1973 Legislative Session: 2nd Session, 30th Parliament

HANSARD

The following electronic version is for informational purposes

only.

The printed version remains the official version.

Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)

TUESDAY, APRIL 10, 1973

Morning Sitting

[ Page 2439 ]

CONTENTS

Morning sitting

Routine proceedings

An Act to Amend the Municipal Act (Bill No. 177). Mr.

D.A.

Anderson. Introduction and first reading — 2439

An Act to Amend the Petroleum and Natural Gas Act, 1965

(Bill No. 31).

Second reading.

Mr. Smith — 2439

Mr. Phillips — 2445

Mr. Richter — 2450

Mr. McGeer — 2451

Mr. Wallace — 2453

Hon. Mr. Nimsick — 2453

Division on second reading — 2454

An Act to Amend the Mineral Act (Bill No. 44). Second

reading.

Hon. Mr. Nimsick — 2455

Mr. Phillips — 2456

TUESDAY, APRIL 10, 1973

The House met at 10:00 a.m.

Prayers.

Introduction of bills.

MR. SPEAKER: The Hon. Second Member for Victoria.

AN ACT TO AMEND THE

MUNICIPAL ACT

Mr. D.A. Anderson moves introduction and first reading of

Bill No. 177 intituled

An Act to Amend the Municipal

Act .

Motion approved.

Bill No. 177 read a first time and ordered to be placed on

orders of the day for second reading at the next sitting of the

House after today.

Orders of the day.

HON. D. BARRETT (Premier): Mr. Speaker, I move we proceed to

public bills and orders.

Motion approved.

HON. MR. BARRETT: Adjourned debate on Bill No. 31, Mr.

Speaker.

AN ACT TO AMEND THE

PETROLEUM AND NATURAL

GAS ACT, 1965

(continued)

MR. SPEAKER: The Hon. Member for North Peace River adjourned

the debate.

MR. D.E. SMITH (North Peace River): Thank you, Mr. Speaker.

Last evening at the hour of adjournment I was speaking about

the petroleum business in the Province of British Columbia. I

brought before the House a few facts which have a bearing on

the eventual position of the exploration business in the

province. I'd like to continue relating to the House some of

the facts and figures that have been brought to my

attention.

I think that these facts and figures are such that had the

Minister been interested not only in the state of the industry

in the province but also in what they see as their future in

British Columbia, he would have paid more attention to them

than he has in bringing before the House this increase in

royalty that is being debated this morning.

Mr. Speaker, I'd like to quote from a report prepared by the

Canadian Petroleum Association for a few moments, concerning

the state of the oil industry in the Province of British

Columbia. It's a very recent publication. I think it pretty

well summarizes in a few pages the position of the industry in

the Province of British Columbia and the way they feel about

the increase in royalties.

As I mentioned last night, the petroleum industry would have

been prepared to accept a reasonable increase. Certainly they

see no reason, and neither do I, for an increase which more

than doubles the average rate of royalty being levied against

the production of petroleum products in the province. Quoting

from the report:

"The industry spent $155 million in British Columbia in 1972

and a record 219 wells were drilled. Natural gas production

topped the 1 billion cubic feet per day mark for the first

time, up from 920 million in 1971. Oil production declined 5

per cent to 65,500 barrels per day.

"Until recently, there was considerable confidence in the

industry, stemming from increases in oil prices and anticipated

gas price increases. These would have rectified the serious

shortage of capital for new exploration programmes under which

the industry in the province has been labouring."

I think we should re-emphasize that point, Mr. Speaker. It

says that these things "would have rectified the serious

shortage of capital for new exploration programmes under which

the industry in the province has been labouring."

"But a shadow has come across the industry with the

introduction of punitive oil royalties by the British Columbia

Government, compounded by apprehension about what is planned

for the gas industry. Petroleum companies now must completely

re-examine their exploration programmes in the light of the

following legislative proposals.

"First, increasing the oil royalty to a range of 10 to 40

per cent where it previously had a range of 5 to 16 2/3 per

cent; cancellation of all special oil unit royalty agreements

with no indication of what new rules will govern unit

conservation programmes; introduction of an incentive scheme

which rewards only those who are successful in their

exploration or follow-up activities but does not reward the

wildcat drilling efforts necessary to achieve success;

increased corporate tax from 10 to 12 per cent of taxable

profits effective January 1, 1973; taxing capital utilized by

companies at the rate of one-tenth of 1 per cent.

"The industry spent $95 million last year in British

Columbia directly in areas of exploration and development. If

the negative effect of the royalties is such that industry

activities drop by one-half, this will mean that $46 million

less will be spent in the province. Even if there is a drop

[ Page 2440 ]

one-quarter in activity, the effect on the economy will be

severe.

"People should not be deceived by a continuation of

exploration in the immediate future. Many of the companies'

exploration commitments are locked in and the economic impact

of the royalty decision may not be visible until later this

year or next year. The real damage may only come to light five

years from now.

"Those who suffer most will, of course, be the people

directly employed by the industry. These include drilling-rig

workers, earth-moving contractors, truckers, seismic crews, the

dozens of companies that supply drilling rigs with equipment

and services, freight companies, water haulers and many more.

The secondary effects will be felt by retailers in the towns of

north-eastern British Columbia, communications workers,

airlines, railways and utilities.

"If north-eastern British Columbia becomes a drag on the

economy, this depressing effect will spread and make itself

felt, to a greater or lesser degree, among the people of the

southern part of the province. People who work for financial

organizations, food suppliers, appliance distributors,

professional people — nearly everyone could feel the

pinch eventually.

"Here are some basic facts about the petroleum industry in

British Columbia. Every year the industry spends more in

British Columbia than it receives in revenue. In just 20 years

it has spent $1.5 billion and has recovered barely half of this

to date.

"Man don't realize that the British Columbia government has

always received the lion's share of oil industry revenues. For

every dollar generated by the industry since 1955, the

government received 57 cents, according to our 1972 year-end

analysis. The government does not have to take risks."

I repeat that, Mr. Speaker: For every dollar generated by

the industry since 1955, the government has received 57 cents,

or 57 per cent, of every dollar. And the government has taken

no risks, none whatsoever. They've not become involved in the

drilling of dry holes, unsuccessful operations. They've not

become involved in exploration procedures that they learned by

a trial and error method of operating in the muskeg areas of

northern British Columbia.

I think we would be well advised to ask ourselves just what

other useful purpose we can make of the hundreds of thousands

of acres of muskeg country that are basically inhabited by a

few beaver, some muskrats, and very little else. Even the large

game animals do not occupy the muskeg areas. They avoid

them.

And there's hundreds of thousands of square acres of land in north-eastern

British Columbia, that would have no utilization if

it was not for the petroleum industry in that area.

Again from the report:

"The huge risks taken by oil companies are often overlooked.

Of 1,591 exploratory wells drilled in British Columbia, 1,060

were dry holes. They cost the oil companies that drilled them

about $250,000 per well.

"The additional burden imposed recently by the government

will, on the average, make the oil royalties of British

Columbia almost 50 per cent greater than those of Alberta and

Saskatchewan. This will certainly be one of the factors that

influences oil company decisions about where to put their

exploration dollars.

"British Columbia has oil reserves of 292 million barrels

— enough to last 12 years at current production rates.

The discovery rate is declining. Gas reserves are 10 trillion

cubic feet — enough for 27 years under present

commitments. The recovery rate has been accelerating.

"I would like to draw to your attention two areas of concern

that are becoming evident. 1: the proposed legislation enabling

the massive oil royalty increase raises severe doubt as to

whether past or future investors have any prospect of return,

or in fact, the opportunity to recover their investment. 2:

moreover, the manner in which the government proposes to carry

out these changes raises questions as to the sanctity of any

agreement now or hereafter made with the government of the

province.

"In conclusion, it is clear that companies must make

allowances in their long-range planning for the new economic

environment in which they now find themselves."

Attached to the report is an operational review of the year

1972 and a number of graphs indicating production of gas and

oil — the amount of reserves that we know to be proven

reserves in the Province of British Columbia — the

production rates.

And one very interesting graph, Mr. Speaker, a graph that

projects the royalty increases calculated under this new

formula — the amendments to the Petroleum and Natural

Gas Act — and the rates that will be in effect when

this bill passes in comparison with the provinces of Alberta

and Saskatchewan. The rate in Alberta goes from a low of 10 per

cent to a high of 26 per cent. In Saskatchewan it goes from a

low of 7 per cent to a high of about 28 per cent. In British

Columbia the new rate will be from a low of 10 per cent to a

high of 40 per cent.

If that was on a line that gradually projected upwards from

the low quota or low production units right through to the high

production units, it might not be so bad, Mr. Speaker. But, in

British Columbia the proposed rate of 40 per cent will be

reached on production of 200 barrels per day, and anything

over

[ Page 2441 ]

and above that will obviously be charged a 40 per cent

royalty.

Interjection by an Hon. Member.

MR. SMITH: Pardon me? Oh no. But there's a graph; and it's

in the bill. It's in the bill, Mr. Minister. Yes it is.

The average production of oil in British Columbia, depending

on the field and on the wells involved and how long they've

been in production, will mean that the average royalty being

paid from this point on will be better than double what it was

before because the projection and the

schedule is so set that

the majority of our production will fall into a rate of from 30

to 40 per cent as far as royalty is concerned.

There is no requirement on the part of any exploration

company to drill for oil in the province of British Columbia.

As a matter of fact, this last sale, I think, indicates very

clearly the position that the petroleum industry is taking in

this province. Only 25 per cent of the drilling reserves

actually advertised received acceptable bids. The rest were

rejected and while the dollar volume was approximately the same

as it has been in previous years, that does not really give you

the picture of what's going on in the petroleum business

because any time we put up 12 drilling reserves for bid and

public tender and only receive acceptable bids on three of

them, it gives an indication that the companies bid only the

choice areas. Of the other land put up for bid, less than 50

per cent received acceptable bids — mainly in the areas

where gas exploration has the greatest potential.

So it must be obvious that the exploration business has

reached a peak in the province of British Columbia, and unless

something is done to attract the industry to this province, it

will gradually decline in British Columbia. There is no chance

of discovering major wells or major fields unless exploration

continues. There is a tremendous area that so far has only been

scratched in terms of exploration activity. There is every

possibility that major fields have yet to be discovered, or

will be discovered. But that is dependent upon the position

taken by the oil companies in relation to the imposts that are

placed against them. If they follow the trend that I see

developing, they'll find and we will find in a few years the

exploration activity in the province — the lifeblood of

the petroleum production business, the initial stages of it

— will have dropped off to zero.

Now what could be more foolish from an economic standpoint than to increase

the royalties at a time like this and pick up 10 million to $12 million per

year increase in revenue and by so doing, discourage the exploration business

so that the $20 million to $40 million a year that we get in revenue from that

source disappears. The net result in terms of dollars to the treasury will be

a deficit — a decreasing quantity.

Surely to goodness, Mr. Speaker, the Minister of Mines and

Petroleum Resources (Hon. Mr. Nimsick) and the Minister of

Finance (Hon. Mr. Barrett) must realize that there is a very

distinct possibility that instead of increasing returns that

they like to talk about to the beneficiaries — that is,

the people that live in British Columbia — they will have

committed an error that will see the returns gradually go

downhill and finally disappear.

The life of the presently productive oil fields that we have

in the province is anywhere from 10 to 20 years — some of

them less than that, some of them more. One thing is sure in my

mind: unless the exploration end of the business continues, the

net results will be decreased revenue to the Crown and,

finally, the phasing out of the industry.

Now that's bad enough, but in the process we will have wiped

out the jobs and the job opportunities for hundreds and

hundreds of people in north-eastern British Columbia, because

our economy in that part of the country is very dependent upon

the exploration business. Most of the people who presently live

there in one way or another are intimately involved in some

part of the petroleum industry.

Even the farming community, which has had a tough time the

past few years, find that the oil patch, as it's referred to up

there, has been a source of revenue and jobs on which they

could capitalize during the winter months when they're not

farming. As a matter of fact a large percentage of the work

force in the industry, at the peak of their season, which

happens to be the months of January, February, March and on

into April, comes from the farming community in that area. It

has been a very comfortable arrangement for both the petroleum

industry and the farming community, each dependent upon the

other, with very satisfactory economic results for both the

industry and the farmers. I don't know of anybody in the

farming profession today, for instance, who doesn't have to

depend upon some outside job to continue his chosen

vocation.

So the jobs that have been created through exploration

provided the province with an increasing source of revenue and

provided a large segment of the population with good jobs

during the winter months when ordinarily they would not have

been employed. The results have been beneficial to the whole

province. Certainly, those companies that went in originally to

look for oil and hit natural gas have provided tremendous

financial advantages to both the province and the people who

live in the Peace River country.

The point that I wish to make is this, Mr. Speaker: the real

impact of what is really taking place in the petroleum industry

will not be felt immediately. It's a gradual process as much as

the building up of the industry was a gradual process, with

first a few rigs coming in and doing some wildcatting, having

some

[ Page 2442 ]

success and then gradually expanding from there to the point

where last year was probably a banner year in terms of

locations drilled in the province.

It's not only being talked about in British Columbia. The

petroleum fraternity generally, which because of the activity

that's taking place in Alberta concentrate in the cities of

either Edmonton or Calgary, talk about what is going to go on

and about their projections for British Columbia. I'd like to

quote from a Canadian Press report:

"Petroleum industry spokesmen say that the New Democratic

Party governments in British Columbia and Saskatchewan will

improve Alberta's competitive ability to attract dollars if

they increase royalty on oil and natural gas.

" 'These governments have become too greedy at the wrong

time,' a spokesman said. 'The disincentive to exploration comes

at a time when energy demand is making it economically

attractive to develop the marginal potential of the two

regions. The British Columbia government royalty has to be a

great help to Alberta,' the spokesman said."

If that is the objective of this government, they couldn't

have approached it in a better manner, Mr. Speaker, because the

impost that is suggested by this bill will have a deterrent

effect on the industry and can't help but have the same

deterrent effect on the whole economy of north-eastern British

Columbia.

I have a stack of letters here, and I don't intend to read

them, indicating the position of the small service companies

that cater to the oil patch. I'm sure that the Minister has

received similar letters. These people basically employ

anywhere from one or two to 15 people in their operations. I

recently had a communication from a company that does a lot of

surveying in north-eastern British Columbia for the petroleum

industry. Their average staff was 18 to 20 people. As of today,

Mr. Speaker, their staff is down to four. They've laid off

everyone else. Those that have remained have had to take

voluntary cuts in salary in order to retain their jobs.

Is this what the government has in mind? Is this how you

create employment? Is this the manner you create more jobs?

Nonsense! You save a few jobs in one spot and you cancel out an

equal number in another. False economy, stupid economics as far

as I'm concerned.

These people cannot help but be affected by the decisions of this Government.

It would be different, Mr. Speaker, if there was a requirement for increased

revenue to finance government programmes — if we were budgeting for a deficit.

But there is no requirement for the Government to increase royalties to the

extent that they have. There's no requirement for that additional revenue and,

as a matter of fact, from a strictly economic point of view, the revenue that

you generate in one place you are going to lose in another

because of the decrease in exploration activity.

The hang-up that this government has regarding all resource

industries is incredible. It's something to behold, really. The

Government would apparently set out to purposely destroy an

industry when that industry has paid its way and has cost the

Government nothing in terms of finance or actual contribution.

We have to this point taken 57 cents of every dollar generated

directly into the coffers of the province.

What greater share could you ask for than that? Take none of

the risks; do none of the financing; sit back and participate

to the tune of 57 per cent of every dollar generated. To me

that is sound economics. I cannot see that the Government could

request any greater break than that.

If you decided that you did need a modest increase in

royalties, why didn't you make it a modest increase? Why didn't

you look at the pattern developed in other provinces and other

jurisdictions in Canada before you pulled a figure out of the

hat? Just as sure as I stand here, Mr. Speaker, there was no

requirement to increase the royalties to the level that is

suggested in this bill. It was a figure that was pulled right

out of the air. There is no reason for it except that it

generates more revenue, supposedly, for the time being.

Let me quote to you from a report prepared by the

administration in the Town of Fort St. John.

Interjection by an Hon. Member.

MR. SMITH: I think that you probably have, Mr. Minister. The

brief was certainly presented to you. But it's very obvious

that what you've read and the briefs that have been before you

have had absolutely no effect on your thinking. I'll quote from

the report:

"A rig moves in to drill in this area. What is required

first is a road built by local contractors who hire local help

as Cat operators and foremen. The rig is moved on the lease by

local trucking companies who employ drivers and swampers. All

these people are dependent directly on the local service

industry contractors. At this point, and dependent on distance,

the lease preparation, site work and the moving in of the rig

has brought in from $15,000 to $25,000 to the contractors.

"The drilling rig now begins work and stays on the lease for

two weeks. The service industry here must provide labour for

welding, testing, camp facilities, groceries, et cetera, daily.

Without exaggerating, 50 service industries from Fort St. John

become directly involved. It is estimated that upon completion,

a further $60,000 is spent by the drilling contractor. With the

present pollution control laws, employment is created for tank

truck

[ Page 2443 ]

services and expenditures now are being made by the oil companies

for this purpose at a much accelerated rate.

"The above is very indicative that if the drilling rig is

not working, the economy has lost $85,000 on just one such

hole. This directly affects the local service industry and

local farmers who in turn employ local people. These people

total 75 per cent of the population of Fort St. John or Fort

Nelson. They in turn buy homes, pay taxes, pay 5 per cent

provincial tax and contribute to the economy of this province

and community.

"The province in turn receives income from land sales and

royalties on oil production. The service industries who locally

employ our people purchase equipment, buildings and vehicle

plates and contribute towards the economy. This is a chain

economic situation which would place a great majority of our

people out of work if it were upset by the withdrawal of the

oil industry.

"We urge the provincial government to negotiate and consider

its policy and if any increase in royalty is required, that

this increase be at a level somewhat parallel to the Province

of Alberta. We are only 35 miles from the Alberta border."

Here again, there are a number of pages of statistical

information available to anyone who is interested in looking at

the actual returns of the petroleum business in British

Columbia.

The industry will remain viable provided it has an

opportunity afforded it equal to that afforded it in Alberta,

Saskatchewan and the Northwest Territories. The bill that's

before us provides not only for increased royalty but also that

there will be a credit allowed in areas of new discoveries. In

other words, you give them a three-year write-off against

royalty in discoveries in a new pool discovery well, whatever

that means. I don't think we've even had a definition yet of

what the Government considers a new field or a new find.

Regardless of that, let's assume that we do find a new

field. The company involved is given a credit for three years

or the royalty is deferred actually. They pay no royalty on the

first three years of production. That in no way is going to

help them to any great extent. Their financing is arranged upon

the future potential of that field. The money that they need to

generate must be borrowed and paid off at some period down the

line.

If anyone who is in the financial world looks at the

economics of the proposition and says that regardless of the

three-year original deferment, the overall impact of royalty on

production will not allow you a return of your capital on the

average length of life of a well, the funds are simply going to

dry up, Mr. Speaker. They'll not be available.

The other thing is that what you're doing with this type of incentive, if that's

what you wish to call it, is providing a write-off

of royalty for only those people who are successful. I've already pointed out

this morning, in the report that I read from the Canadian Petroleum Association,

that the success rate is less than 50 per cent.

If you happen to be unfortunate enough to be one of the

companies that has drilled a succession of dry holes, you've

spent the same amount of money as the ones who were successful.

But there's no write-off there. There's no provision to help

offset the expense that they've had in drilling those holes.

Then when they do hit a good well and are successful you give

them a three-year deferment — but bang; hit them with a

rate of royalty higher than in any other part of Canada.

It's not going to be an attraction to the petroleum

industry. As a matter of fact, it's probably a disincentive to

the industry.

When you were considering this proposition, why did you not

look at what is being done in other jurisdictions? The Province

of Alberta has a much fairer system. We'll forget about the

rate of royalty for a few moments and not even argue that

point. The Province of Alberta has a much fairer system in what

they are prepared to do for companies exploring in wildcat

areas.

What happens there is that under the regulations, when a

company goes into a new area and a step-out, before the well is

drilled, it is agreed with the Province of Alberta that it will

be an incentive wildcat well. In other words, they agree that

this is in an area where it will be considered a wildcat well

and entitled to an incentive bonus, if you like to call it

that, if the well is successful.

So, under the agreement, you may have several drilling

companies involved. Quite often they co-operate among themselves

and they'll own a percentage of the leases on a pro rata basis.

So you might have one driller going in but the actual results

will be pro-rated among three, four or up to half a dozen

different companies who are involved in the actual exploration

business.

Let's assume that they complete the well. Then, when an

incentive wildcat well has been completed or abandoned to the

satisfaction of the board, a credit in accordance with

schedule

A shall be established in the records of the department in the

name of the licensee. The department in writing as to the

matter of allocation of the credit among the participants

— that the credit shall be allocated and established

accordingly.

So they not only credit the licensee but they credit the

participating companies on a pro rata basis established

according to formula. They also give them a pro rata decrease

or write-off in royalty according to the depth of the well and

the actual cost of drilling it.

Now that credit, Mr. Speaker, is available regard-

[ Page 2444 ]

less of whether they have a successful completion or not. So

the people who drill the dry holes are not penalized. They are

able to write off part of the costs of that against royalties

that they would ordinarily be paying the Crown from other

discovery wells.

It would seem to me that in our haste, or in the haste of

this Government to increase the revenue received from the

petroleum production of this province they have completely

ignored not only the established practices, but the pattern

that is set up in other jurisdictions.

For anyone to think that in British Columbia we are an

island unto ourselves, particularly as it refers to the

petroleum exploration business is to be very mistaken. Canada

is a large country. The potential for development of petroleum

resources is better or as good in many other parts of the

country as it is right here.

The manner in which we participate with the petroleum

industry is certainly one that no one can fault. We take none

of the risk and we receive the lion's share of the dollars

generated. Certainly a better proposition than buying defunct

lumber companies, even when you get one given to you so that

you have to pick up $70 million of bonded indebtedness along

with it. That's not much of a gift.

For the government to proceed along the lines that they are

doing at the present time will do nothing but add a deterrent

factor to the petroleum industry. In the long run, Mr. Speaker,

it will result in decreased revenue to the Crown, not

increased revenue. It will result in fewer jobs…

HON. L.T. NIMSICK (Minister of Mines and Petroleum Resources): You've said that before.

MR. SMITH: I know. But, I'm telling you again, Mr.

Minister.

MRS. P.J. JORDAN (North Okanagan): Can't you get the

message?

MR. J.R. CHABOT (Columbia River): You learn hard.

MR. SMITH: Sometimes it takes a long time to get through to

this Government. The thing that should be done to this bill is

have it withdrawn, or at least amended.

HON. MR. NIMSICK: You've said that about every bill on the

order paper.

MRS. JORDAN: That's right — they're all bad.

Interjections by some Hon. Members.

MR. SMITH: Mr. Speaker, the collective effect of this

bill and a number of others on the order paper will result in decreased job

opportunities in British Columbia. Of that we're sure. And that's why we are

on our feet suggesting in the most kind terms, Mr. Minister, that you've made

a mistake…

Interjection by an Hon. Member.

MR. SMITH: Leo the lion is now Leo the lamb? We're trying to

impress upon you, in a kindly manner — just a little bit

of friendly advice — that a reasonable increase would

have been accepted, but an increase of this nature will have

long-term results which will be certainly a disincentive to the

industry. It will result in fewer jobs, and will have a direct

effect on the economy of north-eastern British Columbia.

Now we've already felt the effects of several bad years in

the farming industry up there. If we have added on top of that

a slackening of the pace of exploration for petroleum and all

the attendant companies that work in that field, the economy

will collapse. It will go downhill very quickly. And all I'm

saying to you this morning, Mr. Speaker, is that it's stupid

economics — that for the short-term gains there will be

long-term disadvantages and those long-term disadvantages,

while they'll hit north-eastern British Columbia directly in a

very disastrous manner, will affect the whole province of

British Columbia.

I suggest to the Minister that he take a second look;

consult with the petroleum industry; look at the position taken

by other jurisdictions in Canada. Back off. Reduce the increase

or projected increase to one that both industry and government

can live with. In that way we'll continue to enjoy the benefits

of a vigorous economy and the fruits of the exploration

business in a very tangible way.

Take a look at this bill in relation to what is going on in

other jurisdictions. If you want an increase, make it one that

you can justify, Mr. Minister, through you Mr. Speaker. Don't

get too greedy because in so doing, the disincentive that is

apparent will result in a decrease in the activity in the

province and we'll all be sorrier people for it. Take a look at

what you are doing. Withdraw the bill or amend it and come up

with a reasonable scale of royalty increase. Not what we have

before us this morning.

The Minister quite often likes to suggest he's a reasonable

man, and I believe he is. In this case I say, in all sincerity,

through you Mr. Speaker, that the bite you are about to take is

just too big. The Minister says it's just a nibble. I guess

there are some people who just do not understand the economics

of any type of a business proposition outside of the business

of running a popcorn stand.

This is not a popcorn stand, Mr. Minister. It's a viable

industry which has been build up over a period

[ Page 2445 ]

of 20 years. It can continue to be a viable industry and the

Province of British Columbia can continue to generate revenue

without investing a dollar in it if you'll take a reasonable

attitude on the increases proposed.

Every person who works in the industry or caters to it knows

that their costs went up substantially over the last few years

— even an increase in the price is not going to result in

any great increase in net profit to themselves. It will only

help them recover what they've already invested. Hopefully,

somewhere down the line they'll be able to recapture their

original investment.

They are a long way from that at the present time in the

Province of British Columbia. That is just original investment;

that doesn't even take into consideration any interest on the

money they've borrowed. Just about 50 cents on the dollar has

been recaptured. For every dollar the petroleum industry has

been involved in, the province already has 57 cents of it. For

goodness' sake, look at the economics of what you are about to

do.

A reasonable increase, yes. But this is far from reasonable

— it better than doubles the royalty on petroleum

production. For every company that is involved in petroleum

production in British Columbia, their rate has just doubled.

Does that make economic sense? Is that going to provide an

incentive for companies to come in and look for new areas of

discovery? No.

What will happen is that the exploration business will

concentrate in the few areas where they have a fair chance of

success. They'll concentrate in the areas known to be rich in

natural gas and they'll forget about the oil end of it. They

know that not only is the risk high but the return is not

there.

Even contracts that were negotiated in good faith under this

bill will be renegotiated. Those contracts, through agreement,

should not have been terminated until 1975. But this bill

indicates that you are going to go in and renegotiate those on

the basis of higher royalties immediately.

There is no such thing as good faith when these types of

capers are pulled at the expense of a major industry. A fair

increase, yes; but not this. It's too high. It will not produce

the results that you hope for, and in the long run it will wipe

the industry out in the Province of British Columbia.

Reconsider your position, Mr. Minister, through you Mr.

Speaker. Consult with these companies Everyone in the

Government likes to talk about input and to say that they are

an open Government, that they want to listen. Well, you have to

listen with open ears, not with a closed mind.

Just as sure as I'm on my feet this morning, there was no consultation. You

did not go to the petroleum industry and tell them what you had in mind. You

used the steam-roller process and said, "Like it or lump it. This is what it's

going to be." In order to justify that position, you said, "We're doing this

for the people of British Columbia."

Well, the people in north-eastern British Columbia say,

"Nonsense." What you are doing is destroying their livelihood.

Don't ever think that they are going to look benevolently or

kindly on a government that sets out to destroy the basis of

our whole economy.

Mr. Minister, if you had purposely set out to scuttle an

industry, you couldn't have done it in a better way than that.

Reconsider your position; come in with an amendment that will

reduce that royalty to a reasonable level; listen to the advice

of the oil companies that the fraternity would be prepared to

give you; take a look at the reports and the results, and then

hopefully we'll still have an industry that we can be proud of

in the Province of British Columbia two, three, five and 20

years down the line.

MR. SPEAKER: The Hon. Member for South Peace River.

MR. D.M. PHILLIPS (South Peace River): Thank you, Mr.

Speaker, on this lovely Tuesday morning with eight Government

Members in the House. Why, they can't be too interested. It's

going to get cold, come winter, and we're going to need oil and

gas to keep the wheels of progress turning and to heat the

homes, Mr. Speaker. They should be here paying attention to

what is going on.

Oh, one came in. Well, this is the way we are running the

House these days: legislation by exhaustion, starvation. But

that's the way it goes, Mr. Speaker. I suppose you have to put

up with it too.

MR. SPEAKER: Are you complaining about the dining room?

MR. PHILLIPS: No, I'm not complaining about the dining room;

I'm complaining about the hours that we have to spend in this

House. That's what I'm complaining about, Mr. Speaker.

Now the Minister has even gone out. Where did he go? See,

even he can't stand the hours: 10 o'clock in the morning until

11 o'clock at night, sometimes without lunch, Mr. Speaker.

Well, shall I wait for the Minister to come back or shall I

carry on, Mr. Speaker?

MR. SPEAKER: Well, it is entirely up to the Hon. Member

whether he wants to be seated or standing.

MR. PHILLIPS: There are a few things I want to read into the

record, so I'll carry on. The Minister has a closed mind on the

subject anyway but maybe some of the backbench will pick up a

few pointers.

Last year in British Columbia oil production declined by 5

per cent to approximately 65,000

[ Page 2446 ]

barrels per day. That was before Bill No. 31,

An Act to

Amend the Petroleum and Natural Gas Act , came in. That was

also in an area where the need for petroleum resources

and more oil is increasing every day.

The oil pipeline from the Peace River area to this area is

running at capacity at the present time. We're going to have to

get our supplies from the Alberta sources through the

trans-mountain pipeline. I don't think anyone in the petroleum

or pipeline business will invest in additional facilities in

British Columbia as long as the present administration is in

power. So we're going to be at the mercy of our neighbouring

province, Alberta, for the majority of our oil supplies in the

very near future. Of course, the situation will get worse.

This increase in royalties, Mr. Speaker, at a time when we

need to be looking for more reserves is uncalled for. The

increase in oil royalties to a range of 10 to 40 per cent from

a range of 5 to 16 2/3 per cent is more than a 100 per cent

increase.

When the bill was introduced in this House, the Member for

North Peace River (Mr. Smith) and myself said it would drive

the industry out of British Columbia. The Minister of Mines,

and Petroleum Resources laughed; the Premier laughed. But the

last sale completed on April 5 proves that what the Member for

North Peace and myself said was true.

Interjection by an Hon. Member.

MR. PHILLIPS: It's true because your sale was only $3

million and it should have been $14 million.

At a time in the world when resources are a top priority and

everybody is interested in energy, you have one of the smallest

sales this province has ever had. You tell me why, Mr.

Minister!

I suppose the Minister is proud of that sale. I don't know

what we have to do to draw your attention. We tell you a fact.

What do we have to do to convince the Minister that what we are

telling him is right? I've listened too much to you, Mr.

Minister.

AN HON. MEMBER: We've listened too much to you.

[Mr. Dent in the chair.]

MR. PHILLIPS: Well, you're going to hear a little bit more.

Maybe eventually some little glimmer of hope, some little crack

of light will break through.

Interjection by an Hon. Member.

MR. PHILLIPS: Maybe something.

AN HON. MEMBER: There has to be a source of light if you…

MR. PHILLIPS: There was no show of interest in this last

sale. No show of interest at all. The majority of that $3

million came from the Monkman Pass area, where there is a

discovery of gas and it's a proving-up field. How much money

out of that sale was actually from interest in the oil? Very

little. A very, very small percentage, Mr. Speaker, a very

small percentage. And as I say, action talks. In the history of

the world when resources and energy is on the tip of

everybody's tongue…

Interjection by an Hon. Member.

MR. PHILLIPS: I don't know, Mr. Speaker, what we can do to

convince the Minister. There's the Minister of Highways (Hon.

Mr. Strachan) smiling over there like a Cheshire cat; maybe he

doesn't want anybody to drive on the roads any more. I guess

he's going to stop the wheels of progress in British Columbia

and stop everybody's wheels. Mr. Speaker, we'll return to the

horse and buggy days.

Interjections by some Hon. Members.

MR. PHILLIPS: Unfortunately, Mr. Speaker, it grieves me to

have to stand in this Legislature and say to the Minister of

Mines and Petroleum Resources, "I told you so. Two months ago,

I told you so."

Interjections by some Hon. Members.

MR. PHILLIPS: Well, maybe he's not out to change the Act.

Maybe he's going to bring in an amendment. Maybe he's finally

seen the light, Mr. Speaker.

Interjections by some Hon. Members.

MR. PHILLIPS: You know, Mr. Speaker, I remember in this

Legislature not more than two months ago when the Member for

North Peace (Mr. Smith) raised this question, and our Premier

stood up and he ranted and he raved and he threw statistics

around to try to prove the Member and myself wrong. I don't see

him in his chair today. I didn't hear him when this sale came

off and he got $3 million.

I didn't hear him come in this Legislature, Mr. Speaker, and

say, "See, I told you so. See, the petroleum industries are not

afraid of this Government; they're not afraid of what's

happening." I didn't see him bragging about that. No, as a

matter of fact, his silence was almost deafening, Mr.

Speaker.

He said he had met with more people in his office than you

could shake a stick at; more people in the last six months, he

said, than have been in this office in the last 20 years. "Oh," he said, "We met with the petroleum industry. Oh, we

had a big meeting, and we worked this all out. Oh, we're

co-operating with

[ Page 2447 ]

them. We're co-operating with the industry. A new era has

come in."

Oh, when he ranted and he raved it was fantastic. There

weren't many facts in what he said but there was a lot of

fiction.

Mr. Speaker, if the Premier had a great meeting with the oil

industry and discussed the problems and discussed where they're

going, I wonder why one of the largest oil industries in

western Canada would write this letter; and I'd like to read

you this letter. I'm not going to read a bunch of letters, but

I want to read one because this is one of the largest in

western Canada and this letter came after this great new era of

co-operation, he said. I remember the day he got up there, his

hands were going and the statistics were flying. You remember

that, Mr. Speaker, I'll never forget it.

AN HON. MEMBER: Hear, hear.

MR. PHILLIPS: I'll never forget it. The letter is addressed

to many people.

Interjection by an Hon. Member.

MR. PHILLIPS: That's the Premier, it goes to the Premier

— you know, the chap that had the meeting in his new

$250,000 suite down there.

Interjection by an Hon, Member.

MR. PHILLIPS: A carbon copy of the letter was sent to me and

a carbon copy of the letter was sent to the Hon. Member…do

you want me to tell you all the people that got carbon

copies?

AN HON. MEMBER: Read them all.

MR. PHILLIPS: A copy was sent to Hon. Leo T. Nimsick and a

copy was sent to Dr. James T. Fyles and a copy was sent to Mr.

F.X. Richter. But this letter was after this new era, this new

era of co-operation. Who did he meet with? A roughneck from an

oil rig?

DEPUTY SPEAKER: Order, please. Would the Hon. Member please

address the Chair — and relate his…

MR. PHILLIPS: The Premier must have met with some roughneck

from an oil rig. Because he certainly didn't meet with the

executives of the oil companies.

HON. R.M. STRACHAN (Minister of Highways): Are you

condemning the roughnecks now?

MR. PHILLIPS: Certainly we have roughnecks. If you knew

anything about the oil industry, you'd know there were roughnecks out there, working in the mud,

working in the slush, to try and find oil for you. If you knew

anything about the industry at all…

DEPUTY SPEAKER: Order, please. Could we have the Hon. Member

please address the Chair?

AN HON. MEMBER: Condemning the roughnecks.

MR. PHILLIPS: I'm not condemning the roughnecks, but you are

condemning the roughnecks. You are putting them out of

work.

DEPUTY SPEAKER: Order, order please. Would the Hon. Member

please continue with his comments on the bill.

MR. PHILLIPS: You know as much about the oil industry as I

know about flying people to the moon.

DEPUTY SPEAKER: I would ask the Hon. Members to observe

standing order 17; to not interrupt the Member please while

he's making his speech.

HON. MR. STRACHAN: If you'd make a speech, I wouldn't

interrupt. But you can't interrupt a non-speech.

MRS. JORDAN: You wouldn't know a speech if you fell into

one.

Interjections by some Hon. Members.

MR. PHILLIPS: No, Mr. Speaker, it always amazes me when I

stand on the floor of this Legislature and get to those guys

over there — get to them, make them eat their own words

— they can't stand it, Mr. Speaker. They can't stand it,

so they say that I'm not making a speech. I don't condemn the

way they perform in this House, Mr. Speaker.

DEPUTY SPEAKER: Order, please. I'll just say to the Hon.

Member that if he proceeds and ignores them, I'm sure they'll

ignore him after awhile. (Laughter).

MR. PHILLIPS: I don't want them to ignore me, I want them to

pay attention. I want to read this letter, Mr. Speaker.

DEPUTY SPEAKER: Please read it.

MR. PHILLIPS: It's from one of the top oil executives

— after this big meeting that the Premier had. He

says:

"I am writing on behalf of BPOG Operations

[ Page 2448 ]

Limited to express our deep concern and disappointment over

the action and statements of your Government in proposals

recently made with respect to oil and gas operations in the

Province of British Columbia."

Now this is after this new era of co-operation and, Mr.

Speaker, after the meeting that the premier had with all the

top executives. You know, the one that he was — you

know.

"B.P. is an explorer and producer which has been active in

British Columbia since 1955. In the past two years our

exploration activity has been increasing considerably. In the

present season we employ approximately 8 per cent of the

drilling rigs and about 8 per cent of the geophysical crews

active in the province. In 1971 and 1972, our company has spent

nearly $2 million in land acquisition…"

I wonder how much they purchased on the last sale. I didn't

see their name there at all.

"…our company has spent nearly $2 million in land

acquisition, drilling and seismic surveys in programmes where

we have acted mainly as operators of joint ventures involving

total expenditures to the order of $6 million. These efforts

and expenditures were made in good faith and in our belief that

our high-risk undertakings would have a reasonable prospect of

profit in the future.

"For your information, our company's expenditure on

exploration and development in British Columbia since 1955 is

in the order of $19 million."

This is just one company.

"To the end of 1972 we had recovered $8.6 million of this

investment, and even under the existing conditions of royalty

payments our remaining reserves are not sufficient to complete

the recovery of the remaining $10.4 million. We cannot agree

that the province is not receiving a fair share of revenue from

these resources.

"We are particularly concerned with your Government's

proposed legislation."

I'm not going to read the rest of the letter. But the point

that I want to make very, very clear is that when the Premier

tries to make the people of this Province think that he is

co-operating with industry, it is not so. It is not so. I am

disappointed that the Premier would go out of his way with the

performance that he put on in this House to try and, I guess

I'd have to say, mislead us. It's not, in my opinion…

DEPUTY SPEAKER: Order, please. I'm sure that the Hon. Member

did not intend in the last comment that any Member of this

House would deliberately…

MR. PHILLIPS: No, in my opinion, I said — in my

opinion.

DEPUTY SPEAKER: Nevertheless, I don't think you should

impute any motive to any other Member of the House other than

the highest possible motives.

MR. PHILLIPS: Mr. Speaker, I've been standing here trying to

think of some other way to say it. I have. The wheels have been

turning and I've been trying to think of some other way. If he

had just gotten up gently and said it, Mr. Speaker — but

you remember the performance he put on.

DEPUTY SPEAKER: I would ask the Hon. Member to withdraw the

comment.

MR. PHILLIPS: I'll withdraw the comment, Mr. Speaker. It's

all right for the Premier to go ahead and do these things but

no one must ever say anything about what he does. But the

people will know some day. The people will know, Mr. Speaker.

The people will read through all of this fanfare of the

Premier's. The light will shine through.

Mr. Speaker, I think the only people the Premier has met

with in his office to discuss the oil industry are the people

from the Waffle group in southern Ontario who came out here to

draw up this legislation. Those are the only people he's met

with. Maybe he thought they were the executives of the oil

industry. People from the Waffle group were out here, Mr.

Speaker, They're writing the legislation to nationalize every

industry in British Columbia.

As the Member for North Peace River (Mr. Smith) says, we in

British Columbia are not an island unto ourselves. Nor, Mr.

Speaker, are we a financial institution unto ourselves. I

realize that the previous administration left this province in

very good financial condition with hundreds of millions of

dollars in surplus. But someday those are going to be gone.

In this province, Mr. Speaker, we require anywhere from $3

to $4 billion in investment capital every year. I hate to

predict that this source of investment capital is going to dry

up, Mr. Speaker. But I have predicted that the oil companies

are not going to continue to invest in British Columbia. My

prediction was right. So I'm going to have to predict that all

of the risk capital that we require in British Columbia and all

of the capital expenditures that we require to keep the

province's economy…not necessarily expanding, Mr. Speaker.

I'm not talking about expanding. I'm just saying to keep it

going on a level plane, with no expansion at all, it's in the

vicinity of $3 to $4 billion a year. That's twice what our

complete budget is, Mr. Speaker.

We will lose from Bill No. 31, not gain. You may get a

little more money from the oil that's coming out of the ground

right now, Mr. Speaker, but in the long term we will be the

losers. Instead of working and co-operating with the industry

and sitting down and working it out, our government — and

I hate to

[ Page

2449 ]

say this, Mr. Speaker has created hostility within the

industry.

This last sale we had, Mr. Speaker, should have produced

three to four times the amount of revenue that it produced. I

hate to make another prediction, Mr. Speaker, but I feel

compelled to do so. I want this prediction written in the

record. I predict, Mr. Speaker, that if Bill No. 31 is passed

by this Legislature — and I want the Minister of Mines

(Hon. Mr. Nimsick) to hear this very clearly — that the

new sale that's coming up in August will produce a smaller

return than the one that was just held. That is my prediction.

I'm afraid, Mr. Speaker, that I'm going to have to come back to

this Legislature to the fall sitting and stand where I'm

standing now and again say to the Ministers of Mines and

Petroleum Resources, "I told you so."

Mr. Speaker, the people in our area are concerned. It has

mainly been the petroleum industry that has opened up the Peace

River area. I hate to predict that the land will go back to

being known as it was before to the rest of British Columbia.

That was before the previous administration opened up the area

by linking it with a road and a railroad and pipelines. I

predict that the north-eastern part of British Columbia, which

has contributed so much to the economy of British Columbia in

previous years, will return to being known as the "land beyond

the Peace." That's about all you'll hear about it.

Interjection by an Hon. Member.

MR. PHILLIPS: Well, now. There's the Minister of Mines and

Petroleum Resources. He's awake and he says that my predictions

haven't been known to be worth very much, when I just proved to

him, through you Mr. Speaker, not more than 15 minutes ago,

that one of my predictions came true.

It's unbelievable, Mr. Speaker. After all the economic

benefits that this province has derived from the land beyond

the Peace, it will go back to being known as the land beyond

the Peace. During the past 20 years, Mr. Speaker, the

exploration in that area has been great, but the exploration in

the north-east is still in its infancy. The potential has not

yet been scratched. Nor will it be scratched, Mr. Speaker,

after Bill No. 31. The potential will lie there.

Mr. Speaker, that area could make this province the greatest petroleum province

in Canada, even surpassing Alberta. It could, but it won't. To have exploration

and risk money, you've got to have a favourable government. This Government,

Mr. Speaker, will do nothing but drive it away. British Columbia will be going

to Alberta for more and more and more of its oil. We will be at the mercy of

our neighbouring province. That is a bad situation, Mr. Speaker, when we have

an area that is rich in petroleum products, where the surface hasn't even

been scratched.

Why, Mr. Speaker? Because of a get-rich-now policy of this

Government. Get rich now, that's all Bill 31 is. Get rich

tonight but don't worry about the years ahead.

As both the Member for North Peace (Mr. Smith) and myself

have predicted, exploration in the area has now slowed to a

snail's pace. Across the border in Alberta — and I was

just up there over the weekend — it's a complete beehive

of activity. They raised their royalties in Alberta too, enough

to keep up with inflation and the increased costs of doing

business. But they didn't raise them to 40 per cent and I'd

like to point that out to the Minister.

Why don't you withdraw this bill and take a second look? No,

you want to prove yourself right. A socialist never accepted a

new idea from anybody, Mr. Speaker. They know it all. Closed

mind.

While he's closing the debate on this bill, maybe the

Minister will tell me why 27 miles across the border in Alberta

there is a beehive of activity in the oil exploration

business, while in our province it has ground to a halt. I'd

like to know the answer to that question. Maybe the Minister

will tell me. He seems to have all the answers, Mr. Speaker.

Maybe he'll tell me instead of just sitting there smiling and

not really paying any attention. He can't even see the facts.

Maybe he'll tell me.

The proof of the pudding, Mr. Speaker, has got to be in the

eating. The proof of the cessation of exploration in our oil

fields is happening now because of Bill No. 31. The proof is

there. Mr. Speaker, I recommend to the Minister — and I

don't want to lecture the Minister. In all common sense, Mr.

Speaker, I'd like to ask the Minister of Mines and Petroleum

Resources to do exactly what the Premier said he had done

— sit down and talk with the oil industry.

Surely to goodness if the Premier said he had done that, you

should do it. Now is that unreasonable? Is that unreasonable,

Mr. Speaker? Is it an unreasonable request just to ask the

Ministers to sit down and talk with these people.

Hold the bill, take another look at it. If the Minister can

with calm and ordinary logic sit down with the oil industry and

prove that Bill 31 is necessary, that these increased royalties

are necessary, if he can protect his legislation — which

he's not too good at doing, by the way — with the people

in the industry, I'm sure they'll go along with it. If he can

justify this legislation, I'm sure they'll go along with

it.

All I'm asking the Minister to do is hold back the bill, sit

down and, in common sense, talk with the industry.

Surely to goodness after what's been happening, Mr. Speaker,

he can see what is going on. And I don't think, Mr. Speaker,

that is an out-of-the-way request.

[ Page 2450 ]

The economy of our area is going to suffer, and as the

economy of north-eastern British Columbia suffers so the whole

province suffers.

I want the Minister to talk to the industry and quit taking

advice from that Waffle group in Ontario. They're not running

the province. I know they're trying to. They're certainly

writing all the legislation.

Mr. Speaker, when the known resources dwindle, the source of

supply dwindles and a shortage develops. That's the way we are

heading as far as petroleum supply in British Columbia is

going.

Up go the prices, and who suffers? Who suffers, Mr. Speaker?

The ordinary man and woman in British Columbia suffers. Every

person that drives an automobile suffers. The result of this

legislation in the long-run will be the shortage of petroleum

products and higher gasoline prices — a complete

reversal, Mr. Speaker, of what this Government thinks they're

trying to attain.

I wish, Mr. Speaker, that they would be able to see the

error of their ways. The history of exploration in the

north-east, Mr. Speaker, parallels that of road building in the

area. It was the Alaska Highway that opened up the plains area

in north-eastern British Columbia and its course determined the

first exploratory efforts and finds. That Alaska Highway, Mr.

Speaker, was built by the American government without cost to

the Canadian taxpayers. Because of it, the petroleum industry

opened up in British Columbia. Once the exploration ball got

rolling, Mr. Speaker, the boom itself spawned new roads into

other areas and has opened up the entire north-east.

As I have said before, Mr. Speaker, exploration in the

north-east is costly. The oil value is considerably below the

rule-of-thumb ratio of 40,000 to 45,000 barrels per cubic mile

of sediment. I wonder, Mr. Speaker, if the Minister is aware of

that fact. Does he know how many barrels of oil a cubic mile of

sediment in British Columbia produces? Do you know?

[Mr. Speaker in the chair.]

HON. MR. NIMSICK: Sit down and I'll tell you.

MR. PHILLIPS: When I said that it is more costly to explore

in north-eastern British Columbia than in many, many other

parts of the world and in Canada, exploration is more costly

and the recovery is less.

HON. MR. NIMSICK: You've told me that four times.

MR. PHILLIPS: I haven't told you what the recovery is, and you don't

know. So I'm going to tell you. The recovery in north-eastern British Columbia

is 21,000 barrels per cubic mile of sediment — less than half of the industry's

rule of thumb. And you wonder why, when they're expected

to pay 10 to 20 per cent more in royalties and recovery is less than half, why

there is no exploration going on at the present time.

All I'm asking you, Mr. Minister, to do is to sit down, call

the oil industry into your office, hold up the bill…

HON. MR. NIMSICK: I had them there this morning.

MR. PHILLIPS: You had them there this morning. Did you

discuss Bill No. 31?

Interjection by an Hon. Member.

MR. PHILLIPS: No, Mr. Speaker, I don't know how, when

somebody calls black white, we can make them see the

difference. And they insist on doing it. That's the attitude

that the Minister of Mines is taking, Mr. Speaker.

MR. SPEAKER: I'd say it's no use repeating it over and over,

because he's obviously not going to accept it.

Would the Hon. Member get on with some new debate other than

what is a repetition of what the Hon. Member for North Peace

River (Mr. Smith) had already underlined four times.

MR. PHILLIPS: Well, I thought, Mr. Speaker, that I had done

very well in bringing up new material that the Member for North

Peace hadn't already discussed. Certainly, I have repeated his

plea to the Minister.

MR. SPEAKER: Yes. Exhaustively.

MR. PHILLIPS: But I have to, because it's on behalf of the

constituency which I represent. That is the area that is

affected now; all of the province will be affected.

But I've finished my little talk to the Minister, and I

hope, Mr. Speaker, that I have pointed out new areas for

consideration. I hope when he realizes that the Premier didn't

really have all that great, grand and glorious meeting with the

oil industry, and when he sees…

I see that he's back in the House now and I hope he's

ashamed of himself, Mr. Speaker, for the way he ranted and

raved and passed around statistics and said he had met with the

oil industry, and all this garbage. I hope he's ashamed of

himself.

MR. SPEAKER: The Hon. Member for Boundary-Similkameen.

MR. F.X. RICHTER (Boundary-Similkameen): Mr. Speaker, a few

remarks in relation to the

[ Page 2451 ]

principle of the Bill No. 31.

In British Columbia the petroleum and natural gas industry

is in its infancy. We haven't been producers for very many

years. There's been a very substantial amount of capital spent

in exploration and development. There have been very many

disappointments in drilling dry holes and dusters. While the

industry and the government of the day worked co-operatively to

attempt to develop a very substantial industry — and I

still have confidence that this can be done — we have

large, large tracts of potential petroleum and natural

gas-bearing land. But it is difficult to get access to this

type of land. The periods in which they can work are very

limited.

Actually, in proportion to the amount of money that has been

spent on exploration, the results have not been all that

encouraging. It would be my contention that we should encourage

the exploration even if it is only to cap a gas well or

discover petroleum, because we need the statistical data and an

inventory so that we will know the potential.

This is not a flash-in-the-pan sort of an industry where you

are in today and out tomorrow. This is something that is going

to be a resource revenue producer for years to come. The

province needs this sort of an economy; the people need these

types of jobs. Certain regulations and certain agreements were

made. This legislation destroys the sanctity of the earlier

agreements which we were to carry on until 1975 and then, at

that period, review the royalties.

I'm not for a minute suggesting that the industry would not

have been prepared to acquiesce to a reasonable increase in the

royalties, but certainly in proportion to the success they have

had. During my term of office — and I think equally so

during your short term of office — it hasn't been all

that encouraging.

You used the term yourself: a number of "dry holes" have

been drilled in British Columbia.

You used the term yourself: a number of "dry holes" have

been drilled. This is one of the reasons that probably there

wasn't more activity at the time of the last dispersal of oil

rights. I'm confident that we are going to discover fields;

where you discover fields then of course you do get an

accelerated activity and interest through the oil companies,

because it's obvious then that they have a better potential of

success in drilling.

I'm very, very discouraged with this legislation. I think that with the hearings

that were held in Alberta a better understanding, a better liaison and co-operation

was engendered within the industry and government. I think that maybe this is

the way it should have been looked at in British Columbia.

I don't see any real reason, in light of the statement of

the Minister of Finance (Hon. Mr. Barrett), that you need this

revenue right at this time. Why not carry out some hearings,

get some input from the industry. Certainly you have people in

your department — if you listen to them — who have

the intelligence and the acumen to fully understand this

industry. Certainly their guidance would stand you in excellent

stead.

I'm sure that there wouldn't be that much lost. I feel that

you're going to lose a great deal more by the discouragement

that is coming about by the principles that are laid out in

Bill 31. It would be my urging on you to reconsider this, to

hold it up a little while. Sure, we're going to have to have

increase in royalties as time goes on. There's no question

about that. But at least give the companies who are attempting

to develop the resource in the interests of the province an

opportunity to prove up more production and more data in

relation to the resource.

I think it's the intention of the Minister of Finance that

the resources and the profitability of the development of the

resources in the province should take place. I am sure that in

his business experience in the field of social welfare,

certainly he has learned this principle. I don't think in any

way that you're extending any social welfare to the oil

industry — in fact this is distinctly the opposite.

Mr. Speaker, I am very concerned about what is going to

happen in the Province of British Columbia. I think in terms of

the jobs that we're going to lose; I think in terms of the

economy that we're going to deter from the province. I'm not

prepared to support this bill nor is the official

Opposition.

MR. SPEAKER: The Hon. First Member for Vancouver–Point

Grey.

MR. P.L. McGEER (Vancouver–Point Grey): Mr. Speaker, I

think the Members of the official Opposition have drawn some

very compelling points to the attention of the Minister during

this debate; enough so that the Minister should reconsider

that this Act, as many other punitive taxation Acts, should be

reconsidered by the Government.

What is at stake in British Columbia is the provision of

jobs for the people. The most significant aspect of the

petroleum industry in British Columbia today is that it has put

more money into B.C. by far

[ Page 2452 ]

than it has taken out. The petroleum industry has been a net

contributor to wealth and to jobs.

We are a developing province. We do have a labour surplus.

It is in our interests to encourage capital and to encourage

exploration. If it were that the petroleum industry had made

enormous profits in British Columbia at the expense of the

people — if they were genuinely exploiting us, then the

Minister's bill would be welcome.

But as it is, British Columbia is more of a potential

producer of significant amounts of gas than it is a real

producer. At this stage in our development the critical thing

is to find how much has there really is in the ground thing is

to find how much gas there really is in the ground.

Interjection by an Hon. Member.

MR. McGEER: I'm not under-rating, Mr. Speaker, the amount of

natural gas that may lie beneath the surface in northeastern

British Columbia. But I think the Minister is decidedly

over-rating the willingness of people to pay exorbitant

royalties when the risks are so high and when the difficulties

are so great. Northeastern British Columbia is still pretty

tough territory in which to operate.

We've debated in this House before, the consequences of the

Government's announcements. The consequences have been to limit

and to reduce the amount of exploration activity that's going

on.

Earlier I drew to the attention of the Minister the fact

that the majority of the jobs in the Fort Nelson area will

disappear if exploration in the natural gas industry does not

continue at its present level. We brought it up in the House,

Mr. Minister, two or three weeks ago. I would have thought, Mr.

Speaker, the least the Minister would have done is to be in

contact with the people in northeastern British Columbia to

confirm that this is indeed the case and to set forward

policies that would preserve jobs in that area. Indeed, we

should be looking to policies that would increase the number of

jobs in northern British Columbia.

When all is said and done, that's the most important aspect

of the taxation policies — not to try and squeeze a few

more dollars out of the hard work that goes on in northeastern

British Columbia to provide greater benefits in the lower

mainland area in the way of services to people. Because the

established portion of this province, where services are higher

and where living is easier, should not be parasitic on the

wealth that's being produced and can be produced in

northeastern British Columbia.

Yet, the policies that the Minister has announced are

parasitic. They're policies which will decrease the risk

capital, reduce the exploration and the jobs — all, Mr.

Speaker, in the interests of collecting more revenue for the

Government so it can provide richer services to the "fat cats"

that live in Coquitlam and Vancouver East.

Interjection by an Hon. Member. (Laughter).

MR. McGEER: Well, aren't the people who live in Vancouver

East "fat cats" compared with those who live in Fort Nelson?

Certainly they are, Mr. Speaker. The idea that there aren't

"fat cats" in Vancouver East is utter nonsense. I would say for

some of the cabinet Ministers who live in Esquimalt and other

areas in the greater Victoria region that the healthiest thing

they could do, both for themselves and for the public of

British Columbia, is to go up and do a couple of hard days'

work on one of those wildcat rigs — in the middle of

winter in northeast British Columbia. Then they'd perhaps have

some appreciation for the people who are opening up this

country.

The cabinet Ministers can talk about the "fat cats" in Point

Grey, Mr. Speaker, but none of them have lost any weight since

they took office, I can tell you. Life is easy in Vancouver

East. It's very easy for some in Vancouver East. But up there

in northeast British Columbia, where the exploration is going

on, it's tough. The weather's tough, the work is hard and there

aren't any slackers up there.

All of this is financed, Mr. Speaker, by high risk capital.

We may have no sympathy — or even have contempt —

for these great corporations that are doing the work; but

nevertheless, they're the ones that are taking the risks and

spending the money. To date they're spending a lot more than

they're taking out.

Mr. Speaker, the time to tax heavily is after the reserves

have been proved and when the productions lines have been

established.

It was an old principle of Mackenzie King and C.D. Howe to

make it awful easy for them to come in and tough for them once

they get here.

We haven't reached that stage in British Columbia. There's a

tremendous amount of money that yet has to be spent in

exploration in this province before we'll begin. to know how

secure our petroleum industry is going to be. It's important to

know this. As well as to provide jobs, we should not be

undertaking taxation policies that will discourage such

exploration.

Mr. Speaker, again it's the old socialist philosophy that

everybody who works must be doing something wrong. "Everybody

who makes a profit or is willing to risk capital must be

greedy. Therefore what we should do is do things to handicap

and penalize those

[ Page 2453 ]

people. That's the fair thing to do."

Mr. Speaker, I can tell you that if that kind of philosophy

worked, every country in the world would have a socialist

government. But the strange thing about it is that those

countries of the world that are doing best and are able to

provide the greatest benefits and highest standard of living to

the people are not the ones that pursue that course of action.

Instead they're the ones that encourage people to work hard and

to take risks. Then, on behalf of those who aren't pursuing

that aggressive way of life, a share of the profits are taken

so that benefits can be passed around. This, indeed, is what

will be the best for British Columbia in the long run.

I hope that the Minister, whose philosophy to date has been

so mistaken, will get on the telephone after this debate today

and find out what the facts are in north-east British Columbia.

Perhaps he'll do something I wonder if he's ever done before,

Mr. Speaker. Have you ever been up to those gas fields in

north-eastern British Columbia? When? Several years ago but not

since he's taken office. "Haven't had any time." Well, maybe

the Member for South Peace River (Mr. Phillips) will give you a

little time off, Mr. Minister. Maybe he'll give us all a little

time off over the weekend. You could go up to the Peace River

country with the Member for South Peace River and the Member

for North Peace River (Mr. Smith).

I'm sure that they'd be quite willing to accompany you and

let you see the facts of life as they are, instead of making

Ministerial decisions in your office in the Douglas Building

that will do untold damage to that

section of the country,

without even taking an on-site inspection.

HON. MR. NIMSICK: They might put me down one of those dry

holes. (Laughter).

MR. McGEER: Mr. Speaker, it would be unparliamentary and, to

say the least, a difficult job. I won't comment on their

wisdom, if that would be their judgment after having talked to

the Minister.

Certainly, Mr. Speaker, if he fails to convince us in this

House, he'll have much greater difficulty convincing them. But

there would be nothing wrong with the Minister making an

on-site inspection of what's going on in north-eastern British

Columbia, to find out for himself what the potential

consequences of this legislation might be. If, having made that

trip, he discovers that perhaps this wasn't the wisest thing to

do but instead was a nitwit idea thought up by somebody in the

Douglas Building or a convention of the Young New Democrats in

the lower mainland over a weekend, he might get a little

perspective and balance and then withdraw the bill.

For the moment, Mr. Speaker, we think it is extremely

injudicious to do something of this kind in 1973 and we intend

to vote against the bill.

MR. SPEAKER: The Hon. Member for Oak Bay.

MR. G.S. WALLACE (Oak Bay): Thank you, Mr. Speaker. I'll be

very brief because many of the reasons we oppose the bill have

been expressed.

I'll just return again to our theme in the budget debate,

that we just do not see the need for increased tax revenue,

particularly at a time when we should be encouraging

development with the inevitable consequence of more jobs,

particularly when the Premier has said so often that this is

the number one challenge to this Government.

Therefore, for the very basic reason that there is not the

need for tax revenue and there is a need for jobs, we oppose

this bill.

MR. SPEAKER: The Hon. Minister closes the debate.

HON. MR. NIMSICK: Mr. Speaker, it took us quite a while to

get to this point. I'm very pleased. For a minute I thought

that I wouldn't get there at all.

They talk about incentives and about development for oil.

The previous government carried on a policy that you say is a

good policy. You say that we could get more revenue. Yet with

those policies, the interest in oil was declining all the time.

In November of last year when we had the sale, 80 per cent of

them were for gas. They've got the greatest interest in natural

gas. I didn't look back but the decline has been going on for

quite a while.

MR. PHILLIPS: It's declined ever since you came to

power.

MR. SPEAKER: The Hon. Member had his say for a very lengthy

period. Would he kindly let the Minister have his say, too?

HON. MR. NIMSICK: I'm surprised that the Hon. Member for

Point Grey (Mr. McGeer) would tell us that we should lead them

down the garden path and then give it to them. I don't like

that kind of a policy. I'd sooner tell them what we're

doing.

A lot of you talked about the rates in the bill — from

10 per cent to 40 per cent. There's a maximum in our bill. In

Alberta there's no ceiling on it. So who is the worst? It all

depends on how you graduate the tax to 40 per cent that tells

the tale. But nobody said anything about that.

Very little has been said about the incentives in the bill

to try and encourage development for oil in the Province of

British Columbia. The Hon. Member for Point Grey said that we

should wait until they get stabilized. We've only got six years

of proven oil left at the present rate of production.

[ Page 2454 ]

Interjection by an Hon. Member.

HON. MR. NIMSICK: They'll be all out in 12 years. But I'm

talking about at the present rate of production. I agree very

much with the Hon. Member for Boundary-Similkameen (Mr.

Richter) when he said that I've got very fine men in the

department considering oil. I want to thank him for that.

The Hon. Member for Point Grey (Mr. McGeer) spoke about the

hard work on the drills. I just wonder if he ever did work on

any drills. I have and it's quite interesting work. It may be

hard work but it's pleasant work, too. People sometimes get a

lot of kick out of their jobs and I had a lot of fun

drilling.

They say we're at the mercy of Alberta. Well, if we don't

find any more oil, before long we might be at the mercy of more

than Alberta. The energy situation throughout the whole country

is coming to the surface. People are now beginning to realize

that at the rate we're using these energies, a time is coming

when they'll be depleted. So I don't think we're looking at

this from the right angle when we want to get rid of it as

quickly as we can.

In regard to those contracts that were negotiated until

1975, if I were a Member of Her Majesty's Loyal Opposition, I'd

never mention those contracts. I think they were the most

dastardly contracts that were ever written up. In those

contracts 46 per cent of our oil production is boxed in at the

present rate until the wells go dry. I think that it is

terrible that any government should box themselves in on a rate

from 5 to 16 2-3 per cent until the wells go absolutely dry. If

I were the people on that side, I wouldn't mention those

contracts at all. They're not the type of contracts that any

government should sign or agree to over the years.

There was a question of what a wildcat well is. In the

incentive programme, we say that a wildcat well is the first

well on a new pool. That's the one that would get the big

incentive.

Nevertheless, we feel the depletion of this

non-replenishable resource involves a responsibility to the

people. I hear people say that these companies take all the

risks. But the people of British Columbia risk the resource

itself which makes it possible!

Don't forget some of the larger companies that bid on these

areas and got these acreages. They farm out some of these

agreements. They own the oil rights on the lands so they farm

them out to somebody else. They say to that other party, "You

drill and if you find oil you can have 50 per cent of it." Here

we're saying "If you drill and you find oil all we're asking is

10 to 40 per cent of it." But the big companies can go to the

little oil drilling outfits and say, "We want 50 per cent of

it." So this is how they farm out these oil resources.

MR. PHILLIPS: I suggest that you learn mathematics.

HON. MR. NIMSICK: When you talk about the money being spent

on exploration, remember that a lot of it is tax-deductible on

the federal field. A lot of it is contributions made by the

taxpayers of Canada to the exploration of this. So don't cry

too much on behalf of the large companies.

I say that there must be responsibility to the people. If

we're going to deplete this resource we have to deplete it

wisely; we have a social responsibility. These wells that are

in operation now were paid back a long time ago. Whether we're

going to get more oil or not in British Columbia will depend on

the drilling that will go on and how much we have in the way of

oil lands in British Columbia.

Mr. Speaker, I move second reading of this bill.

Motion approved on the following division:

YEAS — 31

Hall

Barrett

Dailly

Strachan

Nimsick

Stupich

Nunweiler

Nicolson

Brown

Radford

Sanford

Cummings

Dent

Levi

Lorimer

Williams, R.A.

Cocke

King

Calder

Lauk

Lea

Young

Lockstead

Gorst

Rolston

Anderson, G.H.

Barnes

Steves

Lewis

Kelly

Liden

NAYS — 16

Richter

Bennett

Chabot

Jordan

Smith

Fraser

Phillips

McClelland

Morrison

Schroeder

McGeer

Anderson, D.A

Williams, L.A.

Brousson

Wallace

Curtis

PAIRED

Gardom

Macdonald

Bill No. 31 read a second time and referred to a committee

of the whole House to be considered at the next sitting after

today.

HON. MR. BARRETT: Second reading of Bill No. 44, Mr.

Speaker.

AN ACT TO AMEND THE

MINERAL ACT

MR. SPEAKER: The Hon. Minister of Mines.

[ Page

2455 ]

HON. MR. NIMSICK: Mr. Speaker, that last bill took longer

than I had expected, but this one here shouldn't take near as

long. (Laughter).

Mr. Speaker, the mineral resources of our province are a

very important resource, and one that has to be managed in the

best interests of the people. Since taking over this department

one of the things that I have tried to do is to bring about a

better management of the resource and bring it back into the

department, because I do not believe that a resource that

belongs to the people should be left entirely at the behest of

the private sector throughout the province.

For years we have realized, in the case of our forests, that

we had to manage them if we were going to continue to have a

yield from those forests. We have to do the same with land and

water. But minerals have been taken for granted, and minerals

are one of the resources that are not replenishable —

once they're used up, they are gone. You cannot preserve

minerals in the ground. The only way you can do it is by

leaving them there. So when you use them, you have to use them

in a judicial manner, so that the greatest benefit will not

only come to the people who are living today — we must be

thinking of our future generations when we are talking about

depleting a non-replenishable resource. This is what I have

tried to do in the department. We have made some changes in

these amendment to the Mineral Act . I'll run over the

highlights quickly with you.

We have tried to update the rights of Canadians. We say that

the free miner certificates that were given to anyone

previously, should be reserved for Canadians or those landed

immigrants who intend to become Canadians — and we give

them a period of eight years to make up their minds. Anyone who

has been here longer than eight years would be treated the same

as any other outsider.

It is my opinion that we've got to give some worth to being

a Canadian. I don't think it is right to say that these mineral

resources throughout the Province of British Columbia should be

free for the taking to anyone from any place.

In this Act we have done away with some of the lists of

figures that were in the

schedule and we're putting it down to

prescribed fees. This gives you a little more flexibility in

operating.

Thirdly, restrict exploration in parks — in all parks

in the province. In order to explore or prospect, you would

have to have a valid permit from the people who are in charge

of the parks. And that's got to go to the

Lieutenant-Governor-in-Council.

There are little changes in the surface rights — where

if we consider it in the best public interest, you can use the

surface for other than mining, as well as the mining.

The work requirements have been changed from $100 to $200 per claim per year.

The $100 work requirement at the present time has been that way since 1891 when

a top miner got $3 a day for mining. Today, with the difference in the value

of the dollar and the wages, $200 seems quite reasonable for work requirements

on a lease.

The reverted Crown-granted mineral claims that come back to

the Crown now will have to go through the same process as an

ordinary claim. Up until now, a Crown-granted mineral claim

that reverted to the Crown and somebody else staked it, they

could get a 21-year lease on it. From now on it will have to go

through the ordinary channels.

One of the very important changes is the production leases.

According to

section 15, if you're just shipping out small

quantities from a mine, this can be allowed by the Minister.

But, if you're going into production then you must get a

production lease. I find that there has been some objection to

a production lease because they feel that we are asking too

much.

When a mine goes into production there are certain social

responsibilities that they must observe as well as making a

profit. The life of the mine should be considered, and if it's

a feasible and a viable operation. If they can extend that life

and still make it a viable operation, it also extends the life

of communities around the mine.

All these things must be taken into consideration —

the optimum recovery from a mine. We don't believe that you

should go in and take the rich ore out and leave the rest if it

can be made viable by taking the whole amount out. We expect if

there is lower grade ore in that mine, that it will be left to

the future generations, then they too, if they need it, can go

in there; not left so that you cannot use it. There have been

mines throughout the country that have been mined and left and

nobody was able to get anything out of it at a later date.

In order to obtain these production leases, they've got to

lay their plans before the government or before the Minister

and show the recovery, the life, and the feasibility. One thing

that this will do, when they get the stamp of approval from the

department to go ahead and produce, it will be a boon to those

types of mines.

If we find a mine has not got sufficient ore to make it

feasible to operate and to bring a production into force, then

we should have the right to say this. Maybe in that case, we

might stop some of the bogus promotions that go on in the stock

market where money is made and lost and very little of it ever

gets into the ground to do the actual work of developing a

mine.

We also provide where government may participate. I have had

many people ask me already if we were willing to participate

with them in operating a mine. This is there so that we can do

it if we so wish,

[ Page 2456 ]

or if the party in the negotiations wants us to participate

in that mine.

Now those are the highlights, I'll be listening for further

debate on this very important bill and then I will be able to… Unless you would like me not to speak on it because it's

such a good bill. I move second reading of this bill now.

MR. SPEAKER: The Hon. Member for South Peace River.

MR. PHILLIPS: Well, Mr. Speaker, I can understand the

Minister of Mines wanting this bill to slip through without

anybody having the opportunity to talk on it. The reasons is,

Mr. Speaker, that he's not very proud of the bill himself. He'd

just sort of like to have it slip through.

He just stood up and would have given the people of this

province the idea that the resources of the province have never

been managed up to this point in history and that he's going to

bring in a new day. There's going to be light shining on the

mineral industry. That's not so at all, Mr. Speaker. He talked about its being in the best interests of the

people. I sometimes think that the Minister really thinks it's

in the best interests of the people to be unemployed, because

that's what's going to happen. The employment in the mining

industry is going to decline.

To say that the minerals are there, Mr. Speaker, such as our

Minister of Mines just did, to say that they're there for

anyone to take, is just not so at the present time —

before his condemning bill. It's just not so and he knows it.

You would think, Mr. Speaker, that in order to get a mine going

all you had to do was to go out there with a pail and pick up

the ore and take it and sell it. That's what the Minister would

lead you to believe.

However, he picked out all the little, teeny bits of

"motherhood" that there were in the bill — and there are

very few. It didn't take him very long to pick out what few

good points he could find in the bill. It's pretty hard for him

to do, Mr. Speaker, because there's very little good to say

about the bill. Even the Minister himself has trouble.

He would also lead one to believe, Mr. Speaker, that there

had been no changes in the mining laws in this province in 100

years. That also is not so, Mr. Speaker, because there have

been major changes in mining legislation. When I was in this

Legislature between 1966 and 1969 there were major changes in

mining legislation — when we brought in the bill that

makes a mining company show a plan of how they're going to put

the land back into use. There have been major changes made, Mr.

Speaker. I don't like to have the Minister say that there have

been no changes made.

Interjection by an Hon. Member.

MR. PHILLIPS: Well, it's a mines regulations Act, but it all

ties in. There have been major changes in the Mineral

Act , too, if you look in the statutes. Yours is probably

all up-to-date and reprinted. But, if you take the time to go

back into the books that we have, you'll find out just how many

changes there have been to the Mineral Act . All right.

You've been here too long. Mr. Speaker, the Minister of Mines

has been here too long. But he's got a theory, and that's all

the Minister talks about — theory; not much in practice,

but lots of theory. I don't think that theory is going to

develop our mines, particularly his theory, because it hasn't

worked anywhere else in the world. And I see no reason to think

that it is going to work here in British Columbia.

HON. MR. NIMSICK: I think you'd have been against it anyway,

no matter what I do.

MR. PHILLIPS: No, I wouldn't be against it. Now that's not

fair, Mr. Speaker. I think you'll have to agree, Mr. Speaker,

that when good legislation comes before this House, we support

it. But when bad legislation comes before this House, Mr.

Speaker, we have to be against it. We have to be against it,

because that's our job.

Now I wonder, Mr. Speaker, if I could get somebody to bring

me a podium, because when you work in this Legislature as long

as we have to, why, I need something to lean on.

MR. SPEAKER: I hope you are not going to start reading

something.

MR. PHILLIPS: What's that?

MR. SPEAKER: You are not going to start reading something,

are you?

MR. PHILLIPS: I'm going to read a little bit, and I'm going

to use a few notes; but I need something to lean on, Mr.

Speaker, because I'm getting a little tired. I have a few

notes, Mr. Speaker.

I'd like to start off talking about Bill 44, Mr. Speaker, by

saying that it is arrogantly discretionary. The reason I say

that, Mr. Speaker, is because it gives too much power, Mr.

Speaker, to the Minister of Mines. Yes, it gives too much power

to the Minister of Mines, Mr. Speaker.

Anybody that knows anything about business, Mr. Speaker,

knows that if you are going to go into a long-range programme

of developing something that may last for years and years and

years, you have to know the rules before you start.

Even in the short game of poker you have to know the rules

before you start; and you know what

[ Page 2457 ]

happens, Mr. Speaker, if you've ever played poker. You know

that no one in the middle of the game can change the rules

because if you try, why the other players they get kind of

angry. They get very angry indeed.

Developing a mine that's maybe going to be in production for

20 or 30 years is a gamble and it usually involves, Mr.

Speaker, a lot more money than is on the table in a simple

poker game.

Yet by this bill, Mr. Speaker, the Minister wants to take

onto himself the right to use his discretionary powers, maybe

in the middle of the game — maybe even after there's just

been millions spent on exploration and province-out. His

discretionary powers.

Anybody, Mr. Speaker, who is going to develop a mine must

first find the resource…

HON. MR. NIMSICK: That crystal ball of yours isn't very

good.

MR. PHILLIPS: Well, it's been working fairly well this

session. I've looked into it and I just a few moments ago

reminded the Minister…but I don't believe he understands or

believes in cold, hard facts. If it's fiction or theory, the

Minister can understand it and the Minister can believe it.

But, Mr. Speaker, when it comes to cold, hard facts, the

Minister drops away.

Businessmen, Mr. Speaker, have to plan against known rules.

It is very difficult to plan when you don't know the rules.

They must find the resource or develop a product, and then they

must get customers for it, Mr. Speaker. They must produce or

manufacture the product so that they can make a profit. That's

a kind of a nasty word, I realize, Mr. Speaker — a very

nasty word in this House. I guess, instead of saying profit,

we'll say a return on investment. I don't know if the Minister

would even understand that.

Above all they must know that once they have got such an

enterprise in motion, Mr. Speaker, they must know that no one

is going to come along and capriciously bankrupt them by

banning their operations without warning or without reason.

That's a pretty stable statement; but unfortunately they're

not going to know that, Mr. Speaker, under the terms of Bill

Businesses will be deterred from investing. Why, Mr.

Speaker? Because of the uncertainty of Bill 44.

The Act, Mr. Speaker, leaves the granting of a production

lease at the discretion and at the sole discretion of the

Minister of Mines. He is a super know-all, Mr. Speaker. This

means, Mr. Speaker, that a prospecting and mining company could

spend years of effort to find one economically viable mine, one

economically viable deposit, take all the steps to develop a

mine and then have, Mr. Speaker, the Minister of Mines veto the

whole project. That is what can happen.

HON. MR. NIMSICK: You know I wouldn't do that.

MR. PHILLIPS: Well, some more "trust us" legislation, Mr.

Speaker — some more "trust us" legislation.

You know, Mr. Speaker, if you're going to have people trust

you, you must first of all prove that you can be trusted. But

I'm not necessarily saying that to this present Minister, grand

old man that he is. What bothers me, Mr. Speaker, is that he's

not going to be here after four years, and we don't know who

the new Minister of Mines is going to be. This is the

problem.

I am a firm believer, Mr. Speaker, that the government

should be of laws rather than of men, because the men change;

the laws remain as guidelines for business and industry to

develop under.

I know that our Minister of Mines has had a lot of

experience in the mining business. He's dished out supplies to

mines. He knows what's involved. But I don't know how many

mines, Mr. Speaker, how many mining enterprises, how many

viable, economically-feasible mining enterprises the Minister

has ever developed on his own.

Therefore, Mr. Speaker, I have to sometimes — as much

as I hate to — I have to question his ability to make

these discretionary decisions. Low-grade, large-tonnage

deposits, Mr. Speaker, like Lornex, which require large capital

outlays, will in the future, under Bill 44, have a great deal

of difficulty in financing because, Mr. Speaker, the right to

mine the deposit is not assured.

Surely the Minister of Mines can understand that nobody is

going to invest large sums of money if the end result is not

guaranteed. At the present time, Mr. Speaker, long-term

contracts like those with Japan reduce to a certain extent the

risk involved in large-scale mining. But now, Mr. Speaker, with

Bill 44 staring them in the face, the risk becomes greater. I

don't think, Mr. Speaker, that you will see any long-range

planning any more.

With the new smelter provision in this bill these long-range

contracts would not be available and thus, Mr. Speaker, will

reduce the chance of the development of marginal deposits. And,

Mr. Speaker, there are many, many marginal deposits in British

Columbia. But the development of those marginal deposits, Mr.

Speaker, will provide employment, much-needed employment, in

this province. The unemployment grows every day, Mr.

Speaker.

[Ms. Young in the chair]

MR. PHILLIPS: These new rules under Bill 44, Madam Speaker,

would encourage a company to scrap a project as soon as it

appeared to be marginal rather than continue some development

on the

[ Page 2458 ]

chance that conditions may possibly improve. So this means,

Madam Speaker, that our mines that are maybe a little lower in

grade — in no way will they be developed.

This bill, Madam Speaker, will disseminate the volume of

activity of many companies in the mining business. Rarely is

the economic feasibility of a project easily separated from the

economic feasibility with respect to the entire company. That

is to say that the total company tax planning and total company

cash flow planning would also be involved. That is why we have

large companies taking a look at some of these marginal

developments. Conceivably because of a temporary cash flow

problem the company could be forced to either sell the property

or accept government financing. Maybe that is what this whole

bill is about — government financing so that the

government will control and nationalize the mining industry in

British Columbia.

These changes, Madam Speaker, would discourage a company

from taking on many projects at the same time. The net effect

will be to shrink exploration in the province because if,

perchance, there should be two properties come on stream at the

same time, the company could not afford to hold one in abeyance

until it had developed the other…

HON. MR. NIMSICK: You can sure blow a lot of bubbles.

MR. PHILLIPS: …unless they go to the government for

financing.

Madam Speaker, the Minister of Mines says that I blow a lot

of bubbles. Well, I'm sorry that he considers good, intelligent

debate in this Legislature as "so many bubbles." It seems that

if they say anything over there it's law, it's right and it's

good; if we say anything over here, well, it's not.

The bill puts all the vital management decisions in the

hands of the government and removes any reason for a real

entrepreneur to continue to put his imagination and energy into

the industry. This in a nutshell is maybe what the Government

wants to do — they want the people to get out of the

mining industry, to not put any imagination into the mining

industry, to not put any energy into the mining industry so

that they can step in and take the industry over.

Madam Speaker, this bill invites spectres of expropriation

and pressure tactics. The possible reasonableness of the

government is not made clear. The Minister certainly didn't

make it very clear when he stood to introduce the bill this

morning.

As the Act is written, with no further legislation — I am not referring to

any other bills, but just as this Act is written — the government could ban

any property from going into production regardless of its stage of development

or the economics involved. That is some of the discretionary

power that this bill gives to the Minister of Mines.

Another thing that could happen, as the Act is written,

Madam Speaker, is that the government could assume a

controlling interest in any property for no investment

whatsoever. After a company has brought a mine to any stage of

development along the line, whether it's from the original

exploration or from partial drilling or in the midst of setting

up the actual mining operation itself, our Minister of Mines

and Petroleum Resources can step in and assume controlling

interest with no investment. Now I ask you, Madam Speaker, is

that fair or is it right or is it going to promote good

business relations or is it going to help to develop our mining

industry in this province?

Some of the vague wording in the bill, Madam Speaker, makes

almost anything possible. The bill says that any person may

apply for a free miner's certificate. They can apply, but who

says whether they shall get that certificate? The Minister of

Mines.

Anyone can apply for anything, anywhere, any time, Madam

Speaker. The Act gives no indication as to under what

circumstances a person will have a right to receive such a

licence.

"Further discretionary powers." The Act gives the Government

powers to acquire an interest or equity in a property. They

then clearly have enormous and arbitrary power to indicate the

terms of their interest in return for the permission to produce

all in the hands of the Minister of Mines.

Madam Speaker, Bill 44 will substantially increase costs. It

will add to exploration costs. Entrepreneurs now will have to

face up to increased government restrictions on production and

so will have to spread their exploration dollars over a wider

front than previous to Bill 44. It adds to pre-production and

production costs as well.

The submission of plans, maps and reports to the government

is going to be a significantly costly business. Then when they

are submitted the Minister of Mines has the right to deny them

or send them back and ask them to be redone. It tends to

restrict profits without recognizing exploration and

development risk, thereby encouraging major companies to take

their skills and capital elsewhere. I think that that is the

biggest detriment, the biggest thing against Bill 44. It tends

to restrict profits without recognizing exploration costs, and

it will encourage the major mining companies to take their

skills and capital elsewhere.

Madam Speaker, the financial feasibility report will give

the Government all the information they require to slap on

heavy royalties. The discretion of what these royalties will be

is in the hands of the Minister of Mines. So if a person wants

to develop a mine, he does all the research, prepares his

feasibility study, takes it in to the Minister of Mines, and

the

[ Page 2459 ]

Minister goes over it. If it looks like a good deal —

after they've maybe invested millions in it — the

Minister, at his discretion, can say, "Well, it looks like a

good deal. We want in on it."

I think this perhaps will lead many mining companies to not

put all of the facts and figures in their feasibility studies,

Madam Speaker. This automatically denies anybody, be he

prospector or mining company, the right to that pot of gold at

the end of the rainbow.

I realize that the Minister wants to take that pot of gold

away. He doesn't believe that there should be any pot of gold

at the end of the rainbow. There shouldn't be any reward, so

he's going to make sure that there is no reward because if the

reports, the feasibility studies, Madam Speaker, prove up

— there's going to be something good there — then

the Minister's going to step in and take over.

The bill, Madam Speaker, does not appreciate the fact that

not only a financial decision is involved in a go-no go

production decision. It doesn't appreciate that at all, this

bill doesn't.

Planning up to three to five years ahead, most companies

will be gearing up their staffing and resources to handle the

anticipated new venture. But now, when they don't know whether

they're going to be able to go ahead or not, all of that

planning will have to cease, Madam Speaker. If the project is

cancelled, the company ends up having an organization which has

to face a sudden and drastic pruning, and no one is going to

know until our Minister of Mines makes his decision.

One of the worst things about the bill, Madam Speaker, is

that it hurts individual prospectors, and there are some 1,000

individual prospectors in British Columbia, all hard-working

individual entrepreneurs in their own right. The exploration

and development work required to hold one claim for one year

will double from $100 to $200 per claim. The Minister very

rightly set out that if it hasn't been changed for 80 years,

that's not much of an increase from $100 to $200.

However, I will try and explain why this increased cost is more

than doubled.

This increase penalizes the small entrepreneur, Madam

Speaker, because in settlements for property development with

large mining companies, the total package includes an amount

for individual work and an amount paid to the entrepreneur.

This is the way it has been and this is the way it will still

be. The costs are doubled. Either the market value will

increase and force the mining companies to be more selective

about their prospects, or the small entrepreneur, the

prospector, will get a smaller chunk of the pie. If he gets a

smaller chunk of the pie, Madam Speaker, he's going to have far

less incentive to search for minerals.

Madam Speaker, I have to be against this bill. There have been major changes,

and there could have been changes made in the Mineral

Act which would not have caused the problems that Bill 44 has caused. There

weren't too many changes required to our Mineral Act , and I'll tell you why.

Our mining Act as it now stands is one of the finest pieces

of mining legislation anywhere in Canada. Talk to the other

jurisdictions, talk to other provinces, talk to other

governments. They are coming here, and have been coming for

years, modelling their mining legislation after our Mineral

Act. So I don't think that too many changes are required,

Madam Speaker. This Mineral Act became such a unique and

wonderful piece of legislation by the Mines department and the

government working in co-operation with the industry. Big

difference, Madam Speaker, from working in co-operation with an

industry and bringing in a bill such as Bill 44 without

consultation with the mining industry.

HON. MR. NIMSICK: Just how little you know.

MR. PHILLIPS: Just how do I know?

HON. MR. NIMSICK: How little you know.

MR. PHILLIPS: So the Minister of Mines says. Well I know,

Madam Speaker, that if there were any co-operation with the

mining industry, and if the bill had been drawn up in

co-operation with the mining industry, certainly the mining

industry would not be as angry as they are now with this piece

of legislation. That's how I know, Madam Speaker.

The present bill, as I say, is one of the finest pieces of

mining legislation anywhere. It became so because it was worked

out in co-operation with the mining industry. This Minister,

Madam Speaker, should be called the "Minister of Unemployment"

instead of the Minister of Mines.

I would like to ask the Minister what is his reasoning? How

could he possibly justify this legislation, because this is a

freedom-robbing bill. I think that the Waffle movement

in the NDP must have prepared these resolutions.

The Waffle movement, Madam Speaker, that is for an

independent socialist Canada. The reason I say that is because

the following programme regarding resource industries is laid

out in the Waffle manifesto. That's where this legislation came

from, Madam Speaker. It says, "The NDP will work for the

nationalization of Canadian resource industries including the

petroleum industry" — oil and natural gas wells included

in that — "pipelines, refineries, and petro-chemical

industries, coal, uranium, and the forest products industry"

— and last, but not least, Madam Speaker — "the

hard mineral industries and related smelting."

This policy of nationalizing the hard mineral industry and

the related smelting is subscribed to and

[ Page 2460 ]

signed by our Premier, our Minister of Education, our

Speaker, our Minister of Municipalities and our Minister of

Rehabilitation and Social Improvement. Madam Speaker, our

Minister of Mines maybe wasn't around to sign this, because I'm

sure he subscribes to it. If he doesn't subscribe to it, with

all that power in the Cabinet subscribing to it, his hand would

be forced.

Another reason I think that this Bill 44 is for the ultimate

goal of nationalizing the entire mining industry is because of

the resolution that was submitted to the NDP 1972 convention.

That resolution, Madam Speaker, is that the B.C. Government

commit itself to the principle of nationalization of all

primary resource industries. And I think, Madam Speaker, that…

Interjections by some Hon. Members.

MR. PHILLIPS: Madam Speaker, it seems to bother some of the

Members of the cabinet that I would discuss this. However, it

would not be necessary to discuss the theories and principles

of the NDP government if they didn't show up so clearly in

these bills. And when we're assessing a piece of legislation,

Madam Speaker, we have to assess what is going to be the

ultimate end when the legislation is brought in. If we really

analyse the legislation, Madam Speaker, we try and determine

what the thought behind the legislation was. Why was the

legislation necessary? So the whole thing comes into the

ballpark of analyzing a piece of legislation.

All I'm trying to do here, Madam Speaker, is determine why

this legislation is necessary. What is it going to do for the

Government?

It's going to do nothing for the mining industry. As a

matter of fact, it's going to take private free enterprise

right out of the mining industry. But it's going to do

something for the Government in that it's going to allow the

Government to step in and take over the entire mining

industry.

The principle involved in the bill is very clear, Madam

Speaker — it will allow the socialist Government that we

have now to go into the mining industry, from the hiring of

prospectors to the smelting of the ore. The Government will be

in every phase of the mineral industry in British Columbia,

from start to finish.

The bill, Madam Speaker, removes all references to forms and

fees that are prescribed in the Act. Again there is more

discretionary power where it allows the Minister to prescribe

any forms that he desires — more power to the Minister.

These forms naturally Are going to be designed to meet the

Minister's ends, his own needs, wants and likes. The forms can

be changed at any time the Minister decides that he wants to

change them.

The bill also allows the cabinet to prescribe fees. I am actually surprised that the bill gives the Minister So

many other powers. I can't understand why it doesn't also even

allow him to prescribe the fees, but i guess the cabinet want to

have a little say. So they come in and prescribe the fees.

The fees, Madam Speaker, will be as the cabinet sees fit at

the time, suitable to the occasion with no ground rules laid

down at all. There will be no pre-set rules — they make

them up as they go along.

The bill amends the requirements and the rights of free

miners. In so doing, Madam Speaker, it takes away their

incentives and gives them no security whatsoever — like

there was in the previous bill.

Interjection by an Hon. Member.

MR. PHILLIPS: Yes, as a matter of fact I have studied the

previous bill, Mr. Minister of Mines. When you brought in your

legislation I got a copy of the bill and I sat down and I have

done a fair amount of studying on it.

Now I have to ask the Minister if he knows what's in the

bill. I sometimes think an assistant makes all the decisions.

Where did that executive assistant of his come from —

Saskatchewan, Manitoba? I think that's the guy that makes the

decisions in the Minister's office, Madam Speaker.

The bill allows the Crown to make loans and acquire interest

in any mining operation. That is what is allowed under Bill 44,

Madam Speaker. Why would that be in there if it wasn't the

intent of this Government to completely nationalize the mining

industry?

Every word, every comma, every period, everything in the Act

is directed to the possible nationalization of the mining

industry.

In 1972, Madam Speaker, the annual gross value of mineral

production increased in Canada as a whole. I wonder if we will

be able to look back next year or in 1975 and ask the same

question and get the same answer. Will there be an increase in

production? After all, Madam Speaker, that's what we have to do

when we're looking at Bill 44. We have to ask: is it going to

increase production?

Mineral production in Canada last year rose from $5.9

billion to $6.2 billion — an increase of approximately 5

per cent. Preliminary figures from the British Columbia

Department of Mines and Petroleum Resources show that in

British Columbia the gross value of mineral production rose for

the eleventh consecutive year to a record high in British

Columbia of $631 million — a 20 per cent increase and the

largest single advance that has ever been recorded in the

mining history of British Columbia. All of this has been made

possible, Madam Speaker, by one of the finest mineral Acts

anywhere in Canada. Yet we have to change it.

I predict, Madam Speaker, that if this Government

[ Page 2461 ]

is crazy enough to pass Bill 44, within a few years we will

look back and say that "the mineral production decreased last

year to such a percentage point that it will be the largest

decrease in mineral production in any single year."

The mineral industry in the Yukon exceeded $120 million

— up $26 million or 28 per cent over 1971. The reason

that I am bringing this statistic in is that mining companies

are going farther north into farther remote areas where the

cost of exploration is greater and where the cost of getting

the ore out is greater.

We're going to have to move in British Columbia into an area

behind the Alaska Panhandle that is not very readily accessible

at the present time. But with the railway going up there it

will become more accessible.

One of the purposes of building the railroad up of course

was to tap the natural resources in that area — lumber

and mining. But after Bill 44, Madam Speaker, there won't be

many minerals coming out of that area behind the Alaska

Panhandle.

These record figures and the record achievement of the

mining industry that I have been talking about was under one of

the finest mineral Acts anywhere in the entire world. The

market and legislation and the attitude of the government over

the past 10 years have attracted the risk capital that is

necessary to sustain 13 existing mines, and to search for and

develop and bring into production a total of 23 new mines.

[Mr. Speaker in the chair.]

Welcome back, Mr. Speaker. I hope you enjoyed your lunch.

It's nice that you were able to get away for lunch. Those of us

who are legislators here, the common, ordinary people, have to

work through our lunch hour.

MR. SPEAKER: I was thinking of you all the time, Hon.

Member.

MR. PHILLIPS: We have to work through our lunch hour. We

don't get the opportunity to go out and eat. That's why I say

it's "legislation by starvation." We broke at 12:30, we passed

the bill. We could have recessed until 2 o'clock, but I'll

carry on, Mr. Speaker, hungry as I am. Thirsty as I may be,

I'll carry on.

Annual exploration expenditures during that same period have

risen from $10 million to a high of $40 million in 1970. 1

haven't got the figures for 1971 and 1972 but I know it was

higher. But in 1973, with the threat of Bill 44 hanging over

the heads of those who would…

Interjection by an Hon. Member.

Surely to goodness, Mr. Speaker, the Minister of Mines will

recognize that if we're going to have a viable, profitable

mineral industry, we must take into consideration the entire

world market. We must not let the Minister mislead us into

thinking that British Columbia has the say over what the price

of minerals is going to be, that British Columbia has the say

over the quantity of minerals that are produced everywhere else

in the world, or that British Columbia has the say over whether

there'll be a shortage or overage of a particular mineral.

Mr. Speaker, the question I'd like to ask is if the

Government had equity share capital, would the Government have

kept these two mines, Davis Keys and Churchill Copper —

north of Fort Nelson; they're closed down — would the

Minister of Mines have kept the mines going even though they

were not profitable, viable operations? Mr. Minister, I think

that this is what we have to explore under Bill 44.

There were people thrown out of work when those mines

closed. People north of my area were thrown out of work.

MR. D.T. KELLY (Omineca): Under Social Credit.

MR. PHILLIPS: Yes, under Social Credit. But if you had been

listening to what I said, you'd have known why the mines were

closed down. But you don't propose to listen. I told you just a

few moments ago that the mines closed down because of the world

price of copper. You try and twist it around and say that it

was because of Social Credit.

Interjection by an Hon. Member.

MR. PHILLIPS: I don't care whether it was under Social

Credit. If you would just listen and open your mind, you might

possibly learn something. But you don't want to learn. I just

went to some length to explain the world situation as it refers

to mines, the price of minerals and the supply and demand of

minerals. But they over there on the Government backbench, Mr.

Speaker, would like to think — as they must have been led

to think — that British Columbia can control the price of

minerals; British Columbia can control the world production of

minerals; British Columbia can create…

I explained last night in this Legislature that British

Columbia cannot create a market for its own minerals. We can't

absorb 20 per cent of the minerals that we produce. But the

Government backbench would like to say, "Oh, here's great big

British Columbia." They've got half a million dollars in the

kitty and, my heavens, they think they rule the world —

half a million dollars, I might add, that was left by the

previous administration.

The question I'm asking the Minister is would he

[ Page 2462 ]

have kept these mines operating even though they were not

profitable? Would he have sold the minerals on the world market

at a loss? Would he have kept the mines operating and

stockpiled the concentrate? What would the Minister have

done?

I think the Minister would have realized that economics play

a heavy

part in the decisions that have to be made by mining

companies. Maybe, Mr. Speaker, he would have come to grips with

the cold, hard, bare facts. If he did, it would be for the

first time in his life. Mr. Speaker, our Minister of Mines

lives in a theory world, in a dream world, as is witnessed by

the way he drew up the mining Acts and the legislation that is

before us.

Another thing, Mr. Speaker, that the mining industry has no

control over whatsoever…and w