1996 Legislative Session: 1st Session, 36th Parliament

HANSARD

The following electronic version is for informational purposes only.

The printed version remains the official version.

Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)

WEDNESDAY, JULY 31, 1996

Afternoon

Volume 2, Number 10,

Part 2

[ Page 1275 ]

The House resumed at 6:40 p.m.

[The Speaker in the chair.]

Hon. D. Streifel: I call Committee of Supply. In Committee A, for the information of the House, we'll be examining the estimates for the Ministry of Employment and Investment and for the Ministry of Municipal Affairs -- and, if I remember the TV screen, a multitude of other responsibilities. And in Committee B, we will call in the Minister of Forests, to examine his estimates.

The House in Committee of Supply B; G. Brewin in the chair.

ESTIMATES: MINISTRY OF FORESTS

(continued)

On vote 36: minister's office, $432,868 (continued).

T. Nebbeling: Before we broke for dinner, we were talking about the Forest Practices Board, its membership and its functions, and we started to touch on the budget. Could the minister repeat how much the budget is for the board?

Hon. D. Zirnhelt: This year's budget is $4.3 million; that's in vote 63.

T. Nebbeling: Could you also give me the budget for '95-96?

Hon. D. Zirnhelt: The budget for '95-96 was $2.29 million.

T. Nebbeling: Could the minister give me a rundown on how the process works: how the funds are made available to the board, who monitors this fund and how it is spent? Who's really accountable? Does the board report to the minister, or does another body check how that fund is spent?

Hon. D. Zirnhelt: For convenience, we're allowing some latitude in discussing this. Vote 63 is not actually part of the Forests ministry's estimates. For convenience, it's placed with the Ministry of Environment, Lands and Parks estimates. The two ministers are jointly responsible in terms of the reporting relationship, but the financial monitoring would be through the Ministry of Environment, Lands and Parks.

T. Nebbeling: So who's responsible for the implementation of the Forest Practices Code?

Hon. D. Zirnhelt: As I understand the question, it is: who's responsible for administering the code? There are three ministries that are responsible: Forests; Environment, Lands and Parks; and Employment and Investment.

T. Nebbeling: Is the minister telling me that the Ministry of Forests does not contribute towards that $2.9 million, which was the budget for last year?

[6:45]

Hon. D. Zirnhelt: Perhaps I could describe it this way. This particular vote is under the envelope of those votes that are the responsibility of the Minister of Environment, Lands and Parks. So there is a reporting relationship, but the financial accounting and the estimates -- the budgetary processes -- are with the Environment, Lands and Parks ministry.

T. Nebbeling: Have you had a report, then, on the budget expenditure of the board?

Hon. D. Zirnhelt: No, that report would go to the Minister of Environment, Lands and Parks.

T. Nebbeling: Just to make sure, the minister does not know what the expenditure of the Forest Renewal board has been or if indeed, as I asked earlier on, they have spent the full $2.2 million. If they haven't, is the minister telling me that he's not aware what amount has been returned to general revenue, which he told us earlier on is the way this money normally flows?

The Chair: I wonder if I might just ask for my own edification how this relates to vote 36, which at this stage is around $432,000. Hon. minister, perhaps you could clarify it for all of us.

Hon. D. Zirnhelt: Yes. As a minister -- and this is my office budget -- I do have this agency reporting to me, but not for financial accounting purposes. So I don't have the information the member is asking for. I can get it for him. We'll get it as quickly as we can, we'll pass it to him, and he can pick it up later. The Minister of Environment is responsible, really, but we can certainly talk about the policy, objectives and the performance of this particular agency, as it does report to me.

The Chair: So, hon. member, do you understand that as well as I do about what it makes sense to talk about?

T. Nebbeling: Yes.

The Chair: You may proceed.

T. Nebbeling: Thank you, Madam Chair. The minister mentioned the budget prior to when we went for dinner, so that's why I had some questions on the budget.

The Chair: I think the hon. minister clarified that the hon. member can talk about policy around all of that, but not necessarily about the budget, because it's in another ministry.

T. Nebbeling: Before dinner we finished talking about the system that is in place to monitor the activities under the Forest Practices Code, and I believe that is within the minister's guidelines dealing with that bill.

Hon. D. Zirnhelt: Yes.

T. Nebbeling: Before dinner I asked the minister if he could give me a rundown on how the whole monitoring process works as far as the implementation of the Forest Practices Code is concerned, and on the role of this board.

Hon. D. Zirnhelt: The Forest Practices Code is a major piece of legislation which, coupled with the Forest Act, governs the activities of our district offices. Our field offices spend a good amount of their time applying the code, either approving cutting permits or one of the many plans, or monitoring

[ Page 1276 ]

and enforcing the code. The role of the board is to be there to audit independently, as we said before. It watches what all the people who function in the forest harvesting and management system do. They monitor that, and they will take complaints about the application of the Forest Practices Code to particular activities and events. They will, having conducted an investigation or audit, report those. They also have the role of referring a particular complaint to an appeal process. It might be one of the appeal processes under the Forest Act, for example.

It might be somebody appealing a decision of the forest manager, because he made a ruling or someone in operations made a ruling. I'm trying to simplify the role. They are at arm's length from the Ministry of Forests. They watch what the Ministry of Forests is doing under, say, the small business program or what is happening under any of those people who are licensed to operate under the Forest Act.

T. Nebbeling: When the minister says people are watching in the field and taking complaints, I don't understand. Are these people not working for the Ministry of Forests? The way you talk about it, it is as if these are independent bodies not related to the Ministry of Forests. I was under the impression that you actually do employ these people.

Hon. D. Zirnhelt: Well, what happens is very complicated. Anybody can take a complaint anywhere they want. They could go to a district office; they could go to a regional office; indeed, they might even write to the minister. Then we have to get it into the appropriate process. People are free to take their complaints to this independent board if they wish. Many complaints are taken directly to Ministry of Forests operations at the district level, and they're obliged to go out and investigate if, somewhere in the decision chain, they have made a mistake or somebody is not complying.

So there are many levels at which the Forest Practices Code is enforced. The ministries and the government employees are doing the enforcement. All these people do is review or investigate decisions, or conduct independent audits when they want to. But as far as investigations are concerned, they kick in when a member of the public presses a complaint.

T. Nebbeling: Let's go beyond the board, then, for a moment and into the district office. I believe there are a number of people employed in every office who are there specifically to go into the field and implement the Forest Practices Code. Or maybe I phrased it incorrectly; it's not to implement the Forest Practices Code but to make sure that indeed the Forest Practices Code is being implemented according to the code.

Hon. D. Zirnhelt: The actual philosophy that the ministry undertakes to enforce is really one of promoting compliance, as opposed to just looking for opportunities to take enforcement measures. But, where necessary, officials have the authority to do, and will do, appropriate enforcement activities.

Just to give you an example, last year, to determine industry compliance with the code, the compliance and enforcement staff -- that's what they're called -- carried out over 30,000 compliance inspections between June 15, '95, and June 15, '96. These compliance inspections revealed a total of 2,545 incidents which required some action. Of those incidents, the ministry worked with the licensees to resolve 942, and ministry officials took formal enforcement action 386 times. So we were able to encourage compliance in almost three times more cases than those in which we were forced to take some kind of enforcement action.

T. Nebbeling: Are these enforcement-takers hired for that specific purpose, or were they employees in the forest districts that were given that additional task -- or have even given up their existing jobs to take on that task, which would make them full-time enforcers?

Hon. D. Zirnhelt: The answer is some of both. Some people were already there who had the qualifications, experience and interest to go into this business, and in some cases we hired people especially to do that.

T. Nebbeling: The people who do a bit of both, as the minister explained -- the job they had before they got involved with Forest Practices Code enforcement.... Is there any reporting to the ministry? Or are there any rumblings within the district offices that this enforcement portion that has been imposed on them is becoming burdensome?

Hon. D. Zirnhelt: There were new resources provided by government to the ministry for the enforcement function. They didn't directly take away from the jobs that other people were doing.

T. Nebbeling: I know that there were new resources made available to increase staffing, but I'm also under the impression that a substantial number of forest workers have been given an additional task: to go into the bush and to do checks on the implementation of the Forest Practices Code in the field. That's the type of people I'm talking about. My previous question, about disgruntlement and the level of discontent within the district offices today, was based on the fact that people are now made to be policemen, where before they were foresters. Is that coming to the minister's attention, and is there reason for concern?

Hon. D. Zirnhelt: I don't think there's reason for concern. You have to watch when you bring in change and you've created code implementation, across all its facets, as the highest priority. It's a new code. There's bound to be a learning curve; there are bound to be frustrations. I would be surprised if there weren't some frustrations. Although the best forest practices in the world can be prescribed, if you haven't got a way to enforce and require compliance with good prescriptions, then there can be a problem.

If there has been a problem in the past, it's because professional foresters and others in the system haven't been able, or haven't been directed, to create a high standard of performance. The new code came in; it brought procedures, because they have the force of law in the end. You can't have people with infinite discretion out there making decisions that are different, inconsistent and not based on a very thorough standard that has been laid down.

T. Nebbeling: I'm very happy that the minister said: "Now we have to watch." That's exactly the question I had for the minister three questions ago when I asked about what is in place to monitor what happens in the forest and to make sure the people doing the enforcement have a system that can send messages back to the minister. That is what I meant by: "Are you watching what's happening out there?" and "How do they report back to you?" and "How did they feel about the role they have to play?" It is the enforcement, the monitoring of the enforcement and the collection of the information that I was asking about earlier on. Your last answer went in that direction.

[ Page 1277 ]

Hon. D. Zirnhelt: I tried to explain what the ministry has done to try to bring order to this kind of change. We established a compliance and enforcement branch that reports to an assistant deputy minister of operations, so right here at the executive level there is a branch that checks on what's happening and that assists and monitors what's going on in the field. They have developed and implemented a compliance and enforcement training curriculum for officials and support staff.

With respect to the enforcement, we've got an information-tracking system, as well, to track enforcement activities and trends, and there is a set of policies and procedures for compliance and enforcement. So you've got the procedures, you've got training, you've got an information system, and you've got an organization that reports to headquarters.

T. Nebbeling: That's exactly what I was looking for. There is a branch doing all these functions, to train and to bring together all the information that is accumulated. What's the name of this branch?

[7:00]

Hon. D. Zirnhelt: The name is the compliance and enforcement branch. But just to be helpful to the member, there are some 400 people involved in code implementation and compliance and enforcement across the whole ministry.

T. Nebbeling: There are 400 people working under the umbrella of this branch, or 400 people working in the field and reporting to this branch?

Hon. D. Zirnhelt: There are approximately ten people in Victoria in the branch headquarters. But, again, approximately 400 people are out in the field doing the work. So there is a small group here doing monitoring, management information, and policies, procedures and training development, and there are 400 people in the field.

T. Nebbeling: These 400 people -- are they 100 percent occupied doing the job you just described, or are they part of that force that already worked in the forest district and was given an additional task?

Hon. D. Zirnhelt: There has been reorganization in the districts, so some people are working full-time and some people do this in addition to their other duties. Generally, they have a choice of the jobs that they do. Some people blend activities; some are full-time.

T. Nebbeling: Now I'm getting to where I wanted to go, and that is identifying who is playing what role. I think the 400 people you talk about are indeed the people I previously described as, in part, being discontented with the fact that they have been made policemen over being foresters. Then, over that body of 400 -- if I'm getting it right, and I ask the minister to check if I'm putting it right -- is this so-called compliance agency or branch, which consists of ten people.

Hon. D. Zirnhelt: The compliance and enforcement branch -- the ten people -- is a service to those people out in the field, to make their job easier. As to your comment about whether they're grumbling about it, well, no one probably likes being a regulator. But as I pointed out in some of those statistics, they are to encourage compliance. If they find it difficult to do their job, then training has been made available so that it's easier for them to do their job.

T. Nebbeling: If we talk about training, how many hours in total has the ministry spent on training these people? What is the average time period that every one of these 400 people has been going to class to learn the Forest Practices Code, which is a very complicated document? And how are they checked, so that they implement it in the proper way?

Hon. D. Zirnhelt: We don't have the exact figures; we'll get them for you. It's probably one of the biggest training programs in the history of the public service in British Columbia. It's certainly the largest the Forest Service has undertaken, and we say it's probably the largest in the public service. We knew that it wouldn't be possible to bring about change.... You know from the press that people are saying: "You aren't monitoring enough. You're not thorough enough." So to get this up and running would require training. There was no way to get it up and running without the training.

T. Nebbeling: Like the minister says, it is a very complicated document. I do not necessarily take my information from the press. I live in a timber supply area, and I talk to a lot of people who work in the timber supply area. I talk to a lot of people who work in the district offices. Your deputy minister knows that I've been involved with the forestry issues in the Sea to Sky corridor for a number of years. So I have a very good relationship with many people who work in either the district or in the field.

One of the things I constantly hear is that many decisions are not made because the code is so complicated. It's not that the ministry hasn't tried to educate the workers; it is just that the implementation of the code can go so many different ways on every issue that it creates a lot of turbulence. I would like to ask the minister: how are we going to get past that? We are now in the second year of implementation of the code. There has to be a moment, through whatever mechanism the ministry is thinking of, when the Forest Practices Code can be implemented in an effective and reasonable manner.

Hon. D. Zirnhelt: When the code was brought in, it was called a living document, so this is an evolutionary process. As we find inadequacies or complications that provide problems, we learn from that, and we will make changes. We focus on the operational planning regulation, which is the key regulation that gives effect to the planning process, to ensure compliance with the code in the prescriptions. So we learn, and I think that by this time next year, things will be a lot smoother. We're actually pleased with the way it's rolling out, and I just put out the caution that it is change.

We have to teach loggers new ways of doing it. My own experience is that they don't want to get rid of the code. While they may be frustrated, they don't want to go back to pre-code days. They do want to smooth out some of the wrinkles, there's no question about that, and we will be doing that.

T. Nebbeling: I agree with the minister that the Forest Practices Code must be a living document. The unfortunate thing is that it has killed a lot of incentives, especially amongst the smaller operators. It is not that they are afraid of the code, Mr. Minister. They're afraid of the lack of knowledge and of the lack of decision-making and willingness, if that is the proper word, amongst the people who are in the field trying to implement it. The main reason, I believe, is that the

[ Page 1278 ]

enforcers are very uncomfortable with the code because it is either too strict or not clear enough. I don't think we can stick our heads in the sand today and pretend that the code is a workable document. It is not, as far as the reporting to me is concerned. That's one of the reasons I asked the minister earlier: what kind of mechanism have you got in place to get that kind of feedback, deal with it, analyze it and use it to make the code a livable document?

Knowing now that there is a branch that monitors these 400 people, maybe I can get an explanation of how the minister sees that process happening -- improving the code through feedback from people in the forest, including the 400 workers in the district.

[R. Kasper in the chair.]

Hon. D. Zirnhelt: We have internal committees that deal with transition. There are committees that work with the Ministry of Environment, because we're jointly responsible for the code. As necessary, we will be meeting with stakeholders who may have some considered response. I've personally had discussions with a lot of people and have asked for their considered advice on how we might streamline those parts of the code that need to be streamlined. So there is an open invitation to anybody who wants to do that.

In terms of formal mechanisms, we will undertake consultations. It's scarcely past year one, so in order to have anything meaningful to say, we have to try it for a while. They say that you can argue it both ways: that it's going all right or that it's not going all right. Where it isn't going all right, we'll listen to concrete suggestions of how to make improvements. We'll do that by listening to the people who are doing the enforcing and to the people who are being forced to comply. We also get a steady stream of comments from stakeholders on inadequacies or on what they like about the code.

But to a person, they don't want to change the standards in the code. We know that. They do want to see things run more smoothly in terms of its operation.

T. Nebbeling: We begin, at least, to agree that things are not as rosy in the field as they looked at the beginning of the discussion. There is clearly discontent out there. I think we have to deal with it, because it may well lead to smaller operators, in particular, making decisions that we don't want them to make, like: "Get out of there." I have talked to a number of people who say: "It's tough as it is because of all the other initiatives that are out there from the Ministry of Forests. And on top of that, I get restrictions. When I go into some land, I've got a paper mill to deal with that is insurmountable."

It is important for me to hear that indeed the minister believes that he has a mechanism through which he can absorb all that information, assimilate it and turn out a better product. That is what I'm hoping to hear tonight as a consequence of the discussion we're having. I've haven't heard yet that, indeed, somewhere there is a body -- that is, another board; not the Forest Practices Board, obviously -- that says: "Hey, here are the areas." If lack of education, even after all the time and money you've spent on education, is still an issue, then there should be a ministerial decision to get in there and do more.

If the code is too broad, or if it is not detailed enough and the worker has to fake how to deal with it, get in there and.... There has to be a body somewhere that deals with that, and I don't think that it is in place.

I think that is one of the reasons why we see turmoil. If we add to that the turmoil we see because of the Forest Practices Board, which has been there for a year now and, I believe, is totally ineffective, because it hasn't got inspectors.... It has met six days a month, but it hasn't really come out with anything that you can say was worth the expenditure. I think we need to address the changes, when it comes to the Forest Practices Code.

I would like to let my other colleague have a go for a while. I will certainly come back, hon. minister, and I thank you for being patient with me so far.

Hon. D. Zirnhelt: I don't really want you to have the last word on this subject. We have not created a special organization to revise the code. That's a function of the whole Ministry of Forests. If the Ministry of Forests isn't looking at it and making the improvements through consultation with stakeholders, then we wouldn't be served well by creating yet another agency or organization to do that. Let me say this very clearly: it is a function of the Ministry of Forests to improve upon the existing administrative and regulatory regimes in order to achieve the results.

If we are starting to hear that there is a lot of compliance out there, then we know.... We work, of course, with the Ministry of Environment, Lands and Parks. If we know we are achieving the objectives of the code, then something must be working. I'm not going to say that everybody's going to be happy with that, but it is a function of government that the ministry is involved in making the changes -- in consultation. The policy and planning and operations divisions all work together to do the best they can. But there are often conflicting values out there on the land, and we have to resolve those conflicts.

T. Nebbeling: I'm not trying to get the last word, either, but what you just said is worrying me again. The reason is that it is so easy to get information into an organization such as yours, which is huge, and it dissipates. It disappears.

Earlier on, when talking about the Forest Practices Board, I asked you about the social and economic consequences of some of the potential decisions the board can make. You basically said: "No, that's a totally different function. That's a ministerial function, and the board doesn't deal with that." I am afraid that all the separation of these things, which have to come together somewhere....

If there is an impact on the social and economic well-being of communities because of actions taken by another group in the ministry, there must be some place where this all comes together, so that people can have a clear picture of what's happening. Maybe the problem with the code is that indeed there is not an element of bringing it together, so it can be a clear, transparent action. That's what I am looking for.

[7:15]

J. Wilson: Hon. Chair, on the subject we're on at the moment, could the minister lay out the way the penalties that are now assessed under the code are catalogued and how they add up -- whether they have a point system, a fine system, and just how they go?

[S. Orcherton in the chair.]

Hon. D. Zirnhelt: The legislation and the regulations under the legislation, which comprise the code, have a great amount of detail on the scale of fines for various offences and the degrees of discretion that are available to the different levels of management.

J. Wilson: What I need to know is: if you are given a ticket under the code, how is it recorded? And how does the

[ Page 1279 ]

next one come into play, and the next one and the next one? Are they just simply given a number, with no description of what the penalty was for, or is each one recorded separately, with a description of what the infringement was?

Hon. D. Zirnhelt: The district office will keep a record on file, and there will be a central registry in the compliance and enforcement branch in Victoria.

J. Wilson: So when a penalty is being assessed for a violation of the code, is anything...? On the fine that would be incurred because of the infraction, is any weight given to the type of penalty or to what it was? A ticket was written up. Now, if it is for a very minor thing or for something you may not be even guilty of doing, and you get a ticket for it.... Are they all considered to be the same? Is the thing cumulative? Or do you have certain levels of fines for certain infractions as they are accumulated, but they build at a different rate?

Hon. D. Zirnhelt: There are administrative penalties and then there are fines, and the courts are the ones that will administer the fines. They're the larger ones, and they can go up to $1 million. But the code specifies what the appropriate range of penalty is for a type of offence. That's specified in the code and the regulations.

J. Wilson: Does the fine increase each time a penalty is assessed?

Hon. D. Zirnhelt: It is possible that you could get a more severe penalty for a second offence. For example, on a trespass you might get one-time stumpage the first time. It might go up to two or three, depending on the circumstances. So it is possible that there is a greater fine for a second offence of the same nature.

J. Wilson: So, for instance, if I were to park a spare machine on an operating site and I do not comply with the code, because this machine is not fully equipped, what would be the penalty for that infraction?

Hon. D. Zirnhelt: The penalty may be something very simple. It might be just a simple directive to replace a fire extinguisher or to do something, as a ticket might be if you're caught driving without a licence -- you might just be told to produce your licence at the police station. There's a whole range of ticketing, right up to the fines levied by the court. So there's quite a range of discretion, and people will be trained on how to apply that. But a lot of it's new, so it wouldn't surprise me if there is some real difference in how it's applied for a while, until we get a standard that's settled.

We have attempted through training to coach people to know what the limits are and what the appropriate level of fines are. It is regulated. They don't have a wide area of discretion, but they do have some.

T. Nebbeling: I just want to quickly come back to what I was talking about a couple of minutes ago, because I don't think the minister should have the impression that I'm here on the basis of interrogation. I'm really very concerned today, when I go into my area and I meet with the loggers and with the people in the district office, that there is really a need for answers. I think most people are concerned that we are almost entangled in bureaucratic entrapment.

So I want the minister to understand that what I'm doing tonight and in the coming days is really trying to not only find answers to the problems that the forest industry is facing but also find some common ground, so that we can say: "Yes, this is the direction we should go in." Once we go in that direction, then hopefully things will be a lot better.

All we have talked about so far is the Forest Practices Code and the impact of the Forest Practices Code. But you know very well that in many timber supply areas, there will be many other issues that will have an impact on how the forests will be harvested, on what will be happening in the forests and on jobs. I just want to be on the record that once we do get into these areas, the things I ask about are all in the context of this particular concern -- that the combination and accumulation of these different areas is going to cost us dearly.

In my particular area, the Soo TSA, we see right now a big debate going on about the spotted owl and the consequences of the spotted owl decisions that will have to be made or the decision that will preserve the spotted owl. Nobody really knows what the reports are indicating, but there will be an impact on the timber supply area. There is tremendous fear that it will be severe and that many of the jobs in the field today could be at risk. Having said that, and seeing that the minister has a smile on his face, I think I can sit down and let my colleague go again.

J. Wilson: Back to the topic we were on. If you take a machine out to your worksite, and rather than park it off the worksite somewhere, you park it near that worksite, that machine is not being used. It is simply there as a spare machine in case yours breaks down and you require the use of it. Rather than low-bed it in for many miles, you park it there. How do you see the code kicking in and issuing a penalty on a machine that is not in use, simply because it lacks a fire extinguisher? It's not operational, there's no one using it and no one is running it. Why would you issue a penalty on a machine like that, if is not being used?

Hon. D. Zirnhelt: Well, I'd have to say that the inspector may not know that it's not being used. But somebody has to exercise some judgment, and I would suspect that if a ticket has been issued for wrongful reasons, then it would be appealed. Then somebody would look at that decision and make a judgment.

J. Wilson: That sounds like the logical thing to do. How effective is the appeal process? If we're going to appeal the lack of a fire extinguisher on an ancillary piece of equipment we're not using, how far do we carry this?

Hon. D. Zirnhelt: The first level of appeal, from the enforcement officer, would be to the supervisor of that person. Presumably, if it's a simple case, it would end right there, and satisfaction would be had by the appellant. But it could go through a number of other steps right up, finally, to the Forest Appeals Commission.

J. Wilson: There are many things that are happening today out there by the people that enforce the code. They may be highly trained -- I can't argue that point -- but the application as they see it in many cases does not fit. If we're working with a living document here, it's time this document started to live. For example, if an officer comes into a worksite and finds a piece of litter on the ground, which could be a lunch wrapper or a gum wrapper or something like that, there will be a penalty put in -- it will be written up -- and it goes against your record.

In the future you may want to apply for a different job. Each time there's an infraction it goes on your record. Must you appeal these charges each time they occur?

[ Page 1280 ]

[7:30]

Hon. D. Zirnhelt: We clearly expect both licensees and ministry officials to show a level of discretion here, some sense of proportion about how important these things are. So in the case of a gum wrapper.... To have a gum wrapper charge on your file is probably not seen as something that will penalize you very seriously the next time around. But were it to be a series of oil tails, banding material, whatever, then maybe that gets to be a bit more serious. I would suspect that if somebody were fined for something like that and they didn't do it, a simple appeal would clear their file if they were successful.

There may be some overzealous officers out there that, in spite of the training, aren't very judicious -- they don't balance things and show the common sense that's required. We all know that since there have been regulations there have been people who go by the book, and sometimes the book isn't written clearly enough to cover the circumstance at hand.

J. Wilson: These are cases -- and if the minister would like, I can document them tomorrow.

On the question of assessing a penalty, there seems to be an inconsistency among forest districts on how they assess penalties or.... For instance, if you write up a stop-work order, in some forest districts that will go down as two offences; in other forest districts it will go down as one; and if they really get meticulous they can put it down as three -- they vary from area to area. Do we have a clear set of ground rules or rules that people can go by when they do this work?

Hon. D. Miller: Yes, there are monitors in each region who are looking at consistency between districts. Then, of course, the enforcement and compliance unit in headquarters in Victoria would look at consistency between regions. So there is a system built in to try to get consistency there.

J. Wilson: At present, though, we have nothing except an appeal, which is costly -- and it doesn't matter whether you do it yourself or you hire someone to do it, it costs you money to appeal even the slightest infraction. For example, a few days ago one forest company at 100 Mile House had a problem. It was too wet to operate; they shut down. Forestry came along the same morning, wrote them up and ordered a cease-work, and it went in as two penalties. These penalties are adding up, and they're for minor things that are really insignificant as to whether or not they are doing a good job of harvesting timber out there.

Hon. D. Zirnhelt: I think that when performance is reviewed and there happens to be an accumulation of offences on a particular licensee's file, it is to be expected that the people reviewing the performance will keep it in proportion. So if there is a large number of relatively small offences, it's probably not as important as a few very serious offences. Those kinds of proportions have to be taken into account. There are a number of internal reviews that aren't costly; it might be as simple as a phone call or an appearance in a district forest office while you're doing other business.

So the internal reviews aren't expensive. But if there's something really serious and there's a serious disagreement, then that operator or licensee should appeal it. We're always hearing about the cases that people are angry at, and clearly it has to work and to be reasonable. But it requires a higher standard of performance, and there's very low tolerance in the public for some of the damage that can be brought about. That's why we're watching very carefully. My comment to the member for West Vancouver-Garibaldi was fairly clear: people really expect us to be out there enforcing it, and not giving an inch on the code.

J. Wilson: If I'm assessed a penalty because of one of these minor things and I wish to appeal it, I have a penalty there and there will be a fine attached to it. Is this correct?

Hon. D. Zirnhelt: The answer is sometimes yes and sometimes no.

J. Wilson: If the answer is no, then that's fine. It goes on the record; I can appeal it down the road or I may appeal it for the next six months, and maybe I'll win it. However, if there is a fine, however small, what time frame do I have to pay that in? Even though I may have it up for appeal, I will still be charged or assessed that penalty. What is the time frame that I must pay that in before you shut me down?

Hon. D. Zirnhelt: I'll have to get that information for the member. I don't have the time frame for paying a fine with me here. We'll get that for him.

W. Hurd: I'm following the debate on the Ministry of Forests estimates with a great deal of interest, as I always do. Having spent the last few hours in the Ministry of Employment and Investment estimates, if I canvass some issues that may have already been canvassed, I'm sure the minister will take the opportunity to advise me. I just want to start this evening by asking some fairly basic questions about the Ministry of Forests expenditures to be voted upon. I note that there's been a dramatic reduction in the amount of allocated expenditures this year for forest resources management and forest investment.

I wonder, in light of the concern about the repatriation of some ministry functions to Forest Renewal B.C., whether or not the minister could take a minute to advise the committee why there's been a significant reduction in the allocated expenditures for forest resources management in this set of estimates.

Hon. D. Zirnhelt: I'll outline where the reductions came from. The biggest part was a $33 million reduction in FRDA because of the ending of the federal-provincial agreement. There was $5 million in general efficiencies that we took out. There was $7.5 million in NSR, $3 million out of small business, $3.5 million out of stand-tending and $4 million out of a collection of other areas.

W. Hurd: I wonder if the minister could take a minute to explain to us, then, what is going to happen to those programs that clearly were funded in the last set of estimates, not this year. Does that mean that the projects that may have a five-year shelf life within the Ministry of Forests will not be completed this year? I wonder if he could describe for the committee, first of all, the rationale for reducing the expenditures. Clearly, the one that comes to mind is the NSR reduction, which I assume is related to FRDA.

Some of the other intensive forest management initiatives that he's described as not being funded this year would give one cause for great concern. I wonder if the minister could advise us, again, whether specific projects are on the block in this current budget year, and whether or not they're just not going to be picked up, funded or otherwise advanced.

[ Page 1281 ]

Hon. D. Zirnhelt: With respect to stand-tending that comes on formerly NSR land, there are some resources devoted to maintaining those stands that have been treated or have been established. We're not forgetting about them.

Basically, there is some restraint in each department. We're having to find it somewhere, and we're taking it where it can least hurt the operations of the ministry. For example, the stand-tending reduction is more than made up for by FRBC. Some of the things that were funded by the FRDA agreement and some of the things that were over and above basic silviculture can fit in either place. If FRBC wants to take on some of the incremental silviculture activities, they're free to do that, and they certainly have the resources to do that.

W. Hurd: As I do the math, I see a $12 million reduction in the forest resources management and almost $45 million in the forest investment category of the ministry, for a total reduction in capital spending, or at least in appropriate spending for this ministry, of some $57 million in those two categories.

I think the minister has basically concurred with the concern that people around the province have expressed about Forest Renewal B.C., that voted expenditures in the last set of estimates are in fact being eliminated; and the minister seems to have concurred that Forest Renewal B.C., the Crown corporation, will be asked to pick up some of those projects.

I want to go on record in this set of estimates as saying that that confirmation disappoints me, because I think this minister should be, at the very least, fighting to maintain the level of commitment for funding for both forest resources management and forest investment, and shouldn't be relying on the corporation -- which was supposed to be incremental when it was set up -- to now begin to take on those previously voted expenditures for the Ministry of Forests.

In light of the $57 million in reductions, what portion of that will be taken up by Forest Renewal B.C.? How much of the voted expenditures in the '95-96 estimates that we've seen eliminated in '96-97 will now be taken up by the forest renewal corporation -- since the minister now sits on the board as a director?

[7:45]

Hon. D. Zirnhelt: Nothing will happen because I am a member of the board; I'll be one member of a board and will have some view. But $33 million of the $57 million.... So that can I make myself clear, the FRDA program ended. When Forest Renewal B.C. was created, we knew FRDA was going to end. We didn't say we would keep the contributions to the joint program. You smirk and smile, but you don't understand. It was very clear when we set up FRBC that FRDA was going to end; we knew that. We didn't say that the ministry would keep the FRDA program whole. It was known it was going to be eliminated.

W. Hurd: During the long and considerable debate about Forest Renewal B.C., I don't recall the government ever suggesting that it would be used to fund the federal government's commitment under the forest resource development agreement. I don't recall hearing that, but maybe I am in error.

I wonder if the minister can advise us: of the $33 million reduction from the federal government under the FRDA agreement, what was the reciprocal provincial commitment in the last year, and what amount would have been available this year had the agreement been continued for another year? I think that's an important statistic to flesh out. As the minister knows, it was a matching forest development agreement that required a commitment from not only the federal government but also the province of British Columbia.

Hon. D. Zirnhelt: If the FRDA program had continued, it would be matching, and as a rule, the matching is equivalent. The reciprocal amount is equal: 50-50 federal-provincial. I don't have the exact amount, but in notional terms, if it was a $33 million program, then that's what.... We would have to continue to get the federal dollars spent, unless the agreement was something else. It was a 50-50 cost-shared agreement, as the member knows.

We would rather the federal government continue their funding, but they have chosen not to, and I am quite sure that they were not encouraged to when we established such a massive program as FRBC. But we would rather the federal Liberal government had chosen to keep the funding. So I think the answer is: approximately what the federal government would have contributed, and if they had gone on funding at a level of $33 million, we would have been obliged to contribute very close to that amount.

W. Hurd: Am I correct in assuming that the loss of revenues or the loss of funding to the ministry is actually 50-50? Obviously the federal contribution has been taken out of this set of estimates -- some $33 million, as the minister has indicated -- but I would assume that so too has the provincial investment, if we are dealing with a 50-50 program. It seems to me that we're dealing with a 50-50 program.

It seems to me that we're dealing with a wash. Am I correct in assuming, then, that the ministry has decided to reduce budgeted expenditures in this fiscal year by $33 million, but has chosen not to count its own commitment of $33 million, which would have been a fact of life in the '95-96 estimates, where we had significantly larger sums voted to both forest resources management and forest investment?

Hon. D. Zirnhelt: I'm trying to be clear. We don't understand the question 100 percent here, but let me try this answer. The amount by which our budget is reduced this year is $33 million. If we were to have continued the spending at the same levels as last year, we would have had to have this additional $33 million. That's how much our budget has been reduced this year. If you want the figures for '95-96 -- how much provincial, how much federal -- we could take a guess, had that program continued this year, at how much would have been delivered jointly out there. The net effect of the ending of the FRDA program is that there's a reduction of our expenditures of $33 million this year.

W. Hurd: I'm not going to belabour the point, but in attempting to identify the reason for the $57 million reduction in those two categories, the minister suggested that $33 million of it is a reduction in FRDA funding. It becomes, then, an issue to ask: what was the provincial contribution to this joint forest resource development agreement in 1995-96? If indeed the province had committed an equal amount in 1995-96, then I think the minister can see what I'm driving at: there is no effective reduction in terms of the current set of budget estimates.

So I think, maybe, if the minister could resolve to advise the committee at a future time during this set of estimates what the province spent in 1995-96 to continue to participate in the forest resource development agreement, and if I could accept that commitment, we could probably move on.

Hon. D. Zirnhelt: I'll answer, for the record: $33 million is the answer to your question.

[ Page 1282 ]

W. Hurd: Moving on in this set of estimates, I notice also that there's been a dramatic reduction in revenue from the small business enterprise program -- quite a huge reduction, as a matter of fact, over the estimates for '95-96. I wonder if the minister could take a few minutes to explain to the committee why we've seen such a dramatic slump in revenues from this particular program over the estimates of '95-96.

Hon. D. Zirnhelt: The revised forecast for 1995-96 was $333 million. The estimate this year is $360 million. So we're actually over last year's revised forecast by some $27 million -- an 8 percent increase.

W. Hurd: I don't know if I have the same estimates book as the minister, but I see a figure of $473 million in the estimates of 1995-96 in the small business forest enterprise special account, and the estimates for '96-97 on the revenue side come in at $360 million. That translates into an almost $113 million reduction in revenues from that program. I wonder if the minister could confirm the figure or explain to me where he got his from.

Hon. D. Zirnhelt: The difference between what was originally estimated and the revised estimates can be accounted for by a number of things. The pulp market went down, so a lot of the pulp log component of the small business enterprise program wasn't readily marketable. Prices for solid wood had come down over the year, and people weren't harvesting and selling. So the estimate was revised downward, and what we have this year is realistic, we think, given what's happened in the pulp and lumber markets.

W. Hurd: I'm aware that the ministry established as a benchmark, or a target, a harvest level of, I believe, 16 million cubic metres per annum for the small business enterprise program. I wonder if the minister could advise us whether the ministry has hit that target for the last fiscal year and whether the reduction in revenues is in any way attributable to the fact that the ministry may not have been able to harvest that volume. I wonder if I could first just ask the minister whether the target of 16 million cubic metres was in fact realized.

Hon. D. Zirnhelt: For '95-96 the volume sold was nine million, but the actual amount billed was 7.6 million.

W. Hurd: Maybe I can just dispense with the sparring and relay the concern about this program to the minister. It's my understanding that the ministry set some fairly aggressive targets for the small business program and that one of the reasons they weren't met was the approval process. For this particular program, as the minister well knows, the ministry is responsible for the developmental work to bring these agreements into place and to have the applicants begin logging. I'm certainly aware of delays of up to a year for the approval of small business applications.

I'm aware of the fact that deposits were held by the ministry for an inordinately long time. As the critic last year, I had occasion to write to the ministry on a number of occasions on behalf of licensees who had deposits tied up for a sizeable amount of time. I wonder if the minister can confirm that one of the reasons for the dramatic reduction in revenue for this program was the failure of the ministry to be able to dispense and award the licences in a timely way.

Hon. D. Zirnhelt: I won't say that. The AAC for the small business program was 9.9 million, and nine million was sold. There may be many reasons. If there's a drop-off in market.... This is within the range of cut control, so I don't think a 10 percent reduction is worrisome. Ideally, yes, you sell everything you can, but you don't always meet your targets.

[8:00]

W. Hurd: Having moved on to another portfolio, it has been a while since I've received the press releases from the ministry on an ongoing basis, but it sure seems to me that great fanfare was attached to a target of 16 million cubic metres by this ministry for the small business program. I think it was in conjunction with an expansion of the woodlot program at the time. There was a desire on the part of the ministry to dramatically increase the amount of wood harvested through that program. I wonder if the minister can confirm that the target was in fact 16 million cubic metres.

I just can't recall which fiscal year it was. It seems to me that it was the one recently completed, '95-96. If the minister is now advising us that only nine million cubic metres was harvested, that leaves a tremendous gap between what the ministry claimed it was trying to do as a matter of forest policy and what actually got harvested. Because we have now missed the top of the cycle in terms of market and stumpage costs, as the minister correctly points out, it would be fair to say that the loss to the Crown is quite dramatic, as we can see from these figures.

I wonder if the minister can tell us whether the target was 16 million cubic metres for the last fiscal year. Was it 14 million? I'm sure I saw a press release from his ministry establishing that as a benchmark for the ministry under the small business program.

Hon. D. Zirnhelt: The figure of 16 million has us a bit mystified here. My advisers are not aware of that figure. If you can produce it, then maybe we can go back to what it was.

But let me explain, in order, what the three reasons were for the weaker-than-desired performance of the small business enterprise program. The first was market conditions. In the winter of '95, the pulp market weakened considerably, and I mentioned that there were lower lumber and log prices. A lot of the small business firms actually curtailed logging, and revenue fell as a result. Secondly, on the sale of timber, the volume of timber sold to small business firms was lower than expected. Weather was a factor in some areas.

Thirdly, the weather itself led to curtailment, because loggers were simply reluctant to log under wet conditions. In those regions where it was wet, the Forest Practices Code was in effect, and people didn't particularly want to log.

We are going to have to find ways of working around this, making sure that there's proficient marketing of small business amounts. I think you would probably find that the amount that sales were down may not be inconsistent with other programs of government, for the same reasons.

The Chair: Shall vote 36 pass? Sorry -- the hon. member continues.

W. Hurd: Thank you, hon. Chair. There was a resounding aye from the former Minister of Forests, who had the portfolio during a portion of the time for which we were debating the performance of the small business program.

I want to ask about the waiting period for the processing of these licences. The minister will be aware that concerns have been expressed about the amount of time it takes to process an application for a small business licence. I wonder if

[ Page 1283 ]

I can ask the minister whether he or his staff have reviewed the waiting periods during the last fiscal year and what steps he or his ministry staff are taking to reduce the amount of time it takes to allocate or award timber under this program.

Hon. D. Zirnhelt: I want to point out, before getting into answering your question, that the volume sold in the small business program was nine million cubic metres in 1995-96. In the previous year we sold 7.6 million. There was more sold -- 16 or 17 percent more -- so there was a performance improvement there. We are currently reviewing the small business program -- looking at the waiting period and all other factors that affect the program with a view to achieving efficiencies in selling timber, getting jobs and getting the revenue from it.

W. Hurd: I wonder if the minister could describe the nature of the review. Is it an internal matter? Will the review of the program be available to the public, or to this Legislature? I wonder if he could amplify on the kind of work that his staff will be doing on this program during the coming year.

Hon. D. Zirnhelt: The nature of the review.... We are working with consultants who are working with clients and government ministry personnel to look at the operation of the program. I see no reason why final copies won't be available when it's done. Sure, they'll be available.

W. Hurd: I wonder what interim steps might be taken to deal with a backlog of applications under the small business program. Are there any initiatives underway by the ministry to deal with that in the interim? While I'm sure the review might arrive at some of the systemic problems within the program, clearly there's a need to deal with an emerging problem, an urgent problem, which is the amount of time some applications have been in the works. I wonder if the minister could describe for the committee what's being done to deal with the immediate backlog.

Hon. D. Zirnhelt: There is a three-step strategy that's trying to address this particular problem. First of all, ministry staff are reviewing the sales records back to 1982 in order to identify the gross undersold volume as of March 31, 1996. Ministry staff will then prepare a rationale for discontinuing any of that volume which, if sold, would produce negative effects on the current and future AAC, which supports community stability and jobs. We don't want to sell undersold amounts and then jeopardize the long-term AAC.

If it would help contribute to a higher level of AAC, we don't want to undersell it because it's.... We're not going to ever recoup the jobs. It really would be targeted towards stabilizing the existing supply. Once the saleable volume is known, then ministry staff will outline a

schedule for marketing this volume. So, if they've identified volume that can be cut without hurting the long-term AAC, they'll set a

schedule and attempt to hold to that schedule.

W. Hurd: I wonder if part of that review, since the minister has indicated that he's going back to 1982, I believe, which is an exhaustive review.... I'm quite surprised, actually, in this set of estimates to hear the minister confirm that we're dealing with almost a 15-year period, and I commend him for that undertaking. I wonder if part of the analysis will also be a look at the stumpage revenue losses to the Crown as a result of this particular program -- where they've gone over the past number of years. Is the amount of stumpage write-offs that occur with respect to this program something the ministry will also be reviewing?

Hon. D. Zirnhelt: I think, were we to do that.... Back in '82 the price wasn't so high. Now it's higher, so anything we can gain in this year, we'll probably be better off financially, because, as you know, back then the stumpage was tremendously lower. I don't see any advantage in looking at: if we had sold it, we would have had this much for the ministry. I think we identify the volume and then maximize that now. History is history; let's look ahead to what we can do with identifiable volumes. To add to a previous comment, in the Vancouver region the work on identifying volumes and so on is the most advanced.

W. Hurd: I wasn't speaking necessarily of volumes as much as the amount of stumpage revenue that's lost as a result of applicants who aren't able to pay the stumpage bill. I'm just not clear in my own mind, since it's been a while since I've delved into this ministry, but I understand that there is a loss provision equation the ministry uses to write off stumpage losses under any program of the ministry. My question, I guess, is whether as part of this review, a review of losses to the Crown as a result of uncollected stumpage is going to be part of the overall assessment of the program.

Hon. D. Zirnhelt: I could give a long answer to the member, but just so you know, overdue accounts as of June 30, 1996, were $29 million. But we've got a fairly effective collection system. An analysis was done in '95 that concluded that for every $100 of revenue, only about 30 cents is eventually uncollectible. So that's a ratio of 0.3 percent, and that's a very low ratio. On an ongoing basis we know how much of the due and payable stumpage hasn't been collected.

W. Hurd: Can the minister briefly describe for the committee the nature of the formula used for stumpage write-off under this program? Is it stumpage uncollected at the end of three years or at the end of the current fiscal year? Is the formula for the small business program essentially the same as it is for other types of licences? Or are we dealing with a longer period of time in terms of when the ministry declares stumpage to be uncollectible?

Hon. D. Zirnhelt: There's only one set of rules. We don't distinguish between small business licences and other licences with respect to the collection procedures. We write it off when we're convinced it's no long collectible, and that would be regardless of what kind of licence it is.

W. Hurd: So theoretically it would be possible for the ministry to carry the uncollected stumpage on the books for some time before a determination was made that it was uncollectible. I'm just trying to determine.... In his own mind, the minister has made an assessment of the uncollected stumpage being a relatively modest amount of money in terms of the overall program, and I'm just trying to determine whether or not the figures might look better by virtue of the fact that the ministry carries the stumpage on the books for some time as revenue, even though it might not ever be collected.

Hon. D. Zirnhelt: The amount is one-third of a cent on the dollar, so it's a small amount. It isn't really going to affect the revenue picture one way or another.

It's a little hard to estimate what this is in any given year because there are lawsuits, garnishees and so on that are affecting it. That's why we'd have to carry it on the books until the lawsuits are finished or garnishees completed. It's a small

[ Page 1284 ]

amount, and I don't think it affects.... Clearly it would be nice to collect every cent that's owed, but in some cases that's blood out of a stone.

W. Hurd: I could certainly go on at length on other issues, since I've been in this position for a number of years debating the Ministry of Forests estimates.

Before I do turn the floor over to my colleagues, I did want to address a brief question about a study which came into my possession during the last days when I was the critic for Forests. It was a research report issued in April of 1995 by Michael Pendleton from the University of Washington who, as the minister is probably aware, had considerable access to the Ministry of Forests in compiling the report. I'm sure his officials will also be aware that the report contains some rather inflammatory and, I think, critical analysis of ministry staff. Has the minister reviewed the study?

Has access to ministry staff by researchers undergone a review? I wonder whether or not the records that were made available to this particular individual -- the cooperation that he seemed to have of ministry staff.... Are there any changes of policy within the ministry to ensure that research projects are not used by researchers from the University of Washington to paint a fairly damning portrait of ministry operations and forest management in the province?

[8:15]

Hon. D. Zirnhelt: I haven't personally seen that report, but I do know that we have a rebuttal, which we'd be happy to provide for you. We felt that there were a lot of inaccuracies, and we didn't think much of the report. As a result, because of the use to which he put a fairly generous and open sharing of information, we will be more careful about the credentials of the people who are seeking to do research. I think sometimes somebody might appear to be reputable, maybe that person has a certain reputation that can be marketed in some areas, and the information can be damaging to us. We have to be careful, and I think the ministry will be more careful about who gets in to do research.

[G. Brewin in the chair.]

T. Nebbeling: I wish to go away from what we talked about before, although I still have more questions on the Forest Practices Code. Maybe we can do that tomorrow.

In the last couple of weeks, we have seen a fair amount of heated debate on the estimates -- how they can be off in dollars. Many questions have been asked of the Minister of Finance about how it is possible that we can be off by such a large amount of money in revenue over the estimated income. I ask the minister to go through the whole process of how you actually put together your package of estimates that you present to the House. Who are the players? I would like a detailed rundown of the whole process so that I can, in my own mind, get a better idea of why the revenues were over by $250 million in the previous estimates.

Hon. D. Zirnhelt: There's a process of creating estimates that are made available to the Ministry of Finance. It's done in our revenue branch. There are quite a few factors that go into it. There's a complicated model; calculations are made. We run the models; we provide the analysis. There's expert advice. In the end, the government uses this source and other sources to make estimates.

T. Nebbeling: Thank you, hon. minister. That's exactly what I'm interested in: the models you use, the sources you use, how you bring them together and when you bring them together. I can go on for a long time adding elements onto it, so maybe we should go one by one. I really want to get to know what exactly happens on day one, when you start your estimate process for your next budget presentation -- who is involved, what models you use and what kinds of calculations.

Hon. D. Zirnhelt: The ministry does its forecast on revenue regularly. Forecasts and revised forecasts are prepared and submitted, as I said before, to Finance and Corporate Relations. In years past, Forests has made a forecast before the start of the fiscal year and then revised its forecast during the year.

Now, the components of the revenue. Each component is forecasted separately. The estimates include forecasts for timber sales; stumpage from major licensees, woodlots, etc.; the small business forest enterprise program; others, like annual rent fees, etc.; and FRBC revenue to be transferred to Forest Renewal B.C. The forecasts for timber sales, including FRBC, are developed using a model of the stumpage system. The main assumptions that affect the forecast are the volume expected to be harvested, U.S. lumber prices, Japanese lumber prices and the U.S.-Canada exchange rate.

The forecasts for the small business forest enterprise program are developed using a model of the relationship between timber sold and timber harvested at the forest district level. Their main assumptions are the volume expected to be sold, the time delay between the sale and the harvest, and the upset stumpage and bonus bid -- that is, the price expected to be bid for the sale. The other categories I mentioned are based on historical trends, but this is a fairly small amount.

T. Nebbeling: To the minister, who just gave me a whole slew of information.... I've got most of it on paper, but I think I'll just go through it one by one. First of all, you said the forecasts and the information are collected by the Minister of Finance, not by the Ministry of Forests.

Hon. D. Zirnhelt: The Ministry of Forests makes its forecasts and makes them available to the Ministry of Finance. The Ministry of Finance uses that and other information -- growth rates, etc. They then make the final forecasts of revenue.

T. Nebbeling: So that's the first thing. It is the Ministry of Finance that actually puts the estimates together, done on a basis that is the information provided by the Ministry of Forests.

Hon. D. Zirnhelt: The Ministry of Forests provides its forecasts and any other information that's requested. The Ministry of Finance looks at that information and, I understand, other information. They may have other forecasts from economic think tanks, from other levels of government, from bond-rating agencies, or whatever. They make a final estimate, and then they put those in the budget estimates.

T. Nebbeling: What I would like to do tonight, then, is focus on your contribution as Minister of Forests to the Ministry of Finance and the components that you use to show the numbers that the ministry will then use. So if we focus on your part, your contribution, you could give me a rundown -- I understand that the forecast of stumpage fees is part of it -- of all the elements that make your portion as part of the total deliberation.

[ Page 1285 ]

Hon. D. Zirnhelt: Well, I did give the member the components for the revenue, but I don't mind going through it again. Each one is forecast separately. So the estimates include forecasts for: timber sales, which is the stumpage from major licences, woodlots, etc.; the small business forest enterprise program, which is the small business stumpage; other, which are annual rents and fees, which I've said are very small, but they're based on historical trends; and Forest Renewal B.C. revenue, which is collected by the government and then turned over to Forest Renewal B.C.

The forecasts for timber sales, including FRBC, are developed using a model of the stumpage system. Now, the main assumptions that affect the forecast are: the volume expected to be harvested; what U.S. lumber prices are forecast to be; what Japanese lumber prices are forecast to be; and the U.S.-Canada exchange rate.

For the small business portion, we have a model that is based on the timber-sold-versus-timber-harvested relationship, which varies year by year. We have those statistics at the forest district level The main assumptions are: the volume that is expected to be sold; the time delay between the sale and the harvest, because only after it's harvested will the billing actually take place; the upset stumpage; and the bonus bid, the price that's expected for the bid on the sale. In other words, when we target an estimate for the small business program, we can only estimate what the bonus bid might be. We won't know until the envelopes are opened up for each sale, but we do make an estimate.

T. Nebbeling: Again, like earlier on, I really feel disturbed when there are conversations going on by members that are fairly loud and I have a problem hearing the minister speaking. So, please, can we pay some attention to that.

The Chair: Hon. member, there are some devices available that may be in your drawer.

T. Nebbeling: No, my ears are fine. It's just that voices carry well. As you know, Madam Chair, he was called the bullhorn the other day, and he was very proud of that.

Interjection.

T. Nebbeling: There we go again.

Anyhow, I would like to come back to what really is important and that is my education about how these estimates are being put together and what the role of the ministry is. I would like to start with the number one item that the minister mentioned, and that is the timber sales. The information that you accumulate, Mr. Minister, and then present to the Minister of Finance.... First of all, where does the minister get that information from?

Hon. D. Zirnhelt: I'd like to make it quite clear that it's not me, as the minister, nor my predecessor who makes the recommendation -- it's not a call; it is at the officials' level. The officials in Forests make information available to the officials in Finance.

With respect to projected revenue from timber sales, there is a stumpage formula, and it's driven by costs of -- I'm simplifying -- harvesting, manufacturing and so on, including stumpage, and then you get the cost of what the sales are expected to be. That formula works back and will calculate the indicated stumpage.

If you were to walk into a Ministry of Forests office and ask for an explanation, they would say: "How many weeks you have? It's a complicated formula." I can't tell you the factors in the formula, but we get information.... Our officials get information from trade journals, they get actual information coming in. They might phone brokerage houses, they might talk to contractors about a sample to find out what their costs are, they might look at the Price Waterhouse study from the previous year and try to see how.... They use numerous sources, and we generally try to provide a good estimate. But it's just that: an estimate.

I would like to mention that the volume that is cut varies. Any given licensee can harvest 50 percent more or less than their target AAC in any given cut control period, plus or minus 10 percent. That's way more than our errors in forecasts, but forecasts are forecasts.

[8:30]

T. Nebbeling: I understand that the minister doesn't sit on his own in his office and do all this work. I understand the officials put this all together. But I also believe that as the minister, you have the privilege of being ultimately responsible, and for that reason, I address you and not your officials.

The way you describe it, Mr. Minister, it sounds as if it is purely a guessing game -- this whole estimate business. In the past, as the Minister of Finance explained to us on a previous occasion, every year they have been pretty well on target as far as the income was concerned, including the bulk at the end of a fiscal period.

This year the claim is that you didn't miscalculate; it just didn't happen as in previous years. This guessing game is a little bit questionable to me. I wonder, besides getting information from trade journals, sitting in the coffee shop talking to tradespeople, going into the field and talking to a logger, if there is not another source that the ministry taps into to get that information that you need to at least have a semi-rational approach to calculating what, indeed, the revenue will be for your ministry in that particular year that you are working on.

Hon. D. Zirnhelt: I would disagree that it is a guessing game. I talked about the assumptions and about the information used to make those assumptions that go into the model. There are some hard data that go into it. Where you have hard data, you put that in, but you can't see the future.

The other sources.... I guess I could go on.... This is a rational process. The model itself is a rational model, but somebody has to make a judgment call on what data you put in. We try to put the best data in which we get from a number of sources. For example, we would rely on the Ministry of Finance for exchange rate information. We are not going to duplicate the expertise, so we would use that. We might use trade figures that are available from another ministry.

With respect to the price assumptions, let me give you an example. We subscribe to every major forecaster in North America, so we use that information. If you saw the Globe and Mail

article today, only twice in the last 20 years have any business forecasters been accurate. So forecasts are not very often accurate, but it is a rational model and we use the best information available.

F. Gingell: One of my problems in dealing with this issue, which I really do fail to understand, is that I'm not absolutely certain and clear as to the process that leads to forest revenues. Take the major source, timber sales. The tree is cut down, moved to a sorting ground and at some point measured or scaled. Scale slips are prepared by people who

[ Page 1286 ]

are registered and qualified to do this. I presume that those scale slips are sent in to the ministry. Someone at that point, within the ministry, receives the scale slip, which gives them species and volume, and someone at that point prepares an invoice for the revenue that is due to the Crown. Is that correct?

Hon. D. Zirnhelt: I can confirm that the member is correct more or less. Let me give you some detail. Knowing that you asked the same question in former estimates, we just happened to be ready for you. So I'd like to let you know what the billing process is for the Ministry of Forests.

The annual process involves a number of steps. The first is that trees are harvested and the logs are loaded on trucks. Secondly, a timber mark is applied to the logs on the loads to identify the timber -- the mark is on the load, not on every individual log. The truckloads are delivered to a scale site and the logs are measured to determine volume, species and grade. The scale data is sent to the Ministry of Forests, and the data is checked and entered into the ministry's computers.

The fifth step is that the scale data is matched to the stumpage rate using the timber mark; an invoice is prepared and sent to the licensee. Sixth, every month the licensee receives a statement which summarizes all of the invoices in the amounts that are due. Seventh, the payments from the licensees are received by the ministry and matched to the invoices. Credit for payments shows up on the statements. The eighth step is that the ministry's computer systems track all the amounts due and all payments received. The ninth is that the revenue reports are prepared each month to keep track of the revenue.

The process is more detailed than this, but these are the essential steps. We'd be happy to arrange a detailed briefing if you'd like to get into the actual procedures.

F. Gingell: Well, yes, I would, but it's going to be too late for these purposes. Can you tell me at what point a decision is made about which logs are included in this month, this year, and which logs are not? Is it the date they're scaled, or the date they are harvested? You don't know that at this point, because they've been cut, they've been marked, they've been put on a truck, they've been moved to a booming ground or dryland sort or whatever. I'm not in the industry so I don't know all those terms, but they come to a dryland sort or a booming ground where they are measured.

Is it the moment of measurement that determines what's in the May revenue or what's in the June? If it's measured and scaled on May 31, is it in May? If it's scaled on June 1, is it in June?

Hon. D. Zirnhelt: Yes, on the date of scale, the revenue is counted and due.

F. Gingell: So all the invoices for the month of May are produced by a computer that has picked up the species, the grade, the volume and the various stumpage rates. The invoice is prepared and it's billed to Crown Zellerbach -- I guess they aren't in existence anymore...Adventure Logging, my old client on the north end of Vancouver Island -- and it is recorded as revenue at that point. The issue of when the money is collected is irrelevant to this discussion, true?

Hon. D. Zirnhelt: Yes. The date of scale determines revenue, and as you know, the accounting method is accrual.

F. Gingell: In the Finance estimates they kept talking about this bulge. If the scale bills come in -- and I'm sure there's some modern technology that allows the results of the scalers' work to move into the ministry billing system relatively quickly -- where does the bulge come from?

Hon. D. Zirnhelt: As we know it, the system is scaled and is due as of that date. It may not be billed, because it may take some time to crank the billing out later. It might be the middle of the next month. There may be a delay of as much as a month or so to actually get the billing out.

F. Gingell: So this bulge is logs that have been cut, transported and scaled but not billed?

Hon. D. Zirnhelt: Let me try it. To close off the books at the end of the year, there will be timber that is scaled but not yet billed. The bulge comes when you add the scaled wood that has not yet been billed as of the end of the fiscal year.

F. Gingell: Is the billing which devolves from the scaling notices done within your offices?

Hon. D. Zirnhelt: Yes, the billing is done from the branch offices in Victoria.

F. Gingell: What is the process for the regional office that's done the billing to move that information down to some central operation?

Hon. D. Zirnhelt: There are two methods in use, and we're in transition. The old method was that company licensees would actually submit the information to our district offices, our regional offices. Now it's being done electronically. The scale information we're developing.... A system is being implemented whereby it's transmitted electronically to Victoria.

F. Gingell: The situation is that the origin of the billing happens in the regional office. The regional office is, of course, well aware of what's happening, who's cutting what, where the logs are, how many people are working, what the forest fire conditions are, what the weather conditions are, who's ahead of their cutting permits and who's behind in their cutting permits. So at any moment in time -- the regional office would have a very good idea -- a much better idea than Victoria would have -- of how much they've got sitting in the pipeline.

[8:45]

Hon. D. Zirnhelt: The office in Victoria, the revenue branch, would be talking to the regions all the time, so anecdotal information about logging conditions, etc. would be shared. I don't think there is any forecasting that goes on at the regional level in terms of how much they predict will come in. They might be able to tell exactly how much is coming in, but as to how much is in the pipeline, I would doubt very much that they would know how much is on any landing in any given place.

You might have anecdotal information because you know the trucks that are coming in, but getting them from the trucks or the barge.... I doubt that it's being tracked. Well, I know it isn't tracked at all those stages. One hundred thousand invoices a year go out of Victoria and that is seen as the most efficient way -- economies of scale there.

I'd just like to take half a minute here to introduce Bill Howard, director of the revenue branch, who's with us tonight on this subject.

[ Page 1287 ]

F. Gingell: Is it that logs that are on the ground, felled and bucked, or not felled and bucked, just logged, aren't relevant? It's not until the logs are scaled...? The moment of scaling determines when the revenue is counted?

Hon. D. Zirnhelt: You are correct. The moment of scale is the moment the revenue is determined. Some of this information comes down directly to Victoria electronically, and some of it is manually transmitted to the regional office and then sent down to Victoria.

F. Gingell: So if we were to take July 31 -- wonderful day, end of the month -- how long will it be before every scale bill that is prepared before today with today's date or earlier has reached the revenue division of your ministry?

Hon. D. Zirnhelt: Of the amounts that are scaled in the month of July, a small amount will be billed in that month. Most of it will be billed in the month of August, and then a lesser amount, a smaller amount again, may be billed in September.

F. Gingell: That surprises me, I must admit, with all the pressures for the province to get revenues. What is the delay caused by? You have determined volume; you have determined species; you have determined grade. Is it the price issue that slows the process down?

Hon. D. Zirnhelt: We aren't dealing with electronic mail here in terms of sending out the bills. We still have to physically send out a bill. So once a month the scaled information comes down from the regional district offices. Then it's processed here, and the bills are sent out. With the staff available, it takes roughly a month to get the bills out, so there's a delay. I don't know that it's any different anywhere else. You give people 30 days, they have time to pay...and because it's due and payable when it's scaled, they know. They have their own records, so they know approximately how much is coming. So when it does come, it shouldn't delay any payment.

F. Gingell: Well, without dealing with the credit issue, your timber licensees, then, in effect don't need to receive their invoice. If they know that the logs were scaled before the end of July, they know the volume, the species, the grade and the value. So will they send you a cheque before the end of August?

Hon. D. Zirnhelt: I'm not sure where the member is going with it, whether he is talking about the efficiency of the system or whether he's.... I'm just not sure where he's going....

F. Gingell: I can tell you that.

Hon. D. Zirnhelt: Yes, but I don't know -- I'm chasing a rat through a maze here.

Once a month the scale returns are sent down. Then the invoice of that whole batch is sent out, and they have 28 days to pay after that. So obviously we get it out as quickly as we can, but it does take up to a month to get it out.

F. Gingell: I must admit that my questions were leaning on credulity, because I don't understand why you don't send the invoices down every three days. I don't understand why there's this holdup or why you would wait till the middle or end of August to bill lumber scaled in July. I mean, everyone in the government is interested in receiving the income as early as they can.

What we're dealing with, of course, is the issue of the budget and the shortfall, and the role that the Ministry of Forests has, and how information moves from your branch offices down to Victoria so that they can prepare estimates, and how long it takes them to determine what the revenues are. I must admit that from the beginning of this exercise -- which, as you appreciate, became public knowledge at the end of June -- I have not been able to believe in my mind that this information wasn't available a great deal earlier.

Number one, there were financial statements prepared by the Ministry of Finance for the ten months ended January 31. If you go back and look at those, they show the estimates of revenue for the year ended March 31, 1996, they show the actuals for the ten months ended January 31, 1996, and they show the actuals.... I haven't got those figures here, but from memory they show the actuals for the ten months ended January 31, 1995.

If you take the 12-month estimate for 1996 and you divide by 12 and multiply by 10 to give you what you would expect the income to be for ten months -- it's pretty straightforward -- they were $268 million behind. If you take the original estimates that were prepared, that were shown in the budget for the year ended March 31, 1995, and you take ten-twelfths of that sum, which would apply to the ten months ended January, and you look at the actuals shown in that statement, they were $268 million behind.

Now, if I were in the Ministry of Forests and responsible for forest revenues, all kinds of bells would be ringing. "Why are we $268 million behind?" I'd want to know why.

The first thing I'd want to do is get a feel for this bulge -- the scaled but unbilled fibre -- as we go back, to know if we've got a problem we should tell someone about. I don't believe that you wait ten months to let someone know you've got a problem. Your regional officers know what's happening: you know the market price, you know the volumes, you know the AACs, you know who's in the lot, who's in the woods, you know what the weather's like, you know the number of loads that are coming in. So you must have a good feel -- someone in your ministry must have a good feel for this revenue item.

Let's face it: this revenue item is going to be 8 percent of total provincial revenues. It is not an insignificant sum. So clearly the Ministry of Forests treats this as a big responsibility.

We get to the end of January. We're $268 million behind. Ah, what's happened? Well, the next thing we in the opposition know is that the new estimates are tabled. Now, the new estimates go from last year's estimates, and after ten months we were, as I said, more than a quarter of a billion dollars behind. They're estimating that we will in fact surpass the previous year by some $55 million. I think the original estimates were $1.55 billion and the final estimates, the final revised number that were put in this year's estimates -- the book that's sitting over here -- was $1.603 billion. That number is stuck in my mind.

Now, surely the Ministry of Finance didn't make that number up. I mean someone didn't put a dartboard up and say: "Oh, put down a one. Is that a six or a seven? Oh, it's a six. Put down a six." I know I'm being silly, but it surely must have been an estimate or a briefing from the Ministry of Finance that somebody used to make a decision about what we should put in the estimates. "Shall we take the number that was originally estimated? Is it going to be more, or is it going to be less?" At the end of January we were a quarter

[ Page 1288 ]

of a billion dollars behind, but someone made a decision to say we'd be $50 million ahead, and that surely has to come from your ministry.

My purpose this evening is to find out who briefed whom, what information you gave to the Ministry of Finance that caused them to put into the estimates that in fact the forest revenues would be $50 million more than you had originally estimated.

Now, the election campaign was fought on the basis of a balanced budget. It turned out afterwards that Forests ministry revenues were $255 million below that revision. Very similar, I would suggest to you, to the number they were behind at the end of ten months, in January.

There are some more reasons why those numbers are phony. They've included $47 million that the federal government has withheld from the provincial government for CAP payments because we changed our rules on residency for social assistance. There's another $37 million that's under argument that they've included as estimates for cost-sharing arrangements for the care of aboriginal children -- which the federal government says they're not going to pay, but we've put them in. There's $86 million in supposed corporate income taxes that's going to come in because of countervails which hasn't arrived.

There are a whole bunch of other reasons why that budget book was a lie, and an election campaign was fought on that budget book. It was fought on that basis.

[9:00]

The biggest item, and the only item that they've admitted to at this point, is the issue of forest revenues. You know, somebody put in that book that they were going up over $50 million from the original estimate, to the revised number. That number must have come from your ministry, or we're not being told the truth by the Ministry of Finance. Not being told the truth.... They don't answer questions. But the question needs to be answered because you have in your ministry a very professional group of people. No one is making any accusations about political hacks, etc. You've got really professional bureaucrats.

The Ministry of Forests has a reputation in Canada and amongst the universities -- which is where I found out about your reputation -- that you run a good shop. A good shop would know what the forest revenues are going to be. So that's where I'm going; that's the purpose of this discussion. I think the people of British Columbia want to know why those estimates of forest revenues in that budget document, for the revision for 1995-96, were increased to $1.603 billion. The answer I'd like, if we can cut out all the exercise of going through the bulges and so on, is what you advised the Ministry of Finance.

Or did you advise them of something different...?

Hon. D. Zirnhelt: The short answer to the question is that what estimates are finally used, based on a number of pieces of information, I presume, by the Minister of Finance are what go into the estimates book. We provide information. We do an estimate at the beginning of the year in April, and we revise our estimates at the end of December. We can provide those numbers for you.

F. Gingell: The minister said the end of April. I would presume that number in the first place would actually have gone in in March 1995 -- what you thought the estimates for the year 1995-96 would be. So, at the end of December, you gave the government an estimate of how we were doing against plan, as it were. I mean, everyone has a business plan, and we refer to these estimates against plan. Is the minister telling me that there was no communication about the estimated forest revenues sent by your office, by your ministry, to the Ministry of Finance between December and the end of April?

Hon. D. Zirnhelt: There is frequent communication between the officials in Forests and Finance, and once a month we provide an actual of revenues.

F. Gingell: Rather than us spending the next three weeks in estimates following this, would you make available to me or to members of my caucus -- whoever we designate, and we're not going to run in with a thousand people -- all the communications -- E-mail, written, a description if they were verbal -- between your ministry and the Ministry of Finance to do with the issue of a very narrow area? The area is what the revenues were expected to be for the year ended March 31, 1996.

Hon. D. Zirnhelt: As it happens, there's an exact request for that under FOI. When we have the information assembled, we'll be happy to give it to you as well as to the requester of the information under FOI.

F. Gingell: I would think that's pretty simple. The FOI request has been in for roughly four weeks now. We would also like the briefing books that the Minister of Forests would have received immediately after the election. I would like you to add that to it. I believe that that has been FOIed, also.

It would seem to me that information could be put together in three or four days. How many officials are you talking about? How many people in your ministry are designated to communicate with the Ministry of Finance? I would imagine that's a fairly restricted number, because you don't want mixed messages going. You have one person -- I haven't got a phone book here -- who is your director for revenue -- or the revenue policy person, if there's a revenue policy person. You would just go through their files and their E-mail, and that would cover it pretty quickly.

I think that this is a matter of high priority -- well, obviously I think it's high priority. I would really like to get the information before the House rises, and I'd encourage the minister to get it to us as expeditiously as possible.

T. Nebbeling: I have to get my head around this one again. One thing I'm very pleased to hear is that there is indeed, as you stated, a role for the district manager. The reason I'm saying this, Mr. Minister, is that when you were talking about the forecast, you named a number of contributors to it. The one I was really looking for was the district manager. Can you confirm that the district manager is part of the team that provides the minister with the information to come up with the forecasts that in turn are handed over to the Minister of Finance?

Hon. D. Zirnhelt: The district managers don't have any formal, elaborate function in forecasting. What they do have is a responsibility to provide scale information for minor sales. It might be firewood, for example, or it might be direct sales. These are things that they administer, as opposed to the larger system where the major amounts are run through the scale system. That's the extent to which they provide information, and they do it, I think, by the manual method. I don't know that they pass that information on electronically -- not yet.

T. Nebbeling: So the district office does not provide the ministry in Victoria with information pertaining to their

[ Page 1289 ]

annual allowable cut, the timber licences that have been issued or the expected revenue from these timber licences. That is not provided to the minister. I shouldn't say the minister, because the minister keeps telling me that he is not the one receiving this information; it's the officials in the offices of the Ministry of Forests.

Hon. D. Zirnhelt: The easy answer is that they don't provide that to Victoria because Victoria already has that. You mentioned the AAC, the timber licences issued and so on.

T. Nebbeling: How do you get that information by district? That is the first question.

Hon. D. Zirnhelt: The major licences are issued from here, with the exception of the small licences -- direct sale, etc. So we have it here because this where we issue the licences from. The chief forester is here, and he makes the AAC determinations, and then apportionment decisions are made here, out of the minister's office. These major decisions are made here, and we retain the information.

T. Nebbeling: That was really the missing link -- that you get the information from the chief forester and from what is issued right here in Victoria for the various timber supply areas. Is that the information that is then provided as part of the creation of the estimates?

Hon. D. Zirnhelt: The information that comes from the chief forester, for example, is an estimate of the amount that will be cut. I mean, people are licensed to cut so much, so that is one estimate; that is the amount that is licensed to be cut. So that's one factor.

All the other factors, like the Japanese lumber prices, U.S. lumber prices, the exchange rate and the volume expected to be harvested, have to be calculated. I don't think that the volume expected to be harvested is a form that is filled out by the district manager, but I'll check. No, they don't make any estimates of the volume to be harvested. If there were some major functions like weather, season or permitting, then that information -- systems knowledge, knowledge of how the system is behaving -- might be communicated down here and would be used in the forecast.

T. Nebbeling: Of the total forecast, let's say.... You explained earlier that you have a before forecast and a during forecast. In the before forecast, what percentage of the total amount that is calculated as potential income, as an estimated income, comes from your Victoria office through either the officials or your chief forester or whatever mechanism? How much of that total amount of money is actually a Victoria-based or -created number?

Hon. D. Zirnhelt: Virtually everything comes from Victoria. The reason is that 98 percent of the revenue is stumpage, and it is billed out of Victoria.

T. Nebbeling: Ninety-eight percent is stumpage.

You know what the AAC is in a given area, and I suppose the chief forester or your officials use the AAC of a given area, with the stumpage rate for that particular product, to establish that revenue, which ultimately becomes part of your estimate. Is that correct?

Hon. D. Zirnhelt: Yes, when we're calculating the volume that's expected to be harvested, we will take into account whether the chief forester has lowered the AAC in a particular timber supply area or whether it's been raised in another area. That will be taken into account.

T. Nebbeling: I understand that. I'm not talking about a reduction in AAC that the chief forester determines because of the long-term plans for a certain area. I'm talking about a very short period of time. How do the chief forester -- who then provides you with a lot of information, I take it -- or your officials check back? Where are the checks and balances on what actually is happening and what they have forecast during that period starting before coming to the end of a term?

Where are the checks and balances, how often do you check the numbers and whether you are still on line, and when would you make an adjustment if, indeed, the numbers are not jibing any longer -- for example, if there is a 20 percent reduction in cuts because in a particular timber supply area the harvesting activities are not going to their full amount?

[9:15]

Hon. D. Zirnhelt: We monitor every month, but we don't change the forecasts unless asked to change the forecasts. We forecast at the beginning of the year and midyear. That's fairly routine. But we don't change forecasts every month. Similarly, estimates are made once a year for budget purposes. We monitor monthly, but we revise estimates once during the year or as requested by Finance. If Finance asks us to revise our forecast, we go through that calculation.

T. Nebbeling: Then the minister can explain to me why he did change the forecast in the tenth month of last year. As was explained earlier by my colleague, he is trying to find the reason, the justification to change that number and increase it by $50 million. Somebody must have indicated that that need was there, and you just told me that....

Interjection.

T. Nebbeling: Excuse me, Madam Chair, am I talking still, or...?

Interjection.

T. Nebbeling: You just also explained that it's the Ministry of Finance that would ask you to change the figures, and I would like to know who was responsible for the change of $50 million, if that is not the standard practice of the Forests ministry.

Hon. D. Zirnhelt: To clarify that, the last forecast we made was in December. In the tenth month we did not reforecast.

T. Nebbeling: But who, as you said...? Who was responsible, then, for that? Was it the chief forester in this particular case? You gave me two options earlier on: it is within your own organization, with your calculations, so then it is your officials -- and I hear that the chief forester plays a major role in that decision-making process; or it is the Ministry of Finance that asked you to make that change in forecast. These were the two potential request-makers that you just gave me, so we have at least brought it down to a smaller group. Who was it?

The Chair: I remind hon. members about the noise level here -- it makes it difficult for people to hear the speeches -- and that we do all motions and comments through the Chair.

[ Page 1290 ]

Hon. D. Zirnhelt: We have a bit of confusion here, because the chief forester in no way has a role in doing any forecasting. He will set the AAC, and that's information the revenue branch of the Ministry of Forests takes in making its forecasts. We regularly, but infrequently, make forecasts -- March-April and then December. But we were not asked to make a reforecast at month's end.

T. Nebbeling: I'm not confused. I think we are trying to drift away from something that I heard earlier on, and that is that there was a $50 million change made in the ten-month forecast -- in February I believe it was. Earlier on, the minister gave me two possibilities where it could come from. If it is not the chief forester, it is the AAC set by the chief forester that is analyzed by your officials. Someone, somewhere in December, must have said: "Hey, I think there's $50 million extra there, based on the information that is dictated by your chief forester's decision." The AAC is somewhere....

I don't know which supply area we're talking about, but somewhere your officials must have found more income. If that's not the case, then it can only be the only other party, and that is the Ministry of Finance, as you indicated. They are the only other people who can tell you to change the forecast.

Hon. D. Zirnhelt: We've undertaken to provide the information. There are piles and piles of reports, but with respect to forecasting, I have to go back and repeat that December was the last forecast we made. We do monitor, month by month, but we don't change our forecast.... The AAC determination does not come in -- I'd just like to rule that out. The chief forester will summarize all his decisions in terms of the amount that's licensed, and we may not exactly have everything licensed that he has determined is part of the allowable cut. So we have to take that into account as well.

We would take the amount that's licensed to be cut as part of our forecasting. I just have to repeat that we do it in December, we monitor monthly, and we will only do a reforecast if invited to do so by Finance. We were not invited to do so.

T. Nebbeling: Well, if you were not invited to do so, why was there an increase in revenue over previous estimates, and who dictated it?

Hon. D. Zirnhelt: The Ministry of Forests has no control over the forecast that's made for an increase in revenue. It's solely a determination made by the Ministry of Finance, and they will do it based on information we provide. They have their own information about markets, price, what's happening in exchange rates, what's happening in trade figures, economic forecasts, housing price starts in the U.S. I imagine they make their own estimates about all those things that can affect us. They don't always take our estimates -- most often don't take our estimates. They do their own. They make their own growth rate presumptions, etc.

T. Nebbeling: Before an interim estimate report is brought out by the Ministry of Forests -- as they did in January, 1996, for the '95-96 period -- is there any discussion between Ministry of Forests officials and Ministry of Finance officials pertaining to the report that is to be issued in January -- in this particular case?

Hon. D. Zirnhelt: The Ministry of Forests' role is to provide information, whether it be forecasts or data of any kind. We're asked to provide it at the official level; it is provided. It doesn't come up to a minister and across to a minister. We allow the experts and the technicians to share information. Finance doesn't tell us what they do with our information or what they think of it. If they want another forecast, they'll come back and ask for it, or if they want some more information, they'll come back. In fact, they can access our data; it's on line.

T. Nebbeling: I know that the minister is not involved, as he has stated before, in the day-to-day business of running the department. Well, I suppose you are, but when it comes to these kinds of levels, you rely on your officials. But I also feel that as the minister, you are ultimately responsible. So what I'm asking is: has there been or is there traditionally a meeting prior to making that interim report or the interim estimates available to the public at large? Is there a meeting between Ministry of Forests officials and Ministry of Finance officials to, in a sense, look at that report?

Is there a meeting like that happening traditionally? If it is not, then I'd like to hear that as well.

Hon. D. Zirnhelt: All the budget information, as I understand it.... Again, it's really the Minister of Finance who puts together all the revenue figures in the estimates. It's done in secret so that all the information in the budget comes out at one time. But there is not a meeting between the Minister of Forests and the Minister of Finance to discuss what the assumptions and the estimates are going to be. It is simply at the officials' level. It's what I would call unexpurgated data that goes back and forth.

Now, the estimates are calculated based on assumptions, and there may be an exchange of information about those assumptions. But it is strictly an official-reporting-to-official process.

T. Nebbeling: Again I hear the minister: he isn't there when things are decided on. That's why I didn't ask if the minister had met with the Minister of Finance to go over that interim report before it was issued to the public at large; I asked the minister if his officials or anybody within the Ministry of Forests had a look at this report with anybody from the Ministry of Finance -- looked at the details and verified the numbers or verified the facts that are in that report. It's quite simple. I don't think for a second that the minister met with the Minister of Finance, because you've made it clear that officials do it.

Hon. D. Zirnhelt: I'm told that there are frequent meetings between officials to discuss issues. That does happen. But with respect to information that's published by Finance, no, we don't meet with them to review their documents before they publish them.

T. Nebbeling: I have to keep coming back to the same question, unfortunately. Maybe I have the answer now. The minister just told me that none of his officials at any time had a meeting with any ministerial officials of the Ministry of Finance to discuss the interim report that was issued in January or February, the ten-month interim report. At no time did any official have a dialogue with a Ministry of Finance individual.

Hon. D. Zirnhelt: I would like clarification from the member as to just which report he was talking about being released. He was talking about the January or February report. We don't know which report he's speaking of here.

T. Nebbeling: I was talking about the January report first of all, and then any following change in these estimates that, again, had to be part of a discussion between the Ministry of

[ Page 1291 ]

Forests and the Ministry of Finance. Because the minister has told me that there is no dialogue between the two ministries, whenever there is any report released or any change made in the estimates pertaining to the Ministry of Forests.... Has there been any dialogue between these two ministries over the change in the estimates?

[9:30]

Hon. D. Zirnhelt: I'm going to give a general answer because we're not sure about reports and.... I think the answer will help. In general, prior to any forecasts or.... Prior to information being needed or worked on by the Ministry of Finance, there are meetings between officials -- that happens. But specifically, if you're asking whether Finance consult with us about what they're finally putting into their reports, then the answer is no. We're not consulted about what they do with our information that we provide them.

T. Nebbeling: I understand there's no consultation -- which surprises me, but I accept that. I'm not talking about consultation. Consultation means: let's have a dialogue on what we're going to do here. I think that if the Ministry of Finance has made a decision, and they somehow have increased that estimate, and presented it to the officials from the Ministry of Forests -- as in "It's there" -- then that is not consulting; that is basically sharing information, as far as I'm concerned. That is more the direction I'm going.

Was there any knowledge by anybody in the Ministry of Forests prior to the publication of the $50 million increase by a Ministry of Finance official?

Hon. D. Zirnhelt: The answer is no. I think what the member may be getting at is suggesting that the Minister of Forests should be the one that determines what the forest revenue is as an input. It seemed to me that that's where he was leading, but I just want to remind him that the Minister of Finance is totally responsible for all revenue forecasts, including Forests'. That's one of them; but he is solely responsible.

T. Nebbeling: I'm happy now to hear a very firm no, because that's what I was trying to find out -- whether anybody was aware that this was going to happen, with or without justification, and you've told me no. I must say that here is something that truly blows me away: that the Ministry of Forests is not aware what their estimates are going to be at any time during any book year. We will have to deal with that another time, I suppose, because somebody has to be responsible and be hiding behind an official in the Ministry of Finance. We don't know who it is. I don't think it cuts the cake.

I'll take it, then, that once that decision has been made about an increase in an estimate during a year -- at a very unusual time because you told me earlier you do it twice, once in April when you set your estimates, and then in December when you revise them potentially; but this one was in February, I believe.... So once that is done, who is ultimately putting his signature on the document that shows that increase? Is it the Minister of Finance or is it another official?

Hon. D. Zirnhelt: You do refer to a document, so I need to know which document. If it's a Finance document, I can't say whether it's an official in that ministry or the minister who would sign it off. I can tell you that this minister -- this office -- does not sign off the revenue forecasts that go into documents that are edited, authored and signed off by the Minister of Finance.

T. Nebbeling: I understand that, because it has been made very clear that it is the Minister of Finance who makes the decisions and makes the changes. When they do that, they must have some information. Is that information only the billing that they have been receiving? What is there for them to make that change? They haven't talked to you, so there must be something else that led them to do that. Maybe the minister can enlighten me there. What motivated a person in one ministry to do something that is really the result of the activities in another ministry?

Hon. D. Zirnhelt: I'd like to be as helpful as I can to the member, and so I'll try. The information that is before the Minister of Finance is some information from us. This might be a forecast, it might be data we produced, or whatever. They have to add to that their estimates of what logging taxes might be, they have to add transfers of stumpage to FRBC, and they have to look at trends in the economy. They are the experts in trends in the economy. The Ministry of Forests is not the expert in trends in the economy. Trends in the economy can affect what happens in the forest industry. So we have an idea....

If someone has given us an exact trend in the economy, we might be able to go back and then rework our estimates. In fact, that might happen if there was a weakness in the information we used. But much more than just the Ministry of Forests forecasts -- small-e estimates -- goes into the work that is undertaken by the Ministry of Finance.

T. Nebbeling: It's really funny, because I was trying to talk more about 1996-97, and we're back again to 1995-96. It's just because I got triggered. Can the minister tell me if he is aware whether any of his officials.... Maybe he can confer with his officials. What information did they give to the Ministry of Finance -- or did they give information to the Ministry of Finance? What made the Minister of Finance, or the officials in the Ministry of Finance, decide that there was indeed justification for this $50 million increase, based on what you just said -- that from time to time you do provide information?

Hon. D. Zirnhelt: We are bouncing back again to '95-96. The information on '95-96 will be provided, and all the E-mails, memos and information that Finance had from Forests will be part of that package. So it's all being assembled. All I can say is that our officials provide the information and some of it's on line and some of it's in paper form. What Finance does with it, they take to be pretty much their own business, and they don't check with us.

T. Nebbeling: So when a Ministry of Forests official provides some information that leads to a very unusual change of estimates evaluation, that is not done with: "Hey, I've got something that you should really look at that could lead you, Ministry of Finance official, to decide to increase that $50 million." That didn't happen. If there was information provided in December or early January -- whenever that would have been done -- it was not done with the intent that this could increase the estimate for the period over what was intended, over what it had been officially established at?

Hon. D. Zirnhelt: I am advised that the Ministry of Forests had no reason, over the course of the spring, to change the estimate that was provided in December.

T. Nebbeling: Could you ask your officials, then, if they advised the Ministry of Finance, at any other time, of some

[ Page 1292 ]

justified information that led them to look at a readjustment of the estimates up to $50 million. I ask because you said: "I've been advised that no information was given in the spring." Well, was that information given prior to the spring? Was that information given during the winter, that could have led to that $50 million increase?

Hon. D. Zirnhelt: Perhaps I was being too general on the time frames. We provided a December estimate, and between the time we provided that estimate and, say, May -- that time frame -- we had no reason to change what we had done in December. I cover right through January, February, March, April and May.

T. Nebbeling: I'm just trying to think about what the minister said, because I think he's now trying to shift to the next portion of this discussion where suddenly there was the shortfall -- it was around May. As a matter of fact, I think it was the April 30 report that showed there was indeed a serious reduction in stumpage fees coming in. I think it was around that time. I don't know what was said in May -- that's not relevant.

What we are talking about is the period before the $50 million increase: if at that time, at any time, anything was done by the Ministry of Forests that led the Ministry of Finance to believe that, indeed, they could increase the estimates in the order of $50 million.

I'm asking this because, Mr. Minister, you very strongly denied that the Ministry of Forests was in any way, shape or form part of that decision to increase the $50 million. If that is what you tell me -- that they were not -- I'm finished for now on this subject. But you haven't been able to do that.

Hon. D. Zirnhelt: We had no cause to provide any additional information or reforecast to the Ministry of Finance to make them do a redetermination in the time period that I understand you are talking about.

The Ministry of Finance, however, has access to our on-line information. They may have looked at trends or changes or whatever and may have done something with the information; but we don't know -- we wouldn't know.

T. Nebbeling: The minister just told the House that the officials of the Ministry of Finance, from time to time, raid a computer, take information out of the computer without letting the minister know, and use that information to arbitrarily increase the estimate by $50 million. That is what you just told me, Mr. Minister. If you didn't, then please make it a little bit more clear how the Ministry of Finance got from the Ministry of Forests information that led them to make that decision about a $50 million increase.

Hon. D. Zirnhelt: The Ministry of Forests did not make a reforecast. What I said was we have a shared database and they have access to the same database. It is not a matter of taking information; it's just the same database, so they have access to it.

T. Nebbeling: I'm sorry, Madam Chair, if I'm tiring you, but I really want to know what the hell happened here. Now at least we hear....

The Chair: Hon. member, that's slightly inappropriate language.

T. Nebbeling: Sorry, Madam Chair.

The Chair: And you have been canvassing the topic for some time, so I just want to encourage you to get to the point you're looking for.

[9:45]

T. Nebbeling: Well, I'm trying to get to the point, Madam Chair. Every time I get an answer, it eludes what I'm asking. For the first time now, do I hear from the minister that through some form or mechanism -- in this particular case, an electronic mechanism -- the Ministry of Finance may well have taken some information out of the information bank from the Ministry of Forests, which was then used, in return, to justify a $50 million increase in the estimate?

I think that's a very important question, because up to this point that was made, we have not heard once that the information from the Ministry of Forests was part of the decision-making process. That's why I ask the question, and the minister is not answering it. I think I have the right to get that answer. If the minister is saying, "No, that doesn't happen," then let him say so. Then I'm satisfied, and I indicated that earlier. I'm not pursuing just for the sake of pursuing; I'm pursuing because I do not get an answer, and I believe I'm entitled to one.

So I ask one more time, to the minister through you, Madam Chair: do you believe that the Ministry of Finance did get from your ministry information through electronic means -- without informing you, as you told me -- that led the Ministry of Finance to use that information to increase the estimates by $50 million?

Hon. D. Zirnhelt: I have no way of knowing, and I think the last 15 minutes have been in the nature of speculation.

T. Nebbeling: I'm not speculating. If the minister had given me a straightforward answer, I would have been satisfied. I don't think I'm getting a straightforward answer. I seem to offend the Chair by asking these questions. I don't think I'm going to get a straightforward answer. But let the record show that I think the answers create enough suspicion that I'll look into it again. I am not satisfied.

I would like to ask the other member to continue with some questioning.

J. Wilson: Hon. Chair, I'd like to beat this thing a little more. As I understand this, in December the Minister of Forests issued a forecast. In this forecast, did it predict the forest revenues for 1996-97?

Hon. D. Zirnhelt: In December there was a forecast for 1996-97.

J. Wilson: Was this forecast the $50-some million difference between what the Minister of Finance predicted and your prediction in December?

Hon. D. Zirnhelt: The $50 million figure has to do with '95-96, but your question was about '96-97. The December forecast did have a f