Volume 2 PROVINCE OF NEWFOUNDLAND THIRTY-SIXTH GENERAL ASSEMBLY OF NEWFOUNDLAND 2nd Session VERBATIM REPORT Monday, March 26, 1973 SPEAKER: THE HONOURABLE JAMES M. RUSSELL Number 35

March 26, 1973 The House met at 3:00 P.M. Mr. Speaker in the Chair. Tape 787-788 IB-1 t-'R. SPEAKER : Gentlemen, before coll1!llencing this afternoon's proceed- ings it gives me great pleasure to welcome to this honourable House two groups of people from out of St. John's. The first group is the group from the District Vocational School on Bell Island, a group of thirty-six students from the adult centre in that community accompanied by their instructors, ~essrs. Greeley, Rose, Halleran and Pincent. The second group are four members of the Community Council of Burlington in the district of Green Bay.

It gives me great pleasure to welcome these groups to this House and I trust that your visit here will be interesting and informative. HON. WILLIA'M OOODY: (MINISTER OF INDUSTRIAL DEVELOPMENT): Mr. Speaker, today the hondurable the Premier and the honourable Don Jamieson, the Minister of Regional Economic Expansion, announced an amendment to the Special Areas Agreement and I would like at this time to provide some additional information to this House in this regard.

The amendment will provide additional funds amounting to nearly $25,000,000 for the construction of (excuse the expression) infrastructure facilities in the province. Approximately one half of the amount will be in a form of contributions and the other half in loans. The additional money will fund nineteen projects in seven of the eight special areas designated in the agreement which was signed in August, 1971,and expires on March 31, 1975.

The 11mendment which will incrense the totnl amounts payable by the federal government under the agreement to almost $90,000,000 in contrihution and $46,000,000 in loans,is the result of a periodic review of the agreement. Schools dominate the proposed new expenditures,reflecting the long standing deficiencies in education facilities and the need for suhstantial investment to meet the forecasted population growth. The· proportion relating to municipal services is the result of residential, industr-i.nl •"and commercial Rrowth demands in the special areas. 2662

?-(arch 26, 1973 Tape 788 IB-2 In the St. John's special area,110 acres of rail serviced land will be acouired to help with the second phase of development of Ponovan's Industrial Park together with the construction and equiping of the ~1ount Pearl Junior High School and the St. John's We~t Elementary School. These projects will cost seven and a half million dollars. Water supply for the town of Burin and servicing of residential and commerical land on Burin Inlet and water supnlv for Fortune, internal servicing of two subdivisions in Marystown and construction and e'Juining of a high school in St.

Lawrence are the projects agreed on for the Burin special area,at a cost of more than $5,000,000. Servicinr, residential and industrial land and constructing a sewage treatment plant and tuilding and e'luiping a hir,h school for the Town of Gpn~er,together with servicing the extention to the Grand Falls Industrial Park will cost an estimated $3,400,000 in the Gander, Grand Falls snecial area. An elementary school at Stevenville Crossing will be constructed and equ1ped in the Stevenville special area. It will need an exnenditure of more that $2,000,000.

In the Corner Brook special area more than $750,000 will he committed to increase the capacity of the water system in the West F.nd of the city and to relocate the. source of water supply for the F.ast F.nd. The Marine Service Centre: Thi~ will intcP,rate rrarinc facilities, docks and slipways, a new water supply sy~tem, a new sewer system and an access road will he built at Port Saunders in the Hawkes r.ay, Port au Choix area,at a cost of more than Sl,300,000. A replacement for the inadequate nappy Valley water supply will require an expenditure of more than $750,000 in the Happy Valley special area.

All new projects are scheduled to hegin this year, In the Come Jly Chance Apecial area,becnuse of ma1or new devclopmcntR proposed, n<ldttfonal pro1ects are not prnnosed at this time. 2663

March 26, 1973 Tape 788 IB-3 We hope within the next few days to bring in an amendment to the Special Roads Agreement which is not included in this particular amendment. I might say at this time that this particular amendment does not reflect the policy that we hope to bring into being with the third DREE Agreement which we will be negotiating or beginning negotiations on shortly, Mr. Speaker. We will hopefully have more emphasis on resource and on industrial development in our third agreement - without in any way detracting from the necessity for the services that we point out in this amendment.

This $25,000,000 additional which is over and above the original agreement will bring the DREE spending of this year up to the same level that it has been over the past several years and I think that it is a tremendous asset to the province and will be a great help in regard to employment in the services for the coming year. -,.,R. W. ROWE: Mr. Speaker, if I may,I would like to make a comment and ask a question or two on this matter announced by the minister. Ordinarily 111atters like this are announced in the House of Assembly.

I understand the constraints the minister and the Premier were under, because they have to dovetail it with the convenience of the federal government as well. It is too bad that we could not have heard it first hand here,hut there it is. One or two comments, Mr. Speaker. It should be recorded that this is a year and ei~ht months since the last nnEE Agreement was signed. It was the ori~inal intention - which we can see from statements made by the Minister of nREE, Mr. Marchand and myself a couple of years ago - it was the original intention to try to sign a DREE Agreement every year for the five year neriod.

A year and eight months has gone l>y before we get this narticular announcement which is not a new third agreement but an amendment of presumably the second nREE Agreement. That should hP noted. The other potnt thnt should he noted 1.s that the amount of $25,000,000 iR very small,re1ntive1y ~prnkinr,compared to the nvernge which we were 2664

March 26, 1973 Tape 788 IB-4 able to get during the first two years of the operation of OREE, durinp, the first two contracts. There was $132,000,000 co~mitted by DP.EE in the Special Areas Agreement and Hip,hways Agreement over about an e112;hteen month period when we had the pleasure and privilege of holding office in this province. This $25,000,000 is significantly less. I am heartened to hear that the minister hopes to hring in a Special Highways Amendment as well,which hopefully will increase the total amount.

If we take out the $50,000,000 highways money,which was committed earlier,and subtract that from the $130,000,000, there is a total of about $80,000,000 for infrastructure,so called, in the two previous agreements. So, this $25,000,000 doe6 not compare tcofavorably with an average of about $40,000,000 r,er year which we were able to get. The second thing that I would like to say by way of a comment and also to ask the minister a question; of $132,000,000 or so that was prev1ously comm1tted,less the $50,000,000 f!ighways ftgreement,this brings it,as I mentioned,brings the infrastructure to about $80,000,000.

Now the minister says that there is $25,000,000 additional. That should bring the total now for infrastructure up to about $105,000,000. Yet, in the min1sters statement he says that it brings the total up to nearly $90,000,000. So, I can only assume from that statement (until the minister clarifies it ,if he wishes to), that some of the money wh1 ch is .mnounccd here is really reorganization or reassortment of money ,,,hich w:is already comm1.ttc-d. If i.t is not,then J would say that the infrastructure total or the p,~lic serv1ccR total should be UP around and well over $1~0,000,000 at this point.

To me there Reems to be ten or fj_fteen million dollars missing somewhere aJonP, the line. I only want to make these noints, ~r. Sneaker, at this particular time: Ha-fnly th'3t it seems to be a very small amount for infrastructure comnared to what we had heen nccustomPd tn i;(Cttinr, from DREE in Ottawa. The second point that I would Jlkc to mnkc is thnt the time that has elnnsC"d since the> lm1t nr,recment wns sir,necl -fs inonltnately long, a yenr nnn C"fr,ht months. lt sho11lcl hnve hrc-n str,ncd nhout n ycnr ar,o. 2665

March 26, 1973 Tape 788 IB-5 , We still do not have the third agreement. I hope to say more on this during the Address and Reply, Mr. Speaker. I do not want to get into a debate now. I will say more about this in another debate when I speak in the Address and Renly but I think those conanents should be recorded and the minister might want to answer the questions that I put to him. MR. DOODY: I will.

Tt hfts heen noted and I hope it should he noted that this is not the sort of thing, as I remember, that used to go on in this honourable House when I sat in the galleries and watched when this party across the way sat on this side of the House. When there was a statement made,that was it, rt was law and fiat and accepted as such and the honourable Opposition dared not speak. The point that he make about the missing fifteen million dollars is an interesting one.

The amounts of money can be totalled up to in excess of $15,000,000. · lt is not a matter of signing an agreement with Ottawa, lt is a matter of being able to get the cash flow to spend that much money • I will be only too happy to present to this House shortly a statement showinP, the cash flow in the amounts of money snent and the amounts of money that we did not use that were allocated by Ottawa during the previous years.

We have some $12,000,000 over and above this $25,000,000,which we will be spending this year plus another million and a-half which has been allocated in previous agreements,which has been sitting around there waiting for somebody to do somethin~ with it. Part of the reorganization of government which has been decried so loudly on the other side of the House, · will hopefully bring a more efficient use of funds which are available in Ottawa, to the benefit of this province.

This $25,000,000 plus some $12,000,000 which is left over, unspent from previous ar,recments,nlus the million and a-half :Is nearly $40,000,000 which we have here to l'IPen.t which is not as lnrge as the honournble memher mentions in his preat, flowing documents but which wi 11 be used and spent nnd i::rent properly. I mip,ht 2666

Mar ch U, , 1973 Tape 788 IB-6 say that this is being done in this · year and not spread over the period of time that the previous agreements covered. 'f!ON. J. CROSBIE: (!-IINISTET: OF FINANCE): Mr. STJeaker, before we 11re.sent Detitions. I would like to inform the House that the budget will be brought down on Friday afternoon, ~arch 30, at three of the clock. HON. H .A. COLLINS: ( •IJNISTER OF ~JCJPAL AFFAIRS ANO 11011!-INC.): 1-!r .

Speaker, I have a statement here that I would like to read to the · Rouse: For a number of years past there has been a Provindal Appeal Board which was appointed under the Urban and Rural Planning Act to consider appeals arisi ng from t.he illll)l.ement ation of municipal plans in various communities in the province and also in the enforce­ ment of such regulations as the Protective Roads Zoning Regulations which are administered by my department. It has been the desire of this rovernment to establish 2667

March 26, 1973 Tape 789 regional appeal boards to replace the provincial appeal board so that better consideration can be given to the requirements of and the differences b~tween thP various regions in the province.

It is with pleasure therefore that I announce the establishment of three appeal boards as follows: The Eastern Newfoundland Regional Appeal Board which will have jurisdiction over the Avalon Peninsula, the Burin Peninsula, the Bonavista Peninsula and the Isthmus of Avalon: the Central Newfoundland Regional Appeal Board which will have jurisdiction over that part of Central Newfoundland east of a line drawn from Hampden to Rose Blanche and west of a line drawn from Port Blandford to Terrenceville; the West Newfoundland Regional Appeal Board which will have jurisdiction over Western Newfoundland and Labrador.

The ·members of the regional appeal boards will be as follows: In the .Eastern Region the chairman will be Mr. Claude Dawe of St. John's and ,nembers will be Mr. Jack MacDonald of Kilbride, Mr. Ron Steele of ·.Topsail, Mr. Walter Butler of Clarenville and Mr. Vince Edwards of JM - 1 St. Lawrence. In the Central Region the chairman will be Mr. Wilfred French of Gander and the members will be Mr. Norman Janes of Grand Falls, Mr. Rubert Short of Lewisporte, Mr. Cyril Locke of Springdale and Mr. Cecil Abbott of Botwood.

In the Western Region the chairman is (I ·am not sure of the pronunciation of this name but l will try it) Mr. Don Dicesare of Corner Brook and the members are M~. Jack Murdock of Deer Lake, Mrs. Theresa Ryan of Stephenville, Mr. Walter Downey of Codroy and Mr. Joseph Collins of Wabush. HON. W .C. )")AWE (MINISTER OF MANPOWER A.~D I ~DUSTRIAL RELATIONS) : Mr. Speaker, ·on a point of personal privilege. In today's issue of the "Evening Telegram", under heading "Wabush Mines Closed by Wildcat Strike" there was one statement made there which is not true. It says, "Meanwhile ·the union was in touch with Mr.

Dawe during the weekend and he invited ·union officials to come to St. John's for talks on the situation." 2668

Mar.ch 26, 1971 Tape 789 That is not true. I was in touch with union officials but I did not invite them in to St. John's. They told me durin~ the course of the conversation that they would be coming to St. John's and I told them that I would be happy to meet with them and I would also be happy to meet with company officials if they decided to come to St. John's any time at all and I would meet with anybody from either party at any ti-11e. This leaves the impression that I am siding with the union and I am not siding with either party.

In the weekend edition of the "Evening Telegram" there is another erroneous story. "Dawe says Pro con .1umped gun in granting increase.'' This :Is incorrect. I did not say it. I was in conversation with a reporter from the "Evenin~ Telegram" and he made that suggestion but I did not comment on it. I told him that that was his opinion and that it was not necessarily mine at all and that I would not say anything on that particular point. Even if it were my opinion,! would not have told him. I hope that they will make the necessary retraction of that stateT'lent.

It is unfortunate that these little statements are made in these stories when they are writini them because it makes it very, very difficult for these very sensitive ner.otiations and happenings and so on and particularly where Procon people and the union peonle are involved here in Come by Chance. While I am on my feet there was one other statement which appeared in the "Daily Nc>ws",sometime ar,o,concf!rninr. the Bonavista th:lnr,,whfch was ;il.so incorrect but I decided at the t:lmc I would have nothinR to say nhout it. MOTIONS: IION. T.A. l!JCKMAN(MINISTF.R OF JUSTICE): Mr.

S~r.akc>r, I p,ive notice that I will on tomorrow ask leave to introduce a hill, "An Act Further To AmPnd The Trustee Act." HON. J.C. CROSRTE('1INTSTF.R OF FINANCE): Mr. Speaker, I give notice 2669 JM - 2

March 26, 1973 Tape 789 that I will on tomorrow ask leave of the House to introduce a bill, "An Act To Amend The Social Security Assessment Act, 1972." The act numher (56) of 1972. HON. G.R. OTTENHEIMER(MINISTER OF EDUCATION): Mr. Speaker, I wish to reply to question number (182) on the order paper of March 21, asked by the hon. member for St. Barbe North.

I should say in prefix to it that the hon. ~entleman no doubt is aware under sections (84) and (85) of the Schools Act the responsibility for the distribution of capital grants and for construction of school buildings rests with the Denominational Education Committees. The question pertains to a petition from residents of Conne River, which was tabled in the House last April 26.

This petition was submitted by the Department of Education to the Roman Catholic Denominational Committee,on April 28, two days after its tabling in the House,and the executive secretary of the committee has advised me that what was asked for in the petition is in fact being granted. In other words,plans are underway to provide additional classroom facilities for the students of Conne River and these should be ready for the school year beginning next September. ORDERS OF THE DAY: MR. NEARY: Mr. Speaker, I would like to direct a question to the minister responsible for pollution.

Can the minister confirm or deny that - ~~~WE: Mr. Speaker, I do not think there is any minister in government responsible for pollution. MR. ROBERTS: Mr. Speaker, to that point of order, there are a number of ministers responsible for pollution. The hon. gentleman in particular is responsible for it,according to the act which was passed sometime a~o. MR. NEARY: ----- Mr. Speaker, I would like to ask the minister if he can 2670 JM - 3

March 26, 1973 Tape 789 confirm or deny that the chairman of the Clean, Air, Water and Soil Authority has resigned? A.~ HON. MEMBF.R: What minister are you asking? MR. ~F.ARY: The minister responsible for pollution, A.-.. HO!l, MEMBER: He is not in the House. MR. NEARY: Well, Mr. Speaker, could the hon. the Premier tell us whether the chairman of the Clean, Air, Water ancl Soil Authority has resigned or not? MR. MOORES: The answer is, Mr.

Speaker, I do not know but the minister in charge of the environment I am sure will reply to the hon. member on the subject which he so obviously wants to be associated with and that is pollution as opposed to the environment, and I think that is the Minister of Provincial Affairs. JM - 4 MR. NEARY: Mr. Speaker, would the minister care to answer the question? MR. HURPHY: (Inaudible). MR. NEARY: \..'ell, look some minister, some minister on the other side. I do not know who is respon!'liblc for this right now. Will the minister responsible for Mr.

Oakley, the chairma.n of the Clean, Air, Water and Soil Authority, would he inform the House whether Mr. Oakley has resigned or not? MR. HICKEY: Hr. Speaker, I am not sure I am responsible,but Mr. Oakley is responsible for himself. I guess I am responsible for the department that he works in. The only thin~ I have to say is that I will confirm that I have a letter of resignation from Mr. Oakley. That ifi all I have to say on the matter. ~ -'..-~!.f':.A_R.Y_: Mr . Spenker, n supplementnry question. Would the minister indic:1te th<' rc-::11:on for Mr. Oakley's resip,nntion? MR.

HICKEY: l h.ave noth1nr'. further to Erny on i.t, Mr. Spcnkc•r, at this time. If the-re• :lfi need or if there is necessity to cnlarr,c upon what I have saicl,1 t will be done at an app_ropr:latc time. 2671

March 26, 1973 Tape 789 MR. NEARY: A supplementary question, Mr. Speaker. Was Mr. Oakley fired or is he voluntarily resi~ning? MR. HICKEY: I just said, Mr. Speaker, I confirmed receiving Mr. Oakley's resip,nation. If people are fired,they do not usually resign they are usually fired. JM - 5 MR. ROBERTS: Mr. Speaker, a further supplementary question. Mr.

Oakley, as I understand it,is also assistant deputy minister,although there is more than one in that department, noes his resignation as chainnan of the authority carry with it or is it also his resignation as assistant deputy minister of whatever branch of a department he works? In other words, is he leaving the government service? MR. HICKEY: Mr. Speaker, it is my

interpretation that it does cover both areas because when the bill that was passed before the House becomes law, of course, Mr. Oakley is then assistant deputy minister, officially. So one position would disappear and the other one would apply. MR. NEARY: A supplementary question, Mr. Speaker, what steps are being taken to replace Mr. Oakley? MR. HICKEY: I have not had a chance, Mr. Speaker, seeing it was only Friday,I have not been in touch with anyone to advertise yet. MR. NEARY: Mr. Speaker, I have another question for the same minister.

Would the minister indicate to the House whether or not there is any foundation to reports that another spill has occurred at the phosphorous plant at Lonr, Harbour due to a split in a concrete storage tank? MR. HICKEY: I have no information ----- --- 2672

March 26, 1973 Tape 790 PIC - 1 Mr. Speaker, but I will certainly endeavour to find out for the honourable member and inform him. MR. NEARY: Mr. Speaker, I would like to direct a question now to the honourable the Premier. It is in connection with the strike at Come by Chance. Would the honourable Premier indicate to the House whether either party who was on strike was in contact with the government or with the Premier over the weekend and what was the result of these discussions. MR. MOORES: Mr. Speaker, the Minister of Labour I think would be better equipped to answer that one. MR. DAWF.: Mr.

Speaker, there was not much on that over the weekend. MR. NEARY : Well, Mr. Speaker, will the Minister of Manpower indicate whet~er or not representatives of the union in Wabush had been in touch with the Minister of Manpower and Industrial Relations concerning the wildcat strike at Wabush? MR. DAWE: It was the union and company. MR. NF.ARY: }fr. Speaker, a supplementary question, is the minister aware that the company in a public statement today accuRed the minister of procrastinating on this strike,cauRinp, the strike to ' go on for another couple of days when he could have sent the government aircraft - MR.

SPF.AKER: Order, please! The honourable member for Re]l Island is entering into a debate now and he is not asking a question. MR. NF.ARY: No, I am not, Mr. Speaker, I am askinp, the minister if he is aware of a statement that was made. And if so, if the minister iR aware of this statement, Mr. Speaker, why did he not send the r,overnment aircraft to brinr, the union officials to St. John'H or is the p,overnmcnt aircraft reserved for. memhers of the ROvernment to go on fishinr, trips nnd pleasure cruises? MR. DAWF.: the weekend.

It is mainly because we wanted to p,et them here before We unfortunately do not have Mr. Lundrigan's jet 2673

!of.arch 26, 1973 Tape 790 PK - 2 to call on any more. MR. NEARY: It is rather unfortunate, Sir, because the strike is going to cost an extra $100,000, $100 ,000 a day 7 as long as it continues. Now I would like to ask the honourable Minister of Finance a question, I am not sure the Minister of Finance can answer this or the Minister of ~anpower, but either minister could answer. Are they aware of the wildcat strike at the Linerboard logging operations in Goose Bay? If so,has either party been in touch with the ~overnment and what steps have the government taken to resolve this dispute? MR.

CROSBIE: ------ I am not aware of any wildcat strike there, I will check this right away. MR. NEARY: Mr. Speaker, I would like now to direct a question to the Minister of Public Works and Services. On Friday, Sir, the Minister of Public Works and Services informed the House that two contracts had been awarded to Babb Construction on the Carbonear Hospital without calling public tenders, which is not stated government policy. Will the minister now tell the House what work Babb Construction actually did on the hospital in Carboneat'? Did they do the excavation? Did they pour the concrete? MR.

SPEAKER: While the minister may answer that question, it is more properly suited for the Order Paper. MR. EARLE: I will take that as notice of question and I will get the information for the honourable member. MR, NF.ARY: I wonder while the honourable minister is getting that information, Mr. Speaker, would he also get the cost, the value of these two contracts? MR, M, MARTIN: I have a question that I would like to direct to the honourable the Premier.

The question pertains to a promise made by the Premier,on December 13, 1972,to the Federation of Lahour,that he would hnve established a labour standards COllll11ittee for the province. I would like for the honournhle gentleman to inform the House how fnr plans have pror.ressed in this direction, 2674

March 26, 1973 Tape 790 PK - 3 Mr. Speaker, I think that could very well go on the Order Paper aB well. ORDF.RS OF TI!F. DAY On motion a bill "An Act To Amend The Health And Public Welfare Act, "read a third time, ordered passed and title be as on the Order Paper. On motion a bill ''An Act Further To Amend The Agreement Ratified, Confirmed And Adopted By And Set Forth In the

Schedule To The Commodore Mining Company Limited (Agreement) Act, 1968, And To Make Certain Statutory Provisions RelatinR To That Agreement," read a third time, ordered passed and title be as on the Order Paper. On motion a bill, "An Act To Amend The Tobacco Tax Act,'' read a third time, ordered passed and title be as on the Order Paper. On motion a bill "An Act To Make Certain Provisions RespectinR The Reorganization Of The Government And The Public Service Of The Province And Respecting Matters Connected Therewith Or Arising Therefrom," read a third time, ordered passed anrl title be as on the Order Paper.

On motion a bill,"An Act Further To Amend The F.levators Act," read a third time, ordered passed and title be as on the Order Paper. On motion a bill, "An Act To Amend The Adoption Of Children Act, 1972, '' read a third time, ordered passed and title be as on the Order Paper. On motion a bill. "An Act To Establish An Electoral Districts Boundaries Commission To Report Upon The Delimitation Of The Province Into Districts For Which Members Shall ne Returned To the House of Assemhly, "read a third time, ordered passed and title be as on the Order Paper. 2675

}-I.arch 26 • 19 7.3 Iape 790 PK - 4 On 1110tion a bill, "An Act To Amend The Stepl'lenville Linerboard Mill (Agreement) Act, 1972," read a third time, ordered passed and title be as on the Order Paper. Motion, second reading of a bill, "An Act To Ratify, Confirm And Adopt An Agreement Hade Between 'f{e'(foimdland and Labrador Edison Company Limited With Shaheen Natural Resources Company, Incorporated As Intervenor And To Make Provision Respecting Other Metters Concerned With The Agreement.'' MR. MOO_RES: Mr. Speaker, it gives me great pleasure to present this bill to the House.

It is very difficult with bill No. 60 to not also refer to bill No. 76, which is the change in the original agreement regarding the oil refinery. On 2676

March 26, 1973 Tape no. 791 Page 1 - MRW this particular Bill,No. 60, I will do the best I can, Sir, to confine 11fY r'emarks to it and the agreement that is attached or 1a part of the bill. There are some comments,as far as the government are concerned, which led up to this bill being presented to this House for the establishment of a second oil refinery at Come-by-Chance. Would it be agreeable to do both of them together? AN HON. MEMBER: Right: MR. MOORES: It would be much easier, I think, if we did. MR. W. N. ROWE: Mr.

Speaker, as far as we are concerned on this side, if the Premier will allow me, maybe we can speak on Bill No. 60 with the understanding that we can dilate or enlarge our remarks to cover Bill No. 76 and then later the House Leader can introduce Bill No. 76. MR. MOORES: Mr. Speaker, that makes it much easier to cover the waterfront, so to speak, in this particular bill because there was bound to be overlapping, one was tied so closely with the other.

We feel, Sir, that the project that has been previously announced and that we are now asking this House to ratify, the establishment of a second oil refinery at Come-by-Chance; the agreement that substantiates and will allow this refinery to go ahead, plus the changes in the original agreement,are a benefit to the province and one that I feel, as I say and I have said before , I am very proud that we have been able to arrange and negotiate. Mr. ShaheeD, as members on both sides of the House I think will agree, has bee much maligned.

Certainly if they do not agree that he was much maligned, I am sure they agree that he was much abusec' over the years when he initiated the original refinery, together,particularlY, with my predecessor. I think in that regard I would like to say, Sir, that Mr. Shaheen probably took advantage of an unusually good opportunity at least one unusually good for Mr. Shaheen and his colleagues, even though in our opinion,and it remains.the same, it was not a good agreement as far as the province is concerned. 2677

March 26, 1973 Tape no. 791 Page 2 However, it should be said at this time as well that without the initiation of the original agreement, I suppose there would not have been a Shaheen Natural Resources to carry on with the second refinery and possible other developments. Even though there was a great deal in the original agreement that was terribly detrimental to the province, it was beneficial in the fact that we did establish a procedure and a priority as far as deep-water ports were concerned, either by accident or design,and it is close either way. This newest agreement, Mr.

Speaker, regarding the changing of the supplementary agreement to the first agreement,and the new agreement for the second refinery, took many months of pretty intensive negotiations on occasion. The much publicized trip to the United Kingdom by some of my colleagues and myself were not,as was commonly thought, to negotiate with Mr. Shaheen but rather quite the reverse. Most of the negotiations had been done prior to that. The trip to the United ICingdom was to check with the British Government and the Export Credit Guarantee Department,known as ECGD,to find out if what Mr.

Shaheen was telling us regarding the financing by the British Government was in fact correct. One thing I can say here, Sir, which was a misunderstanding and I am sure it will be used by others speaking in this debate, which I found to be incorrect,was the fact that the amounts of the guarantees in the first agreement were only a formality as far as the British Government were concerned in cancelling them out,if Mr. Shaheen bought out the three Provincial Crown Corporations.

This is an absolute falacy because when we sat down with ECGD, up until the day before we left, they were adamant that these first guarantees of their first mortgage be still adhered to by the Crown Corporations,because they felt at that time that these were the same as the government and morally at least, if not legally, they certainly were. It was only on the day we left that 2678

March 26, 1973 Tape no. 791 Page 3 - MRW they agreed, together with the second refinery, that they would go along with removing these guarantees from the corporations and trarusferrinP, them to Shaheen Natural Resources or Newfoundland Refinery if they bought out the first Crown Corporations, bought the shares. ECGD were anything but willing to give up this particular guarantee. I think it is safe to say that without the second refinery agreement there would have been no chance of that happening at all. The details of the agreement itself, Sir, are spelled out in the main bill that is before this House.

I would like to review a few of the main ones but before actually doing that I would like to make just a few remarks regarding the financing and the things that we had hoped to get which we did not and the reasons why not. First of all a lot of people have mentioned,why did we not get an equity position for our loan to the now private company or proposed private company? Why did not the province get an equity position in this regard? HR. ROBERTS: Presumably Edison is a private company. MR.

MOORES: Edison and if the supplementary agreement goes through, the first one, maybe it will all be a private company at that time. But particularly with Edision,in the second agreement, why did we not get an equity position in that regard? Mr.

Speaker, we tried very hard to get an equity position but as we were told.and I think probably correctly, if we wanted to go into the oil business, we should build the refinery, get the crude and sell it as well(and that it is not the business of government) that we would get the royalty benefits plus the normal benefits one gets from advancing loans to companies to provide an incentive to attract them to the province. Mr. Speaker, $78.5 million is a lot of money for the province to put up. I think,going through the financial arrangements, it is not too much to put up considering what in fact was negotiated.

In the original agreement the British Government loan or the ECGD loan, at the time of our negotiations, was $110,400,000. This was 2679

Karch 26, 1973 Tape no. 791 Page 4 secured by a first mortgage as well as by a guarantee of the Crown CM-porations that were involved. Since that time the devaluation of the American dollar, which has taken the Canadian dollar with it, has made that $110 million much closer to $120 million in fact. For the purposes of stating the case here today, Sir, I will stick with the original figures because other than that they could become very confused, even more possibly than they are already. There was an UOP loan of $11 million ~hich also had the Newfoundland Government's guarantee.

The Newfoundland Government had loaned actually $30 million cash and this was secured by a second mortgage. The Canadian Government had a guarantee from Provincial Operating.which were the Newfoundland Crown Corporations,regarding the users' fee for the wharf. I will be dealing with this particular item later. This price now is between $22 million and $23 million. Mr. Shaheen had an equity in the first proposal of $10 million. Tne Shaheen loan which was raised last year upon demand by the agreement itself of some $15 million must not be construed as equity by Mr.

Shaheen but rather money that was loaned to Provincial Building who in turn lent it to the project itself. In effect,out of $198.4 million that the first refinery is presently going to cost, the total guaranteed and loaned by the Newfoundland Government was $188 million. Now in fact $30 million of that was in cash only and the rest were obligations to the British Government through their ECGD and the Canadian Government in the wharf agreement. In effect $188 million of the $198 million was guaranteed or loaned by the Newfoundland Government,where Mr.

Shaheen had some $10 million actually in equity in the corporation itself. MR. ROBERTS: I wonder, Mr. Speaker, if the Premier would table either the gurantees by the government of this money, except for the $30 million which was loaned,or perhaps the authority for the guarantees? 2680

March 26 • 19 7 3 Tape no. 791 Page 5 Mr. Roberts. We are genuinely confused. I know of the existence of a so-called full­ comfort letter. This word "guarantee" means something to a lawyer that it may not mean to a layman. I wonder if the Premier could table those guarantees. MR. MOORES: Mr. Speaker, the guarantee I referred to is the guarantee of the Crown Corporation.

Now legally it can be argued that a crown corporation is not liable for any indebtedness it may have or so on but in fact any crown corporation that takes on a responsibility, it is also the moral responsibility of the government to back up its own crown corporations. MR. ROBERTS: Leaving that aside. because that is a matter for debate - we will debate that, the Premier said the guarantee by the Crown Corporations, The Crown Corporations are the borrowers. MR. MOORES: The Crown Corporations are the borrowers. _l{R. ROBERTS: Provincial Building Company Limited are the mortgagors. MR. W. N.

ROWE: They are in fact the direct borrowers of the money. MR. MOORES: They are the borrowers and they sell out to Mr. Shaheen 2681

March 26, 1973 Tape No. 792 NM - 1 MR. MOORES: for some $2,000, I think - MR. ROBERTS: No, $10 million. MR. MOORES: $10 million and a five per cent royalty, but $2,000 for the actual shares, I think the honourable Leader of the Opposition will find. MR. ROBERTS: Well we will straighten it out after. MR. NEARY: Inaudible. MR. MOORES: Mr. Speaker, I know the honourable member for Bell Island does not understand anything but baby talk, so maybe he should want to put up his hand to leave the room or something for a couple of hours, because he is going to have to listen to this whether he likes it or not.

The second agreement, Mr. Speaker, for the second refinery. is in fact a much more simple one than the first and that is that the ECGD loan would be now in the form of a first mortgage that would he owned by Shaheen Natural Resources,by their buying out the crown corporations. The Newfoundland Government loan of $30 million would remain in the second mortgage position.

The Shaheen equity position would be $10 million and that in fact would mean that the Newfoundland Government would have $30 million in cash loaned to the company and the Sh~heen interest would have the balance of the money that happened to be involved. except for the wharf agreement, Sir, which I would like to deal with separately when I come to it because it is the part that is not finalized as yet. MR. ~._ROWE: I do not want to make him lose his train of thoup,ht. Mr. Speaker• is there in fact now an agreement between the government and Shaheen Natural Resources to buy the crown corpontion shares? MR.

MOORES: Yes I have a letter here which I will table in a moment, Mr. Spenker, ns an a~reemcnt to do thnt,based on this particular proposal that we are asking the- House to ratify. The first ngrecment on the second refinery or the agreement 2682

March 2fi, 1973 Tape No,792 NM - 2 on the Bec0nd refinery, Mr. Speaker, has an ECGD loan of $190 million, baaed on a first mort~aP,e. The Shaheen equity position of $40 million -andcthe Newfoundland Government loan on what is called. I think somewhere through here, subordinated to the first mortgage ~ut in fact is a polite way of saying a second mortgage. I do not think there is any other word for it. It is in fact a second mortgage position of $308.5 million in total for the second refinery,as I say,of which the British Government. through their guarantee export department, are putting up $190 million, Mr.

Shaheen $40 million in equity and the provincial government $78.5 million in the way of a loan. Mr. Speaker, taking in the total of the two new agreements versus the present position or the position at least that we found ourselves in when we started to negotiate this, the amounts at the present time, the total guaranteed loan by the Newfoundland Government will be $108.5 million; the total loan by the British Government throuRh their ECGD department, $311 million: the total equity and loan by Mr. Shaheen, sum in total $50 million. As I say,the wharf agreement is not included in those figures.

The two refineries,the cost $506,500,000 as opposed to the $198 million commitment for the first refinery. These figures, Mr. Speaker, can be very complicated when you are reading them into the record such as this. I will table this information after but I am pretty sure the information in fact is pretty well know to most members of the House as it is. One point I would like to make here, Mr.

Speaker, is that here we are havinR 400,000 barrels of oil beinr, refined at Come Hy Ch::ince versus 100,000 today l>ut the ironic pnrt of it and T think a point worthy of note in these comments, is the fact thnt the nritish Gov<'rnment arc. now p,uaranteeinr: somethinp, of approximately $311 million or fnvestinr, $311 million into this $506 million project, 2683

March 26, 1973 Tape No. 792 NM - 3 The Canadian Manufacturers Association,very naturally I be~ieve, is very upset about the fact that Canadian goods are not being used in the refinery. Goods produced and goods . supplied in Newfoundland as well as Newfoundland labour and so on, servicing, this has been written into the second agreement but the fact is that British manufactured goods are going into this refinery as opposed to Canadian manufactured goods. The reason for this, Mr.

Speaker, is that the British Government have an export credit department which allows for this sort of expansion whereby the Canadian Government in fact also have an export credit department that would allow this refinery,for instance if it was being built in St, Pierre for the Canadian Government,to assist in just exactly the way the British Government is, but in fact there 11re no internal workings of the Canadian Government that allow for this sort of financing. I think possibly,Mr.

Speaker, and somewhat off the subject, but the function of the Department of Regional and Economic Expansion itself possibly should be looking at the financing of the have-not areas of the country,to see if there is not some method of financing Canadian industry to participate in Canada's development rather than have to do it through the method that we are now looking at here. But now, Mr.

Speaker, I would like at this time to table one letter and this is the letter of cancellation that the honourable House Leader opposite mentioned a moment ago. lhis is a letter. it is addressed to me and it is signed by the principals of Labrador Edison Company limited and executed by Shaheen Natural Resources, and we refer to the agreement, and this is a principal agreement between Edison and the government. Without going into all the

preamble,it says, "This will confi:rm our agreement that unless within fifteen months after the date hereof, (

a) Newfoundland Refining Company Limited shall have acquired the shares of 2684

March 26; 1973 Tape No. 792 NM building company, holding company and operating company in accordance with and subject to the terms of the supplemental agreement and (

b) the government is satisfied that all legal, financial, business and other responsibilities of the government to any person or authority whatsoever in respect of building c0111pany, holding company and operating company have been discharged. •The government shall not be obliged to advance the sum of $78,500,000 or any part of it under the principal agreement.

We have taken communication of and agree with the government's position that unless the condition set forth in paragraphs 4 "a" and "b" of this letter - agreement are fulfilled within the said period of fifteen months after the date hereof,the government will reserve the right to introduce in the House of Assembly and support as a party measure legislation designed to rescin~ the principal agreement and the supple~ental agreement and to repeal all legislation related thereto." I will table that particular document which is not attached to . the original one,. It probably should be, Mr. Speaker but it is not.

I also have one here regarding the wharf agreement and I a~so have another here regarding the amendment to the first agreement that was originally signed. Right now, Sir, probably it is better if I take the bill itself and go through it very briefly because I am sure the opposition will have a lot to say on it and I would rather in closing up to make any replies to any questions that they might have outstanding. On page nine,in

section (II),oblir,ations of the r,ovcrnment. In this regard there will be a slight amendment to the 1,077.4 acres that the Edison Company requires to build. On the land, they have written us to the effect that there is something like even acres that should not be in this particular parcel,so there will be actunlly $7 million less. 2685

March 26, 1973 ,Tape No. 792 NM - 5 But in effect this

section says that the land that is required at the Come By Chance Area be made available for the sum of $1 million as part of the agreement. Now, Mr. Speaker, I will be talking about the precedents in this particular agreement a little later on, because one of them certainly is the sale of land for industrial development and in this case to the tune of $1,000 an acre, not a huge sum for the type of land it is being used for but $1 million certainly at least is some income to the province and it sets a precedent for any future development we mav have in mind regarding industrial development in the province itself.

Section 2 (

b) really only deals with right-of-ways as to giving easements on land that gives access to the mill itself 1n respect of the major clause. Clause 2 (c).regarding the making the $78.S million available, in this regard the provincial government will be called on earlier than the other people in the agreement to install the first payments that are going to be required. The ECGD money will catch up very rapidly the second year and as a matter of fact will be far out-distancing anything that we will have to put in.

We figure our financing will have to be approximately twenty-five, twenty-five and twenty-eight point five over a three year period but in the second year the ECGD loan will pick up because after all it is mainly for equipment ordered and so on in the UK,

whereas site clearinR and so on will be the responsibility of Shaheen's equity position and ourselves. One thing that should be pointed out in this clause as well, Mr. Speaker, is the fact that whilst the first principal loan has to be repaid to the British Government over the first seven years and our second mortgage position done over the following eight years, I think it is worthy of note to realize that in the 2686

March 26, 1973 :rape No. 792 NM - 6 mortgaee agreements that have not been signed as yet,of course, there will be a speed up clause to the effect that after a fair return has been given to the company 2687

March 26, 1973 Tape 793 PK - 1 regarding dividends, profits and so on, Any excess money that is earned over that particular amount will be applied to our prepaid mortgage payments both for the first and second mortgages themselves. Now regarding I think it is 3 \

b) this is basically regarding the wharf agreement itself. Now it is our intention and hope, Sir, that we will be able to negotiate with Ottawa in that they can have the same confidence in us as the British Government does,in easing the wharf situation so that the refinery can pay it back, that is Newfoundland Refining Company Limited, BCGD has the confidence, I would hope that the Canadian government would have the same confidence. However, if they do not,there is another letter of agreement between ourselves or at least send to us by Newfoundland and Labrador Edison Company Limited which says, and once again I will forget the

preamble,"This will confirm our further agreement that if Government of Canada shall not consent to the transfer of the outstanding shares of building company and operating company and the termination of all legal financial business or other responsibility of the government to the Government of Canada in respect to these companies,as provided in the supplemental agreement, and also to the use of the wharf by Edison,as provided in the principal agreement,the government and Edison shall each provide, whether in cash or guarantee,one half of the funds needed to enable buildinr, company and operating company to purchase the wharf from the Government of Canada,which funds will be repaid by operating company and building company to the persons providing the same as provided in the existing agreement with the Government of Canada except that the interest factors to be used shall be the interest accrued the persons providing the funds." Mr.

Speaker, in essence, and I will table this letter of agreements as well, In essence this means that if the federal iovernment do not in fact P,o along with the purchasing of the three 2688

March 26, 1973 Tape 793 PK - 2 crown corporations,that Mr. Shaheen's company together with the government will pay out half of the wharfap,e. Now that means in fact that the Shaheen company will pay half of the wharf in cash through their guarantee or cash position and hopefully the provincial government if need be will have a situation with the federal government similar to the one we have at the present time. Hopefully that will not be necessary. Following in 3(

c) of thE' agreement itself. "The government will ensure that no provincial,municipal or other authority under provincial control within whose jurisdiction the project is established will enact or impose any discriminatory rules or regulations against Edison.' ' This I think is fairly standard as is the forty per cent of municipal taxes, the total that is allowed to be taxed to any one given company in any onecommunity. That is also standard. The (

f) in that

section is not quite as standard "That we will cause adequate supplies of electric power to be made availahle to Edison at standard industrial rates." Later on in the agreement the standard industrial rates are spelled out more clearly but the actual usage of power is considerable by this company and we will have to plan the power requirements for industrial development generally in that area very carefully for the years ahead.

Rep,arding the construction of the plant,that there will be a qualified prime contractor, that there be not less than 300,000 barrels per day, that the lend~rs of the principal loan in reviewing and approving the plans and specifications of the plant and so on., in other words that we and the lenders of the principal loan will be allowed to check the design of the plant, the feasibility of the plant and so on to make sure that it is indeed what it should be. Number five, in fact says that these are conditions precedent to the advance of any government loan to the company.

First of all, "Edison shall have to cor,,.mit to the government evidence satisfactory that they have irrevocable commitments for $40 million 2689

March 26, 1973 Tape 793 PK - 3 in equity. In 5 (

b) that the Edison·Company shall provide that they have arrangements made for principal loan and in this case we assume of course that it is going to be the British Government through ECGD to provide the necessary financing. (

c) Edison Company shall provide the proof that they have sixty per cent of their products for at least five years sold in the American market. It it is interesting to note, I think, Sir, that this low sulphur fuel product that has heen comtemplated for the second refinery is one of very great demand in the energy market today. In the following

section (

d) it says that Edison must have a guarantee of sixty per cent of its crude oil requirements, these are standard for five years.

These are standard conditions but that sixty per cent of the crude oil supply is probably a great deal more important at this particular time than any other clause in this particular group because it is as we know with the energy crisis as it is, with the major companies in the Middle East and North Africa and Venezuela and so on, being in a position such as they are in, knowing the demand for crude oil 1 it is very critical that the Shaheen companies proved to the government that they have very definitely,be it crude oil from the North African Continent or from the African Continent, North African they are talking about and the Middle East, are sewed up before we get into this.

I am sure, Sir, someone will talk about the possibility of war in the Mid East but I do not think we can base our economic future on whether there will or will not be war anywhere. But this is one of the factors that is very important to the bill itself. Th~t independent advisers which will he referred to later on he set up. This of course is the feasibility study by people independent of Mr. Shaheen who can take a look at all of the facts and figures he has put forward to make sure that the government are getti .ng involved in a r,ood proposition. 2690

MAy 2~, 1971 Tape 793 PK - 4 Inspection on the site, that is once again standard, even though for a private company it probably would not be, but as long as there is government money involved the fact remains that we will be having inspection on the site itself. The working capital for the project this, Mr. Speaker, is one thing that is not spelled out in this agreement but which was a very clear understanding I had when we dealt with the British Government through their F.CGD Department. That was that the $40 million that Hr.

Shaheen is putting forward for this project that this money be very definitely kept topped up to that amount for working capital. Because they feel very strongly that if they are putting up the money for capital expenditure as is the Newfoundland Government that there should be adequate monies available for working capital at the end.

Now there is a clause in here whereby if there is an over expenditure for capital expense.the Shaheen companies will in fact have the obligation to raise this additional money, What it is going to be I think a requirement of the first mortgage, I cannot say this for sure, but I would be surprised if it is not, is that the fact that the working capital money be kept in such a condition as to be definitely available when the project itself does start. Number four I think is just a standard clause.

Number five,it eays,ulf for any reason funds in addition to those provided by the Principal T,oan, the Government Loan and the Edison Equity Investment (that is Mr. Shaheen's equity) are required to defray any part of the costs of the project, Edison shall provide such funds. Mr. Speaker, I think this was the same as in the last agreement. I think possibly Mr. Shaheen surprised some people when he rlid come up with the additional funds when it was required and it 1R n part of th1R agreement and a very 1mportnnt pnrt ns well. We move on, Mr. Speaker. to the position of roynlties in this particular n~reement.

The royalties themselves are 2691

March 26, 1973 Tape 794 IB-1 spelled out I think by standard

definitions all the way through. One point I would like to make in regard to

section (D), subsection (2), sales cost of five point one per cent paid or payable by Edison or the project operator. This was in the original agreement for the first refinery as well. Also in the first agreement was twenty-seven point eight per cent management fee to be considered as a deductible expense. This twenty-seven point eight per cent management fee is not in the second agreement. I think this should be made clear hecause this was a management fee that was in there as a cost to the project in the first agreement, a ridiculous fact really to put in this sort of a management fee for such a huge project,but this was the case. It is not the case in the second refinery. I think the

definitions other than that, Sir, are standard all the way through,without wordsof clarification. I would now like to move on to number 3 (

E) on the royalties. This is in fact the five per cent of the gross profits which will be coming to the province at the end of a maximum of seven years but in fact could be much faster than that with the speed-up prepayment arrangement that is being nep,otiated for the first mortgage.

The royalty of five per cent is calculated at $4,000,000 a year of the gross profit and the royalty of f:f.ve per cent of the net value,which does not start until after both mortp,ap,es are paid off.is calculated at $2,000,000 which in effect then would last for five years hecause it is only up to a total of $10,000,000 all together. This particular one is the same amou~t as the first refinery agreement as well. Mr. Speaker, I think all the rest of these particular points here are standard as far as the agreement is concerned and are well known.

On pap,e (22), item (8), the Mutual Covenants of the government and Edison, the principal loan which shall he repa:f cl over a period of seven years comrnencinp, at a date following the comolet:fon of the olnnt. This of course, as I said.is sub.1cct to prepayments if the enrnin,:.,:s nre ns great as they are oresentlv comtemplated 2692

Mnrch 26, 1973 Tape 794 IB-2 and the same applies to the government loan, section (2). In section (9),(1), the first clause is fairly standard and .here ve have the peripheries in which the agreement can actually be started under. That is that the construction has to be within two years and that the operati .on of the agreement must be finalized within five years,in order for this agreement to be ratified that we are asking here today. These of course are the outside fi~ures to give the protection that are normally built into these things. Number (3) in this subheading and I think this is imoortant, ~r.

Sneaker that f.dison shall, in the procuring of materials, equipment and labour and in selecting subcontractors for any work undertaken by it or for its account under the terms of this Ar,reement,give or cam1e to he !!'iven perference,where feasible and economic to do so, to material and e,quipment originating, manufactured or dj strihuted and serviced and to subcontractors located in the province and prior opportunity of employment to qualified workmen whose usual place of residence is in the province. This is one clause, ~r.

Speaker, that we as a government will ensure is very closely adhered to as will they I think this one is of particular importance to us. Under subsection (4) both (

a) and (

h) spell out the anti­ pollution controls that must be associated with the construction of the second refinery.~s we rememher,a lot of the additional cost of the first refinery was the fact that there were not cnour,h precautions taken for anti-nollution measures. This cannot be allowed to hanoen in this particular refinery. Suhsc>ct1.on (5) just spells out the fact that, as we h:1.ve been sayin~, the> SSA tnx will he paid. This n~nin is n rrecedPnt and will vary somewhere hetween $12,000,000 and $1~.nno,onn on the calculated amount for cnnitnl expenditure on enutnment now.

Numher (6),J think is a stAndard cJnuse. Number (7): If with1n fifte..en months 1.mmed1ntely succeeding the date of the rntificatinn of this Agreement, Edison hns not ohtained an irrevocahl<" commitment for the Principal Loim, or if within two years of the dnte rnt1fication of this A~rermcnt the Plant 1s not under 2693

March 26, 1973 Tape 794 IB-3 construction, the r.overnment may uoon notice in writing to Edison terminate this A~reement. Number (8) that we shall retain the independent advisors in order to check the. feasibility of the project which I mentioned before, which would he our intention, ~r. Speaker, upon the ratification of this a~reement, of getting on with very quickly. Mr. Speaker, in section (9) there is the right to permit a third party the use of the wharf. Now, in this narticular

section and also in section (10) immediately underneath it, it in fact gives Edison the right to have first refusal on the right of the wharf. It also gives him the right to have first refusal on anyone else locating w:lth an oil refinery in the area,to build that oil refinery upon the same conditions as the government has with the potential new builder. Now, this was in the original agreement. It is still part of this one with the one difference that in the original ap,reement - and if we remember the hassle we had with Ottawa and the differences of opinion between Mr. Lang and particularly Mr. Lang and Mr.

Smallwood - one of the main reasons was that no one was alJowed to use the wharf except for Provincial Operating Company which in fact was the crown corporation which Mr. Shaheen had the option to huy and which in fact Mr. Shaheen controlled. Now, this is not an improvement whereby there is total, what we would call a oublic wharf,but it is a considerable improvement over the first ar,reeTTJent,1,1hich now ~ives us at least the opportunity to provide another refinery if Mr. Shaheen cannot meet the same terms with the use of that wharf. Number (11) in this particular clause is a standard clause as well.

Number (12)Rpclls out once a~ain the fact that noth:lnr; in this ar,reemept shall he <lccmcd to re(Juire the povernment to adv;:1nce any moneys towards the coRts of the oro1<>ct nddftionAl to the Rovernment loan. To further that 1n (13) it l'!RYR that the r,overnment shall have two d1rPctors. T think the rest of this nnrticular bill itself 1.n fRct Roells out the method of arbitration, the force ma.1eure c]auses 2694

!'!arch 26, 1973 Tape 794 IB-4 and so on which are once again, I think, standard. Now, regarding the changes in the second bill. I think it is bill number 76. The changes that have been made in that particular bill are not particularly major. There are a few that are of significance, the offically changing even in this letter that I will table which I do not think was written previously to ~r. Smallwood,but which was never tabled.

The letter which waived the two point five mills oer kilowatt hour subsidy to the --~ company - that is two point five that they are going to be charged so that they now pay full industrial power rates. This is in this letter that the power commission should be no longer_, .be required to buy fuel if not comnetitive from Mr. Shaheen's Refining Company.

That Ne,,1foundland Refining-fluild:fnr, Company Limited, Ho] ding Company and Shaheen Natural P.esources 1 hereby that the letter dated July 15, 1970 of Canadian Caribbean Oil romnany Limited to the government and the letter dated August 29, 1970 of Provincial Refining Company and the Newfoundland Refining Company to the government relating to the sales of oil to the power commission and so on be cancelled. All this was .as I said~kno1,m previously and which I ·will table now for the benefit of the House. They are not ma.1or changes but thev are changes of significance and principle, I think. Mr.

Speaker, I am not going to carry on much longer with the introducing of these bills because I think there will he several oeop]e 1,1ho will want to speak more snecifically on them and then I will answer specifically when the time comes at the spcon<ltnr. of the hills, the second rendinr but I thtnk a few noints should he nofnte<l out as heinR very sirnificnnt. First of all that the speed up of the mortgnr.~ agreement in the morti:;aP,e clauses will be of mnjor sir,nif1cnncc at the time that we retain both roy;i.lty payments nnd also for that matter tax payments, tax points and so on.

The revenue to the Tre;:isurv is a point th11 t ha!! not heen made 2695

'!-'.arch 26, 1973 Taoe 794 IB-5 I do not think clearly enough. F.ven though when the first mortgage is paid we get some $4,000,000 a year in royalties and even though after the second mortgage is 1>aid we get a further $2,000,000 in royalties up to an amount of $10,000,000, one of the major points that has been missed, 11.fr. Sneaker, is the fact that the revenue from tax points, corporation tax,.which is thirty.,..five per cent in - of the thirty-five per cent that they will be accessed, Mr. Speaker, thirteen per cent is ours o-f which we have a calculated ·. \ 2696

March 26, 1973 Tape no. 795 Pagel - MRW revnue of $11 million a year. This will start either in the second or fourth year after completion, depending on what happens to Hr. Turner's write-off in Ottawa. What it boils down to is that ten years from the completion date of the refinery, we will have a direct revenue into the treasury of between $135 million and $160 million over and above the repayment of the loan. This is money that will be paid in.

I can assure this honourable House as the Minister of Finance I am sure will do on Friday, this is money that is badly needed f0r either current or capital account in this province. The number of jobs that will be created - like my predecessor,Mr. Smallwood ,said at the time, "that is not the important thing." It is somewhat important at this time with the number of skill construction people that are going off construction jobs because of the fact that there will be 3,000 jobs for most of the three-year period that it will take to build the refinery itself.

One thing I think should be pointed out very clearly is the confidence that the British Government have in this development. Where at one time we through our crown corporations either owned - we gave Mr. Shaheen an option to buy and the cr01o1n corporations he controlled anyway - in fact we morally had the responsibility of the repayment or the loss or whatever. At this time the British Goverrunent are putting in, in the form of a loan, in excess of $300 million of a $500 million expansion. Mr.

Shaheen'& equity position has gone up to $40 million in the second refinery from $10 million in the first, for a total of $50 million. The precedents that have been set in this agreement itself I also think to be important. The fact that these refineries will be playing a full industrial power rate, which should be at a profit to the province, I think ie beneficial. The fact that all taxes will be applicable and 2697

, March 26, 19 73 Tape no. 795 Page 2 here alone S.S.A •• as I said. will be from $12 million to $14 million and the corporation taxes as well, plus the fact that there has been a laud sale rather than a land giveaway, that there will be users' rates for vater and so on. Mr.

Speaker, when you look at the figures of the $78.5 million that we say we are lending,in fact we take $13 million as the S.S.A. figure, (that is the middle figure between $12 million and $14 million) plus the $1 million for land. which is a total of $14 million, that in effect means that our loan by the time we have finally paid into the loan. we will in fact have so111e $14 million back,which will make our net imput into the project some $64 million and not $78.5 million. It created an easement for the wharf where none presently exists. We have a letter of intent from Mr.

Shaheen, which I do not have with me,unfortunately,or I would gladly table it. It agrees to train Newfoundlanders at the first refinery for skilled and managerial jobs in the second refinery. We have a first refusal for jobs, materials that ve can produce in the province. Mr.

Speaker. tha one thing that I think, in the broad terms at least, should be spelled out and spoken about very briefly is the potential of what will happen to the refinery location - this is the first and second refinery, I will just refer to it as Come-by-Chance, what can happen to this particular area once these refineries themselves are completed.

You have heard a lot of talk in the past about petro­ chemical indu.stries,and they are still potential for this sort of development, if the petro-chemic:al climate in the world changes • At the present time the petro-chemical industry - well it is on the way back,a little bit now, but it was in a very depressed state for a long while. Mr. Speaker, with the energy crisis that is so much talked about today and in the United States particularly but in Western Europe as well, the potential of getting industries into Come-by-Chance that 2698

Karch 26, 1973 Tape no. 795 Page 3 in fact need energy as their source of existence should be a very real possibility if we as a government put together the team of people that are required to go and sell the resources we have, auch as deep water, the energy and so on. Any industry in the United States that is going to be depending upon energy for its existence will have to make up its mind on one or two things; either it stays where it is and hopes to cache the energy it requires or it will have to move to a location where it is guaranteed an energy supply.

We have in Newfoundland, of course, and Labrador several opportunities in this regard; one being the hydro-electrical opportunity in Labrador.But here you have the ice problem on the coast, which is a subject of study by the university right now,by the way. The other opportunity you have is petroleum energy, of course, with the ice-free deep water ports on the south coast of our province. I personally think that the deal we have signed here is a good deal. I think it is a beneficial deal to the province. I am not saying it is the best deal the province could get.

There is always I suppose a way you can get a better deal. It was the best deal that my colleagues and I could work out. I think we did a fairly good job for the province. I am speaking on behalf of them. It certainly was not for the lack of effort,anything that we have missed. I think the province will get considerable revenue, Sir, in the future, not just from the jobs but from the actual revenue going into the Treasury. I would just like to close the introduction of these bills by saying one thing that over the years we have had with Mr.

Shaheen and the oil refinery at Come-by-Chance and other people I suppose in this Legislature a great deal of recriminations and the involvement of personalities. Here we Rre today introducing a bill that has Hr. Shaheen as the head of it. He has yet to disprove to me that he is anything but sincere and honest in his negotiations. I do not think, Sir, he will. For both sides of the House, personalities 2699

Karch 26, 1973 Tape no. 795 Page 4 have been involved in debate in the past,with justification when it came to the first agreement I think,but it should be the agreement that was debated ,and for political reasons or otherwise the names and personalities have been bandied around this House, whether it be John Shaheen, George McLean or who have you. I think, Sir, that on a bill as important as this, for that matter, the whole mood of this House, I think when we are attacking a principle, we are doing something that is worthwhile.

When we are attacking an issue, I think we are doing something worthwhile,if we are in opposition. When we are defending it, we are doing what government should do. I think, Sir, the one thing that we should all be more cognizant of than we are is the fact that we can in fact and not for the lack of trying destroy personalities by innunedo, by accusations in this House. I think, Sir, in this particular bill, a great deal has been said, as I have said ,tn the past, regarding the personalities involved.

I would ask, Sir, that both sides of the House keep in mind the fact that we are dealing here with a principle not a personality. MR. W. N. ROWE: Mr. Speaker, it is with some interest that we listened to the honourable Premier introduce these bills into the House. Interest, Sir, because we have already gone on record for the past several years and now and hopefully in the future as being in complete and absolute support of the principle of the main bill in this House today.

We view these negotiations and the perspective ratification of the agreement by this House as a continuation of the policy initiated by the former administration, under the leadership of Mr. Smallwood and with several ministers involved, including ministers on that side of the House and on this aide of the House. We support completely and absolutely the principles 2700

March 26 • 1973 Tape no. 795 Page S and the main principles enunciated in the bill. 'l'be only thing which is a little difficult to swallow,in spite of the Premier's plea for sweet reasonableness, just before he s•t down, is the callous cynicism which has been evide11ced by the present administration in their revenaal of policy as stated formerly to the people of Newfoundland and as against the bU.l which they now bring in. But aside from that, Sir, there is no question at all that we support the principle of this bill. Bow could we do otherwise, Mr. Speaker? Far be it from us to do otherwise.

How could we do otherwise? The bill is in essence and mainly and substantially a replica of the bill that was brought into this House in 1970 and earlier in 1968 but the two bills, the 1968 and the 1970 bills - this present bill is in large 2701

March 26, 1973, Tape 796, Page 1 - apb measure a replica of those two bills with one or two changes for the better I think, which I will deal with later and which other members of the opposition and undoubtedly the government will deal with later as well. What I would like to do, Mr. Speaker, before going into other aspects of the bill, is to compare for the record, to compare the two refineries which will be going in Come by Chance, one nearly completed and another one which is porbably a year or two away from commencement as far as construction is concerned.

Compare the terms and conditions of the two refineries to see just how much imporvement there is in this present bill over the two bills which were fonnerly brought in or prev1.ously brought into this House. I will use the fip,uree which the honourable the Premier gave when he made the announcement in the House sometime in February, February 26, I believe.

I will use those figures to try to compare the onerousness, the burdensomeness of the terms on the government and on the other parties and the benefits which will accrue to this province as a result of the terms and conditions in bot~.agreements and other the several pieces of legislation. In the first refinery which is now under construction, Mr. Speaker, there was a provision that E.C.G.D. guarantee to the syndicate of bankers the repaymc>nt of a certain amount of money. The whole thinr, is rather complicat(' .d.

Actually, hankers lend money to the crown corporation, the huildinr, company,and that is guaranteed by E.C.G.D. and the prime borrowers are the building company, the crown corporation itself. For the sake of simplicity, as the Premier has done, let us tall<. about the British Government loan, the loan of the British Goverrnnent, the amount of obligation which the British Government has in respect of the first refinery and later in respect of the second refinery. The British r.overnment puts into the first refinery in present day values, I bc>Jieve ~n amount of $120 million,securcd by a first 2702

March 26, 1973, Tape 796, Page 2 -- apb mortga17.e with the repayment to be made by the crown corporation. AP:,dn, for th(' a11ke of p,ettinr, rid of any confusion, the Premier k•pt n,ferrfnr, dur1n17. hfs rcmork11 to a guarantee by crown corporations. ~ut the crown corporations, Sir, were actually the borrowers end they their.selves have obligated themselves,under the agreement and under the mortgage deeds, to pay back the money. I think perhaps he was confusing that with the comfort letter which we will refer to later which the provincial govermnent gave to E.C.G.D.

In any event, the British Government put in $120 million, secured by a first mortgage 1 to be repaid by a crown corporation of the r,0vernment of this Province. The Newfoundland r.overnment put in $30 million,secured by a second mortgage. We stand behind the the British r.overnment in the event of any defaults in getting our money out of that project. Shaheen,(and I use the term Shaheen emhraceably, comprehensively, to comprehend the various companies that he is involved in) Shaheen agrees to put in and puts in $10 million which we will consider to be his eouity into the first refinery.

The wharf is to be built at a cost of $21 million dollars for the first refinery and a crown corporation guaranteed to the Government of Canada that if the toppage and sideage docs not repay the amount of that l'!Oney,the crown corporation itself will repay the money. Not the f-overnment of Newfoundland but the crown corporation will repay that money to the Government of Canada. A further $15 million w.ts raised by Shaheen,to rely on the PrPmier's infomation, and I do not J,_now whether that was guaranteed by the rovernmcnt or not.

It could not be lef!ally ~uaranteed by the r,ovennnent, it was raised by Shaheen and presumably the ohl1r,ntion run~ from the buildinp, company once more to pay that back to the prime lenders of the $15 million. $15 million raised by ShahPen and the wharf costs a further $2 million,accordin~ to the Premier's figures. The Premier says that there is now a total of $198 million of which $188 million, 2703

~.arch 26, 1973, Tape 796, Page 3 -- apb that is all but $10 million of the cost of the refinery and wharf. is an obligation of the government. !4R. MOOR~~ That is what the government have at risk. MR. W.N.ROWE: Well, right, that is a matter for debate. The crown corporations have at risk,whether the government have it at risk or not is another question, Mr. Speaker.

There has been said over the past couple of years and in this House,again when the Premier made his remarks, although he did not make too much of a clear reference to it today, it has been said that there is a moral or practical obligation by the Government of this Province in consideration or with respect to the Government of Great Britain and the Government of Canada> a moral or practical consideration by the r.overnment of this Province to repay to the Government of Canada the amount of money for the wharf in the event of default and to pay to the Government of Great Britain the amount of the E.C.G.D. guarantee or the E.C.G.D. advancement or loan in the event of default.

I think it has been generally admitted,on both sides and by all people who have commented on the first refinery, that there is no legal obligation on the part of the government itself as an entity, the Government of Newfoundland and Labrador, to pay anything to anyone with the exception of the $30 million which was in fact loaned by the govertll!lent. In other words, the legal risk of the Government of Newfoundland andLabrador ·is $30 million in respect of the first oil refinery at Come by Chance.

It has been said by the Premier and others,inside and outside of this House, that in addition to the $30 million there is a moral or a practical oblip,ation on the part of the Government of Newfoundland and Labrador to pay all the rest of the money as well,with the possible exception of tl1e $10 million which ~r. Shaheen himself is puttinr, into the deal. This is where the Premier gets his fir,ures, Mr. Speaker, when 2704

March 26, 1973, Tape 796, Page 4 - apb he says that the government is on the hook for $188 million as against the total cost of the refinery which is $198 million. Now, Sir, as I said, it has been admitted that there is no le~al obligation as such. I want to enquire into and to look at this whole thing as fairly as I can, Mr. Speaker, and look into the whole situation with respect to the first refinery and the second refinery in order to see what in f11ct is the government's obligation, practically, morally or ler,ally in respect of the first refinery and the second refinery.

In doing so, Sir, I want to clearly state that I am not considering the position or the situation or the prospect which could arise if for some reason or other the first refinery were to fail or the second refinery were to fail as far as the present monies or the present commitments are concerned . In that case, you would have the situation that arose in Nova Scotia with regard to the heavy water plant, where the p,overnment had to take the decision as to whether they would close down the heavy water plant or put additional 1110ney into it.

We had this situation arise here with the regard to the lincrboard mill, where the government had to take a decision and this House had to take a decision as to whether they would in fact close down the linerboard plant 7 because the costs had escalated, more money was needed, or to pour more money into it. I am not talking about that situation as far as the refineries are concerned. I will assume that the refineries can be built, the first refinery can be built for $198 million,including the wharf,and the second refinery can be built for the amount the Premier has mentioned, $305 m1111on, I would imagine.

So we just separate that situation nllor,ethcr and 1ust talk, Hr. Speaker, about the r,overnment's position in the event of a default by either the crown corporation in respect of the first rnf1nery or the Ed1son situation in reRpect of the second refinery. If more money is needed, then the r.overnment will have to take identically the same decision in respect of both 2705

March 26, 1973, Tape 796, Page 5 - apb refineries. If they decide to allow it to close down and put no 1110re money into it, what then? Is the liability legally, practically or morally in respect of the monies already committed to both refineries? ' If the first refinery cannot live up to its obligations, if the building company, the crown corporation cannot live up to its obligations to the British C'..overnment or in the event that Shaheen Natural Resources takes over, they cannot live up to the obligations, then the British Covermnent goes after other peQple who 2706

March 26, 1973 Tape 797 PK - 1 stands behind these obligations, Mr. Speaker. To look at the situation which my colleague and! and the former Premier negotiated, if the' first refinery were to close down and ECGD were to try and realize its $120 million out of the assets of the first refinery and fail to do so, then they would go after any possible guarantors, any people who put their name on the line in respect of that first refinery. The British Government would go after the crown corporations and they would find that the crown corporations as they then existed had no assets except the refinery itself.

Then they would presumably come after the Newfoundland Government to see if the Newfoundland Government would pick up any of the money which the British Government have lost as a result of the refinery say going bankrupt or going under. Now, Mr. ~peaker, what position would the Newfoundland Government take as far as the first refinery is concerned and assuming that the buidling company and the crown corporation were still on the hook as far as that first one is concerned? I would say, Mr.

Speaker, that any covernment of Newfoundland and Labrador who was called upon by the British Government to guarantee or to give extra money to the British Government hecause they could not get enough out of the first refinery when they took it over say, any government of Newfoundland and Labrador would be well within its rights to laugh in the face of the British Government and ECCD and tell them not to hother the Newfoundland Government with such nonsense and such fooli Rhness.

Remember, Sir, that the British Government have not done any favours to the Province of Newfoundland and Labrador in respect to the first refinery or the second refinery. They have done no favours. The British Government got into the first refinery deal for one reason and one reason only,to do the British Government and the British people a favour, The British Government have p,uranteed loans by the British hanks. Why have they done that, Mr. Speaker? The only reason why they have done that is for the sake of export, 2707

March 26, 1973 Tape 797 PK - 2 to get more exports out of Britain, out of England and other parts of Great Britain,to improve their balance of payment situation, to increase the viability and the stability of the pound, to keep more people in Britain working and to make sure that the factories are operatinr, at a maximum capacity. This deal by the British Government, Mr. Speaker, by guaranteeing or lending $120 million to the first refinery,was no favour to Newfoundland and Labrador, it was a favour to themselves and it was a pure and simple husiness deal.

It was an ordinary business deal which is done by every other sophisticated country in this world with regards to the guaranteeing of export credits. The British Government lend $120 million to the first refinery, Sir, on the basis of feasibility reports and painstaking studies which they themselves made. They made sure that their risk in respect of the first oil refinery was as small as human ingenunity could make it. They made sure, Sir, that the money which they are lending to the first refinery gets back to the British Government in the shortest possible time and at good interest rates.

This loan by the British Government in respect of the first refinery, Mr. Speaker, was by no means interest free, it was at good interest rates consistent with the interest paid for similar commerical enterprises all over this world. AN HON. MEMBER: They were low rates. MR!-RO!"E, W. N. They are low rates but low compared to say if you 'went to !AC to get it. Hut the normal ECGD guarantee and the interest rates are exactly the same and about the same as Hermaeys in Britain, for example, There may be a fluctuation of a point or two. But that is not the point anyway, Mr.

Speaker, the pointis that ECGD got into the fin~t refinery situation with its eyes open, as a commerical venture, an ordinary business deal,to make sure that there were jobs opened in Great Britain, that their factories operated, to increase the stability of the pound,as I have said, to make sure that the balance of payments surplus or deficit, the surplus would be as 2708

March 26, 1973 Tape 797 PK - 3 great a• pose1.ble or the deficit as small as possible. In addition, Mr. Speaker, they took a mortgage on the assets of the first refinery. The amount of their mortgage and the amount of their loan is about three-quarters of the then cost of the oil refinery which the previous administration negotiated. Mr. Speaker, the whole of the commerical world knows all of this,what I have said. They know that ECGD got into thi~ as an ordinary commerical deal, for the benefit of their own country, not as a favour to Newfoundland and Labrador.

They would do the same thing for any other country in this world, any other province or state in this world, if it were a feasible project and if it were a project which would mean that machinery would he supplied by the Great Britain factories and that British people would be working and the balance of payments would be favourably affected.

If there were a default under the original deal negotiated and finalized in 1970, if there were a default by the crown corporations or anyone else under that originally negotiated first refinery deal, this government, Sir, the Government of Newfoundland and Labrador not only could but should and I would submit would refuse to pay to the Government of Great Rritain one cent more than the amount which the Government of Newfoundland had already put into it, namely $30 million.

I would further submit, Sir, that this refusal by the r,overnment of Newfoundland and Labrador to pay one cent more than the amount of their already committed money,$30 million,would not affect Newfoundland's credit by one iota for that paricular reason, would not affect Newfoundland's credit at all. Why should it affect Newfoundland's credit? Every commerical enterprise, every lending institution in the world kno,~s the type of deals that ECGD gets into. So for that reason it would not affect Newfoundland's credit.

Newfoundland's er.edit would be affected if the refinery went bankrupt ohviously, hut not because the Newfoundland Government did not stand 2709

March 26, 1973 Tape 797 Pk - 4 behind it, but because the refinery itself went bankrupt, just as if the second refinery were to go bankrupt where the Newfoundland Government have admittedly no moral or practical or any other kind of obligation outside of its $78.5 million, that also would affect the credibility or the credit rating of this government.

So the point that I am tryin~ to make, Sir, is fairly and squarely as possible in order to compare the two deals, the first oil refinery and the second oil refinery,is to try and get rid of this notion that for some reason or other the Newfoundland Government were on the hook for $18R million. It has been admitted I think that we were not on the hook for that amount of money,legally, in any legally binded way, All we were on the hook for legally was $30 million.

But there has been some thought or some suggestion made that because it is a crown corporation involved,therefore the Newfoundland Government are on the hook morally and practically. I think the present government have relied to a considerable extent on some comfort letters which the former Premier sent to ECGD,which stated in effect that - AN HON. MF.MRF.R: Inaud:f.hle. MR. ROWE, W.N. Well somebody mentioned it before. It has been mentioned. The only way that this moral or practical obli~ation can arise, Mr.

Speaker, is because the former Premier sent, MR. },IOORES: Would the honourable member for White Bay South permit a question. MR. ROWE, W.N: Sure. MR. ~O0RF.S: Is he stating the fact that governments that create crown corporations have no ohlip,ation for their debts? MR. ROWF.. W,N, If the Premier will allow me? MR. MOORES: Yes. MR. ROWF.. W. N ._ I have heen in some pnins making, perhaps I have not been makinr. the point too clearly but that is exactly, Mr. Speaker, what I am sayinr.. 2710

March 26, 1973 Tape 797 PK - 5 MR. MOORES: In that regard, Mr. Speaker, the honourable member is suggesting, for instance, that the Newfoundland Steel Mill we should have laughed in their face,to use his expression? .HR. ROWE, W.N. Laughed in the faces,as t-o whom? . MR. MOORES: The people we owed money tot the people who got eight months severance pay. AN HON. MEMBER: He does not understand the difference between guarantees. MR. ROWE, W.N. Mr. Speaker, I am not talking about - the government could of course laugh in the face of people who were working for the Steel Mill if they wanted to.

They could legally but naturally they would not do it in respect of a bunch of workers in our own province, Mr. Speaker. What I am saying, Mr. Speaker, if the Premier will allow me? MR, MOORES: I am sorry, go ahead. MR. ROWE, W.N.

Is to say this, if CNR, for example, were suddenly to go under in some way, shape or form, you know went off the face of the earth, and previous to goinr bankrupt the British Government had in some way lend money to CNR through ECGD and lend it for the purposes which I have already said, a pure and simple,ordinary commerical business deal,secured by a mortgage of seventy-five per cent of the assets of CNR say, and did it as a very quick pay-back provision seven or eight years, seven years I think in respect of the first refinery and the second, and also did as everybody 2711

March 26, 1973 Tape No. 798 NM - 1 knows, Mr.

Speaker, did it for the sake of increasing their own balance of payment situation,making that better and for the purpose of getting their old factories going and everything to the benefit of the British state, the people of Britian, · and if the Government of Canada had had money into CNR which it lost as well and then the British Government came along to the Government of Canada and said, "How about you, my good friends of the Commonwealth, picking up the pieces for us here now and paying back money to us that we guarantee, the British Government guarantee:' ,The Canadian Government would be mad, Mr.

Speaker, in say to even consider paying out the tax dollars of this nation to pay back the British Government after the British Government has gotten in with their ey~s open. If the British Government, when it makes a deal to loan money or guarantee money for some commercial or industrial enterprise in Newfoundland or r.anada or Malawi or Bechuanaland or anywhere else and they want a guarantee from the parent government, then they should get a legal guarantee, Mr. Speaker.

Otherwise the parent government, in this case the Government of Newfoundland, is perfectly within its rights, legally, morally and for all practical purposes to say· "No,my friends, you did th1s with your eyes open, if you wanted to negotiate a legally binding guarantee by the Newfoundland Government, you should have done so.8ut you did not ner,otiate a legally binding guarantee, so do not come after us for your $100 milUon that yon were unable to r,et,because we are not going to pay it back to yon, You have had your benefit under this commercial industrial deal, why should we now,out of the pockets of the Newfoundlnnd people or the Canadian people, dir, deeper in those pockets and pay you hack money on a • reasonable sensible, ordinary business deal." Mr.

Speaker, the whole idea is lauP,hable. The best proof Mr. Speaker, that the r,uarantee so-called, the moral or practical guarantee of Newfoundland was of no value to the British 2712

March 26, 1973 'l'ape No. 798 NM - 2 Government was the fact that they have now agreed or allowed the crown corporation apparently, although we have not had any proof, have now allowed the crown corporation, the shares of those crown corporations to go to a private company. That Mr. Speaker, is the best proof that the Newfoundland Government was never in any way on the hook with regard to the extra money above and beyond the $30 million which the Newfoundland Government put into it. I think that point should be made, Mr.

Speaker, because there has been a lot of talk in papers and on the media and by members of the House and the Premier and the MiniRter of Finance and others, to the effect that we were somehow obligated to pay the British Government $188 million.

I would say that if the British Government had merely, as a favour to the Newfoundland Government,lashed out $120 million of their first mortgage money and there were no returns of any kind, no interest payments to be made,no benefits to accrue to Britian in respect of jobs or factories or balance of payment,for the stability of the pound or anything else, in that case there mir,ht be some moral obliP,ation for the Newfoundland Government to pay back the British Government hut in no other cnse, Mr. Speaker. Why should we on a normal collllJlercial business deal?

It is exactly analogous to a situation where a father and a son might p,o in to see the bank manager downstairs and the son wants to borrow $2,000 from the bank · to buy a car and the bank manager looks at the father and says, "How about this, whAt do you think of all this?" and the father said to t1'e bank manager, "Well\my son is a good risk. I know my son is a good risk. lie nas always been careful to pay his debts. It is unthinknblc that we would allow him to r,o bankrupt, personally bankrupt,'' worst case.

Thnt sort of thin~. we will take 1t at its Then 1f thot son did not in fact live up to his commitmentA to the bank, if the hank were to come nfter the father 2713

March 26, 1973 T'ape No. 798 NM - 3 in that situation, Mr. Speaker, which is the worst possible situation, outside the legal obligation. That father would be able to laugh in the face of the bank manager. If they wanted a guarantee from the father in respect of the son's debts, then they should get a legally binding guarantee, To suppose otherwise, Mr. Speaker, is to assume that the people negotiating for the British Government and ECGD are a bunch of fools and nitwits, as if they go into these normal commercial and industrial undertaking with their eyes closed and with their heads buried in the sand.

They know what they are doing, Mr. Speaker. They know exactly what they are doing.

They also knew that if they had come after the Newfoundland Government for a guarantee of the whole amount of money~$188 million as it subsequently transpired,that the Newfoundland Government would have said, "No,we will not guarantee that, because then we would be legally on the hook and we do not want to risk the Newfoundland people to that kind of debt repayment.• In that case, the ECGD, the British Government would have had one of two choices, to go ahead without any Newfoundland Government guarantees or to pull out of the deal altogether. In the case of the first refinery, Mr.

Speaker, the British Government decided to go ahead with no guarantee of the Newfoundland ('..overnment, A 11 they decided to do was to take a first mortgage on the assets of the first refinery, there amounting to seventy-five per cent of the value of those assets and a commitment from the crown corporation,which was the building company,to pay back the amount of money.

If the thing had p,one belly up and the Rritish Government could not realize its full $120 million plus interest from the assets of that industrial enterprize in Come By Chance, then they would have no further recourse except to go to the crown corporation, the building company, and say, "How about you paying up," and the building company 2714

March 26, 1973 Tape NO. 798 will say, 'Well, you have our asset 11. A 11 of our assets are the assets of the industrial enterprise itself '." Then if they came after the Newfoundland Government, the Newfoundland Government would say,"We are sorry, our British friends, our Anglo Saxon friends, we are sorry that NM - 4 you have lost your money on this deal, but you went into it with your eyes open,as we did.

We lost $30 million on this deal and now you, after the benefits which you have gotten from this in terms of the possible interest, the tight security, all of the other benefits to the British people 1 are coming after us for the difference between theu whatever they got the $198 million or the difference between whatever they got and $120 million rather which they had committed) 'you are coming after the Newfoundland Government for that." The Newfoundland Government would tell the British Government in that case, ~r.

Speaker, to go jump in the lake,and nobody in the commercial world, the credit markets of this world, the borrowers rather the institutional lenders and the underwriters of bond issues, would not fault the Newfoundland Government by one iota in that case. For anyone to suggest otherwise, Mr. Speaker, is absolutely ludicrous. Why should they? The ECGD crowd are not a bunch of idiots. or nitwits. They know what they are doing. They know how to draw up legally binding documents. They have lawyers over there,coming out of their ears.

Lord Goodman is over there who sort of acts as an honest broker,mediating back and forth between the Shaheen r,roup and the F.CCD crowd. Ile is an indispensable man. lie is also I think Chnirmnn of the Arts Council of Great Britinn. AN HON. MEMIIF.R: Inaudible. - ·----- ·- --- -- MR. WM. R0WF.: F.xpensive? Yes, he is a very expensive ~entleman but he is an honest broker. He is a man who gives r,ood advice to 2715

March 26, 1973 Tape No. 798 NM - 5 his clients. ECGD have lawyers, Mr. Speaker, coming out of their ears and if they wanted a legally binding document from the Newfoundland Government, they would have gotten a legally binding commitment from the Newfoundland Government 0 They would have gotten a legally binding commitment or the deal would not have gone ahead, lf tha~ is what they wanted. MR. ROBERTS: They have a very tood Newfoundland counsel. MR. WM. ROWE: That is right. They have a firm of lawyers down here, Mr. Speaker, whose name I will not mention.

I am not allowed to advertise in the profession, a very good firm of Newfoundland lawyers who have given them all kinds of advice and to suggest that there is no legally binding commitment by the Newfoundland Government but there is a moral and practical commit~ent by the Newfoundland Government is idiotic in the extreme, Mr. Speaker. I am sure Your Honour knows whereof I speak, being used to drawing up legal documents and knowing what is legal and whRt is noral and what is practical and what is anything else. At one p9int, Mr.

Speaker, ECGD asked the Newfoundland Government to secure the guarantee of the Canadian Government. Do you remember that? AN HON. MEMHER: That is right, Yes. MR. 'WM. ROWE: The Canadian Government, they wanted to guarantee the rep~yment to them of their $120 million and we all sat around and laughed hilariously and they lauP,hed hilariously as well, Mr. Speaker,because they knew it was an impossibility. AN HON. MF.MRER: Inaudihle. MRo:.__WJ:!_~~OWE: Well we will try. They would not get the Canadian Government behind this. It makes our security that much better 2716

March 26, 1973 Tape 799 and they asked for the Newfoundland Government's guarantee and we refused, ~r. Speaker. The most they got out of the Newfoundland eo,.Jernrient was a comfort letter, so-called, by the previous Premie~ 11011ethin17, to the effect that it is unthinkable thnt a crown corporation would go bankrupt or it has been unprecedented for a crown corporation anywhere to go bankrupt. Mr.

Speaker, when we were trying to ~et this deal for Newfoundland, just as I suspect the Premier and his other colleagues when they were trying to get their deal for Newfoundland,and a good deal it is,the same as the first deal, we would say, Mr. Speaker, anything within the bounds of reason that our ears might want to hear. If they wanted to say. ''Well, what about crown corporations? Are they good, bad or indifferent?

They do not seem to have much assets." There is nothinr. wrong with the government saying, "Well, we have never heard of a crown corporation goinp, bankrupt." By the same token 7 we could say we never heard of an oil company going bankrupt. I would say that when Edison comes to borrow its money or to guarantee the money which ECGD will be putting into this project,the same kind of a deal will be made.

There will be a guarantee by 'Edison and maybe there might be a guarantee by a parent company or there might be some moral or practical so-called committment from some parent company of Edison to the effect that well there has never been an oil refinery known to p,o bankrupt in the existence of the world. They may say that,but to think that this means anything more than what it says to a bunch of lawyers and directors in ECGD is to think the impossible, Mr. Speaker. There is no way that we here in this province can flatter JM - 1 ourselves Ro to think thnt we can pull the wool over the eyes of ECGD.

They know what they arc doing. They hnve lawyers and company directors, the bankinp, companies,Kleinwort-Bcnson and all the syndicate of banks which were in on the first deal. They have their lawyers. There were 2717

March 26. 1973 , Tape 799 JM - 2 hundreds of lawyers involved in, this deal, Mr.

Speaker, and to think that all of them thought that because of the crown corporation therefore the Newfounrlland Government stands behind it absolutely, legally, morally, practically and all that is to be ridiculous in the extreme, especially when you realize that we were not dealing with Americans where they have a different system altogether, we were dealinp, with a country which is similar to Newfoundland and where crown corporaticns have the same meaning, the same types of powers and whatever , responsibility exists between a government and a crown corpora~ion is exactly the same.

The point I hope I have made, Mr. Speaker, trying to look at it fairly and squarely,is that the crown corporation stood or fell on its own substance, itR own assets and its own feasibility as a project and the owner of a project. The same thing applies, Mr. Speaker, to the wharf and the Government of Canada. The crown corporation undertook to obligate itself to the Government of Canada that if the amount of the loan for the Goverronent of Canada, about now $23 million, was not repaid from toppage and sideage then the crown corporation itself guaranteed repayment.

Well, what about if the Canadian Government loan was not repaid by the toppage and si<leage of the operation of that plant? What about if the plant went under and suddenly the Government of Canada found itself $21 million in the hole and wanted to come after the crown corporation for repayment of that $21 million?

The crown corporation once more would say, Mr. ~peaker, "We have no assets except this wharf and the refinery which have already be~n Rwallowed up by ECCD and the British Government." Then the Canadian Government is supposed to come after the Newfoundland Governmf'nt hecauRe it :Is n crown corporation,anrl get their $21 million. Arthur Lninr: askrrl for that. The hon. Mr, Lainp, ,who was then the Minister of Public Works,aRked for that cor.imittment by the 2718

March 26, 1973 Tape 799 Newfoundland Government and t.he Newfoundland Government said, ''No," Mr. Speaker, and that delayed negotiations for a very long period of time until the Canadian Government finally decided.at the eleventh hour, and we have the newspaper clippings to back that up, at the eleventh hour the Canadian Government decided that it would go ahead and build the wharf and rely on toppage and eideage payments from ships and users of the wharf and the guarantee of the crown corporation for repayment of the amount of $21 million,with no reference to the Newfoundland Government whatsoever, . Mr.

Speaker. The Canadian Government again is not stupid. They have lawyers, they have people who are experienced in this kind of a deal. · rf they wanted, if they insisted on the Newfoundland Government guarantee on that $21 million,then the deal would never have gone through. It is because we held firm on our position, namely not to give a Newfound1and Government guarantee, that there was no Newfoundland Government guarantee and the Canadian Government then,reasonably and sensibly,decided that what they would do is to build the wharf anyway for this great industrial project. So, Mr.

Speaker, neither the British Government nor the Canadian Government is entitlcd,in case of any difficulty in respect of that first oil refinery,to come after the Newfoundland Government. JM - 3 If they wanted the Newfoundland Government to guarantee it and if this was a condition precedent of their lending either the $21 million for the wharf or the $120 million for the refinery,they would have insisted on a legally binding document. The fact that they did not, Mr.

Speaker, meant that it was not a condition precedent, that they were w:f.lling to put their money up for the security which they had and incur whatever additional risks there might have been. Now, Mr. Speaker, I hope that I have shown reasonably and sensibly to ren11onahle people that the Role risk of the Government of Nrwf ouncll ;ind nnd L11hrnrlor, the 11ole lcr:al, mornl or practical risk of the Government of Newfound]and and L'lhrndor in respect of the first 2719

March 26, 1973 Tape 799 oil refinery was $30 million which the Newfoundland Government put into it. Now I am sure that the hon. Minister of Finance and the hon. the Premier when he summarizes, sums up and closes the debate will agrue with that point. It is to their political benefit to argue that point, Mr. Speaker. I do not expect to see them become suddenly fair and reasonable and sensible about all this because they do after all have to substantiate and support their complete reversal in earlier policy in going ahead with this second refinery.

I understand the political problems that they had with that, the obvious imputations which can be made against the Premier and his colleagues that this is the rankest hypocrisy and callous cynicism for them to have been condemning Mr. Shaheen and his companies and the Come by Chance refinery for a period of two or three years and then suddenly come in with an essentially similar deal for approval by this House. I understand that politically there is a political necessity on them to try to extricate themselves from any kind of public connnendation for their complete reversal and turnabout in policy.

So I do not expect them to agree with me but I do hope, Sir, that members of the media, those that are given to analyze this kind of a situation,if they do not agree with what I say at least they put the si<le forward 1 because it has been taken for granted for too long in this province that the provincial government was on the hook for $188 million and all thought all distinction between legal and practical and moral and all that kind of thing was lost and it looked like there were 334 jobs or something being supplied in this province for a total of $188 million,which was the reverse of the true situation.

I do hope that there is some thought given to what I have said this afternoon, Mr. Speaker. The sole risk of the Newfoundland Government for the first 2720 JM - 4

March 21, 1973 Tape 799 refinery was $30 million,out of a total of $160 million for the refinery plus $20 million or so for the wharf, $30 million out of a total of $180 million at the time that we negotiated the deal. Since then it has gone up from $180 million to $198 million. The present government did not back the extra $15 million which Mr. Shaheen found, that falls into exactly the same category as the $120 million which ECGD put into it.

It is the sole responsibility and liability of the crown corporation and so therefore it does not affect in any way the $30 million which the Newfoundland Government put into it,that still remains our liability in the first refinery. AB a matter of fact, Mr. Speaker, if you read the 1968 bill and act,together with its supplementary, its amendment in 1970, you will find that the Newfoundland Government cannot legally advance any more money than the $30 million which was in fact advanced by them. They cannot legally do it. If the present r,overnment or the previous 2721 JM - 5

March 26, 1973 T~pe 800 PK - l govemmet were to sign 150 million letters of intent,moral obligations, doclD!lents, signed, sealed and delivered that government does not have the legal capacity norright norpower to obligate the people of Newfoundland and Labrador for one cent more than the $30 million that was put in. Surely it is idiotic for anyone in this province or in Canada to think that the ECGD people and the British bankers and the Government of Canada did not know that. Their lawyers looked at the legislation.

They know that it is legally impossible for the Newfoundland Government to obligate itself to more than $30 million. Remember the problems we had with some of the other overruns and that. Shaheen and his group wanted the Newfoundland Government to pick up the tab for customs duties and fluctations in the dollar and pound and all that sort of thing. Mr. Speaker, we had opinion after opinion from Mr. McCarthy, Mr. Mcaulay and · our other legal officials, and we had our own legal opinion on it as well.

The Newfoundland Government could not legally obligate itself in any way, shape or form to pay more than $30 million in respect of that particular project. AN HON. MEMBF.R: Inaudible. MR. ROWF., W.N. Mr. Speaker, I have already dealt with that point I think adequately. The Newfoundland Government, the former Premier and his colleagues,of which I was one, gave this comfort letter to the ECGD. I do not mind that, Mr. Speaker, they knew what they were talking about - MR. ROBERTS: binding? MR. ROWE, W.N. What about the other letters? They were not legally The other letters were not legally binding. Mr.

Speaker, look for the Minister of Finance to come into this House and say why did you do this and why did you do that with regard to Mr. Shaheen? The honourable Minister of Finance if he were allowed to negotiate with Mr. Shaheen on this second deal, he obviously was not, otherwise it could not have gone through - the honourable the Premier knows this and the honourable the Minister 2722

March 26, 1973 Tape 800 PK - 2 of Industrial Development and the Minister of Education know that Mr. Shaheen is an honourable man but a ruthless - what is a word for him? Skinflint, I suppose is the word for him, he will not let one drop remain in the turnip, Mr. Speaker, if he can avoid it. He will try and squeeze every cent out of the Newfoundland Government for the sake of his companies. I mean he is a promoter , he is a negotiator, he is a developer and if he were not doing that he would be hopelessly derelict in his duty.

His job is to represent his companies interest to the best of his ability and this is what he did. If he were satisfied to get pieces of paper to wave around that might make the situation a little better from his point of view, we were satisfied to give it to him. He, Mr. Speaker, looked at law no, 86, he would wave that, Mr. Speaker, when it was to his benefit and he would put it into the drawer when it was not to his benefit. He knew. He is not a fool either, Mr. Speaker. He knew exactly what the legal corrmitments were.

He knew what the Newfoundland Government were on the hook for, he knew what everyone else was on the hook for. So let us try and look at the thing fairly.and I would like to hear the Premier and any other ministers who wish to speak look at the thinp, fairly and squarely and try to compare refinery number one with refinery number two in a reasonable, sensible and rational way. Now, Mr. Speaker, having said that, I would like to compare the two deals, the first refinery and the second refinery, usinp, the Premier's figures as he gave them in this House two or three weeks ago.

In the second refinery,the British Government, F.CGD, is putting up $190 million or thereabouts and that amount of money, the repayment of that amount of money is to be secured by a first mortgap.e. The Newfoundland Government, Mr. Speaker, is puttinP, up $78.5 million and that is to he secured hy a second mortr,age. Shaheen through his var1ous companies is putting in $40 million by wny of equity. 2723

March 26, 1973 Tape 800 PK - 3 Now, Mr. Speaker, that means that the British Government are putting in about sixty-two per cent of the cost of that project, sixty-two per cent of the cost of the project. You can check the figures, I was very strong on arithmetic, but I believe these figures are correct.

The Newfoundland Government is putting in twenty-five per cent of that project, twenty-five per cent, one­ quarter of the total cost of the second refinery, Newfoundland is putting in one-quarter of the total cost of the second refinery and Shaheen's company or Shaheen himself,however it is going to be arranged,is puttinr, in thirteen per cent of the cost of that refinery and I believe those figures add up to something like one hundred per cent, Mr. Speaker, give or take a decimal point or two.

Sixty-two per cent by the British Government, twenty-five per cent by the Newfoundland Government and thirteen per cent by Shaheen, thirteen per cent by way of equity. In the first refinery, Mr.

Speaker, and we will leave out the wharf because the wharf applies to both, if we add it to one, we should add it to another, the wharf applies to both, I think there is $10 million extra going on the wharf to accommodate the second refinery, but leave out the wharf because it is something which complicated the picture,because if we leave it out of one we have to leave it out of the other, if we add it to one, we can add it to the other.

I have taken for the purpose of my figures I have decided to leave the wharf out of both refineries because it might be used by third parties or hundreds of parties before the thing is out, so it is somethinr, which is sort of ancillary to the development of both refineries but should be left outside of it for the purposes of argument and comparsion. The position,when we ne~otiated it and completed the deal in 1970,when we brought legislation through this House, Mr. Speaker, the position at that time was as follows: the British Government put up seventy-five per cent of the cost of the refinery, $120 million.

The cost of the refinery at that time was $160 million, seventy-five per cent. 2724

March 26, 1973 Tape 800 PK - 4 AN HON, MEMBER: Inaudible. MR. ROWE, W.N. I did not know. No, Mr. Speaker, I did not know it was more than that. I knew that there might be things that had to be found, more money that had to be found but our law, law no. 86, so called,was very clear about that. The Newfoundland Goverrunent were responsi~le for $30 million and any further monies had to be found by the Shaheen companies. I mean that is the statement of the lep,al position, surely the Minister of Finance is not going to disagree with that.

So if the refinery cost went from $160 million to $250 billion, so what,as far as our commitment is concerned. Naturally we would not like to see it, it might affect the viability of the operation but our $30 million was all that we were permitted without coming to this House. MR. ROBERTS· MR. ROWE, W.N. There was a fixed price contract. And there was a fixed price contract. And as the Premier found and his_colleagues found when they got into government, there were certain overruns of $15 million and Mr. Shaheen found them, found that money,· He found the money.

The government's commitment have not been increased by one cent as a result. AN HON. MF.~F.R : Inaudible. MR~Oti"..:..z_11.N. Well that is his problem,is it not? If he does not find it, Mr. Speaker, I would submit and we will come to this point when we take about the take-over by Shaheen of the shares of the crown corporations by his private companies,we will find out whether in fact it is a good thinr, for this province or not because there may he a possibility that our security is weakened in fact. At this present time, Mr.

Speaker, with these crown corporations and with certain commitments in respect of them, if Mr. Shaheen does not meet his commitments this government naturally would not capriciously go in and take it away from hi111, as was sup,gested that perhaps this administration would do when they got in, not hy the Premier I mip,ht add. The Premier said in the paper when the denJ waR sir,ned that we have it now, we will livP. with it, %725

March 26, 1973 Tape 800 PK - 5 when he was Leader of the Progressive Conservative Party. AN HON. 1-P.MBER· Inaudible. ---- ---· MR. R_OWE,~ He did say that they were going to look at the contract,"if everyone lives up to their commitments, we will live with it." Certainly his colleagues were a little bit more radical d " an said, "Ah,well ,we will take her over. _But he, I must say, you know looked at them and said it was reasonably. MR. CROSBIE: Inaudible. MR. ROWE, W.N. Mr.

Speaker, if the honourable Minister of Finance will forgive me, I am trying to talk about this now at the moment but the time will come during this present session when we will debate certain things which the Minister of Finance and other people hav~ said in connection with the refinery.and I will have papers then which I will gladly table in the House. MR. ROBERTS: A previous incarnation. MR. ROWE. W.N. That is ri~ht, when he was saviour of the people there a year or two ago. MR.. CROS JI IF. : Inaudible. MR. ROWE, W.N. Inaudible. MR. ROBERTS: That is what the government would like, yes. }1R, ROWE, W.N. Now, Mr.

Speaker, for the sake of the members on the other side,the position when we negotiated was seventy-five per cent, the British Government seventy-five per cent and the Newfoundland Government ei~hteen point seven per cent and Shaheen six point two per cent. I will repeat those fir,ures, Sir, 2726

March 26. 1973, Tape 801. Page 1 -- apb In the first refinery at the time ·that we completed the negotiations and the costs were there established. the f1xed price contract, the British Government put in money which represented seventy-five percent of the cost of the project. The Newfoundland Government put in money which represented 18~7 percent of the cost of the project and Shaheen put in as equity 6.2 percent of the cost of the project so they add up to 99.9 percent I believe, Mr. Speaker. About 100 percent. Now, Mr.

Speaker, for the records a~d for any people in the media who may be interested in analyzinr, the two deals let us just look at those figures and compare them. The Premier.when he brour,ht in his great statement into this House of Assembly a week or two ago, a few weeks ago, did not resort to comparisons.he said how bad the first refinery was and then lumped everything together to make his own deal look beautiful. In the first refinery the British Government had at risk seventy