

market that deposit then.

MR. CHAIRMAN: Order, please! The member's time

is up. We will get back to you again, Dr. Hulan.

Now it is the intention of the Chair to make sure

that every member of the committee has an opportunity to ask whatever questions

he or she wishes, to a maximum of ten minutes. Once that has been done the Chair

will recognize whoever indicates that he or she wishes to ask questions. If it

is the same person each time, then that is the way it will go.

The next name on my list is Mr. Shelley.

MR. SHELLEY: Thank you, Mr. Chair.

Mr. Minister, I have basically a question for

dates, I guess, an update on the status of the amount of fill at the Baie Verte

site, just basically to find out where it is now. I know the second proposal

went in for the assessment, environmental, and just what time frames are we

talking about, where it is cut off, and when decisions will be made on that.

DR. GIBBONS: I have to say, Mr. Shelley, I am

not up to date on exactly where that one sits right now, so I will ask Paul

again, as he would be... I haven't heard anything on it.

MR. SHELLEY: I just want to know the basic time

frame, even if it is not exact. I just want to know where it is right now.

DR. GIBBONS: I have no idea.

MR. DEAN: Thank you, Minister.

Mr. Shelley, my understanding was that the revised

environmental review report for the Baie Verte mine fill project was to be

submitted to the Department of Environment and Lands last week. I am not aware

that has actually taken place, but I think the plan was that it be submitted

late last week. Then, I guess, there would be another forty-five day period -

MR. SHELLEY: Yes, that is what I am not sure

of. I just want to know the time frames, really.

MR. DEAN: I think it is forty-five days - I

stand to be corrected on that - whereby the Minister of Environment and Lands

announces that she has the revised preview report and it is available for public

viewing for that period of time. So she invites comments from the public for, I

think it is forty-five days.

MR. SHELLEY: Okay, then to continue with the

process - I mean that's what I am trying to find out - so once it is submitted

to the environmental minister, she announces that and then gives it forty-five

days from her announcement for any input from the public, I think that's right -

and then after that?

DR. GIBBONS: I can tell you what is going to

happen with that, it is not a project of the department -

MR. SHELLEY: No I know but it is related to

mines and energy. So I just thought I would ask it here to see -

DR. GIBBONS: Yes, they just proposed to use the

pits at Baie Verte between that company and the environment department.

MR. SHELLEY: Okay, so you cannot (inaudible).

DR. GIBBONS: I really don't know.

MR. SHELLEY: Just one final other quick

question, for another update again. Even since we talked the last time, of

course like the minister now, I hear so much hearsay and everything about the

gold situation there and I've heard it again this week. So I was just wondering

if there is any update on that particular project?

DR. GIBBONS: As far as I know they still

haven't got their money finalized. I don't know if Mr. Dean has everything in

sync since we were there last, a week-and-a-half ago. I have not because I have

been away. I only spent two nights in my bed in the last ten days so I have not

been here very much.

MR. SHELLEY: Okay, I just asked again because

of course it is the same drawn out thing and I keep getting asked by the media

and everybody else as well too.

DR. GIBBONS: Paul does not have anything either

but we did have some information related to your district regarding the Terra

Nova project. Apparently Cliff Resources has now taken its option for 50 per

cent and Paul can tell you the details of that, Paul Dean.

MR. SHELLEY: Okay, that was my next one.

MR. DEAN: On May 4, Cliff Resources exercised

its option to purchase 50 per cent of the Terra Nova operation at Baie Verte.

They purchased that from Princeton Mining, so Princeton is no longer involved in

the Baie Verte project at all. Cliff will actually own 50 per cent of the

project and is committed to spend 50 per cent of any additional funding required

to get the operation up and running efficiently.

MR. SHELLEY: So it looks very positive, as of

right now anyway. Is that fair to say?

MR. DEAN: Yes, I believe so. My understanding,

Mr. Shelley, is that at the present time there are some difficulties operating

the plant but that the prime cause of it appears to be the water temperature.

The water in Baie Verte is very cold at this time and some of the fibre is not

behaving as it should in these cold water temperatures but it looks like that

problem will be overcome as water temperatures improve.

MR. SHELLEY: Now as far as I understand it, the

Cliff Resources Group or the Terra Nova Group were actually talking with

Enterprise Newfoundland and Labrador about assistance and upgrading of some of

that equipment. Do you know if there is any status on that? Are you aware of

that?

MR. DEAN: No, Mr. Shelley, I'm not aware that

there is any change in the status of that request.

MR. SHELLEY: Okay. Thank you, Mr. Chairman.

MR. CHAIRMAN: Thank you, Mr. Shelley.

In keeping with the ruling that the Chair made a

few minutes ago, we go to Mr. Whelan.

MR. WHELAN: Thank you, Mr. Chairman.

Mr. Minister, I just wanted to get some sort of an

update - to change the topic somewhat - with regard to Hibernia and the delivery

of oil from Hibernia, specifically dealing with tankers. Will there need to be

tankers constructed for that or will they be using tankers that are already in

existence? If so, what companies will be involved with it?

DR. GIBBONS: Mr. Whelan, they propose to use

new builds. At this time they are talking about two, possibly three, with the

question being whether or not there is a trans-shipment facility. If there is a

trans-shipment facility, one, two or whatever number of trans-shipment

facilities, then they probably only need two tankers that will be purpose built,

new tankers. If there is no trans-shipment facility they will need three

tankers. The expectation now is that they would still have first oil in late

1997. The original

schedule called for first oil by July of 1997 but as a result

of announcements that we have all heard in the last few weeks, it looks like

they are going to miss the tow-out window in 1996 for the GBS. So that it would

be towing out early in 1997 and they hope to have it on site by mid-year in

order to have first oil by December. That is their present target. People have

acknowledged: Well, December could become January or February, but they are

still targeting first oil in December 1997, so the first tanker would have to be

available by that time, or probably the first two I think would be available by

that time.

So they would be new builds. There are proposal

calls out now for the selection of contractors to build these tankers or provide

these tankers. There hasn't been any final decision at this time as to who will

get that contract. In the fall of this year a decision will be made as to who

will get the contract for the tankers. They are looking at various means of

getting them (inaudible). They will be new, ice-reinforced, double-hulled and

things like that.

MR. WHELAN: I should have included in that

question as well supply vessels. I was wondering what port would be doing the

servicing for the Hibernia site, or for the Hibernia oilfield. Will it be the

site itself, or will it be St. John's or some other more convenient area?

DR. GIBBONS: In that regard I don't think there

has been any final decision made as to what port will be used. They are going to

be looking at the various port options. Construction of supply vessels has been

let. Marystown has won the contract for two and word is that there may be a

third one, there is an option for a third one. So there would be two new built

and possibly a third one for that. Marystown has the contract for the first two.

You are only talking about two or three vessels, you are not talking about a lot

of shipping, so it could well be St. John's, but it could be some other ports.

People have speculated that there may be some other ports. What is the status of

that right now?

AN HON. MEMBER: (Inaudible).

DR. GIBBONS: No change from what I've said, but

MR. WHELAN: When the rig is moved to the well

head and production starts, will there be a lot of activity with regard to

exploration as well as exploitation at that time?

DR. GIBBONS: Yes, we anticipate that there will

be extra drilling starting then in general in the region. For the Hibernia

development alone there will be over eighty wells drilled from the GBS very

quickly, so that is all from the gravity-based structure itself. We anticipate

that once the Hibernia rig goes to sea then there will be more exploration all

around Hibernia. Because there is still a lot of geological potential and there

are a lot of structures that have never been drilled. In another couple of years

it will be very busy out there, I believe.

MR. WHELAN: With regard to the offshore and

Labrador, a number of years ago there was quite a bit of activity up there and I

understood they were fairly optimistic that something would come of that. Have

they lost interest in that or is it still just on hold?

DR. GIBBONS: The discoveries in Labrador turned

out to be primarily gas rather than oil. There was a small amount of oil

associated with a couple of discoveries I think, but primarily gas. There are

five discoveries in the Labrador region and there are large gas fields.

Particularly in the Hopedale Channel there is a very large one. Presently it is

a matter of demand for natural gas and the economics of getting gas ashore.

There is no shortage at this time from mainland sources and the Labrador gas

would probably be some of the most expensive we could consider developing now,

considering where it is and how far away it is from markets.

There is some thought that maybe there will be

development in the next few years in the Nova Scotia gas, in the Sable Island

region. I know that the companies have been doing some changing around of

ownership positions over there to position themselves for future development

there. Again, that is much closer to the market in the northeastern United

States, eastern Canada, where there would be a possibility of shipping gas.

Sometime in the next century I believe we will see development of the Labrador

gas. I think you are talking two or three decades or more down the road. But it

is a gas field rather than oil fields, so it seems like companies have backed

off from exploring for that further right now.

MR. WHELAN: Thank you, Sir.

MR. CHAIRMAN: Thank you, Mr. Whelan. Ms. Verge.

MS. VERGE: Thank you. I will come back to

Hydro. CF(L)Co, which owns the Upper Churchill, from what we have heard, will go

into a deficit position in about four years time, with the deficit becoming

progressively worse, or the shortfall of revenue compared to operating

requirements becoming greater as the years go on. How does the government

propose to deal with the projected CF(L)Co deficit?

DR. GIBBONS: Ms. Verge, the truth of the matter

is, or the fact of the matter is, that is not going to happen in four years

time. For years there has been speculation of when CF(L)Co costs might outstrip

CF(L)Co revenues, and there have been a lot of projections over time. She could

probably look back to her own time in government and realize that at one time

there was a projection that CF(L)Co was going to run into a deficit by 1983.

This is 1994. It didn't happen in 1983. It didn't happen a few years later when

people were projecting it was going to go in deficit, and other people have

speculated at certain other times that CF(L)Co would go into deficit by a

certain date. It is not true that CF(L)Co will go into deficit in about four

years time. That is not the case, and right now, based on our detailed analysis

of CF(L)Co revenues and costs, and how we project these revenues and costs, we

don't foresee any problem in the next few years, and we frankly don't foresee

any problem that we will not be able to handle in some way. We think CF(L)Co is

safe.

MS. VERGE: Would the minister table, give the

committee members, copies of the government's detailed analysis of CF(L)Co?

DR. GIBBONS: I don't have a copy of the

detailed analysis. We have had the people at Hydro and CF(L)Co work together on

this, and look at cost and so on, and I don't have a piece of paper that I am

able to table. I could certainly look into the matter and see whether there is

something we could table, but I can assure her and others that everything that

we have seen indicates that we are not going to have a deficit position in the

near term, and I have not seen anything that would indicate any reason for us to

have concerns for many years. If there is anything happening in the distant

future, I think we will certainly be able to handle it.

MS. VERGE: The minister did say that the

government has had a detailed analysis done, and I am asking for a copy of that

detailed analysis.

DR. GIBBONS: We certainly ask the Hydro people

regularly to review the cost and the revenues related to its operations, and we

asked them to do that relative to CF(L)Co. I will check into that matter to see

if there is anything that we might be able to table, but certainly about a year

or so ago - I can't remember the exact timing - I had a review of CF(L)Co cost

and revenues and found no reason - no reason at all - to have any concerns about

it, so I think we should stop spreading the misinformation that CF(L)Co is going

to go into deficit in four years. That is not the case; it will not happen.

MS. VERGE: Well, people might be more trusting

of that statement if they could see a copy of the detailed analysis. Now the

minister has said that it is not his staff in the Department of Mines and

Energy, it is not public servants who work at Confederation Building who have

done this detailed analysis, or who have a copy of the detailed analysis, or who

know about the detailed analysis. It is the people at Hydro who have done it and

know about it, the same people who, with privatization, will work for the

private sector and will be at the command of whatever mainland private interests

own Hydro. Doesn't the minister think that the citizens and taxpayers of

Newfoundland and Labrador have a priority claim to that detailed analysis over

the mainland investors who will end up controlling a private Hydro?

DR. GIBBONS: I don't see mainland investors

controlling a private Hydro having any dealings to do with CF(L)Co. CF(L)Co.

operates with its own independent board of directors, its own independent

president. Sure, it reports through the Hydro group at this time and they also

report to me as the minister. I deal with them. We are still going to have good

people on that board and monitoring every cost and every revenue of CF(L)Co. in

the future.

As I said a moment ago, I will check to see whether

there is anything that might be appropriate to make public. I haven't seen a

written out document, text, like that, but we have had continued assessments of

the cost of all of our operations and one of them is CF(L)Co. I'm pleased with

what I've seen and we are not going to go into a deficit position in the near

term, and certainly we should not be spreading such erroneous information. It is

no more than the speculation that was there in the past when people, as I said

earlier, were speculating: It is going broke in 1983, or it is going broke in

some other year. It didn't happen, it is not going to happen now. A government

of the future that is still going to continue to own two-thirds approximately of

CF(L)Co. will ensure that things are done in an appropriate way, that we will

not have a problem.

MS. VERGE: If the minister is so confident in

saying that CF(L)Co. is in great shape and won't in a few years time go into a

deficit position why won't the minister make public projections of revenue and

cost year by year?

DR. GIBBONS: As I said, I will check to see if

there is anything that we may be able to make public.

MS. VERGE: But why wouldn't you make it public?

DR. GIBBONS: I will check and see.

MS. VERGE: Why wouldn't you share it with the

public of the Province?

DR. GIBBONS: I will check and see what is

possible, what is in that kind of form that we might be able to make it public.

But we do continue to monitor it, the CF(L)Co. board continues to monitor it,

and the CF(L)Co. report is published annually. We all know, based on information

that has been made public, that CF(L)Co. had a net profit again this year of

$11.2 million. It still has a considerable profit, a considerable cash flow

positive, and we don't foresee any problems. The analysis that we've had done

indicates that we should not have any problems. I don't think we should be

trying to make something negative of something that is not a negative.

MS. VERGE: How can we help it when we don't

have access to the analysis and the financial projections?

DR. GIBBONS: As I said, I would check to see if

there is anything that might be able to be made public on that but I am

satisfied myself. I have seen the analysis, I've seen the details. I know the

present situation with CF(L)Co., I know the profits that were made last year by

CF(L)Co., and we have no indication of any problems as indicated by the hon.

member. I think we should stop spreading that erroneous information around. I've

heard it several times in the last few months and I wish you would stop

spreading it.

MS. VERGE: If the minister has heard it several

times in the past few months, and if the minister has access to the analysis

that was done of Hydro, why hasn't the minister put out his projections to show

what he believes will be the likely annual revenue and cost of CF(L)Co. over the

next several years?

DR. GIBBONS: As I said, I will check to see if

there is anything that may be done in that regard. What I did say is that I have

heard yourself, Madam Member, make the statement in the past -

MS. VERGE: Yes, I've made the statement because

I believe it is true.

DR. GIBBONS: - (inaudible) tried to correct it

and say there is no problem, and it keeps getting repeated. There is no problem.

We are quite comfortable with that. There is no problem.

MS. VERGE: I would suggest to the minister that

people are not going to believe him unless he lays out his figures and gives a

satisfactory explanation of his estimates that CF(L)Co. is in great shape.

Now, questions about Hydro. The Premier in trying

to defend the indefensible, in trying to tell people that privatizing Hydro will

be good for them, suggests that rates will go up only about 11 per cent in the

next five years but that it is likely that a private operation will lead to some

efficiencies and some reduction in jobs which he hopes will be brought about

through attrition.

I notice in the 1983 annual report of Hydro, which

the minister tabled in the House of Assembly last week, that on Page 33 there is

an indication of total employment of the Hydro group of corporations year by

year from 1984 to 1993, inclusive. Now, for the five years that the minister and

his 'real change' administration have been in office the government has

eliminated probably over 3000 public sector jobs, many jobs in the health and

education sectors, health particularly, however there has been no reduction in

jobs in the Hydro group of companies. It has not changed appreciably but it is

slightly up from the number of jobs five years ago.

Has the minister made any effort to trim the

payroll in the Hydro group of companies, or lower the number of jobs? Obviously

the number is slightly up from what it was when the minister assumed office. Was

there any attempt to reduce the number of jobs at Hydro?

DR. GIBBONS: I think it was about a year ago

they laid off about twenty-eight people around the Province in terms of its

permanent staff, and, I think if the hon. member looks at that report the

numbers did decrease somewhat from 1992 to 1993, but there did have to be some

additions in certain sectors in Hydro so the number of permanent people is 1229

compared to 1246 in 1992.

MS. VERGE: It compares to 1219 in 1988.

DR. GIBBONS: And 1219 back in 1988.

MS. VERGE: And the number of temporary

employees increased from 215 to 266.

DR. GIBBONS: The number of temporary employees

fluctuated up and down depending on certain things that the Hydro group were

doing, where they would need to hire temporary employees. In that group of

temporary employees you get a lot of apprentices as well and some others in that

category. I know there were thirty or so apprentices this year in the number.

MS. VERGE: And co-op students.

DR. GIBBONS: And students as well. There are

students and so on included in that temporary number. They come and go.

Hydro regularly has had assessments done as well on

the staffing levels it needs. It has had external groups come in and review its

operations to determine what would be the optimum number of people and what it

should do with its whole organization. It has been told it is fairly efficient

but do this and this. As I said about a year ago they did lay off about

twenty-eight people around the Province as they were doing some reorganizing,

but the number has not changed dramatically.

MS. VERGE: Does the minister believe that the

current staffing level is about right, or does he think it is excessive?

DR. GIBBONS: The external people who have

analyzed Hydro consider it to be an efficiently run operation so it is not for

me to speculate otherwise. In talking about privatization we have said many

times that we do not consider this to be a jobs issue and we leave it at that.

MS. VERGE: The Premier has said that he expects

that a private corporation would reduce payroll and he hopes it would be done

through attrition. Would the minister make public the external evaluations of

staffing levels at Hydro?

DR. GIBBONS: That may well already be public. I

do not know but I will check into that.

MS. VERGE: A lot of the people out in the

population who are worried about the government's proposal to privatize Hydro

would like to have the external evaluation of Hydro's staffing level.

DR. GIBBONS: I am not sure. As I said, it may

already be public because the Public Utilities Board requires that Hydro do an

assessment regularly and I think it is supposed to be filed. I am not 100 per

cent sure -

MS. VERGE: Well in that case the minister

should have no trouble in giving it to the committee.

DR. GIBBONS: - I think it is supposed to be

filed with the Public Utilities Board, so I could check on that matter and see

the status of these assessments that have been done but certainly -

MS. VERGE: But would the minister in

particular, provide copies of the external evaluation of Hydro's staffing levels

to the committee?

MR. CHAIRMAN: Order, please!

The hon. member's time is up.

DR. GIBBONS: I will check on that and see what

is possible.

MR. CHAIRMAN: Dr. Hulan.

DR. HULAN: Thank you, Mr. Chairman.

Mr. Minister, as I listened to you answer the

questions, I know you are very pleased with so many things going on in this

Province right now and the difficulties we have, that you always look at the

glass as half full and not half empty, and so I commend you for that.

The gold deposit that was recently announced on

Glover Island, I heard it under a news report; is that real or, is there any

information you may have on that right now?

DR. GIBBONS: Yes, Dr. Hulan. There is no

question it is real; the question is I guess, the size of it and whether or not

it is economic; that was one of the projects that we helped support last year

under our exploration projects owned by a local Newfoundland company, and I

remember seeing a press release myself, from the company just a few days ago,

where, they announced some of their latest figures, and I think they said it was

something over 4 million tons of reserve at .06 gold. They still need to do more

work on it and I think they will be doing more work on it.

I have not heard the details of their plans for '94

yet, but certainly that is one of our better prospects. It is one of the better

prospects for the Province but it is still not a mineable deposit. I would like

to see the grade a little better; the tonnage is good if the grade were a little

better, but some of the other small deposits that we know, for example, on the

Baie Verte Peninsula, have better grades, and the Hope Brook mines, instead of

.06 I think it is .14, a combination of grade and size, but clearly the company

will be doing more work. It is a very interesting deposit and a very interesting

area.

DR. HULAN: Just one more question, Mr.

Minister, and I will go back to the peat-burning project proposal for two of the

Stanton groups. Considering the economic multipliers that would be involved in

that project in the District of St. George's and the general area, and

considering the importance of that project if I understand it correctly - now

you can correct me here - to the survival actually, not the total survival but a

major factor probably in the survival of the Stephenville mill, you and your

officials I know are taking all of these things into consideration but putting

it altogether, how positive is it looking?

DR. GIBBONS: Well, I really don't know, Dr.

Hulan.

As I said earlier, it has to be taken in the

context of the electricity demands of the Province and really, Hydro should not

be putting on stream new supplies of electricity until they are needed, because

if they are put on stream before they are needed someone has to pay for them,

particularly the rate payers of the Province will have to pay for them, so I

would rather not speculate on it at all, but we have done a lot of work with the

companies over the last couple of years, and I just wish the economy was booming

along so that we would not have to question the next sources of supply, but we

would like to have the least cost options going to the grid because the rate

payers have to pay for them. There is a process in the new proposal act, the

Power Control Act, which would see the Public Utilities Board evaluating all

possible options for future development and picking out one which is going to be

the lowest possible cost to the rate payers.

As I said, I don't speculate on it, but I would

like to see a booming economy with lots of new projects coming on in

electricity.

DR. HULAN: One final comment, again, because of

the problem the closure of Domtar at Flat Bay is creating, I met with a group of

individuals this past weekend who are interested in something that I think I

made comment on last year in this committee review, the tremendous resource that

we have here in this Province with regard to peat - not for burning peat, but

providing peat to the Middle East as a source of organic matter for their sandy

soils, and that is a real thing. We now have one company doing just that in the

form of an organic fertilizer, Genesis out of the Corner Brook area, but there

is a possibility of a major industry starting there, or at least there is some

indication that these people... I don't know if they have contacted you people

yet, but this is just in its infant stage of enquiry, I guess, and they came to

me since it is in my district, but it is a possibility that we may have

something there. They are specifically interested in the Domtar site.

DR. GIBBONS: I am not aware that anyone has

come to us recently relative to the Domtar site in that regard, but over the

last few years occasionally we have had people come in to us and talk about peat

for export, using tankers or some other way, and there is nothing more we would

like to see if they can do it economically. Transportation cost is such a major

part of the cost, peat itself not really being a high value product.

DR. HULAN: Am I to understand then, Mr.

Minister, that any enquiry in the past, then, has not come through because of

economics of transporting the product?

DR. GIBBONS: It seems to be a concern about the

economics of transport. We have been looking at mechanisms for transporting it

economically, but certainly we are very supportive of any company that wants to

develop a peat bog for export. We have huge supplies, as you well know, so if

that can be done and someone can do it economically then let us proceed with it.

DR. HULAN: I am especially interested, since I

am the MHA of peat bog, because we have so much in the District of St. George's.

Anyhow, we will follow that up and be encouraging it, I can assure you.

Thank you, Sir.

DR. GIBBONS: You are welcome.

MR. CHAIRMAN: Mr. Whelan.

MR. WHELAN: Mr. Minister, with regard to

Newfoundland Hydro again, I understand that the sole mandate of Newfoundland

Hydro is to create electricity. Is that true?

DR. GIBBONS: I see that as their mandate, to

produce and distribute electricity for sale. I think that is their number one

prime mandate, yes.

MR. WHELAN: A privatized Hydro, would they have

the same mandate or would it be expanded?

DR. GIBBONS: I would see it the same way. That

would be their prime mandate, to produce and distribute electricity at the

lowest possible rate for the Newfoundland rate payer.

MR. WHELAN: New Hydro itself, would they have

the capability, the legal capability, of expanding to other facets of business,

based on the prime business of producing electricity?

DR. GIBBONS: I personally prefer to see them

stick to their mandate, electricity distribution. We have the example in the

province of Newfoundland Light and Power, which is again a pure electricity

company in its own right. It produces some, distributes a lot, but its parent

company, Fortis, has spread out into other types of ventures. It has spread out

into other types of ventures as a parent company, and I would personally prefer

to see a private Hydro concentrate on its key business, its core business, but I

don't know what a future might hold in terms of a diversification away from that

by a parent -

MR. WHELAN: I just asked a hypothetical

question. You have addressed a number of hypothetical questions this morning, so

I suppose one more won't hurt. Is there a possibility that a new Hydro, a

privatized Hydro, might create more jobs than the potential loss of jobs?

DR. GIBBONS: Well, I don't know. If you

concentrate purely on the electricity part, I don't see a great possibility for

expansion in the pure electricity part.

MR. WHELAN: Well, I was thinking along the

lines of diversification, their ability to diversify as opposed to (inaudible).

DR. GIBBONS: Yes, but certainly the ability is

there to diversify, to do like Light and Power has done and get into other types

of ventures which may result in some growth in other sectors. For example in the

Light and Power case where they have gotten involved with NewTel, trust

companies and others. There may be other sectors since Hydro might reorganized

itself - involved in but we would want Hydro, as an electrical company, to

concentrate on electricity. That would be my view, that we want to see it

produce and provide electricity to the rate payers of Newfoundland for the

lowest possible cost.

MR. WHELAN: I heard a news item, I think it was

a couple of weeks ago, something to the effect that there was a revived interest

in modifying cars to burn propane or some other types of natural gas. Is there

anything new on that in the Province? Is there any renewed interest in this

particular area?

DR. GIBBONS: Yes, about a year ago we signed a

joint agreement with the federal government and with Superior Propane for five

years to try to convert up to 2,000 vehicles with emphasis being on fleet

vehicles because they have higher mileage and that is when the economics become

better. So that we - well if we continue to promote for the next few years, in

our case we reduce the gas tax by half. We cut it down to about 7 cents per

litre from, I think it is 13.7 cents or so otherwise. So we are doing that to

help stimulate the propane sector because it is an environmentally friendly fuel

and it is one that we do not use a lot for transportation. Agencies that have

big fleets of vehicles, travelling long distances, can do it economically using

propane.

MR. WHELAN: How is the program working out

then?

DR. GIBBONS: It seems to be working out fairly

well.

MR. WHELAN: Thank you, Mr. Chairman.

MR. CHAIRMAN: Thank you, Mr. Whelan. Ms. Verge.

MS. VERGE: Back to Hydro, the minister just

said that he would want or the government would want Hydro to continue to

produce electricity to serve Newfoundland and Labrador consumers and sell it to

consumers at the lowest possible cost. If that is really what the government

wants then why is the government even thinking about privatizing Hydro because

privatizing Hydro is going to lead to - very quickly after the first couple

years of subsidiary and cushion - to annual rate increases of $50 million or so?

How can the minister possibly talk about providing electricity at the lowest

possible cost through a privatized corporation?

DR. GIBBONS: I believe that the hon. member is

confusing two factors again. There are no subsidiaries going into this to do -

MS. VERGE: What about the $15 million a year

rate stabilization fund, the $20 million pension top-up and the rebate of

federal corporate income tax?

DR. GIBBONS: The federal corporate tax, PUITTA,

is going back through the companies to keep rates down and that will continue,

that is not a rebate to the companies. It is to keep rates down and that will

continue. I don't know what the pension top-up has to do with it at all. That is

a liability of the government, it will always be there and it is being addressed

at this time. The $15 million rate adjustment fund is to accommodate a phase-out

where the industrial sector right now makes a contribution to the rural deficit

for the rural diesel areas and other rural areas that do not pay their full

share. While we are phasing it out from the industrial customers we are

providing this $15 million fund to phase it into the other sector and that is

all (inaudible).

MS. VERGE: It is a subsidiary but the point is

the rates are going to go way up -

DR. GIBBONS: No they are not.

MS. VERGE: - to the tune of $50 million a year,

they have to.

DR. GIBBONS: No, no they don't.

MS. VERGE: The government's propaganda - the

Premier's propaganda acknowledges rate increases of 11 per cent over the first

five years. That is a distorted projection but objective assessments, including

that of Wade Locke at Memorial's Economics Department, indicate annual rate

increases of $50 million or more.

DR. GIBBONS: No, our analysis shows and we have

made it public from the first press conference on -

MS. VERGE: That press conference was -

MR. CHAIRMAN: Order, please!

I would have to remind the hon. member to my left

that she is not giving the minister time to answer her questions, she keeps

interjecting. So I would suggest that if she wants the minister to answer her

questions that she give him time to do so.

DR. GIBBONS: The net cost for us, as a result

of this, we have said is approximately $25 million per year and we do not see

that net cost increasing per year in any way. As far as I know it stays around

$25 million per year.

MS. VERGE: So you are admitting to annual rate

increases of $25 million?

DR. GIBBONS: No, I did not say annual rate

increases. I said there was a cost of $25 million to recapitalize the company

and that does not jump by $25 million a year after that. It is approximately $25

million extra and that translates into, as we showed, about a 2 per cent per

year increase for the first five years compared to a 1.7 per cent increase per

year for the first five under a public scenario and that is assuming that no

efficiencies are found in the private sector.

MS. VERGE: But why would you insinuate that

efficiencies are going to be found when just a few minutes ago you said that an

external objective evaluation of Hydro concluded that staffing levels were

appropriate and that it is an efficiently run corporation?

DR. GIBBONS: Well, efficiencies are not solely

related to staffing levels, certainly not solely related to staffing levels.

There are other things that can cost the company extra. I feel and others feel

that over time the company would be able to operate more efficiently as a

private company then it now operates burdened by government.

MS. VERGE: How do you think a private operation

could improve efficiency if it is not reducing payroll?

DR. GIBBONS: Well there may well be I guess but

right at this time we are not speculating that there would be any reduction in

payroll and -

MS. VERGE: But why are you speculating there

might be a reduction in (inaudible)?

DR. GIBBONS: But there are things that can be

done. Right now for example everything has to be done through the public tender

process in government and we burden the company with having to do things that

way. The company may be able to find ways of doing things without having to do

that and do it cheaper. I think that a private company will probably find ways

to do things cheaper and it is not for me to speculate on the ways they may find

MS. VERGE: Well if you think the public tender

process is an unnecessary burden why don't you remove that now then, you have

that power as a government?

DR. GIBBONS: The nature of government is that

we require everything to be done through the public tendering process.

MS. VERGE: Well you don't have to if it is

inefficient, if it is costing. What assumptions is the minister making in

projecting that there will not be significant rate increases? The debt equity

ratio now is 80/18 according to the annual report the minister made public last

week.

DR. GIBBONS: That is correct.

MS. VERGE: What debt equity ratio is the

minister assuming that a privatized corporation would have?

DR. GIBBONS: What we said publicly, in the

first press conference, is that we anticipate that a new Hydro, a private Hydro

would have a debt equity of about 57/43. Approximately 57/43 which is similar, I

think, to what Light and Power is today.

MS. VERGE: Okay, does the minister acknowledge

that debt is a fair bit less expensive than equity?

DR. GIBBONS: Well that depends on the interest

rates.

MS. VERGE: Obviously.

DR. GIBBONS: It depends on the rate of return

on equity.

MS. VERGE: So what figures are in the ministers

assumptions for interest rates?

DR. GIBBONS: I don't have the details of all

that in front of me and we have never made public all these details either, and

I don't think I -

MS. VERGE: That is why people don't believe

what you are saying, with respect. Is the minister expecting that the Public

Utilities Board would order the same rate of return equity for a private Hydro

as for privately owned Newfoundland Light and Power?

DR. GIBBONS: I don't see why they wouldn't

treat both private companies the same. Of course.

MS. VERGE: Okay. The rate of return now for

Light and Power, rate of return on equity, is what? About 13.7 per cent, 13.5

per cent?

DR. GIBBONS: I've heard that number repeated by

yourself. I don't know what the rate of return is by Light and Power at this

time. I would say that the rate of return that Light and Power gets now was set

the last time it went in for a rate hearing. I'm not sure if that was 1991 or

1992. It was a long time ago. That was before the recession we've had.

MS. VERGE: Before interest rates went up.

DR. GIBBONS: Before the recession we've gone

through, when interest rates were quite high, when they were in there.

MS. VERGE: The average annual interest rate

paid on Hydro debt, about 10 per cent?

DR. GIBBONS: That is in the book if you can

calculate it. I haven't calculated the average. It is there in the annual report

that we tabled last week and -

MS. VERGE: About 10 per cent.

DR. GIBBONS: - it varies considerably. It is

probably in the 10 per cent to 10.5 per cent range. I haven't taken out a

calculator and calculated it.

MS. VERGE: You must make some assumptions about

interest rates to be able to project -

DR. GIBBONS: Sure.

MS. VERGE: - the difference between rates under

public ownership and private ownership.

DR. GIBBONS: Of course.

MS. VERGE: What assumptions did you make?

DR. GIBBONS: I don't know the details right

now. I can't give you the details off the top of my head.

MS. VERGE: Is that because you are not really

involved in any of this privatization?

DR. GIBBONS: No, that is not so.

MS. VERGE: Is that because the Premier is

handling it and has marginalized the minister and the Department of Mines and

Energy?

DR. GIBBONS: No. I haven't tried to memorize

all the figures related to this, and I'm not going to try to memorize all the

figures related to this.

MS. VERGE: You didn't bring them with you this

morning because you didn't think it would come up?

DR. GIBBONS: No. I'm hear to defend the twelve

point something million dollar budget of the Department of Mines and Energy and

Hydro does not appear in this budget as a line item. It does not appear in this

budget, it did not appear last year in this budget, it does not appear this

year, and would have no reason to appear any year.

MR. CHAIRMAN: Those figures are not in the

estimates that we will be asked to approve today are they, Mr. Minister?

DR. GIBBONS: No they are not (inaudible).

MS. VERGE: We already had a discussion about

this the last time. One of the minister's nominal responsibilities, even if the

Premier is in fact exercising it, is Hydro. The minister's salary is in these

estimates.

The difference between the average interest rate

paid on Hydro debt, 10 per cent, and the 13.7 per cent -

DR. GIBBONS: Ten per cent, 10.5 per cent. I

haven't calculated it.

MS. VERGE: It is not hard to figure out.

DR. GIBBONS: I'm not going to play games with

the hon. member on numbers, nor am I going to play games with the hon. member,

but what may or may not be the rate of return on equity that would be allowed

today by (inaudible) -

MS. VERGE: But you have to make assumptions.

DR. GIBBONS: I know that.

MS. VERGE: You have to make the best educated

estimates of those interest rates if you are going to make a statement about the

effect on rates of privatization.

DR. GIBBONS: We have done that now.

MS. VERGE: That is what I'm asking for.

DR. GIBBONS: We have done that. I am not here

to defend the details of those numbers today. I did not bring those numbers and

MS. VERGE: Will you get them and give them to

the Committee?

DR. GIBBONS: At this time we have not made any

decision on when we are going to give out the details like that, and there are

certain limitations on us, as you know and we have said, as to what we can put

out there before we can put out a prospectus.

At a certain time we will put out a prospectus that

will include all these details, but until we do that there are limitations that

are put on us by securities commission regulations, and I cannot be going out in

a piecemeal way with that type of information. When the prospectus is put out it

will all be there, all the information you need.

MS. VERGE: The prospectus won't be an issue

until legislation is passed in the House of Assembly. Surely the people expected

to vote on that legislation, and the constituents we represent, should have all

that information before the final decision is made.

DR. GIBBONS: I am not going to speculate on the

numbers.

MS. VERGE: The problem is, you and your

government are speculating on numbers, and you are giving false projections -

DR. GIBBONS: We are not giving false

projections.

MS. VERGE: And you are trying to mislead

people. Now, as it happens, people don't believe you.

MR. CHAIRMAN: Order, please!

DR. GIBBONS: We are giving the most accurate

information we can.

MR. CHAIRMAN: Order, please!

MS. VERGE: Obviously you are not. You are

saying here this morning that you don't even have the figures in your head, and

you didn't bring the documents.

MR. CHAIRMAN: Order, please! The Chair has

called for order.

The Member for Humber East is entering into debate,

and I would remind the member that there will be an opportunity for three hours

in the House of Assembly to debate the motion to concur in the report of this

committee, and that is the opportune time for the member and any other Members

of the House of Assembly to debate what is happening here today.

If the member has any specific questions, I would

ask that the minister do his best to answer them. Other than that, I would ask

that the minister not engage in debate.

Ms. Verge.

MS. VERGE: Thank you.

I thought we were here to debate the estimates of

the Department of Mines and Energy. Quite honestly, I don't think there is much

point for me to keep questioning the minister. The minister either doesn't know

or is under orders from the Premier not to reveal the truth about whatever

calculations and projections the government has done about Hydro privatization,

so there is really not much point for me to continue.

MR. CHAIRMAN: Shall we call the subheads?

On motion, subheads 1.1.01 through 5.1.03 carried.

On motion, Department of Mines and Energy, total

heads carried.

MR. CHAIRMAN: Before I entertain a motion to

adjourn, I would like to give the minister an opportunity to make a closing

statement if he so wishes.

DR. GIBBONS: Mr. Chair, I thank you and your

committee. I appreciate the opportunity to discuss our estimates. Thank you very

much.

MR. CHAIRMAN: I would like to thank the

minister and his officials for coming again the second time. I would like to

thank him for the manner in which he has been forthright with his answers to the

questions. I would like to thank the members of our committee, and Ms. Verge who

filled in for Mr. Woodford, and I would like to thank the other members who have

been so loyal to us, the Table officers, the pages, and the people who have been

working to make sure that this is transcribed for posterity. Having said that, I

will entertain a motion to adjourn.

On motion, committee adjourned.