Resource Committee — Department of Mines and Energy — 4 May 1992

1992-05-04

Newfoundland and Labrador — Committees

May 4, 1992

RESOURCE ESTIMATES COMMITTEE (MINES AND ENERGY)

The Committee met at 7:00 p.m. in the Legislative

Chamber of the Colonial Building.

On motion of Mr. Murphy, seconded by Mr. Dumaresque,

Mr. Langdon was elected Chair.

On motion of Mr. Hewlett, seconded by Mr. Snow, Mr.

Woodford was elected Vice-Chair.

MR. CHAIRMAN (Langdon): Order, please!

Good evening. We are here this evening to consider

the Estimates of the Department of Mines and Energy.

First, I would like to introduce the members of the

Committee. We already know the Chairman and the Vice-Chairman. We have Mr. Alec

Snow, the Member for Menihek; Mr. Alvin Hewlett, the Member for Green Bay; Mr.

Harold Small, the Member for Baie Verte - White Bay; Mr. Danny Dumaresque, the

Member for Menihek; and Mr. Tom Murphy, the Member for St. John's South.

MR. DUMARESQUE: I have the responsibility for

two ridings now, I don't want Menihek.

MR. CHAIRMAN: I am sorry - Eagle River. I am

sorry about that, Danny, my apologies to you.

MR. A. SNOW: Anyhow, the people of Menihek,

they don't want him.

MR. CHAIRMAN: That's right.

SOME HON. MEMBERS: Hear, hear!

MR. CHAIRMAN: Before we ask the minister to

introduce the Estimates of the Committee, I guess it is generally agreed that

the minister would introduce the Minutes and give us the prepared statement that

he has. After that has been finished, then we ask the Vice-Chair to lead off in

the debate. I guess it is probably the same length of time, fifteen minutes,

that he has at his disposal to question the minister and his officials. I would

hope, after that has been done, that each member would then be given ten minutes

to question the minister.

Probably we should keep the questions short and not

have them compounded so that we can ask one question at a time and get through

the Estimates without any difficulty.

I am looking forward to a co-operative evening with

all the groups concerned, and probably, at the end of the evening we might be

able to conclude by having the Estimates approved.

Without further ado, the hon. the minister, Dr.

Gibbons.

DR. GIBBONS: Thank you, Mr. Chairman.

I would like to introduce the staff I have with me

this evening: Starting on my right is the Deputy Minister of Mines and Energy,

Mr. Gordon Gosse. On my immediate right and to his right, is the Assistant

Deputy Minister for Mines, Mr. Paul Dean. Starting on my immediate left is the

President and Chief Executive Officer of Hydro, Mr. David Mercer. Next to Mr.

Mercer is Mr. Charles Lester, a director in the Energy Branch of the Department

of Mines and Energy. Next to Mr. Lester is Mr. Kevin Whelan, Director of

Administration in the department - I guess, the prime person responsible for

making sure the Budget is all in one document, so he has all the answers. Next

to Mr. Whelan is Mr. David Collett, Vice-President of Operations for

Newfoundland and Labrador Hydro.

That is the staff I have with me. As we get to the

question period, if there is anything I don't have an answer for, I am sure they

have lots of answers.

AN HON. MEMBER: (Inaudible).

DR. GIBBONS: Yes, I noticed.

Before I get into my presentation this evening,

Alvin and other members, it looks as if we don't have any media interest in this

today, unless they are hiding.

MR. DUMARESQUE: The Page will have to take

notes for The Telegram and The Express, I guess.

DR. GIBBONS: Mr. Chairman, I will first run

through a statement I have here with a few words about each sector of my

department that is covered by this Budget, and I will say a few words then about

the agencies also reporting through my department.

One of the main activities of my department deals

with the geological survey, which is the first item on the Budget list. I think

the number on the Budget Estimates is $5,465,700, so it is the biggest single

item on the Budget within the department.

Geoscientific survey work by the survey has been

under way in a fairly planned and extensive way since 1972, so this is the

twentieth year since we started federal/provincial agreements and doing planned

survey activity. The long-term objective of this activity is to provide a basic

geological data base for mineral exploration industry and for the Province.

Geological mapping has now been completed for about

half of the Province, so we are halfway there in twenty years. Other elements of

the data base are at roughly similar stages of completion. Data provided so far

have been a major factor in attracting mineral exploration activity to the

Province, and these data played a role in all of the important new discoveries

that we have witnessed over the last several years.

It is critically important for the continued

success of our mineral exploration sector and the mining sector, that these

surveys continue, and this year's program is no exception. This year, there will

be forty-seven projects; twenty-eight of these projects have a field component,

the others are office-based and lab-based projects. The total net cost of the

program this year, 1992, is $4.4 million. Results of the work will be

communicated to the mineral exploration industry and other interested parties,

including the public, through various publications and information services and

maps.

Much of the program this year will be funded under

the Canada/Newfoundland Co-operation Agreement on Mineral Development which was

signed in October of 1990, so we are now going into basically the third season.

The agreement continues for two more years to March 31, 1994. The total

provincial expenditures on geoscience, under this agreement in 1992, will be

$1.9 million; $1 million in federal revenue is also associated with this.

The federal government, through the Geological

Survey of Canada, also proposes to spend an additional $1.6 million on surveys

in the Province under the agreement this fiscal year, so the federal survey is

also very much involved this summer. I will not go down through the two pages of

detailed survey projects I have listed in my briefing notes, but I will just

indicate, in passing through them, some of the areas.

For example, in Newfoundland, on the Island part of

the Province, there are the cambro-ordovician carbonate rocks of the West Coast,

mostly up and down the Northern Peninsula on the west side, the north central

granitic rocks within the central core of the Province - this year, more in the

centre of the Island,

whereas in earlier years it went down to Fortune Bay - and

sedimentology in the Notre Dame Bay areas, three projects on the Island out of

about eight.

In Labrador, there are going to be various types of

mapping carried out. In the northernmost part of Labrador there is a project

centered in the Saglek area, there is another in the Nain area, another in what

we call the Eastern Grenville which comes over south of Lake Melville towards

Eagle River, and in Western Grenville, there is a project which is, basically,

west and south of Churchill towards Labrador City-Wabush, in that area, and

also, in Western Labrador in what we call the superior and western Churchill

province which tends to be north of Labrador City-Wabush up towards

Schefferville and west.

Another type of project is called Geochemistry and

Geophysics, and there are various surveys of both types again this year. In the

mineral deposits sector, there are a number of projects; one is called the

Dunnage Zone Metalogeny, and dunnage just happens to be a geological name for an

area which comes up and takes in a lot of Central Newfoundland, including the

Buchans Belt.

Rare Metalogeny, by one of our project geologists,

is in Northern Labrador. This is an area that includes the Strange Lake deposit

in Northern Labrador but also includes Flowers River. A number of other projects

in mineral deposits: industrial minerals in Labrador includes the Nain

Labradorite, from which we are hoping to have real production this year for

dimension stone and similar projects around the Island of Newfoundland including

some of the granites and marbles in the Island part of the Province.

There are a number of other projects. I won't go

into the details on them but, in total, as I said earlier, there are forty-seven

projects altogether by the survey, plus a number of projects by the federal

survey this year - a lot of action. On Friday of last week I approved, I think,

about thirty of the summer staff who are coming to work on some of these

projects this year, so we have started to hire summer assistance now for the

field season.

We move now to the second part of the mineral

branch that is budgeted in the Estimates, the Mineral Resource Management

Section is budgeted here for $2,422,900, and this branch is responsible for

basically administering the law relative to all types of mineral development -

mineral land tenure, regulation of mining operations and related matters.

The branch has a number of divisions: one is the

Mineral Lands Division, another the Mines Division, and another called the

Project Analysis Division. The Mineral Lands Division is responsible for all

land tenure legislation, including mineral claims legislation and quarry

materials legislation - so, everything relative to all types of licenses by that

division.

The division also includes responsibility for the

Core Storage program, where we have six regional core storage libraries, in St.

John's, Pasadena, Buchans, Springdale, Baie Verte, and Goose Bay.

The Mines Division is the technical division and

this one is responsible for delivery of programs and policies related to

operating mines or proposed mines. It conducts technical monitoring and

engineering analysis of all mines that are now operating, or all that are

proposed, and any that are inactive and closed.

Today, I talked to a couple of the engineers

involved with this particular division and they are now, today, this week, doing

a detailed analysis of the proposed Pine Cove gold mine on the Baie Verte

Peninsula.

The third part of this branch, the Project Analysis

Division is primarily responsible for the financial analysis, the economic

analysis and related research, plus the collection of all statistics relative to

the mining and mineral industry. It also includes in its responsibility the

Prospectors Grant and the Prospectors Training Program for the Province. That is

the mining side.

I would like now to switch to the petroleum side

and there our department is broken down primarily into two main divisions.

Petroleum and Energy Resources is one, more on the technical aspect of it. It is

responsible for formulating policy and providing advice to government on

offshore matters arising out of the Atlantic Accord Implementation Act, and the

Petroleum and Natural Gas Act, as well as the development of subordinate

legislation under both of these Acts.

This branch liaises with the federal government,

with the Canada/Newfoundland Offshore Petroleum Board, and with the oil and gas

industry. It monitors industry activity, it provides assessment of anything that

is going on, and particularly, assessment of any decision taken by the offshore

board whereby I, as the minister responsible, may have to give approval. It also

carries out a range of geological, geophysical, engineering and land rights

matters related to petroleum on land, as was indicated today by the announcement

of the West Coast land sale.

Another part of this branch is responsible for the

efficient use of energy in all sectors of the economy, and encouraged use of

local alternate energy resources like small hydro or wood waste or peat.

Funding of this branch is provided in the branch

budget under five activities: policy, planning and co-ordination, petroleum

resource development, community information and offshore fund, energy efficiency

and alternative energy, and the Canada/Newfoundland Offshore Petroleum Board.

The total amount there under this particular aspect is $3.5 million. I don't

believe that $3.5 million includes the Offshore Board, does it, Gordon?

MR. GOSSE: Three point five.

DR. GIBBONS: Three point five? Maybe it does

include the Offshore Board.

MR. GOSSE: Yes, it should.

DR. GIBBONS: It should. Okay, $3.5 million.

I won't go into the details of policy and planning.

That is self-evident. I have already covered some of the aspects of what is done

in Petroleum Resources Development relative to land sales. I mentioned the land

sale that was announced today with particular interest in the Parson's Pond

area, and we expect there will be some seismic, probably, this year. But there

was enough in that $1.6 million to $1.7 million bid that there could even be a

little bit of onshore drilling in the next five years in that amount, I would

think.

The community information part of this branch is

looking at money that is contributed towards the Bull Arm Area Co-ordinating

Committee, $375,000 that is included in this budget, and it also includes money

for a book on Hibernia and the law through the Public Legal Information

Association of Newfoundland.

A few extra words on the Energy Efficiency and

Alternative Energy part. This part of the branch has a major responsibility for

the development and implementation of policies, programs and activities related

to energy efficiency and alternative energy for all sectors of the provincial

economy. Specific services include energy management studies for public sector

buildings like schools and hospitals, the provision of technical assistance with

respect to alternative energy development such as small hydro, wood waste

utilization, automobile propane, and the development of peat lands for energy

purposes. For example, very recently, we finalized an agreement relative to auto

propane and we have changed the tax level. I think we are reducing it by about

six cents per litre on auto belt propane to encourage some fleet conversions

over the next five years. This is a joint project between ourselves, the federal

government, and Superior Propane.

This division, over the past year, has also

developed, in consultation with both Newfoundland and Labrador Hydro and

Newfoundland Power, a ten-year Strategic Plan for Energy Efficiency and

Alternative Energy development. This document, encompassing all sectors of the

economy, proposes that we should, between now and the year 2000, achieve maybe a

20 per cent reduction in energy usage and a 50 per cent increase in the use of

alternative energy sources. Right now, 8 per cent of our provincial electricity

is provided by alternate sources. We believe that can be raised to 12 per cent

by the year 2000.

The Offshore Petroleum Board I mentioned, reporting

to me basically through this particular branch, administers the relevant

provisions of the Canada Newfoundland Atlantic Accord Implementation Act on

behalf of the Province and on behalf of the federal government. This year, our

share of its budget is $2,337,700 of a total of $4,675,400. The number in the

detailed Estimates is a little bit incorrect. It said $2,425,500 but that figure

was put in before the federal minister and I had done our assessment and given

our final approval.

The other part of the energy branch is called

Petroleum and Energy Economics and this is the branch on the energy side that

really takes care of all financial analysis and economic analysis. It also

monitors the retail sector, the petroleum product sector. You may recall that

last December we put some amendments through to the Department of Mines and

Energy Act relative to petroleum product prices and marketing to allow us to

collect more detailed information but also to allow us to set regulations

requiring the posting of prices on petroleum products. We are proceeding with

that. This particular branch, relative to petroleum product prices, also does a

weekly survey of the cost of product at twenty-eight retail outlets and five

furnace oil distributors in the metro area, as well as a quarterly update by

census division for the Province - province-wide by census division.

This part of my department also monitors Hibernia

from the economic and financial aspect of it. I will not go into any detail on

Hibernia; I am sure there will be questions on that. It also monitors activities

at the Come By Chance refinery, and that has been in the news today. I won't go

into any further detail on that. That covers the departmental part.

Apart from that, we have Newfoundland and Labrador

Hydro, which reports through me as the minister. I will say a few words about

Newfoundland and Labrador Hydro before I finish my statement. As we are all well

aware, government discontinued its subsidization of Hydro's rural distribution

service effective March 31, 1991, a year ago, therefore, no funds appeared this

year in the Budget for that subsidy. There are some funds in the Budget,

however, for some subsidies under the Electrical Power Control Act for some

industrial users. These are Kruger, Albright and Wilson, and Abitibi-Price,

Grand Falls. The total for these three, which are contractually continuing for a

few years yet, is $1,673,000 this year. That is our estimate of it. The final

figure will not be known until the end of the year when all costs get audited.

Another little bit of information on Hydro: For

1992 Hydro is forecasting electricity sales of approximately $300 million. Hydro

will receive, we expect, in 1992, about $16.4 million from CF(L)Co, which is a

return on equity plus royalties and it will have a total net income of about $32

million. The money from CF(L)Co is used by Hydro to pay the long-term debt

associated with CF(L)Co and the takeover in the mid-1970s. By the end of this

year, 1992, this debt will have been reduced to $47 million, so basically all of

the money from CF(L)Co goes towards paying down that debt. There aren't many

more years to go before it is paid out completely.

A point on rates: in 1992, the industrial rates

have not changed. They have been confirmed by the Hydro Board. On retail sales,

as we are all well aware from the news of the last week, there was an

application by Hydro to the PUB with recommendations that were ruled on last

week by Cabinet.

One other point of interest relative to Hydro is on

capital expenditures. This year we estimate $34.7 million, mostly for a

multitude of small projects scattered throughout the Province, with no big

single project under way. This is about one-third of what the capital would have

been about three, four years ago, when there were some big projects under way.

Mr. Chairman, that is all I want to say in my

statement. I will turn it back to you for any follow-up and any questions. I

say, in concluding also, that budget for my department, program estimates,

totals $16,461,100.

MR. CHAIRMAN: Thank you, Mr. Minister, for a

very thorough and comprehensive report. It certainly covers thoroughly all

aspects of the department. We would like to thank you for presenting us with

that full report on the estimates for your department. I am sure there are going

to be questions and comments on what you presented, but again, thank you for

delivering that to us.

At this time, I ask the Vice-Chair, Mr. Woodford,

if he would begin the discussion.

MR. WOODFORD: Thank you, Mr. Chairman. I just

want to make a few comments, at first, on the actual Estimates. The minister has

a copy of the Estimates. I refer firstly to 3.1.01.05, Professional Services,

under Mineral Resource Management. Why would there be such a large figure here?

DR. GIBBONS: That's related to projects under

the Mineral Development agreement. Paul, you can probably speak to the specifics

of that. It's your section.

MR. PAUL DEAN: Paul Dean. There is an increase

in Professional Services just because of increased activity under the Mineral

Development agreement this year. That includes such things as contracts. For

instance, we are doing some drilling at Baie Verte to better define the

remaining ore body. That is part of that estimate. There are some contracts

related to Professional Services with respect to the iron ore industry. There

are a number of feasibility studies included in there.

MR. WOODFORD: Are those all tendered projects?

MR. DEAN: Generally, yes, they are tendered

projects.

MR. WOODFORD: Let's move on to 3.1.02,

Engineering Analysis. Same thing - Purchased Services, $166,000.

DR. GIBBONS: (Inaudible).

MR. DEAN: That increase relates to the

maintenance of the fluorspar mine at St. Lawrence. During the past year, the

government made a commitment to cost-share the mothballing and maintenance of

the facility for a two-year period. Of that $166,000, $150,000 relates to the

maintenance of the St. Lawrence fluorspar mine.

DR. GIBBONS: We signed a two-year agreement

with the receiver - it is effective January 1 for two years - to keep that

facility mothballed in anticipation that within two years maybe the economy will

recover and maybe there will be an interest in someone else taking over that

operation.

MR. WOODFORD: Mineral Economics Analysis,

3.1.03. That one was down. How would that tie in with the rest being up?

MR. DEAN: I think it is down under Professional

Services. There are a number of professional services not there this year that

were there last year.

DR. GIBBONS: But not significantly though, from

$41,000 to (Inaudible).

MR. WOODFORD: No, it is not a big lot. But with

the other activity and that one down -

Moving on to another one - the same thing, under

Petroleum and Energy Resources, 4.1.02.05, Professional Services.

DR. GIBBONS: Yes, we have an increase there of

about $54,000. Gordon, do you want to speak to that one?

MR. GOSSE: This is for a number of studies,

some related to the Terra Nova field, and more, I think, related to Hibernia and

other oil-related studies that we will have to do this year.

AN HON. MEMBER: (Inaudible).

MR. GOSSE: Some of them will be consultants,

you know, really, specialists in some areas that we do not have the expertise

in-house to handle.

DR. GIBBONS: Basically, it is all outside

(inaudible).

MR. GOSSE: Oh yes, outside.

MR. WOODFORD: Let's get off the Estimates

there, the actual Estimates, for a few minutes. Mini-hydro sites - that one is a

little bit dear to my heart because of the fact there is some activity in my

particular area.

A question I would like to ask the minister - I

guess Mr. Mercer or someone else may answer it if the minister is not sure of

the answer. Why would they call for proposals and wait until 1996 before they

accept any power?

DR. GIBBONS: Well, right now, when we look at

the available supply that we have plus the projected load growth that we are

anticipating for the next few years, these two lines intersect in 1996. So there

is no need for any extra capacity until 1996. In the meantime, there is a lead

time required for any company that is going to construct, propose and take it

through the environment and then construct a site that, for the most part, could

well take until 1996 before any significant site would be available. There may

be some small ones that could be done faster than that.

The call was put out by Newfoundland and Labrador

Hydro on the Wednesday before last for 50 megawatts with a closing in August. So

companies have four months to study their possibilities and bid, and I think

there was a maximum price included in that call for proposals or Hydro would be

taking the best 50. (Inaudible) I guess, the best 50 out of whatever is bid.

Now, you may want to follow on with your question

and I may want to refer to the others later.

MR. WOODFORD: Yes, because you were saying that

some of the companies - now, I know it depends on the project. If it is a larger

project, naturally, they would need more time to do some preliminary work on it

before you get into what you call the project selection phase alone.

DR. GIBBONS: Yes.

MR. WOODFORD: But that, in this case, is

nineteen months, and I would think that a lot of those projects aren't going to

be much over 4, 6, 10 megawatts. To add up that, I would say 4 to 6 or something

like that. A lot of those would be small projects.

DR. GIBBONS: Well, that is what we anticipate.

I think they would be in that range. There may be one or two that are over 10,

but they are going to be in that range of 4 to 10 and a number of projects. We

will see what comes in from the call, but up to now there seems to be a lot of

interest in it. I just noticed that today in the news release I received from

the Minister of Environment, the Great Cat Arm River has been registered as one

possibility.

MR. WOODFORD: Yes, that is Paris Associates.

DR. GIBBONS: Paris Associates just registered a

4.2 megawatt project. And just being registered now, and depending on how much

it has to do under the Environmental Assessment Act to see when it will be

available - I don't know, Mr. Mercer or Mr. Collett might want to speak to that.

MR. MERCER: I will just make one observation. I

think we are trying very hard to give as accurate a signal as we can to the

private developers. I will ask Dave Collett, who I believe has the proposal call

and the

schedule with him, just to reference the critical time for each phase.

But we are trying to provide basic information up front as to the amount we can

pay, then we are giving an opportunity for preliminary proposals to come in

before firms spend a lot of money on engineering. At that stage, we will be able

to tell them what it is going to cost to interconnect to our system because, in

some cases, the individual contractor will have very good information on the

site on which he has received a waiver from us, but he may not have good

information on the distance from that site to the best point to interconnect to

our grid and the transformers that will be needed to put the power in. We can

provide him with information that we would generate internally once we see his

scheme as to what the costs of that will be for him to factor back in his

economics and see if he wants to keep going forward. He may, at that stage, say,

'This doesn't look like it is financially feasible, profitable enough for me to

carry on.' We want to give the private sector the chance to do that evaluation

before they spend hundreds of thousands of dollars on either engineering or

environmental work. So it is a phased interactive process, as we see it. Dave

Collett, could you just comment on the timing for each of these phases?

MR. COLLETT: Yes. As Mr. Mercer had indicated,

the proposal call is a two-stepped approach. This is really so that we can

provide as much guidance as possible to the various proponents. They do not

spend a lot of money on projects that probably are not viable or feasible. That

is why we have indicated, certainly, to repeat what the minister said, in the

RFP, an indication - or not an indication, the actual price that Hydro is

willing to pay for delivery of power in 1996-1997.

Specifically, with respect to the timing for the

acceptance of proposals, the first step which we call a preliminary submission,

is due in August of this year. We gave them four months. At that particular

point the proponent does not have to spend a lot of money in getting data or

getting information to complete the proposal. He basically has to indicate the

site, the location, approximate distance from the grid, and the general nature

of the project he is talking about. Then we do an evaluation to give him an

indication of the interconnection costs that he will be subjected to to tie that

particular project into the existing island grid.

With that information he can then go and complete

the full and final proposal. To do that he will have to spend a considerable

amount of money, depending on the size of the project. But for an eight to ten

megawatt project you could be talking $100,000 to $200,000 of engineering work

to complete the proposal. That is due in July of 1993. That is not an

unreasonable amount of time that an engineering firm will require to do the

study so they can complete the proposal in the proper form.

Then selection is done, in November of 1993, and

then the awards are made at the end of 1993. They have 1994, 1995 and 1996,

three years to build the project.

MR. WOODFORD: Based on information that I have

from at least five different companies those rights were waived some time ago -

at least their rights were waived. They went on and did the work on many hydro

sites in the Province. In fact we have cases where the environmental assessment

was waived on certain projects. I know of one that is ready to go tomorrow

morning.

MR. COLLETT: With respect to the waiver of

rights, all Hydro did when people came to Hydro looking for Hydro to waive their

right, that's all we did, we just literally waived the rights and signed an

agreement with them to that effect. It was not an agreement to purchase power.

That could not happen until - in response to this document, and that information

or that fact was made clear - we took particular caution to make that very

clear, that this was not an agreement to purchase, It was Hydro waiving its

first right to develop this site. Nothing more than that.

MR. WOODFORD: So why then, if there is a

company ready to go, with everything ready to go, with its homework done,

environmental assessment waived, willing to spend $12 million to $14 million of

their own money, not one penny of government money, why then would they have to

go through such a process? They are not the only one. I know of three or four

others that are ready. Now, based on this information and based on the proposal

call, it is quite possible that those people won't even be considered - they'll

be considered, but it is not necessarily saying that they are going to be

accepted.

DR. GIBBONS: They're not necessarily going to

win the proposal.

MR. WOODFORD: No, that's right.

DR. GIBBONS: Hydro is looking for least cost.

MR. WOODFORD: That's right. You are basing your

thing on avoided cost. One of the -

DR. GIBBONS: Avoided cost in 1996 when they

anticipate having to have a new generation available.

MR. WOODFORD: Yes.

DR. GIBBONS: Between now and 1996 their avoided

cost is the cost of a barrel of Bunker C at Holyrood, which is much cheaper than

the price that is in that proposal.

MR. WOODFORD: That's right. But after nineteen

months, after the projection selection phase, then you would agree on a price.

That's when the price will be agreed on. That's approximately nineteen months

from now. When that is done, and like I say, with companies with everything in

place now, I just can't see it. Because from inception to commissioning on some

of those many Hydro sites, those people can do it in probably eighteen months.

They can be ready to go in eighteen months.

MR. COLLETT: But I guess you have to appreciate

from Hydro's point of view, it can only buy the power and energy when it needs

it. Our best indication at the time of release of this document is no earlier

than the fall of 1996. We have indicated in the document the maximum price that

we can pay as correctly as you say, based on our avoided cost that we project to

be at that time.

MR. WOODFORD: In your proposal call under the

pricing structure and power contract, and given the explanation for your avoided

cost, I suppose the question would have to be asked: what is the cost to

generate power in Holyrood? Would it not be cheaper, for instance, to come off a

mini-hydro site than it would from Holyrood?

MR. COLLETT: No. You see the price we have

quoted in this document, in the request for the proposal you are referring to,

is based on hydro having to install additional new capacity and energy. Prior to

1996 we did not have to add additional capacity to generate a kilowatt hour. For

example, today from Holyrood $12.00 a barrel oil is about sixteen mils. We are

quoting (inaudible) price here in the sixty-five to seventy mil range which is

new capacity. If we were to buy energy from a small hydro producer prior to 1996

we would just be able to buy it to displace Holyrood and it would have to beat

the price of energy from Holyrood which today is a fairly low cost.

MR. WOODFORD: You are talking about your mil

rate. How would that relate with regards to kilowatt hours regarding your 3.5

cents per kilowatt hour or something like that?

MR. COLLETT: The rate shown in there, the total

rate, is about seven cents, 6.8 cents or something like that.

MR. WOODFORD: Plus your demand component and

all that.

MR. COLLETT: Well, that is the total. The

demand component and the energy component together equate to about seven cents

per kilowatt hour or seventy mills and that is referring to Holyrood. The energy

from Holyrood today at our current fuel costs, just the energy component alone,

is about 1.5 or l.6 cents.

MR. WOODFORD: You are saying you do not need

any power but if you do need any power before any of these particular projects

are accepted would you consider putting in another generator in Holyrood before

that, or what? What you are saying is it is cheaper but at the same time would

you consider that before you would accept any proposals for mini-hydro sites?

DR. GIBBONS: What we are saying, Mr.

Vice-Chairman, is that using the present three generators at Holyrood without

new capital investment in number four your cost at Holyrood is 1.5 cents per

kilowatt hour because you are only talking about the cost of the fuel, the

$12.00 cost per barrel for the Bunker C. That is today's price and that is going

to fluctuate somewhat probably but when the new generation capacity is required

that is when you have these new sites coming on in 1996. That is when you can

pay the higher cost of seven cents approximately per kilowatt hour because you

are paying therefore the new generation, the new capital in addition to the cost

of the fuel. That is when your small hydro sites are competitive, when you

compare the small hydro site then to a unit number four at Holyrood. For example

last year when the National Energy Board assessed the cost of Holyrood they

estimated Holyrood at 12.8 cents per kilowatt hour. That is unit number four,

because of the cost of the capital. Now, I do not know what Hydro is presently

assessing it to be because it is going to vary a little bit but if you look at

future sources including new generation, new capital, that is when the small

hydro sites can become competitive.

MR. COLLETT: (Inaudible) new additional capital

and additional energy.

MR. WOODFORD: There is some suggestion from

companies I have been talking to these last few days that if you would only move

up the selection process to the end of the year there could be substantial

dollars spent. As you know I think it works out to $3000 or $4000 per kilowatt

and $3 million per megawatt, or something like that, in expenditure on those

sites so it was suggested to me if they meet and moved up the selection process

until the end of this year they would be able to do survey work and engineering

work for road construction and get that started right away, say by next Spring.

I do not know if you have it or not, but I am getting it from other companies,

the nineteenth month selection process seems to be a real stumbling block. They

are ready to go, they have money ready to go provided they are selected.

MR. COLLETT: We have had communication with

most of the people that we have waived rights to and have picked up the

document. As a matter of fact they have been into our office quite frequently in

the last ten days and I'm not aware that that has been of paramount concern to

them, with the schedule. I believe there was one developer who had expressed an

interest in accelerating the schedule, but that

schedule is very much tied to

the whole evaluation process and the time that we require to evaluate these

proposals and get the information back to the proponents.

DR. GIBBONS: Nobody has brought any concerns to

my office either. Nobody.

MR. WOODFORD: None of the companies.

DR. GIBBONS: No, not one company has come to my

office with a concern about that, not at all, since that announcement was put

up.

MR. WOODFORD: So are you aware of any companies

that are ready to go?

MR. COLLETT: No, not personally, as I say. I

believe I am aware of one company that had expressed an interest in accelerating

the schedule, but it was not a big issue. It was brought to my attention anyway.

MR. WOODFORD: Okay.

MR. CHAIRMAN: Thank you, Mr. Woodford. Mr.

Murphy.

MR. MURPHY: Yes, thank you, Mr. Chairman.

(Inaudible) to the minister and/or through the minister to his -

MR. CHAIRMAN: Please state your name.

MR. MURPHY: Yes, excuse me. Tom Murphy, St.

John's South. If and when these private companies were able to generate

electricity, how does the public utilities - how do they fit into the scheme, or

how would they fit into the scheme of obviously recovering their capital

investment? Would Hydro go into a fixed contract, a rate contract, with these

people over a period of time? Would you pay them PUB rate, or how does that come

together?

DR. GIBBONS: We made an exemption in the

legislation recently to allow fifteen megawatt and lower not to have to go to

the Public Utilities Board. So it basically would be a contract with Hydro, and

either Mr. Mercer or Mr. Collett could speak of the details -

MR. MURPHY: So they'd get a hard dollar price

is what you're saying, Mr. Minister.

DR. GIBBONS: Yes.

MR. MURPHY: Yes.

MR. MERCER: We think that they need a long-term

purchase agreement with us to help them finance and not have the expense of the

formality of justifying their project to the Public Utility Board and the return

on their investment. So we think the government action in exempting them will be

helpful to them.

MR. MURPHY: Yes. The reason that I raise that

question is because I spent a little time in the construction of Churchill Falls

and I remember two dollars a barrel, which is no longer reality. Looking over

your shoulder, hindsight of course is twenty-twenty vision. We seem to forget

that today, especially if we are sitting on - depending on what side of the

table we sit on off course. It is obviously 1992. In 1996 you'll see these folks

coming on. I pick up on what you said about the cost of generation at Holyrood

now, and we are looking at approximately, what is it? Twelve, thirteen dollars,

US crude? Somewhere in that vicinity right now. Conceivably in 1996, who knows?

It could be twice that amount for crude which would make the small generation,

the small rivers and what have you, that are existing on the island now,

certainly a lot more attractive.

Because when you look at anywhere from four to ten

megawatts, there's really not a great sense of viability. If you live on the

southern shore and you listen to Newfoundland Light and Power jargon like I did

for fifty years, when the power that was generated up the southern shore was

totally able to handle St. John's, and now I don't know if it could handle the

Avalon Mall. Times have changed.

Again, we're into hypothetical things, I think. But

just to get a feel for it I think that anybody who - and I go along with the

Vice-Chair. That it would be nice to get these things moving. If there was ever

a time we needed folks building roads and doing survey road work and what have

you, it's right now. But of course, I suppose, there is an element of caution.

How would these private companies fit into the

grid? Would they be responsible to bring it to their own transformers and tie in

with us? Is that something that has been looked at?

DR. GIBBONS: Mr. Mercer (Inaudible).

MR. MERCER: They are responsible for all of the

costs of getting it intertied to our grid. We can provide them with certain

information on that cost, particularly as it relates to the standards that have

to be there for safety and reliability. We have to be sure that the transmission

line that they are going to build is of an appropriate standard and that they

can provide the reliable service. If they put up something that is too shaky and

too insecure there is going to be a lot of cost in maintaining it. It would be

their responsibility to do that maintenance, unless they ask us to do it on

their behalf.

MR. MURPHY: I think after the past few months,

Mr. Mercer, we'll wait and (Inaudible) question our own shakability (Inaudible).

No, I just wondered how that was going to come together. Of course, anything

that they had the capability to generate you would obviously take. It would not

be feasible for them to be on for a week and off for a week. So once they come

into the system, they would be there and you would take everything they would

generate.

AN HON. MEMBER: (Inaudible).

MR. MURPHY: Yes, okay, thank you. Thank you,

Mr. Chairman.

MR. WOODFORD: (Inaudible) on the subject for

the Member for St. John's South. I think the non-utility generator is hooked

into Newfoundland Light and Power rather than Hydro or -

MR. MERCER: It would depend on where they are,

you know. They could hook into Light and Power's grid or Hydro's grid, but you

must remember that Light and Power buys from Hydro at the average system cost

which is going to be a lot less than seventy cents, so theoretically, in our

discussions with Light and Power, what we have agreed is that, if there is

anybody out there who should interconnect to the Light and Power system, we will

have a back to back agreement where, we will buy it at seventy mils and we will

sell it back at exactly the same spot to Light and Power at the blended rate,

which might only be forty-five or fifty mils. Do you understand me?

DR. GIBBONS: (Inaudible) today at 45.31.

MR. MERCER: Yes. We want to make sure they tie

into the most economical place.

MR. WOODFORD: In his first question pertaining

to the contract itself, he says in the proposal that the contract would be

signed by month twenty-two and it would be a twenty to thirty year duration.

MR. MERCER: Yes, we have been (inaudible)

Newfoundland and Labrador Hydro, even though they may be delivering to the Light

and Power grid.

MR. CHAIRMAN: Okay, Mr. Snow or Mr. Hewlett

probably.

MR. DUMARESQUE: I had a question in the same

area -

MR. CHAIRMAN: Okay.

MR. DUMARESQUE: I just wanted to get an update

I suppose, if you have it, on the Robertson Lake on the Quebec North Shore, any

idea where that is?

MR. COLLETT: I guess a fair answer is to say I

am not really sure where we are on this thing, but this is a project in

North-eastern Quebec I think is what you are talking about; it is about

twenty-five megawatts total capacity, Hydro-Quebec had planned to develop that

and supply hydro power to Blanc Sablon and probably into St. Augustine as well.

I believe more recently they have indicated that they are going to waive the

rights on those rivers, Lake Robertson and turn it over to a private developer

in the area of Blanc Sablon, and that has been seesawing back and forth between

Hydro-Quebec and that private developer for about the last couple of years and I

do not have anything more recent on this; Mr. Mercer, do you have anything more

recent on that, it is about two years ago?

MR. MERCER: I have spoken to Hydro-Quebec about

it within the last three months and again, there seems to be uncertainty. The

private developer has called us on occasion, speaking as if he had the authority

and had the waiver and was going to do it; at the same time, Hydro-Quebec had

not been able to confirm that, that is the case and quite frankly I am not sure

what is happening there between the private individual and Hydro-Quebec.

DR. GIBBONS: We will certainly hope, up to two

years ago, we approved Hydro negotiating with them to give them an agreement to

supply Coastal Labrador and that area, we will certainly hope that one would

move forward but not much has happened in the last two years.

MR. DUMARESQUE: I have been getting a lot of

the same signals I guess but was hoping that something would have been nailed

down. I wish they would have had diesel generator stations, it would be a lot

better for us if we could tie in.

DR. GIBBONS: It certainly would give you

probably a lower rate and more stable power in all of that area.

MR. DUMARESQUE: Okay, thank you.

MR. CHAIRMAN: Mr. Hewlett.

MR. HEWLETT: (Inaudible) 1.01.06, Purchase

Services, which the minister's office's euphemism usually for the entertainment

account -

DR. GIBBONS: That is maybe why it has been

reduced from $5,000 last year to (inaudible). I have not been doing much

entertaining.

MR. HEWLETT: No. I was just wondering, the

revised figure for last year was five grand and I know the Premier himself

closed the private dining room when Premier Peckford retired and the chef

retired and so on and so forth, he took an entertainment allowance for his own

home, which in his estimates last year, we found out had to do with more of the

upkeep of his lawns than entertaining, so my question to you is, did the Premier

stick you with the bill, because I gathered everything is being farmed out to

various departments; some major entertainment function or delegation from

somewhere far away in the energy related field and the word on the hill is that,

if such were to occur it would not be done at the Premier's home but would be

done at a hotel, and the minister concerned would be stuck with the bill.

DR. GIBBONS: I was never paid for a bill like

that in the three years I have been minister.

MR. HEWLETT: Thank you.

DR. GIBBONS: - A very minimal amount, and I am

not sure what my purchase services got used for last year in terms of the

detail, but I think I had people out to about five lunches - no more than a

couple of people each time, and no more than seventy-five dollars each time - so

very little entertaining in my vote.

MR. HEWLETT: When we talk about bringing in

these mini hydro sites in ninety-six, what size of a unit are you talking about

bringing on vis--vis Holyrood, if you have to add more capacity there? You are

talking about you put out a proposal for fifty megawatts total out of the

various sites.

DR. GIBBONS: Holyrood numbers one, two, and

three are averaging 150/175 megawatts now, so Holyrood number four would be in

the same order of magnitude.

MR. HEWLETT: And these new minisites then would

bring requirements on stream in the 200 range, you are saying, come ninety-six?

DR. GIBBONS: No, we are looking for fifty

megawatts from the (inaudible) sites.

MR. HEWLETT: No, but both combined?

DR. GIBBONS: Well right now we do not know.

Depending on what happens with the Lower Churchill and other options we do not

know whether or not we will be doing number four for sure. The decision on that

issue was deferred last Fall by Hydro. We are going to see what the response is

to the small hydro proposals and have them address that decision this coming

Fall.

MR. HEWLETT: So this Fall you will - because

sooner or later, given lead time on these construction projects and what not,

you are going to have to make some decision as to whether you go local or you

have a potential deal with Quebec. You are saying this Fall is the decision

point?

DR. GIBBONS: Yes, every Fall basically is a

decision point to look at the next source that you are going to need, say four

years down the road, and right now we are saying fifty megawatts. If we can get

fifty from the small hydro sites this Fall, maybe we can defer that decision by

another year.

MR. HEWLETT: Okay.

With regard to the negotiations with Quebec, being

formerly a political employee of the Crown I was witness to fifteen years of

productive discussions with the government and Hydro Corporation of Quebec.

Could you give us an update on the - I guess it is now eighteen years of

productive discussions with Quebec.

DR. GIBBONS: That is probably a good way of

putting it. In the last three years, though, we have had thirty meetings. The

most recent one was March 3, so there has been a lot of attention paid to it by

both sides and a lot of progress has been made.

Right now the ball is in their court. They have our

counterproposal to the latest proposal they left with the Newfoundland and

Labrador Hydro negotiating team on November 21. The counterproposal was tabled

on March 3, so that is two months. We are anticipating, some time in the not too

distant future, that we may get a call saying: Let's have another meeting to

review what you left with us to talk about.

MR. HEWLETT: So you have not established a firm

or even loose date yet for a follow-up meeting?

DR. GIBBONS: For the next meeting, no.

Well it took us from November until March to do our

assessment and get back to them, and it is now two months; but it is at that

stage, I think, where you have documents that thick, where you have made a lot

of progress on the details. It takes a little more time to turn it around.

MR. HEWLETT: One thing I found, from watching

the process over the years from within government, to make progress on the

technical details, etc., financial, construction, engineering and all the rest

of it, it is another to make progress at the political level. Sooner or later

Hydro Quebec, being a creature of the Province of Quebec, would need the

go-ahead, the nod, from the Government of Quebec.

What signals are you getting from the Government of

Quebec with regard to their willingness to take the technical discussions

onwards? You have stated it is commercial dealings between two hydro

corporations. Surely you must admit that sooner or later any Government of

Quebec would have to weigh the political fallout of a deal with this

administration from their own political perspective. What readings are you

getting at that level?

DR. GIBBONS: Well we are not getting anything

negative. The discussions that we had at the political level were some time ago.

We have not had any recent political discussions on the issue.

MR. HEWLETT: You have not gotten anything

super-positive at the political level either, have you?

DR. GIBBONS: Well we have not had any recent

discussions. The political meetings were at the early stage of our discussions

two years ago. At that time everything was said to be full speed ahead: Let's

go, let's get our negotiating teams active and working on it. Since that time

that is what has been happening. We have had no need to have discussions at the

political level. At some time, as you are saying yourself, it has to reach the

political level in both governments. At the appropriate time.

MR. HEWLETT: Quebecers are great talkers. I've

watched them talk for eighteen years now. But there have been political

developments in this nation that have the capacity I suppose to sour the

political will or, put it this way, it might be politically suicidal for a

government in Quebec to sign any kind of a hydro deal with the current

administration in this Province. I am surprised that you discount somewhat the

political angle on this at this stage of the game.

Why are we in our eighteenth year of technical

negotiations when any premier of Quebec would be taken out back and shot if he

was caught doing a deal with the Government of Newfoundland under the current

administration? Or is that an opinion on my part?

DR. GIBBONS: That's an opinion.

MR. MURPHY: I thought we were here, Mr.

Chairman, to deal with the estimates (Inaudible) I think we're starting to get

into political rhetoric.

MR. HEWLETT: What we've generally done, I've

found in these committees, is that we've discussed things, sometimes in detail,

sometimes political principles and philosophical points of view. At the end of

the evening the usual practise in the Resource Estimates has been to pass all

headings from one to whatever in one lump.

MR. MURPHY: (Inaudible) leniency of the Member

for Green Bay -

MR. HEWLETT: By all means.

MR. MURPHY: - ask the minister and/or his staff

what impact would the Great Whale project and the fact that New York has said to

Quebec Hydro: look, we're not interested in buying your power now, what impact

would that have on Lower Churchill? There would be a much more economic question

for my thoughts rather than trying to bring Meech into it.

MR. HEWLETT: Well, no. I don't disagree that

that is an impact. But as well, surely the minister would have to agree, that a

member of the Innu nation lying down in front of a bulldozer would also have

repercussions vis--vis the development of Lower Churchill. So there are

technical discussions here that can go on till the cows come home for the next

fifty years. But if there is no political will, my point being simply that

technical discussions keep certain officials busy and serve a public relations

function. To what extent they would generate electricity is another matter

altogether. Obviously the minister does not share my particular view on that

matter.

DR. GIBBONS: (Inaudible) I referred earlier to

a report by the National Energy Board. It's dated January 1991. It looked at all

the major energy projects in North America. I think it was a total of forty-five

or so projects. Gull Island was rated as number one. The Gull Island project.

Muskrat Falls rated two levels down. Great Whale was about two levels below

Muskrat. So economically, Gull - I can't remember what was in between Gull and

Muskrat - and then a couple of points farther down, Great Whale. Economically,

both these frankly have to be developed I believe for Canada and for eastern

North America. If they do not go soon they will go eventually. Because economics

will dictate that they go.

Environmentally - when you look at the

environmental, apart from the economics - also they are benign compared to most

of the others. Really benign.

MR. HEWLETT: It's a run of the river project

(Inaudible), I understand that.

DR. GIBBONS: Run of the river, total flooding,

about 100 square kilometres. Great Whale alone is about 4,000 square kilometres,

displacing all sorts of people, animals and so on.

MR. HEWLETT: But the other political factor, if

I might, Minister, involved is the whole issue of native land claims and so on

and so forth. The thing that has basically put Great Whale on hold. Are there

any discussions ongoing with the Innu nation vis--vis Lower Churchill? Because

I can see even if the political will, and the premier of Quebec was willing to

commit suicide and cut a deal with you people, one person lying down in front of

a bulldozer would make New York again very nervous. Because you have to realise

you are dealing with urbanites here who think that steak doesn't come from cows,

it comes from supermarkets. So -

MR. SMALL: Mr. Chairman, I think we're a bit

off the track now. There is no more questions (Inaudible) the estimates. I do

not see why we're conducting the House of Assembly here.

MR. CHAIRMAN: I advise the Member for Green Bay

he has another 30 seconds before the ten minutes are up.

MR. HEWLETT: I will throw that over to the

minister. I will leave it for now, and let other members of the Committee get

into the gory details of the numbers if they wish.

MR. MURPHY: Mr. Chairman, I really find it

difficult to sit here and be classified as an urbanite and to listen to the

Member for Green Bay who thinks the people who live in urban Newfoundland think

that -

MR. HEWLETT: I didn't say urban Newfoundland. I

said New York.

MR. MURPHY: It doesn't really matter, you know,

it is the psychology of all this. I just want to say to the hon. member - again

I pick up on the Member for Baie Verte - White Bay (Mr. Small) - we are here,

basically, to discuss the Estimates. And I don't mind the hon. member having

dialogue about the politics associated with Muskrat Falls and any other Hydro

project, but -

MR. HEWLETT: Yes, because Hydro is not here in

detail before us, therefore, in terms of Newfoundland and Labrador Hydro and its

reporting relationship to the minister, I mean, I don't have any detailed

numbers. I asked about one particular detailed number if the Premier had stuck

the hon. minister with an entertainment bill on energy matters, as the word on

the hill has it he does with various departments so that he can keep his $20,000

for other reasons. Therefore, with regard to Hydro, I must probe in a most

general manner because I have no numbers.

MR. MURPHY: I say to the hon. member, he hasn't

probed, he has made a lot of personal observations. If you were probing the

minister and probing the staff, then I would understand it, but you have made a

lot of personal observations about Hydro Quebec, about the Inuit lying down in

front of bulldozers. I mean, I worked in Come by Chance when I saw fifteen

people lying down in the middle of the road. You know, the hon. member must

realize that no industry in Newfoundland progressed without some problems. He

needs to know that, then maybe he can shorten his rhetoric.

MR. HEWLETT: Well, I will stop for now, Mr.

Chairman. I believe the minister is quite capable of defending himself - we have

locked horns before - but if the Member for St. John's South wishes to come to

his rescue that is quite all right with me.

MR. MURPHY: I am not coming to anybody's

rescue, I am just making the same comments that the hon. member is.

MR. CHAIRMAN: Mr. Dumaresque.

MR. DUMARESQUE: (Inaudible).

MR. CHAIRMAN: Mr. Small.

MR. SMALL: I'm a great listener.

MR. CHAIRMAN: Mr. Snow.

MR. A. SNOW: Just a few short questions. With

regard to the geological surveys you mentioned about - How will I approach this,

about two or three - Alec Snow, Menihek. Will I just give one question? We can

go that way rather than -

MR. CHAIRMAN: Whatever you like.

MR. A. SNOW: I probably won't remember all the

questions so then you will confuse me with the answers.

In your opening statement you talked about the

geological survey encompassing about half the Province.

DR. GIBBONS: (Inaudible) geological mapping at

about the same stage as some of the other programs like geochemistry and

geophysics.

MR. A. SNOW: How does that rate? Does that

include offshore?

DR. GIBBONS: No.

MR. A. SNOW: Just the land mass.

DR. GIBBONS: The land mass, that's all.

MR. A. SNOW: How does it split between islands

and Labrador?

DR. GIBBONS: I don't have that figure with me,

but there is certainly a large part of Labrador that has not been mapped at the

same detail as a large part of the Island, and most of the mapping in Labrador

has been on a slightly different scale because of the geography, in order to try

to get it done for one cut.

MR. A. SNOW: Wouldn't it be logical then, if we

are not exploring more, that we have some special program to do a geological

survey in Labrador.

DR. GIBBONS: We have done 100 per cent of

Labrador with geochemical surveys, and we have done part of Labrador, besides

the lake sediment, some water surveys of parts of Labrador. So we have been

paying a fair bit of attention to Labrador and we are going to continue to do

that, but there is no question that there is more of Labrador that has not been

done to the same scale as the Island part of the Province.

MR. A. SNOW: You mean percentage-wise?

DR. GIBBONS: Percentage-wise, yes. We are doing

it at a slightly different scale. A lot of the mapping there because of the

large scale is a somewhat different map scale because we want to complete it

once. We want to get a first run on it. I think we are getting fairly close now

to having an updated geological map. We published a general geological map back

in 1973, and we have been trying to do some more detailed mapping. We are making

a lot of good progress on it. I don't remember the details, but Paul Dean might

be able to speak to exactly where we sit now in terms of the geological map

coverage of Labrador. We are, I think, getting close to having another new map

ready to publish, say, twenty years after the one of 1973. Do you want to speak

to that, Paul?

MR. DEAN: Yes. I think we are about 60 per cent

in Labrador at the 1 - 100,000 scale, which is what the minister refers to. I

would just like to comment that in terms of the expenditures of the geological

survey, the majority of the expenditures, the dollars, if you like, are spent in

Labrador on an annual basis. Because they are expensive programs to run. They

are helicopter-supported programs and so on.

MR. A. SNOW: Because of geography.

MR. DEAN: Because of the geography, and because

of the cost of running mapping programs in Labrador.

DR. GIBBONS: I mentioned two of our projects.

One is in Nain this year and the other is in the Saglek area. You can imagine

that they are very expensive, always with both plane and helicopter support.

MR. A. SNOW: One of the other things - with

regard to mining, you didn't touch very largely on the operation of, I guess,

two of the larger mines anyway, we'll call them.

DR. GIBBONS: I didn't go into the detail on the

operation of any mine other than to say that we monitor all of them.

MR. A. SNOW: If you'd just let me finish, and

I'll get to my question.

DR. GIBBONS: Yes.

MR. A. SNOW: I wonder if you could give us a

little rundown on what is the prospectus, if you will, of the two operating

mines in Western Labrador, what that is for this coming year, as you know them

today. Also, if you could give us a little rundown on the labradorite operation

that is presently being - my understanding is that there is some stone, the

dimension stone?

DR. GIBBONS: Yes.

MR. A. SNOW: It is going to be exported this

year. If you could give us just a few minutes with a little prcis of what that

operation is going to encompass this year.

DR. GIBBONS: Last year, with regard to the

dimension stone first, at Nain, a number of blocks of rock got cut out of the

face. A quarry face did get started. I think it is about 150 feet long right

now. I haven't seen these blocks myself, but generally they try to get blocks

that are eight by eight by eight, about an eight foot cube. They weigh about

twenty to twenty-five tons. The shipping season closed up last year before they

could start getting them out. They are hoping to get a lot of blocks out this

year. Paul, you can speak to the details of that.

MR. DEAN: The project in Nain is a joint

venture between the Labrador Inuit Development Corporation, the native

development corporation, and an Italian company, whereby the LIDC, the native

development corporation, is operating the quarry, will operate the quarry. Then

they will jointly market the stone with this Italian company. The joint venture

is currently being finalized and we hope to see the first stone shipped out of

Nain this year. It is a very unique stone. It is being well accepted in trial

marketing and we believe it will be the first modern dimension stone project in

the Province.

DR. GIBBONS: We, ourselves shipped two big

blocks, two years ago, to Italy so they could cut them and have samples to use.

These are the samples that Mr. Dean referred to as having been widely accepted

in the international dimension stone market. So the company that did that sample

cutting now is saying, 'Hey, come on, we want to get on with this.' It is a very

popular stone.

MR. A. SNOW: What would be the mineral value of

that?

DR. GIBBONS: What is the price on a block of

that?

MR. DEAN: The price varies, because the

uniqueness of the stone can command a unique price in the marketplace. We

estimate that the stone is worth at least $1,000 per cubic metre, at the quarry

in Nain.

MR. A. SNOW: Can you tell me what the

value-added value would be?

MR. DEAN: Again, this will depend on the

market. Of course, the value-added involves cutting, polishing and processing,

and depending on the product, whether you're buying a bathroom sink of this

material or a square foot of tile, is considerably variable. This is the sort of

product that could sell for $15 - $20 per square foot in the tile.

MR. A. SNOW: Of course, this value-added is

done somewhere down south of Labrador, I guess, is it?

MR. DEAN: It can be done anywhere in the world.

MR. A. SNOW: Where is it being done now?

MR. DEAN: No stone is being shipped, so there

is no processing being done.

MR. A. SNOW: Where is it proposed to be done?

MR. DEAN: It could be sold to any processing

plant anywhere in the world.

DR. GIBBONS: Right now it will come out as raw

blocks and be available to any processor who would want to take them, whether

that is in the United States, Italy, or wherever. Right now, there is no

processing plant in Newfoundland. We are hoping there will be a plant set up

sometime in Newfoundland and Labrador.

MR. A. SNOW: But it isn't being done now.

DR. GIBBONS: At this time there is no plant.

There is no company that has a plant. That type of plant would require an

investment of many millions, maybe $100 million plus. It is a big industry. If

you want to switch back to the iron ore -

MR. A. SNOW: Well, if it is a really big

industry it probably is a big employer.

DR. GIBBONS: Yes. Do you want to switch to iron

ore now?

MR. A. SNOW: Surely, go ahead.

DR. GIBBONS: The two mines, as you referred to

them, the two biggest mines in the Province, presently producing about 60 per

cent of Canada's iron ore, went through a very tough time last year with a lot

of layoffs. We are anticipating, of course, the summer shutdown for Iron Ore

Company of Canada this summer. Wabush Mines is not anticipating a summer

shutdown but is running at reduced staff. I think there will be about - is it

about a million tons less, Paul, in the total production this year from last

year?

MR. DEAN: Yes, it would probably be greater

than a million in total production.

DR. GIBBONS: A decrease from last year.

MR. DEAN: A decrease.

DR. GIBBONS: So the total now would be about

fifteen million tons?

MR. DEAN: More like nineteen.

DR. GIBBONS: The total production would be

nineteen million, a combination of concentrated and pellets. This is reflecting

what is happening in the international steel markets and moreso locally in what

is happening in the Canadian and United States steel markets where there has

been a real softening in the demand. We are hoping that things will improve in

Labrador West. We believe that the new partner, Mitsubishi, brings a new view to

that and a window on the Asian market. In the longer term, we have to hope for

an improved market for steel.

MR. A. SNOW: You mentioned, Mr. Dean, that

Wabush mines are going to be down but I didn't quite catch the figure. The

minister said a million. Is it a million?

DR. GIBBONS: IOC is what is down. Wabush is

going to produce about the same this year as last year but they are doing it

with a reduced staff operating full year. The Iron Ore Company is down about a

million or a little better.

MR. A. SNOW: In a five-week shutdown?

DR. GIBBONS: Yes.

MR. A. SNOW: And that is the only anticipated

shutdown?

DR. GIBBONS: That is all.

MR. A. SNOW: Will they continue at the present

rate of production? Are you aware of any change in production schedules after

the start-up?

DR. GIBBONS: I am not aware of any.

MR. A. SNOW: There are no production changes

whatsoever after the start-up, that you are aware of?

DR. GIBBONS: I am not aware of any.

MR. A. SNOW: There was some discussion earlier

about the Churchill negotiations. Could you give us a little rundown on the

economics of the Lower Churchill? You talked about its being listed by the

National Energy Board as the number one energy project left in North America

environmentally, and I thought you said economically.

DR. GIBBONS: They rated it economically, not

environmentally. Environmentally was my own comment, that it is a run of the

river development that really is going to flood a very marginal amount of new

area so it is environmentally very benign and economically rated by the National

Energy Board as the best megaproject left in North America. I don't have that

report with me tonight. I could have brought it, because I have it in my desk.

MR. A. SNOW: Could we get a copy of that?

DR. GIBBONS: I have a copy.

MR. A. SNOW: Will we be able to get a copy?

DR. GIBBONS: I will have to check on that

because I don't know whether or not it is a public document. I have a copy of it

and it shows the various relative prices.

MR. A. SNOW: Can you break down the cost in

site development preparation and transmission costs - how much power would be

consumed provincially and also where it is going to be consumed close to the

source?

DR. GIBBONS: It depends on where the need is.

We are anticipating with the Lower Churchill that we would have a DC line from

the Lower Churchill site to the Holyrood area, the Soldiers Pond area, and it

would basically dump power into the grid, the Island grid near Holyrood, so that

Holyrood, as a thermofired plant, could be closed down and be used just as

backup and we would be using the clean hydro power. In the meantime, we are

saying we would be holding 800 megawatts for ourselves, for Newfoundland and

Labrador, and we believe that is adequate to handle any growth and industrial

development needs in the Island part of the Province or in the Labrador part of

the Province.

MR. A. SNOW: What would be the cost of that

power here on the Island portion of the Province after being delivered to

Holyrood?

DR. GIBBONS: Well, I don't want to get into the

details of those figures at this time, because that is obviously related to

negotiations and so on, but that particular National Energy Board report

referred to a figure at the site as a very good figure.

MR. A. SNOW: Of what site are you speaking?

DR. GIBBONS: At the hydro site.

MR. A. SNOW: At the hydro site, itself, the

generating point.

DR. GIBBONS: It is a very good figure and that

is where they are rating it as being basically the best.

MR. A. SNOW: But what would it be? I mean,

Hydro officials must have some idea of what the cost would be of transmission. I

can understand your wanting to keep that one separate, we call that classified

information, but surely to goodness -

DR. GIBBONS: There is a cost of transmission,

yes. You could generally say transmission costs are about ten mils per 1000

kilometres, per 1000 megawatts or something like that. It is a figure I have

seen somewhere.

MR. A. SNOW: From Labrador to the Island?

DR. GIBBONS: I don't know if we want to get

into the specifics of the rates.

MR. A. SNOW: It is ten mils?

DR. GIBBONS: Overland transmission, I think I

have seen a figure showing wherever that is it would be around ten mils per 1000

megawatts or 1,000 kilometres or something like that. Maybe I'm confused.

MR. DEAN: Well, it depends on the -

DR. GIBBONS: Type of transmission.

MR. DEAN: - type of transmission and where the

transmission facilities are.

MR. A. SNOW: Well, I am not attempting to be

snotty or anything, but I am discussing the Lower Churchill Development. We know

where that is, and we know where the Holyrood generating station is, and that is

where we are going to bring it. So assuming that we are going to transmit it

from one to the other, what would be the cost?

DR. GIBBONS: Well, I don't want to get into

that debate right now, Mr. Snow. What I would rather say is that we are

negotiating an agreement whereby we believe that would be the most economic

long-term answer for power for the Province compared to any other source of

power for the Province, and we are satisfied with where that figure would be.

But I don't think we should be getting into it tonight.

MR. A. SNOW: Okay. I would appreciate that copy

of the National Energy Board report if it is possible to get it.

DR. GIBBONS: I will look into that.

MR. A. SNOW: Thank you. Again, to continue

along the lines of my hon. friend from St. John's South. He talked about the

Great Whale project and the economics of that, I believe, and the environmental

problems associated with it. Are there any other problems associated with the

export of energy sources to the United States market that this so-called Lower

Churchill project would also export to them? Are there any other energy sources?

DR. GIBBONS: We are not negotiating the sale of

the Lower Churchill power to the United States. We are negotiating the sale of

the Lower Churchill power that is surplus to our needs to Hydro Quebec at the

border between Labrador and Quebec. It is up to them what they do with it once

it goes into their grid.

MR. A. SNOW: Let's assume for once that the

Member for St. John's is correct and that there is -

MR. MURPHY: (Inaudible).

MR. A. SNOW: Well, we should assume at least

once. But let's assume that he is correct, that there is an environmental

problem or some other problems associated with the Great Whale project.

DR. GIBBONS: I don't think any environmental

problems associated with Great Whale cannot be overcome in time. Personally, I

believe that the Great Whale will be developed in time. I don't know when that

time might be. Certainly, the Energy minister in Quebec believes that it will be

developed in due course.

MR. A. SNOW: What is the cost? Are you familiar

with what the cost of power would be to, let's say, deliver to New York for the

Great Whale Project? Are you familiar with that?

DR. GIBBONS: We may have some figures for what

New York is paying for power. Do you have any figures, Mr. Mercer?

MR. MERCER: I don't have them from memory, but

it is in excess of 100 mils, as I recall the projections.

MR. A. SNOW: In excess of 100 mils.

MR. MERCER: Yes.

DR. GIBBONS: And the rate that we approved last

week is the rate that Newfoundland Light and Power pays to Hydro's 45.31 mils,

so plus the perspective -

MR. A. SNOW: This is 100 mils to whom?

MR. MERCER: That is what the U.S. utilities

would be paying to Hydro Quebec to purchase energy into the U.S. grids.

MR. A. SNOW: My understanding is that if

natural gas were used to create electrical energy, they would be able to sell it

for about 7.5. Is that correct?

DR. GIBBONS: I don't know.

MR. MERCER: I have no idea.

DR. GIBBONS: Certainly, natural gas is becoming

very competitive. That is what some of the reports have been saying lately. But

I believe the only people who are going to pay more for power as a result of

what happened recently with regard to Great Whale in New York power contract are

the people from New York. Because, when their economy improves and they come

back crying for power, they are going to have to negotiate a new deal. They

would pay more five years later than they would pay today.

MR. A. SNOW: Continuing with energy questions,

if you will. Have we done much research into alternate sources of energy other

than those you mentioned, wood burning, automobile propane, I think, but

specifically, electrical generation through wind?

DR. GIBBONS: Some research has been done on

that and there is a good wind regime in Newfoundland, but nothing has been

proven economic at this stage.

MR. A. SNOW: There was some reference - I

forget who made it now -about the provincial blended rate. Would you elaborate

on that?

DR. GIBBONS: Maybe I could ask Mr. Mercer to

speak about the provincial blended rate.

MR. A. SNOW: Sure.

MR. MERCER: What I was referring to, Mr. Snow,

was that when we sell off the grid to a company like Newfoundland Power or

Abitibi -and I am referring to sales on the Island - we blend the total cost of

older plants and more economical plants like Bay d'Espoir that were built many

years ago with more recently constructed plants like Cat Arm, and naturally,

when you look at all the resources that you have available, you build the

cheapest plants first, so they are the most economical ones, then, as you

exploit these cheap ones you are forced to go to more difficult ones to provide

power and energy and they are more costly. And then, of course, the units at

Holyrood vary in cost depending upon the price of oil, and we put all of these

sources together, blend all their costs and come out with average prices off the

grid to each of our customers.

MR. A. SNOW: You call it provincial blended

rate; that is only pertaining to Island. It is one of the few times I appreciate

your leaving out Labrador, by the way.

DR. GIBBONS: Yes, you're right, Labrador is

still much cheaper than that blended rate.

MR. A. SNOW: Am I correct in assuming that?

MR. MERCER: Yes, Mr. Snow.

MR. CHAIRMAN: Presently we will break for a few

minutes for coffee. We can get in another question before that.

MR. A. SNOW: My understanding, in some

discussion, I guess, probably in the House of Assembly here, is that we have a

right of recall to some of the power being generated in the so-called Upper

Churchill, presently being sold to Hydro-Quebec. We had recall rights in the

contract to about 300 megawatts, and we presently are recalling, I think, about

150 or 160 of that, so we still have 140. How much are we being paid for this

power and have we given any consideration to recalling it?

DR. GIBBONS: We have nothing to recall it for

right now and if we had a reason to recall it, then we have to give three years

notice for any particular industry that would need any part of that, and I

assume it is at the Churchill Falls rate.

AN HON. MEMBER: Yes.

DR. GIBBONS: It is at the Churchill Falls

contract rate because it is coming out of Churchill Falls.

MR. A. SNOW: My understanding is that that

block of power is presently being sold, the 300 megawatts, well, 140 is; you are

saying it is at the present rate which is, what, commonly referred to as 3 mil

power or something like that?

MR. MERCER: Yes, that is correct.

MR. A. SNOW: My understanding is that that 140

megawatts of power is being sold for 1 mil.

DR. GIBBONS: You raised that in the House one

day but I have had no reason to -

MR. MERCER: I think there may be some

misunderstanding about that. I think, in the event that Newfoundland recalls the

electricity but has no use for it, and therefore has to sell it back to Quebec

again, unused, then Hydro-Quebec does not have to pay the 3-mil price for it,

they can, in fact, take it back at a lower price. Dave Collett, who was the

operator at Churchill Falls may have further comment on that.

MR. COLLETT: That is correct. Once we recall a

block of energy and all of that energy is not used within the Province in the

month that we have indicated, it goes back over the border at one-third of the

price. That is part of the Churchill Falls-Hydro-Quebec Contract.

MR. HEWLETT: That would be a political recall,

I think, presumably for political reasons. We decided, for whatever reasons, if

the government of the Province, in any given year, were to take that power from

Quebec and we had no particular practical use for it, then we would pay cash

dollars for that and we would have to give it back to them at one-third of the

going rate.

DR. GIBBONS: Yes, temporary recall, but we

wouldn't recall the power unless we had a real use for it.

MR. HEWLETT: Or, if you had to make a political

point.

DR. GIBBONS: I don't know why we would do that.

MR. HEWLETT: Well, it is called 'cutting off

your nose to spite your face', but then, there are people who would rather fight

than eat, I mean, so that is life.

MR. CHAIRMAN: Okay, we will take a break for

coffee and then come back. It is 8:35, so we have an hour-and-a-half. We will

take ten minutes and come back at 8:45.

Recess

MR. CHAIRMAN: Order, please!

We will reconvene now.

When we left off, the Member for Menihek was in the

process of asking some questions, so we will let him continue for a few minutes

and then go to another speaker.

MR. A. SNOW: I have one more question with regard

to Mines. Earlier, you mentioned prospecting. Can you outline just a little what

type of subsidy program your department has to encourage more prospecting which

is, I suppose, a fairly basic type of exploration work that is probably the most

basic exploration, I guess, next to aerial, is it?

DR. GIBBONS: The most basic, that's for sure, Mr.

Chairman.

We have had a prospector's training program and a

prospector's grant program over the last couple of years. We implemented this as

part of our latest mineral development agreement. Last year, I believe we gave

out twenty $5,000 prospectors' grants and we also trained -

AN HON. MEMBER: (Inaudible).

DR. GIBBONS: Was it twenty prospectors last year

in their first course? This year we have a full slate of prospectors again

registered for a course to be given in the first two weeks of June in

Stephenville, in the college there.

I have been signing prospectors' grants for the last

month or so for the twenty prospectors' grants again this year. They are just

$5,000 grants. I don't think we have assigned twenty yet but we must be getting

well up towards twenty again this year.

I will ask Paul Dean to speak on both of these issues

because it falls under his

section in the department.

MR. DEAN: There is not much extra to say other

than what the minister has said already. In our view, this program has been

very, very successful. The prospectors give very good value to the Province for

the $5,000. A lot of people prospect for four or five months with this money.

We have a number of self-trained prospectors in

addition to those who have taken the training course, and they have been very

successful in delineating new areas of potential mineralization and new

discoveries themselves, particularly on the West Coast and on the Avalon

Peninsula, as well as in Labrador.

One of the good things about prospectors is that they

are not biased by geological thinking the way we are. They look anywhere and

everywhere they think there is a prospect of finding something. I must say that,

in our view, this is a small but important investment in the future.

MR. A. SNOW: Was there not one of our prospectors

last year who staked some claims on some property that resulted in close to half

a million dollars in exploration expenditures by companies on that property?

MR. DEAN: Yes, that is correct - not over a

one-year period but over a three-year period that amount of expenditure was

made.

The way that most of these prospectors work is that

they find a property and stake it, and then have an option agreement with a

major company. The option agreement often results in a cash payment by that

company, so that gives them extra cash to go and prospect further areas. It

works very well for all concerned.

MR. A. SNOW: How long have we had this program in

place in this Province?

DR. GIBBONS: Most recently, with the $5,000

grants, is this the second year or third year?

MR. DEAN: This is the third year.

DR. GIBBONS: The third year.

MR. A. SNOW: Have you investigated any other

methods of - if you have stimulated what, half a million dollars worth of

exploration work that -

DR. GIBBONS: That was just from one prospector.

MR. A. SNOW: From a $5,000 investment and one

prospector; you said a total of what was it, twenty $5,000?

DR. GIBBONS: We have twenty prospectors per year.

MR. A. SNOW: So - $100,000?

DR. GIBBONS: It has been a very successful

program.

MR. A. SNOW: Have you looked at any other

programs?

DR. GIBBONS: None that are targeted at the

prospector, as far as I know. Maybe Mr. Dean can speak to it a little more.

MR. DEAN: I think we, in the department, realize,

Mr. Snow, that with the declining levels of exploration by the mining companies,

if you like, we really need to increase the level of exploration in the

Province. We think the prospectors' grants is one way of doing it, but there are

some other considerations that were made by the minister's Advisory Council on

Mining and Mineral Exploration. Those recommendations have not yet been

finalized for the minister's consideration, but we hope they will be in the next

couple of months.

MR. A. SNOW: Can you enlighten us on what they

are?

MR. DEAN: Paul Dean here.

DR. GIBBONS: He could tell me first.

SOME HON. MEMBERS: Hear, hear!

MR. DEAN: That was going to be my response.

AN HON. MEMBER: What?

DR. GIBBONS: He could have waited until he could

tell me first.

MR. DEAN: (Inaudible).

DR. GIBBONS: I haven't spoken about that

particular advisory council, but last year, in view of what has been happening

to the levels of mineral exploration in the Province, I asked some people from

various parts of the industry to come together to see if they could take a look

at what is happening in the Province and make some recommendations to me, as the

minister, on possible actions to further stimulate the industry. That committee

has been meeting all winter about once a month. Since December, I think, they

might have had their first meeting, and they are due to give me a report now in

the very near future. I am looking forward to receiving that report.

MR. A. SNOW: Are you familiar with the program

that the Province of Quebec has? They tried it I think about four or five years

ago on the Gasp Peninsula.

PAUL DEAN: Yes, I am familiar with that. We have

looked at basically all the provincial programs across Canada to see what might

best serve our needs here. We have looked at the Quebec and especially the

Ontario program, both of which provide matching funds for mineral exploration in

certain regions. In Ontario, in particular, all of northern Ontario, now has

matching funds, fifty cent dollars with a contribution cap at about $300,000 per

company.

MR. A. SNOW: Which includes incentives for

drilling?

MR. DEAN: It would include matching funds for

drilling, 50 per cent of them.

MR. A. SNOW: That was funded by a Hydro

corporation, too, wasn't it?

MR. DEAN: It the case of Ontario it wasn't. I'm

not certain in the case of Quebec.

MR. A. SNOW: I thought it was - yes, it was, in

northern Ontario, by Ontario Hydro.

MR. DEAN: I don't think that is the case, Mr.

Snow.

MR. A. SNOW: Well, I thought it was funded through

the diversification fund in northern Ontario, by Ontario Hydro. Are you familiar

with that?

MR. DEAN: No, my information is to the contrary,

that it is funded directly by the Ontario government.

MR. A. SNOW: Well, are you familiar with the

Ontario Hydro diversification fund in northern Ontario?

MR. DEAN: No, I'm not.

MR. A. SNOW: You should check it. It is there. It

is a fund that Ontario Hydro did in conjunction with the provincial government

and, I believe, the federal government to help offset the massive layoffs in the

mining industry in northern Ontario because of the slowdown in the mining

industry, particularly the uranium industry. And because of the change in

government they decided that they would not be going ahead with the anticipated

construction of more nuclear energy projects, so they didn't need uranium and

miners were laid off. Ontario Hydro felt that they had an obligation to fund the

project, or a project being a diversification fund -

there again, performing a public policy purpose of the

government of the day, right? We would hope that our Crown corporation, our

Hydro Corporation would do a policy purpose similar to that, of course.

DR. GIBBONS: (Inaudible) uranium mines closed

down.

MR. A. SNOW: I thought you were going to say you

had no policies.

SOME HON. MEMBERS: Hear, hear!

MR. A. SNOW: I have nothing more, thank you.

MR. CHAIRMAN: Mr. Woodford.

MR. WOODFORD: Just a couple of short questions

pertaining to the mini Hydro sites again. How did you come up with the figure of

50 megawatts by 1996?

DR. GIBBONS: Looking basically, I think, at the

approximate annual growth and demand, and what might be an amount to take for

about a year or a little over a year.

MR. WOODFORD: So there is a possibility, if you

see a demand there somewhere down the road that, after a year or two, you could

be calling for more proposals?

DR. GIBBONS: Sure. Exactly.

MR. WOODFORD: Would Newfoundland Hydro be sort of

leaning toward this rather than go - well, I suppose, to put it another way, are

Newfoundland Hydro, themselves, now contemplating any projects over the fifteen

megawatts?

DR. GIBBONS: Hydro has two sites that have already

passed through the environmental assessment process in the Bay d'Espoir

watershed and a third one that is partway through that process - Granite Canal,

Round Pond and Island Pond. So there are three hydro projects in that watershed

that total eighty-two megawatts.

MR. WOODFORD: Eighty-two megawatts.

DR. GIBBONS: Eighty-two megawatts, and there

hasn't been any decision made at this time whether these will be carried through

to development or just left there to sit. These three, basically, are available.

Also, Holyrood number four is available as a possibility, depending on what is

most economic. Small hydro sites are, we believe, available to a certain limit.

We will see what the response is to that call for proposals. In Central

Newfoundland, on the Exploits, of course, there is the Greenwood project by

Abitibi that is possibly available for another forty megawatts or so. So there

are a number of possibilities in the hydro area.

MR. WOODFORD: I've been told that Kruger is doing

an assessment on the upper Humber. Is Newfoundland Hydro aware of that?

DR. GIBBONS: Yes. Kruger has water rights to some

area over there in the Humber watershed and I think they've been looking at

something over there. I don't know the details on it.

MR. WOODFORD: Because I've been told it is

somewhere in the vicinity of fifty megawatts. Is that possible?

DR. GIBBONS: Fifty megawatts. Silver Mountain, I

think it's called.

MR. WOODFORD: Fifty megawatts?

DR. GIBBONS: Fifty, fifty-five megawatts?

AN HON. MEMBER: It's in that order.

DR. GIBBONS: In that order.

AN HON. MEMBER: (Inaudible).

DR. GIBBONS: Yes. So there are a number of these

possibilities around the Province.

MR. WOODFORD: Back to the dimensional stone

subject. I have a fairly good deposit in my district in the Goose Arm area. I

would like for the minister or his officials to give me an update of that. I've

been told of possibly a change of management there, or a change of partners and

so on, and that they want to take out some more samples now this spring and send

them, probably to the same people, the Italians. I don't know, but that is what

I've been told. Is there any truth to that?

DR. GIBBONS: You do have one of the best marble

prospects in the Province at Goose Arm, the west side of Deer Lake. I understand

that very recently there was an agreement signed between the person who had

discovered that and a company. I am hoping it will be developed, because the

marble has a number of different colours and characteristics that seem

interesting. Mr. Dean is more familiar with the details of what is going on

there right now and maybe he can speak a little further on that for you.

MR. DEAN: Just to add a little bit to what the

minister said. In our view it is undoubtedly the best marble deposit, from a

dimension stone perspective, in the Province, and possibly one of the best in

North America. It was discovered by one of our prospectors who is receiving

prospecting grants and is continuing to receive prospecting grants. He has very

aggressively promoted the deposit, made its existence known around the world,

including Italy. We've certainly helped him in doing the geological mapping of

the deposit. I think Enterprise Newfoundland has helped him in drilling and

having it evaluated by an Italian company. As the minister said, I think he is

about to finalize a joint venture agreement for a feasibility study, trial

quarry and then, hopefully, take it all the way through to production and

processing.

MR. WOODFORD: I understand, in this particular

area, that if it does go through they are looking at the possibility of doing

the processing right there, as well. Is there anything to that?

MR. DEAN: I think it makes a lot of sense to do it

in that particular case because of the variety of stone that is quarriable in

that deposit. It is very suitable for having a processing plant adjacent to the

deposit or somewhere in the Deer Lake area.

MR. WOODFORD: It is a good location there too, and

pretty close to the waterway.

MR. DEAN: It is an excellent location.

MR. WOODFORD: I've been told also - I don't know,

maybe you can confirm it - that this particular find is like eight kilometres

long, five kilometres wide, and something like 300 kilometres deep, or thick.

MR. DEAN: It is certainly a large deposit. As the

minister said, it contains a great variety of colours and textures of marble. We

really won't know until we get into the quarrying and development of trial

quarries how many varieties there are. But it is a very large deposit. The ridge

of marble is about five kilometres long by at least two kilometres wide. It goes

down to at least the level of the lake of Deer Lake.

MR. WOODFORD: Very good. Let's hope something does

come of it. Could you give me an update on the Glover Island gold find, or some

of the samples? I understand they are in the process of analyzing another couple

of samples from there. Is there anything new on that?

DR. GIBBONS: There will be more drilling done on

that project this summer. It is a very interesting prospect, some very good

grades, but it needs some drilling to prove tonnage and we don't know really if

they will prove tonnage. Again, I will ask Mr. Dean to talk about the details of

it. It is a very interesting gold prospect.

MR. DEAN: Yes, the discovery was made last year.

The original drill holes that intersected the gold were made last year by a

Newfoundland-based company. They just completed some geophysical studies to

develop further targets and are currently attempting to raise some funding to do

a drilling program in the summer or fall of 1992 to, as the minister said,

better define the tonnage and move forward from there.

MR. WOODFORD: How do the samples compare with

other areas? I had some readings on the Cat Arm samples last year from a few

companies. They were very promising but they say that this one is as much again.

Is that true?

MR. DEAN: It is really too early to say, Mr.

Woodford. I think there are only about a dozen holes that are drilled. It is

going to take tens more of holes to define the nature of the deposit. I would

say, on average and in general, the grades are better than the Cat Arm - Sops

Arm area.

MR. WOODFORD: What about an update on the Tally

Pond situation just outside of Buchans? That one last year seemed like it was

going to fly. Is there anything new pertaining to that?

DR. GIBBONS: There isn't much happening on it

right now. The company has about 4.5 million tons of reserve there and they talk

about wishing they had twice that. In today's market, the prices of zinc and

copper are just too low to see that one proceed with that amount of tonnage. So

I don't think we are going to see any immediate development of it.

MR. WOODFORD: One other question - well, I can

leave it to someone else now to put some questions.

MR. CHAIRMAN: It's okay. Go ahead.

MR. WOODFORD: The minister, I think, in his

opening statement said that CF(L)Co paid $16.4 million, if I'm not mistaken, to

Newfoundland Hydro last year, and that was, in turn, paid on debt.

DR. GIBBONS: Paid towards the outstanding debt.

About $16.4 million is what we expect to receive in 1992. By the end of 1992 the

debt should be down to $47 million.

MR. WOODFORD: What was the actual figure received

from Hydro Quebec to CF(L)Co, last year, in the Churchill Falls agreement?

DR. GIBBONS: I don't know. Mr. Mercer?

MR. MERCER: Each year, it is in the order of $90

million to $100 million.

MR. WOODFORD: Ninety to a hundred.

MR. MERCER: And from that, there has to be the

costs of the company, including servicing the debt and paying the employees,

that kind of thing. Then, the dividends are paid out of the profits that remain.

Two-thirds of these profits come to Newfoundland and Labrador Hydro, and

one-third goes back to Quebec.

MR. WOODFORD: Would I be right in saying that last

year Newfoundland Hydro, or maybe it was CF(L)Co, actually got $22 million, the

final figure?

MR. MERCER: In total profit?

MR. WOODFORD: Yes.

MR. MERCER: Yes, it would be in that order.

MR. WOODFORD: After everything else was paid. I

asked a question last year about the maintenance contract. Maybe you could

clarify it for me. I have been going through the contract, the recapture program

and transmission facilities and so on. It was stated last year, I think by

officials from Newfoundland Hydro, that when the contract comes due in 1998 or

1999, I'm not sure of the date; you can confirm that - my understanding is that

Newfoundland Hydro is responsible for the maintenance on the grid - if

Newfoundland Hydro cannot come up with the funding for the maintenance contract,

or whatever is needed at that time, Hydro Quebec has the right to fund that

particular program. And, for every million dollars that they put into it, they

can take one share of CF(L)Co, which is 66 per cent. Is that true?

DR. GIBBONS: I don't know anything about this

maintenance contract but I know that if the occasion arises, Quebec has the

right of paying money at some time. Maybe Mr. Mercer could speak to that.

MR. MERCER: I don't think it is related to a

specific contract, such as a maintenance contract. But I believe that as long as

the debt is outstanding to the bondholders of CF(L)Co, if, for any reason, the

company gets into financial trouble and doesn't have the money available to

service the outstanding debt, then Hydro Quebec has the right to step in if

there is a default. If CF(L)Co doesn't make its interest or principal payments

on time, then Hydro Quebec has a right and an obligation to step in and cure the

default by paying money. And for each input of money they have a right to get

shares, but that is not related to any particular contract, Mr. Woodford, that

is the overall operation of CF(L)Co.

MR. WOODFORD: Yes, but it is broken down to

certain referrals made to recapture transmission facilities and so on, through

it, that would indicate that there is something of the same thing in place. But

that's all - I don't want to belabour that point.

There is just one question that hasn't been brought up

and we might as well bring it up: Hibernia. Is there any sort of an update on

that?

DR. GIBBONS: There is nothing new to report on

Hibernia. The companies have been searching the world, as I have repeated a

number of times. They made presentations to various companies and I can give you

the number of companies to whom they have made presentations. There have been

follow-up discussions with the serious companies, and a number of these serious

companies have gone into what is called the data room, one in Calgary and one in

Asia, I think it is Tokyo. That type of data room activity is still going on

this week. So that continues as long as there is a company or a number of

companies interested, then they keep the data rooms operating and that is going

on right now.

My most recent discussion on this subject was this

afternoon. It was partway through Question Period when I received a message

saying that Mr. Epp called, he was going to be in his office for forty-five

minutes and give him a call. So I talked to him right after Question Period. We

just had a chat about the general status, and that is basically it. The data

room activity is continuing, and we just continue to hope that there will be a

positive resolution in due course. I have no more to say at this time.

MR. WOODFORD: One other question from me. You

mentioned in your opening statement the Electrical Power Control Act. It gives

totals of $1.6 million. Kruger was mentioned. Could you give me a breakdown of

the companies involved and the amounts?

DR. GIBBONS: Kruger, $603,000; Albright and

Wilson, $432,000; Abitibi-Price, Grand Falls, $638,000 for a total of

$1,673,000. That's what is estimated in this year.

MR. WOODFORD: Albright and Wilson was what?

DR. GIBBONS: Albright and Wilson, Long Harbour.

MR. WOODFORD: Yes. What is the total?

DR. GIBBONS: Four hundred and thirty-two thousand

dollars. That is contractual. I think the Albright and Wilson one expires

earliest, in another couple of years.

MR. WOODFORD: If that should be sold is that

transferable?

MR. MERCER: It would depend on the way in which

the sale takes place.

MR. WOODFORD: I have no other questions.

MR. CHAIRMAN: Mr. Murphy.

MR. MURPHY: Mr. Minister, I suppose your

department, in some ways, is a little bit unique inasmuch as - and I would

address this question to the Hydro end of your responsibilities - that you do

receive revenues through royalties and licensing and what have you. Obviously,

that is not in your estimates. Could we just have a ball park figure of what

kind of funding your department -

DR. GIBBONS: (Inaudible) Do you have any idea? I

don't know what that figure is, myself. Paul or Gordon?

MR. DEAN: Most of the royalties, if you like, with

respect to mining operations, are collected by the Department of Finance. We

collect the royalties on quarry materials, and we collect rentals, if you like,

with respect to licences, exploration licences, mining leases and so on like

that.

In terms of our revenue from quarry materials and

rentals and things, it is about $1 million a year. In terms of the Department of

Finance collection on royalties, mining tax, etc., it is about $25 million a

year. Then, in terms of general revenues, other taxes flowing from the mining

industry, it is about $100 million a year.

MR. MURPHY: That is over and above, and I am not

including, of course, Hydro's balance sheet at all.

AN HON. MEMBER: Minus it.

MR. MURPHY: Yes. We were talking about some small

Hydro projects. Moving away a little from the small Hydro projects, has anybody

had a look at the flaring material at Come-by-Chance and how they might capture

that and what it would do for generation? What would it be, five, six or seven

megawatts?

DR. GIBBONS: We have looked at that relative to

what I mentioned earlier about the auto propane. We are hoping that by reducing

the tax on all propane by about 6 cents a litre, we will get a lot of conversion

to auto propane, particularly in fleet vehicles, so we can start using some more

of that and displace gasoline; so that is one way.

There has also been some discussion, over time, on the

possibility of a cogeneration unit at the plant out there, that they may be able

to use that; but there has not been any follow-up on it. It is not one of the

priorities of the company out there at this time.

MR. MURPHY: An obvious question that I have from

my district is looking at Sohilco and Mr. Kierans, What are his aggregate rights

and how long do they extend? What is he up to?

DR. GIBBONS: Does he have any aggregate rights

from us right now?

MR. DEAN: No, he does not have any aggregate

rights from the department, but we have frozen the area so that no one has any

rights, if you like, without a special permit. We have issued permits for say,

the South Side Boat Basin Development and so on.

DR. GIBBONS: Prosser's Rock.

MR. DEAN: Prosser's Rock Development; but, in

fact, it is exempted from issuance of mineral rights.

DR. GIBBONS: Nobody has them. We could have signed

them, I guess, if there were development sometime.

MR. MURPHY: Okay, just one more small question.

You alluded, Mr. Dean, to exploration on the Avalon. I

don't expect you to tell me where, but what types of metals would you be looking

for, would they be exploring for on the Avalon?

MR. DEAN: I think the focus, the amount of

exploration that is going on on the Avalon is mostly related to gold, and it is

generally in the Salmonier Line area - Salmonier Line-Holyrood - and initiated

by one or two of the local prospectors.

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

MR. CHAIRMAN: Mr. Hewlett.

MR. HEWLETT: Today, the minister mentioned a

couple of companies that have taken up some exploration rights onshore in

Western Newfoundland. There was a similar call some years ago when Mr. Justice

Marshall was Minister of Energy, and there were no takers. Would the minister

care to indicate, is it changing economic conditions or is there new information

vis--vis the potential there that would cause people to take it up now versus

not taking it up then, or is there a reason that the minister is aware of?

DR. GIBBONS: Mr. Chairman, I am not sure if it

went all the way the last time. I know there was a call for indications of

interest and some land was identified. I don't believe it ever went to a call

for bids, because the regulations were never finalized, and it wasn't until a

year ago February past that we finalized regulations for onshore exploration.

But, certainly, in the last two years, offshore rights were given off the West

Coast. There has been new seismic work done over there. There were at least

three seismic surveys done last year off that coastline, and in doing that

offshore work, a number of companies did work on land, tying the offshore to the

on-land section. They were very interested in the Parson's Pond area and a

number of bids were received on it. And to receive a bid of more than $1.6

million from one company, I was a little bit surprised and quite pleased to get

that big a bid from Labrador Mining, a subsidiary of Norcen. It was a very

interesting bid because they also have the offshore land in that area.

MR. HEWLETT: The other two small parcels, was it

Vinland or whatever?

DR. GIBBONS: Yes.

MR. HEWLETT: Is that a local company?

DR. GIBBONS: Yes and no. It has some local

partners and some Calgary partners. It is a small company that has been put

together and they did bid on a number of parcels there. They were the only

bidder, I guess, on those two little parcels that they got.

MR. HEWLETT: Come By Chance - I saw your

article

on the CBC television news this evening with regard to their actions in the

United States, Cumberland Farms. You seemed to indicate that from the point of

view of local operations and from the point of view of local creditors that it

was business as usual at Come By Chance. Is that fair to say? I don't wish to be

a panicmonger, so to speak, but if I were a businessman selling widgets or

whatever to that refinery, should I be asking for C.O.D or what?

DR. GIBBONS: Mr. Chairman, I wouldn't want to put

it in those terms, but I have been assured by a representative of the company -

I talked to him today; I talked to him last week before this action happened -

that there was really no direct connection between what was happening in the

United States with Cumberland Farms Incorporated and the Come By Chance

refinery, that there is no direct association between these two companies. Come

By Chance does not receive money from Cumberland Farms Incorporated. It is a

different company that pays a processing fee to Come By Chance. The nature of

the arrangement there is that a foreign company provides crude oil to another

company and that other company pays a processing fee to Come By Chance to get

that crude turned into various types of refined product. The company that pays

that fee is not Cumberland Farms.

MR. HEWLETT: Very good.

DR. GIBBONS: It may sound a bit confusing but

that's the way it is.

MR. HEWLETT: Some of these arrangements, I gather,

are due to American anti-trust laws and vertical integration, and so on, as I

understand it.

Touching on mineral exploration, the mineral

exploration sector - and my district is basically the capital of that sector in

the Province - has been really down ever since the federal government cancelled

their flow through shares program, which I presume, came under criticism for

being overly generous or whatever, as was the Trudeau administration's offshore

drilling program some years ago. Has the government pursued the notion of some

sort of federal-provincial agreement with Ottawa to - you know, you have a

prospectors thing, but I am talking about something that could generate activity

in the tens of millions per year, to bring that industry back to where it used

to be.

If the feds are not willing to go it alone, has there

been any approach to the feds from the point of view of a federal-provincial

co-operative agreement, some sort of stimulation program for the diamond

drilling industry, that sort of thing? I'm talking about in tens of millions

rather than just the thousands kind of thing.

DR. GIBBONS: We've certainly talked a lot about

that particular program that was cancelled. We lobbied vigorously to maintain

that program. I think we and all the other provinces lobbied vigorously, as did

the mineral industry nationally through various organizations. In the end it was

killed, it did not come back, and I don't believe it will come back. We haven't

really had any discussions about anything that we might be able to do -

Newfoundland and Labrador plus Ottawa - in any particular program. Because if

Ottawa is not prepared to come in there is not much we can afford to do.

MR. HEWLETT: No, okay. But you haven't asked

Ottawa?

DR. GIBBONS: No, not specifically, not outside the

bounds of our mineral development agreement, where there is a little bit of

money.

MR. HEWLETT: I was talking about probably a

special agreement for a major stimulation of the diamond drilling industry.

DR. GIBBONS: No, we have not.

MR. HEWLETT: One final point, Mr. Chairman, and

I'm finished. It is with regard to Hibernia. The minister indicated he had a

call from Mr. Epp. I guess I am going to ask an opinion of the minister and I

have a fairly good idea what his answer is going to be. And please don't jump on

me, Mr. St. John's South.

By way of

preamble: the federal government, if

Hibernia falls apart, saves a bundle; companies are going to do whatever

companies do from the point of view of what's best for their bottom line.

Companies don't usually operate under the social conscience kind of thing. Is

the provincial government pro-active enough in this particular process? How come

you're not in Hong Kong dragging people out to the Canadian Embassy, saying:

Sign on the dotted line. I want your cheque for $100 million, sign here. Here's

your Canadian passport, get nine of your buddies and we have a billion bucks?

How come the Premier is not doing that, or you are not doing that?

DR. GIBBONS: I don't think I have to. It is not my

role, really, to do that. But I have to say to you, I was in Tokyo within a

month after the Hibernia announcement came, and I met with four of the top

financial agencies in Japan at that time and we talked Hibernia. I didn't come

back and boast about it, but I was there and we talked about it. And I know that

since that time, the consortium with its advisers has been in Japan and other

parts of Asia and they've talked Hibernia. So I did, as far as I'm concerned,

all that I needed to do. I didn't go deliberately on a Hibernia trip, but being

there on financial matters for the Province, I met with the appropriate

financial houses, I met with a couple of banks, and we talked on the appropriate

subjects.

MR. HEWLETT: So, what you are saying, Mr.

Minister, essentially, is that with regard to salvation of the Hibernia project,

the provincial government, either through yourself or the First Minister, the

Premier, does not have to play the role of co-captain and drag them out by the

hair of the head.

DR. GIBBONS: No, we don't, Mr. Chairman. I say, we

don't, neither does the federal government, and neither of us has done that. The

companies have done an excellent job of going all around the world. They

targeted all the appropriate companies, had meetings with all the appropriate

companies that had any interest in Hibernia and with any of those that showed

any serious interest, have had follow-up discussions. Those who were really

serious have been prepared to pay the money required to get into the data rooms

and that activity is still going on today and this week. I believe everything

that could have been done, has been done, and I give credit to the companies and

their financial advisers for doing the job right. Now, I am hoping, as a result

of all that, that in the next little while there will be a successful conclusion

but there are no guarantees.

MR. HEWLETT: Thank you, Mr. Chairman. I am

finished for the evening.

MR. CHAIRMAN: Mr. Woodford.

MR. WOODFORD: Just a short comment on the

minister's statement today pertaining to the bids for Onshore, the West Coast,

mainly the Northern Peninsula. Reading the three bids, Vinland $10,000, Vinland

$10,000 and then, all of a sudden, Labrador Mining and Exploration company, $1.6

million, since there are only 2,000 hectares in the difference with regard to

the acreage involved, would I assume or would it be fair to say that their bid

is based on - because they did some seismic work last year, offshore, if I am

not mistaken, in the same area. Would it be fair to say they found something in

the seismic work or that the bid is based on the past records of the Parsons

Pond area?

DR. GIBBONS: Based on everything, knowing

historically that there is oil in the Parsons Pond area, knowing the association

with the offshore where they did do seismic work and the fact that they have

done geological work onshore, they put in a good bid on the Parsons Pond area.

Others put in good bids on the Parsons Pond area. Nobody put in any significant

bids on the other areas and I am curious as to what is going on in the other two

little areas myself. But there is one really interesting area there and I look

forward to what that company does this year.

MR. WOODFORD: Yes. You stated that they would have

to spend the amount of the bids over a five-year period.

DR. GIBBONS: A five-year period, yes. Now, in

order to get the permits at all, they have to put in a $10,000 deposit within

fifteen days. So we will see if the other company is really serious about these

other two areas, because they only bid $10,000 and they have to put down ten

right away. We will see if they are serious.

MR. WOODFORD: That was the other question. I mean,

the amount they bid for the five-year period and their bond is up front within

fifteen days, that is the total of the five-year period, so that will determine

whether or not they are serious.

DR. GIBBONS: I really don't know what is in these

other two areas.

MR. WOODFORD: That's it for me, Mr. Chairman.

MR. CHAIRMAN: Mr. Snow, do you have a question?

MR. A. SNOW: This question is for general

information, I guess. We have seen a shakedown, a rationalization of the

gasoline retail business in this country over the last six or eight months. I

wonder if you could tell me how many closures or shutdowns of gasoline retail

outlets we have seen in this Province, are they occurring in all the provinces,

and are they just a Canadian phenomena or are they occurring throughout North

America?

DR. GIBBONS: Mr. Chairman, that is occurring

pretty well everywhere but, in all honesty, I don't think we have had any

closures in Newfoundland and Labrador. If anything, we have seen growth, and

even with what is happening or likely to happen now with some of the majors, I

do not anticipate that Esso will be closing any of its stations in Newfoundland,

nor do I anticipate Petro Canada would be closing its stations. If Petro Canada

sells everything east of wherever, as they talked about as an option, I would

anticipate somebody would take them. I don't see gas station closedowns,

frankly, to be significant in Newfoundland and Labrador. We don't have the

overabundance of gas stations that you would see in a place like Toronto.

MR. A. SNOW: Could you elaborate a bit more on

Chapter 11, that Cumberland Farms is - what

Chapter 11 means and what, exactly,

they are doing?

DR. GIBBONS:

Chapter 11 is a process under the

United States bankruptcy code where companies can get protection from creditors.

So they have not gone into receivership. They get protection from creditors, and

during a specified period and under that protection, they will try to reorganize

their operations and get an agreement with their creditors so that they will

start paying on their bills. That's what is going on here with Cumberland Farms

Incorporated. They are saying specifically that within ninety days they expect

to have an agreement and that all creditors will be satisfied with the

agreement.

MR. A. SNOW: I guess it is similar to what we have

in this country under receivership, is it?

DR. GIBBONS: No, not receivership.

MR. A. SNOW: Well, trusteeship?

DR. GIBBONS: But in Newfoundland and Canada - no,

no. In Canada we have something called the Creditors Co-operative Arrangements

Act, I think the name is. You can also get protection from creditors while you

take a look at your company and see if you can rationalize and get rid of the

weak parts, and maybe end up with a part that can continue to operate.

In Newfoundland right now, for example, Newfoundland

Armature Works is going through that; Ayre's is going through that, but

registered in Ontario, I understand. So there is a similar process in Canada but

it has a different name. In the United States it is called

Chapter 11.

MR. A. SNOW: So that would be Ayre's and who else?

DR. GIBBONS: Newfoundland Armature Works is going

through it here right now. There is a story in today's paper about that one, and

Ayre's. Both of them are going through similar things.

MR. A. SNOW: How much of the product that comes

out of Come By Chance is sold to Cumberland Farms?

DR. GIBBONS: The figure I looked at after today -

I was talking to the media on that, the question, and I said I wasn't sure.

Ninety-six per cent of the product that comes out of Come By Chance goes outside

of Newfoundland, the other 4 per cent is distributed in the Province. That 96

per cent goes into the Cumberland organization somewhere, as far as I know.

MR. A. SNOW: If they are consuming 96 per cent of

the product that we are producing and it is questionable what the financial

viability of the consumers is going to be, doesn't that put the project, itself,

in jeopardy?

DR. GIBBONS: I don't think so. I'll read something

for you from -

MR. A. SNOW: Oh, come on now, let's -

DR. GIBBONS: I will read something for you from

Cumberland Farms: 'Cumberland Farms believes the filing will not affect its

ability to purchase products for its stores and gasoline operations and

manufacturing facilities. Our core operations are sound and I am confident that

CFI will emerge within a short period of time.' That's a comment from the

president of the company. CFI, in fiscal 1991, had revenues of $2.3 billion and

has approximately 8,000 employees, 973 convenience stores in twelve states, and

it operates Gulf Oil in the northeast - the Gulf Oil division, all the Gulf Oil

gas stations.

So they are still going to be providing product

through these stations or somebody will.

MR. A. SNOW: But it's a common

Document details

Collection	Newfoundland and Labrador — Committees
Citation	1992-05-04
Type	committee
Volume / chapter	committees_standingcommittees_resource_ga41session4_1992-05-04_rc-me_.htm
Language	en
Format	html
Source	PROVINCIAL
Identifier	3987f5a515f28bee73ab2a9b9defe637ebc0d257

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