Manitoba Committee Hansard — 17 April 1979 (Public Utilities Committee, Sitting 3, 31st Legislature, 3rd Session)

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Manitoba — Debates (Hansard)

Legislative Assembly of Manitoba STANDING COMMITTEE ON Public Utilities and Natural Resources Chairman Mr. Warren Steen Constituency of Crescentwood Tuesday, April 17, 1979 10:00 A.M. Office of the Queen's Printer for the Province of Manitoba

ne: 10:00 a.m. . Hearing Of The Standing Committee On Public Utilities and Natural Resources Tuesday, April 17, 1979 IAIRMAN: Mr. Warren Steen. �- CHAIRMAN: Gentlemen, we have a quoru m. Public Utilities and Natural Resources. Manitoba restry Resources. The Honourable Mr. McGill. )N. EDWARD McGILL: Mr. Chairman, I'l l intr oduce to the committee the Chairman of the Board d Chief Executive Officer of Manitoba Forestry Limited, Mr. Leifur Hallgrimson, who will present ! report for the year ending September 30th, 1978, and make what prel imi nary remarks he feels ! appropr iate. l. CHAIRMAN: Mr. Hallgrimson. I.

HALLGRIMSON: Thank you, Mr. Minister. Gentlemen, I believe you all have a copy of our nual Report before you for the year ended September 30th, 1978. This report compr ises the mcial statements of the Corporation for the said year. You will note that Mr. Ziprick, the Provincial clitor, who is the auditor for this Corporation, has attached his certificate which certifies the mcial statements without any qualification whatsoever.

There is a short report at the beginnin g i if it is your wish I could go through that and then answer any questions, perhaps update some the figur es in there because we have more current figur es available from the time that the report s made. :. CHAIRMAN: Mr. Walding, did you wish to lead off . . WALDING: Yes. The first page of the Report mentions that productions are on a twenty-four 1r day; seven days a week. I would like to ask what the capacity of the paper mill is. I recall t during the Royal Commission's inq uiries into it, there were various figur es given for what the �d capacity of the mill was.

Can I ask what the present production is either on an average or 1a ximum basis and how it is rated? . CHAIRMAN: Mr. Hallgrimson . . HALLGRIMSON: Yes, Mr. Walding, the average production in the paper mill is 380 tons per which works out to approxima tely to 128,000 to 130,000 tons per year. We maintain that level 1 guess as it's now constituted, the rate of capacity of the mill would be 380 tons per . WALDING: I seem to recall a figure of 300 tons a day.

HALLGRIMSON: No, 1 think as it was constru cted originally, the capacity was 350 tons per , but modif ications have been made and tha t's not unusual that capacity is improved somewhat this ha taken pla ce in that case. WALDING: And you say that you cannot fulfill the demand for pulp and paper? HALLGRIMSON: We cannot fulfill the demand for our paper; yes, that's correct. WALDING: What proportion of that production would be in pulp and how much in �r? 55

Public Utilities and Natural Resources Tuesday, April 17, 1979 MR. HALLGRIMSON: Out of 13 0,000 tons, we produced last year approxima tely 12 ,000 to 15 ,001 tons of pulp. MR. WALDING: I seem to recall at a previous meeting of this committee that you told the committe that most of your production was marke ted in the U.S. Were you speaking of pulp and paper E that time or of lumber? MR.

HALLGRIMSON: I don't recall that particular state ment. lt would be more true of lumber tha it would be of paper, although when we first started out, we might have sold something just ovE 50 percent in the U.S. but that's dimini shed as years have gone by to the point where - 1 caul give you more up-to-date figur es on that if you want. MR. WALDING: That was going to be the next question: where is the pulp and papE marketed? MR.

HALLGRIMSON: Well, for 19 78, the year under review, the domestic sales in Canada amounte to 55 percent of our production; 27 percent to the United States; and 18 percent to other offsho1 markets. One hundr ed percent of the pulp that we produced, which was 12 ,000 tons, was marke tE in the U.S., so our domestic market predomin ates quite substantially. MR. WALDING: And how much of that 55 percent would be used in Manitoba? MR. HALLGRIMSON: Oh, a very small part. I would say that perhaps about 10 ,000 tons out 60,000, which would be about 12 to 15 percent at the most. That's probably high.

Most of o product goes to eastern Canada. MR. CHAIRMAN: Are you through for the time being, Mr. Walding, that I can go on others? MR. WALDING: If you have others on the list, I'll. .. MR. CHAIRMAN: Yes, I do. Mr. Hanuschak and then Mr. Ferg uson. MR. HANUSCHAK: Yes, Mr. Chairman, I have a few questions I wish to dir ect to the Minis! respon sible for ManFor.

In view of the government's commitment during the last election campai and as evidenced by its subsequent actions, and that is the commitment to strip itself of assE acquir ed by the people of Manitoba - we have seen some examples of that: Morden Fine FooE the Lord Selkirk, just to mention a few - is it the intention of the government to deal with ManF in a similar manner? MR. CHAIRMAN: Mr. McGill. MR. McGILL: Mr. Chairman, the position of the government would be that any potential inter in the fi rm, any offers of purchase would be considered.

The determination as to whether or 1 the sale would then result would depend entirely upon the nature of the offer, and that of cou would . . . 1 might say that there have been some enquiri es from inter ested parties, request information, but I can tell the member that there have been no firm offers of purchase for the fore� complex. MR. HANUSCHAK: Could the Min ister ind icate, Mr. Chairman ' whether the enqui ries were fr Canada, or from beyond the boundaries of our country? MR. CHAIRMAN: Mr. McGill. MR. McGILL: I think I could say that the enquiri es were generally from within the boundarief North America.

MR. HANUSCHAK: From corporations operating only in Canada, or multi-nationals with offi based in Canada? MR. McGILL: Well, now, Mr. Chairman, this becomes rather difficult to pin down. The enqui 56

Public Utilities and Natural Resources Tuesday, April 17, 1979 at I am aware of would seem to me to be dev eloping from corporations within Canada. R. HANUSCHAK: Is the Min ister actively seeking out offers to pu rchase in the same manner ; has been done with other Manito ba-owned corporations which were advertised and inviting offers purchase? Is the Minis ter sear ching for offers to pu rchase in the same manner? R. McGILL: Mr. Chairman, I can tell the member that there have been no, to my knowledge, lvertisements in papers adver tising this complex for sale.

I could simply tell him that when enquir ies e received , that the government will endeavour to respond to them. R. HANUSCHAK: Now, in view of the fact that the government, Mr. Chairman, is not being all at aggressive in an attempt to di vest itself of this asset, could we assume, then, that this is one 1si ness enterprise, one corporation, which the government doesn't really mind operating, and li kely 11 continue operating for some time. :r. McGILL: Mr. Chairman, the trends in the pulp and paper ind ustr y are at the moment in an ward dir ection, as Mr.

Hallgrims on will ind icate probably in his further explanations. We are rather lased with the results that have been achie ved during the past year, and of the ind ications of � strong market which is continuing into the current year, so that the ability of the company to mpete, presently at least, is improving. The amount of employment which the operation provides The Pas area is, of course, an imp ortant consideration, and the resources which are av ailable the forestry complex are adequate - in fact, exceed that which is required to maintain the present mages. l. HANUSCHAK: Well, Mr.

Chairman, in view of the fact that the future for ManFor appears be so promising, would the Minis ter then assure the people of Manitoba that the government I not dispose of this, what appears to be in the words of the Minister hi mself, a very valuable j worthwhile asset for the people to own and for the people to operate. I. CHAIRMAN: Mr. McGill. 1. McGILL: No, Mr.

Chairman, I couldn't give the assurance to the member that the government uld not see fit if a very attractive offer came along to disp ose of this operation. lt might be t a potential buyer would see fit to expand the operation in which case we would be int erested what might accrue to the province in terms of increased emplo yment . .. HANUSCHAK: Could the Minis ter ela borate as to what he means by an attractive offer because ; government's track record over the past 16 -17 months in di vesting itself the people's assets :n't been all that good in terms of attract ing attractive offers.

And you know, the sale prices 1ak for the mselves. What does the Min ister mean by an attractive offer, what would he hope recover in order to . . . what would he consider an attractive offer? . McGILL: Mr. Chairman, I don't think this is the proper form to develop a detailed debate what would be an attractive offer for The Pas Forestry, the ManFor's operations ... the facts that we have not received a firm offer for the purchase of the company.

Until such an offer eceived, it is not possible to give specifics as to the kinds of terms or the amount of money t the government would consider a reasonable or attractive offer . . HANUSCHAK: Well, Mr. Chairman, if I just may clarify my question. Perhaps the Minister Jght that I was seeking a precise price tag but I wasn't. And I realize that the Minis ter can pla ce upon that asset at this time but could he in some general terms ind icate to the Committee 1t he may consider as' an attractive offer ? Because we've seen some assets go for very very l, for only a small percentage of the replacement cost.

We've seen another asset go for only price of the inventory and the capital assets were thr own in for free as it were. Is it an offer hat kind that the Minis ter would consider attractive or would he hope to recover something e than that before he would consider it attractive and sell the asset? McGILL: Mr. Chairman, I would not wish to be in any way specific ; to specula te on what Id be an acceptable offer at this stage, would be in my view, a way of preju dicing any kind Jture decisions that might be made.

And the whole matter is quite hypothetical since we do have in front of us any offers to purchase in terms that could be considered at this time. 57

Public Utilities and Natural Resources Tuesday, April 17, 1979 MR. HANUSCHAK: Could the Mini ster then indi cate to the Committee what are the gui delines critefra that the government uses in determ ining whether or not it will continue operating . enterprise owned by the Province of Manitoba? What the Min ister has indi cated, up to this poi1 is that if an attractive offer should come along, he would consider it. Does it follo w, then, that tt is the rationale that the government would apply to all its assets?

For example, if an attracti offer for Manitoba Hydro would come along, that the government would sell it. If an attractive of for the Manitoba Telephone System would come along, that it too would be sold. Is the attractivene of the offer the only criterion that the Mini ster would apply in determ ining whether he will sell 1 asset or continue operating it, or are there other criteria? MR. McGILL: Well, Mr. Chairman, we're operating a forestry complex at The Pas. We will contin to operate the forestry complex until an offer from some private interest is received that we f is worth considering.

When such an offer is receiv ed, we will consider it. If we feel that it's r an adequate offer, we will reject it. If we feel that there are benefits to be achieved by the acceptar of such an offer, then it will be seriously considered. MR; HANUSCHAK: The benefits? I'm sorry, the benefits to whom ? Could the Minister explain w he means by benefits? MR. McGILL: Well, we're very mindful of the benefits which now accrue to the area of The P and in northern Manitoba generally, through the operations of this company. These are the bene that we would want to see maintained. MR. CHAIRMAN: Mr.

Ferg uson, follo wed by Messrs. Doern, McBryde and Brown. Fer guson. MR. JAMES R. FERGUSON (Giadstone): Mr. Chairman, in the report it says that the re is a poss shortage of saw logs, is this correct, Mr. Hallgrimson? From the memorandum ... MR. CHAIRMAN: Mr. Hallgrimson. MR.HALLGRIMSON: I don't know whether I would classify it as a shortage. The fact is that saw logs that are available to us put a limi t on the amount of lumber we can produce. MR. FERGUSON: And you are having no problem moving the quantity of lumber that you producing. MR. HALLGRIMSON: That's right. MR.

FERGUSON: For example, the material for the pulp and paper. MR. HALLGRIMSON: With the saw logs that are av ailable to us, we are able to produce 55 mi board feet of lumber. Now if we had more saw logs, we could have another shift on ther e, considering the overall needs of the complex, this is the amount of saw logs that are avail to us. MR. FERGUSON: How far would be the farthest point that you'r e hauling these logs? MR. HALLGRIMSON: The furthest point would be from the common camp, which is clos Wabowden, and that would be about 15 0 or 16 0 miles, I think. MR. CHAIRMAN: Mr. Doern. MR.

RUSSELL DOERN (Eimwood): Mr. Chairman, I wanted to really spend some time or question of present markets and future projections. One problem apparently, years ago, lof into the Commission of Inquiry, was that there was an artificial and inaccurate wood cost of $ a cord. Could Mr. Hallg rimson ind icate what price they're obtaining nowadays. MR. CHAIRMAN: You mean, what the cost of our wood is, Mr. Doern? Is that what 'I MR. DOERN: Yes, and what your selling price is, if there is such a ... I guess you can't 1 58

Public Utilities and Natural Resources Tuesday, April 17, 1979 1e two too easily, but what is your cost per cord? IR. HALLGRIMSON: Our cost per cord is something slightly in excess of $60 per cord. IR. DOERN: Sixteen? IR. HALLGRIMSON: Sixty. IR. DOERN: $60.00. Now in regard to the question of markets, obviously the position of the anadian dollar has been a boon to the Corpora tion. One pr elimi nary question I have is this, that )U gave us figur es of 55 percent of your produce is shipp ed to Canadian markets, and 27 U.S., 3 other, etc.

Is any of that product shipp ed into the Canadian market, then trans-shipped to the nited States, or is that presumably all consumed in Canada. R. HALLGRIMSMN: I would say that what is sold into the Canadian market is consumed in anada. But we have dir ect sales of our product, of course, into the Un ited States, both in lumber 1d in paper. R. DOERN: And what year and month did the plant actually commence operation? R. HALLGRIMSON: When did our company commence operations? lt would be in 19 71. R. DOERN: What month, roughly? R. HALLGRIMSON: About March of 19 71. R.

DOERN: Okay, now, let's just say that in the past eight years, you gave us the current figur es; i percent of Canadian market, 27 U.S., et c., etc. What were they in the fir st few years, and how ts this pattern been shifting? ft HALLGRIMSON: I just have the figur es back to 19 75, and at that time our domestic shipments mprised about 51 percent, and that has moved up to 55. Our U. S. sales - this is paper - r U.S. sales in 19 75 were 28 percent, and now the y're 27 percent; offshore is 20 percent in 19 75, d 19 78 it's 18 percent. So there's been a slight impr ovement as far as domestic sales are ncerned. :r.

DOERN: So you're saying these are paper figures. Do you have any other figures? :r. HALLGRIMSON: Yes, 1 have figur es for lumber. I n 19 78, 40 percent of our lumber was sold o the local market in Manitoba, and 58 percent into the Uni ted States. t DOERN: And the other? t HALLGRIMSON: Ther e's just 2 percent that goes into eastern and western Canada. t DOERN: So, when 1 look at these original figur es you gave of 55 percent Canadian and 27 rcent U.S., that was largely paper, was it? I. HALLGRIMSON: Yes. I.

DOERN: I find that somewhat surprising, in that the American market has only expanded one ·cent. 1 think most observers assume that because of the Canadian dollar, we're sign ificantly reasing our exports to the U. S., and bringing in some badly needed dollars, and so on. Now, y isn't it inc rea sing by leaps and bounds? t. HALLGRIMSON: The reason is that the domestic market is our best market. We still realize )etter mill net on our Canadian sales than we do on U.S. sales, despite the prem ium on the lar . . DOERN: Are you saying that you make more money on Canadian sales? . HALLGRIMSON: Yes. 59

Public Utilities and Natural Resources Tuesday, April 17, 1979 MR. DOERN: And, are you saying that th erefore you don't actively pursue American sales, or y< discourage American sales, or you'r e not int erested in American sales? MR. HALLGRIMSON: Well, to the extent that we can market it in Canada, we are of cour int erested in American sales, but we would still prefer to sell more in Canada if we could. MR. DOERN: Well, maybe you'r e not concerned with American exports but some people are. A you saying that if you in creased your production, these ratios would still hold? MR.

HALLGRIMSON: Well, of course we are operating at optimum capacity now. In order to g� further capacity we would have to modify our existing operation considerably, but within c capabilities at the present time this is how our product is marketed . lt wouldn't benefit our compa to reject sales or and pur chases in Canada di vert them to the Un ited States at the presE time. MR. DOERN: Well, give me an example then of a unit of paper, a ton, or whatever. How mu do you obtain for that product in Canada and how much in the U.S. MR.

HALLGRIMSON: Yes, it's been brought to my attention here some figur es concerning the sa of paper. Of Canadian prime paper, the average is $364.00. MR. DOERN: That's for a ton? MR. HALLGRIMSON: Per ton, yes. On U.S. prime, it's $385, so there is a higher price, but mill net is lower because of the freight costs. MR. DOERN: Well, what would happen if you in creased your price to the U.S. to $400 or bel to have the equivalent amount of profit per ton? Would you be able to make the sales give1 depreciated dollar? MR.

HALLGRIMSON: We might be able to make some sales but we would be over our marl we would be asking a premium for product which I would suggest in the long run would not in our interest because we would in all likelihood lose that market as soon as the market conditi changed. MR. DOERN: How much was the Canadian dollar worth in 1971 vis-a-vis the Uni ted State� MR. HALLGRIMSON: I don't have that figure, Mr. Chairman. MR. DOERN: Well, I'm just saying that I assume that in the last few years it's been close to at various times. MR. HALLGRIMSON: lt has and it has even exceeded that.

I know that during that period s we've been in opera tion, it even went as high as $1. 10; $1 .09 or $1.10 . MR. DOERN: So you say this is of no particular advantage to you? MR. HALLGRIMSON: No. What? The prem ium on a dollar? MR. DOERN: Yes. MR. HALLGRIMSON: Oh, I would definitely say it was, but I don't think it's to the point w we would div ert all our sales into the U. S. because of it. lt cer tainly incr eases the mill net, up to two weeks ago, it would be about approxima tely 20 percent. Now it's down to about percent. MR.

DOERN: Yet it would appear that in the last seven or eight years that your share of the market has been constant even though the dollar has gone down. lt seems to hold abou· same. MR. HALLGRIMSON: Not our share of the market. These figures are not our share at the Ame 60

Public Utilities and Natural Resources Tuesday, April 17, 1979 1arket; tha t's a very huge market of course. IR. DOERN: A share of your production. IR. HALLGRIMSON: Yes, tha t's right. Now, that's true it has gone down but in our view, it's more dvantageous to develop the Canadian market in the long run than it is to develop the foreign 1arket. IR. DOERN: How do you account for the fact that you're opera ting at full production or you have 1ree shif ts or you're prospering? Why is there a big demand for your products? R.

HALLGRIMSON: Well, I don't pretend that we are di fferent to anybody else in this respect. hink it's quite well known that the pulp and paper market has im proved in the last year considerably 1d we're benefiting from that upturn lik e everybody else is. R. DOERN: And why is there an upturn? R. HALLGRIMSON: Well, I would say that the reason is the demand, the world demand or the �mand in the Un ited States; this has the effect of buoying all the marke ts up, and the situation very tight down there and this has the effect of im proving the situation in other marke ts 0. R.

DOERN: And again, this is not related to the American dollar and the Canadian dollar. You st think it's a gr eater demand for your materials inde pendent of exchange rates. R. HALLGRIMSON: Well, I don't think we can ignore the discounted value of the Canadian dollar. 1doubtedly, it im proves the mill nets on our shipments down there, so that it is a factor in producing better return on the sales that we do make in that market. I wouldn't ignore it and say that it jn't have any bearing on the situation. R.

DOERN: Can you compare your performance now with the way it was the last seven or eight ars in terms of whether we're getting a bigger share of the pie when you're selling in relation other Canadian pulp and paper companies in terms of your share of, let's say, the Canadian 1rket? Are you getting a larger percentage increase or are you holding about the same? �- HALLGRIMSON: I don't have those figures with me but I would say that our position has proved.

We are taking a bigger position .. t DOERN: Do you have any idea what share of the market you have in Canada; 10 , 20 percent, percent? t HALLGRIMSON: lt depends on the type of paper you'r e talking about; the weight of paper. ·ould say that we have approxima tely 60 percent of the heavier grades in check stands; you know, ! bags that are you use in carrying out your gr oceries from the supermarket. We produce perhaps percent of that in Canada. Other grades, it would be lower. In mult i-wall, our percentage there uld probably be 35 percent or so; 30 to 35 percent. l.

DOERN: And for instance, let's say you're 60 percent share five or six years ago; what was hen? I. HALLGRIMSON: I haven't got those figures; I'd have to get them for you. :. DOERN: Would you assume it's been growing? . HALLGRIMSON: it's growing . . DOERN: Just a couple of minor questions and then I wanted to ask the Min ister one or two. you have any projec tions on how many years of operation you can continue for, I mean for ance, how long the trees will last, do you have an answer for that? · .

HALLGRIMSON: Well, we have reserved to us an area of approxima tely40,000 square miles. as been determined that the allowable cut, the annual allowable cut, is about 900,000 cords 61

Public Utilities and Natural Resources Tuesday, April 17, 1979 a year, and that means that we could cut that in perpetuity. So in other words, we could consume that m-uch wood and we would be guar anteed a supply for eternity, I guess. And we are using off that 900,000 cords, we're using about 350,000 cords per year. So there's no shortage of wood there, as far as our present operation is concerned. MR. DOERN: Do you have a reforestat ion program? MR.

HALLGRIMSON: Not in the sense that we are planting trees, or anyth ing like that; we are requi red to clean up the areas after we've cut the wood and the experience is that if you do thi� and scarif y the remaining wood that's lying down that the forest does regenerate itself, and tha' there will be a regrowth there. Considering of course the fact cycle there that ours is approxima teiJ 10 0 years for a tree to reach maturity. MR. DOERN: Le t's say in the province of Ontario or B. C., is it compulsory for pulp and pape companies to replant or are they su bject to the same type of ... MR.

HALLGRIMSON: I think they're subject to much the same type of a situation as we are. don't say that there aren't some situations like that, but I don't think that it's like some of th1 situations you read about where there are tree farms and they in fact plant trees. MR. DOERN: So you assume that by cleaning up the areas that nature will provide? MR. HALLGRIMSON: Yes. And experience is that this does take place. MR. DOERN: I wanted to just ask a couple of questions of Mr. McGill. I was just wondering he is familiar, or maybe Mr.

Hallgrimson, whether he could ind icate whether the Manitoba Forestr Resources has any cl ub memberships that mi ght be of interest to the committee; for example whethE they have a membership in the Manitoba Club or whether there are any larger busi ness or soci; clubs that they belong to on an annual basis? MR. CHAIRMAN: Mr. McGill. MR. McGILL: Mr. Chairman, I think that's a question that Mr. Hallgrimson might lik e to respon to dir ectly, being a decision that would be made by his own board. MR. CHAIRMAN: Mr . Hallgrimson. MR.

HALLGRIMSON: In response to that, I can say, and assure this commit tee that our compar has not at any time paid any membership or in itiation dues in any pri vate club in this provinc or in any other province. I would add that I personally belong to one club in this city and, althou! I am no longer a member of it, but during the time that I was a member I paid my ov dues. MR. DOERN: When you're conducting business - I assume you have people coming to the pia and you occasionally entertain visitors and buyers, etc. - is any of that entert aining done Winn ipeg? MR. HALLGRIMSON: Oh yes, there would be some, yes.

MR. DOERN: Do you have an actual office here where you have a sales office in Win nip eg� MR. HALLGRIMSON: We have an office here in Winn ipeg and the sales forces are located he In both lumber and in paper. MR. DOERN: And when people are entertained, etc., they're just taken to a vari ety of places opposed to a particular location? MR. HALLGRIMSON: That is correct, yes. MR. DOERN: So you don't find it necessary to have a membership in some well-establist business club. 62

Public Utilities and Natural Resources Tuesday, April 17, 1979 R. HALLGRIMSON: I don't think it's necessary. lt might, depending upon circu mstances tha t 1ight be advantageous to a member of of a club, but it's not necessary. R. DOERN: A couple of questions to Mr . McGill, Mr. Chairman. When I lis tened to the Min ister scussing the future of the plant with my colleague, the Member for Bur rows, I had a feeling tha t e Minis ter was almost hinting or reluctant to discuss the future of the operation in that there lemed to be the prospect of some inter ested parties or inter ested buyers.

Have there been any elers put out to the government by people inte rested in buying the plant? R. CHAIRMAN: Mr . McGill. R. McGILL: Well, Mr. Chairman, as I mentioned to the previous line of questions, in this connection, ere have been some inquir ies, some requests for information. And these, as they are received, tve been responded to but none of these has up to this point resulted in any firm offer for 1rchase. R. DOERN: And were these of the nature of par tnership arrangements or buying in, in some 'nglomerate or outrigh t purchase? �- McGILL: Mr . Chairman, as I in dicated, they have not been firm offers.

They have been more the nature of requests for informa tion, upon which, presumably, the people making the request >uld perhaps in the future base some kind of further response. But I can't tell you that they oposed a joint operation or that they proposed any particular opera tion. They proposed nothing, �Y merely asked for information in respect to the plant itself. �- DOERN: And has the government put out any feelers from its point of view?

For instance, fore this whole project got under way in the 60s, the government of the day, which was then � Roblin government, contacted some 10 0 firms to attempt to interest them in deve loping this )ject, and now that it's fully opera tional, I was wondering whether the Mi nister was going to attempt y similar moves, either by contacting a few companies or some mass appeals to see whether lre are any inter ested buyers. l. McGILL: Well, that is a possibili ty, Mr. Chairman.

The kin ds of corp orat ions tha t would be erested and who might have an in terest in this par ticular operation are relatively few in number m advised. So it would not be too difficult an exercise to canvas that market; however, no Jressive undertaking has been in itia ted so far. t. DOERN: Has the Minis ter had any approaches from the Thomson chain, which appears to te hundreds of mill ions of dollars available and is in the newspaper business? 1. McGILL: Mr. Chairman, I don't know what the corporate inv olvements are of the Thomson 1in, but none has come to my atten tion with the name Thomson attached. :.

DOERN: Would the Min ister be inter ested in discussing with these dropouts who are looking buy the Hudson Bay Company some wealthy Canadian corpora tion, well somebody will be a :cessful bidder and somebody won't. But we heard of Westons and Thomsons and ... and 1sCan, they apparently have bags of money in the hundreds of millions of dollars. Is the Min ister lrested in pursuing any discussions with them? . McGILL: Well, Mr . Chairman, quite frankly it hasn't occurred to me, it may have to others, t the Thomson chain or BrasCan might be interested in the Forestry Operations at The Pas. 1ppose, Mr .

Chairman, that is a possibility but it has not been one that has occurred to us up this point . . DOERN: So the Minis ter is saying that if a buyer appeared he would seriously consider selling opera tion? , McGILL: Mr. Chairman, 1 think 1 said and I could repeat that if a serious offer to purchase, rm offer to purcha se were received the government would consider it. DOERN: And although I will have an opportunity to ask the Minis ter this on another occasion, 1ld he be prepared to sell the Telephone System under the same conditions? 63

Public Utilities and Natural Resources Tuesday, April 17, 1979 MR. McGILL: Well I suppose, Mr. Chairman, the kind s of ongoing public utilities such as Hydn and Telephones could qui te clearly be put in a much different category than the operation of ManFa which began as a private operation and through a series of events became the resp onsibil ity c this government. The member would like to compare Manitoba Telephone System with th� operation, I suggest that they are clearly not comparable. MR.

DOERN: Well could the Min ister give us the benefit of his thinking on why he would not dispos of a telephone system or the hydro, on what philosophical or practical ground s would he tend n< to sell them? MR. McGILL: I might mention to Mr. Doern that both Telephones and Hydro will be before th Commit tee at some future date with their annual reports. Perhaps that question could be bett4 asked at that time and that we deal with the Manitoba Forestry Resources Lim ited Annu Report. MR. DOERN: Well I'm just saying, I'm just wondering if the Minis ter could clarify his thin king f1 us.

Maybe it's clear in his mind, I'm saying I have my views on why certain government-ownE operations should not be sold and should be operated

whereas others may be sold. I was ju wondering if the Mi nister could make a distinction for us as to why he would consider selling certa governmen t-owned companies and not others. Can he give us his basic principles? MR. McGILL: Well, Mr. Chairman, I am aware of your ruling with respect to this line of questionil but I could respond very brie fly if I'm not ignoring your advice on this matter.

The two utiliH to which the member refers have some very unique qualiti es, not the least of which are their delive systems which lend them selves enti rely to a monopoly kind of operation and without going a further than that, the difference between those two utilities and the forestry resources operati' are very apparent. MR. DOERN: Well then I would leave the Mi nister with a final question and just ask him if would care to categorize the Liquor Commission in view of that dichotomy. MR.

McGILL: Well now the line of questions is changing direction very subtly here and the memt is ref erring to a possibility of some different retail outlets but it seems to me that we are not talki about the Liquor Commission as one that would change essenti ally in character. I'm sure the memt is ref erring to the suggestion that there might be some merit in providing more variety of liql outlets but the reference to the Liquor Commission , I think, is somewhat different to that. MR. CHAIRMAN: Mr . McBryde , to be followed Mr. Brown and Mr . Walding. Mr. McBr yde. MR. RONALD McBRYDE: Mr . Chairman, Mr.

Hallgrimson, I wonder if you would just review · cyclical swing in the pulp and paper market. Is there a pattern in terms of the number of ye and we're just getting into an upswing now? But is there a pattern so that we might be able predict when the next downswing in this market will occur? MR. HALLGRIMSON: Mr.

McBryde, I don't think that you can predict just how the exact occurre1 or the development of the cycle and its upswing with any certainy and I think the only observat 1 would like to make is that, you know, you can be rest assured that it is a cyclical ind ustry < despite prosperous times that sooner or later it's going to go into a down turn.

Just to rev what has taken place since this company came into existence and our operation in 19 73, that ' a high point at that particular time 19 73 and that at the end of 19 74 it went down into wh understand to be quite a prolonged depression because from 19 75 to 19 77 , things were at a' low ebb. And in 19 78 they started to pick up again and appear to be on the upturn for the pres at least, so other than that I really can't say anymore. I guess if I could I would be an econor or something. MR. McBRYDE: 1 asked. the question basica lly is whether there is a discernible pattern. Is five year pattern or a MR.

HALLGRIMSON: 1 would say no, based on what happened in the last three or four y1 because that was a rather prolonged one. I think prior to that some of the downturns weren' tha t long dura tion . 64

Public Utilities and Natural Resources Tuesday, April 17, 1979 ,R. McBRVDE: What's happening in the ind ustry now? Are there new mill s coming on stream t this time or are they new mills in the planning stages or what? I think that some came on stream uring the down period that were planned during the previous period of high sales. What is the resent situation? IR. HALLGRIMSON: Well the present situation in that regard and you have hit on a very good oint, what may be different now is that there isn't all that much new capacity coming on.

The �ason for this being of course, that the cost of these facilities now are really exorbitant. I think 1ere is only one mill that has come on in the last two or three years, a new mill , and that is in 1e province of Quebec, which is a pulp mill and that mill cost about $300 million. I think when gets to that stage of an investment, then it becomes very difficult to justify such an investment 1en when the market is at a very high point. But they were very fortunate in that they've come 1stream just within the last six months or so.

When they came on their timing was very good. ut that is a feature now of this whole question that there isn 't that much new capacity coming 1, and in fact there's a contraction there of some mills that are moving out of fields and upgrading. 1e practice now seems to be that rather than try and embark on some ambitious programs, mills ·e upgrading their position and spending somewhat less but trying to im prove their situation, and erefore upgrading products and getting out of some fields into others. R. McBRVDE: Who is your competition in the heavy paper and the paper bag market? R.

HALLGRIMSON: At the west coast there are two mill s, much like ours; one at Prince George 1d the other one at Kitimat. These two mills, though, are mainly orien tated towards the export arket. They are not tha t deeply involv ed in the domestic market. Crown Zellerbach have a mill; ey do produce some brown paper. In eastern Canada, Domtar and Consolidated Bathurst produce me paper, but not all that much in the heavier gr ades. R.

McBRVDE: What is the conver tibility to go into other kinds of paper produc tion, that is to ritch emphasis from the heavy paper and the paper bag into newsprint or other types of paper? it one for our mill and for the other mills, I mean, can they switch if the market is better in wsprint, switch into newspri nt? And if the market is better in heavy paper for the bags, can they ritch into bags, or is it specialized so that it's hard to switch back and forth or switch into other les of production? t CHAIRMAN: Mr . Hallgrimson. �- HALLGRIMSON: lt's specialized.

We couldn't produce newsprint without extensive >difications , it would be virtually a new machine. lt's a different machine that's involved. So you're �tty well locked into a particular product. Simi larly, a newsprint machine does not produce Kraft per. I. McBRVDE: My colleague was asking about the U. S. market, etc., and the question that :;urred to me was, how imp ortant during this period when there is a market is to keep certain ;tomers satisfied so that when the market goes down that you still have those customers and J're not as seriously affected by a downturn in the pulp and paper industry. t.

HALLGRIMSON: Well, there's no question; of course, you develop relationships with customers i this results in continuing business with them. Of course, if there is a downturn there's a drop he demand in their needs, so that ther efore their orders go down somewhat, but you have goodwill the trade and you perform well and pr oduce a good product and are reliable in what your ler takings are . . McBRVDE: So it wouldn't be wise to quickly switch around if the U. S. markets suddenly better, because it might be short-term as opposed to a long-term opportunity.

Switching to lumber market, how does the cycle of the lumber market compare, I mean the lumber market ; down at the same time that the pulp and paper market was down, but I think it came up •ner. And how do the cycles compare or are they totally different? . HALLGRIMSON: Well, I think they are somewhat different. They don't always necessarily 1cide. When you talk of the lumber market, the important factor is the number of housing starts, especially in the Uni ted States. This is the pre dominant market and last year I think the housing 65

Public Utilities and Natural Resources Tuesday, April 17, 1979 starts there reached a high of something over 2 million uni ts, 2.3 or 2.4, I think. Of course the number of housing starts depends to a gr eat extent on av ailability of mortgage money and the interest rates, which are at currently high levels and there has been a drop-off for the month o1 February. That's the last figur es I'm aware of. January and Februar y, whether that will continue or not is another question, but if it does then undoubtedly the lumber market will deteriorate a� far as ... MR.

McBRYDE: Even though 40 percent of your lumber sales are in Manitoba, I'm assumi ng tha the Manitoba housing starts and the drop off in construction in Manitoba doesn't seriously affec you because the compet ition is selling in the States, so that leaves that market; that is if the housin! starts are high in the U. S., then it doesn't hurt your Manitoba market that much because yo1 can get a bigger share of it because your competition is selling to the States instead of tc Manitoba. MR. HALLGRIMSON: I'm not quite sure that I ... MR.

McBRYDE: Okay, has there been a change in your Manitoba market over the last fe1 years? MR. HALLGRIMSON: Has there been a change? MR. McBRYDE: Has your lumber sales gone up or down in the last few years in the provinc of Manitoba? ' MR. HALLGRIMSON: I would say that it's been relatively stable, you know, that the market pric of lumber is really determined by the U. S. market. If the market is high, then producers will shi down there. MR. McBRYDE: Of course. MR. HALLGRIMSON: And will raise their prices locally. MR. McBRYDE: That's what I was trying to say but I don't think you understood.

You mentionE at the start that you might be updating some of these figur es we have here. Have you still g some you would like to update for us? MR. HALLGRIMSON: Yes, I can. When I prepared this report, the last figur es for the current ye were for five periods ending the 17 th of Febru ary this year and now we have another period a1 the cash profit by which we mean not taking into account int erest and depre ciation, is now at $� million. lt went up $800,000 in this last period.

So the favourable trend continue s and I would expe that unless there is some sudden downturn in either lu mber or in the pulp and paper market, tt we should have a cash profit probably close to $6 mi llion . MR. McBRYDE: So you're going to go from a cash loss to a cash profit? MR. HALLGRIMSON: Yes, an imp rovement of probably $5 to $6 million. MR. McBRYDE: That's your projection if ever ything holds the way it is? MR. HALLGRIMSON: Yes. MR. McBRYDE: Are there any other figur es that Mr. Hallgrimson wants to update? MR. HALLGRIMSON: No I haven't. That is the only reference to the current situation. MR.

McBRYDE: I wonder if Mr. Hallgrimson would care to clue me in on the present situa1 with fence posts; ManFor. MR. HALLGRIMSON: Well, as you know that plant has been closed down for approxim ately years or more. lt is still closed down and we have no intention at the present time to reo1 it. 66

Public Utilities and Natural Resources Tuesday, April 17, 1979 lt'IR. McBRYDE: What has happened with the inventory that was there? lt'IR. HALLGRIMSON: The inventory has been disposed of, to a gr eat extent I think. IIR. McBRYDE: In the later production, what you've been saying this morning is that with present narket conditions and the sustained yield of the 900,000 cords per year possibility in the north, hat there is an opportunity if someone wished to take it, and I think the Minis ter said the same hing , to expand capacity at The Pas.

Is that under any serious consideration now, and what would 1e the logic al kind of expansion? Are there some modifications to existing plant that can change he capacity sign ificantly, or does it have to be a major addition to existing plant to alter apacity? IR. HALLGRIMSON: Yes, as I indica ted the source of wood fibre would be sufficient as far in xcess of course what we're cutting at the present time, so that it would support a doubling in apacity. That would bring us to about 700,000 cords per annum. An expansion could take the >rm and it would take many directions.

We have the capability of producing either pulp or paper. he existing operation could be converted to a pulp operation, market pulp, by adding a bleach 1cility, but without getting into another machine. If you get into another machine, you're talking 1 excess of $10 0 million. I don't know what figure you could put on that. lt might be in the area f $40 mil lion or so to convert it to a bleached pulp mill. If you're talking about something more mbitious, then you're talking about another machine that could be a newsprint machine, it could e a pulp machine, it could be anything.

I wouldn't think it would be another kraft paper machine. would be wise to have diversifica tion, so then as far as your question as to whether we are , e haven't actively studied that. IR. McBRYDE: The board hasn't looked at those possi biliti es in the last few years. IR. HALLGRIMSON: No. But I would think if any purchaser, he would look at something like liS. R.

McBRYDE: I wonder if I could get some update from you, some clarification in terms of the nployment situation, just a quick review of the numbers of people, but more I think of concern lht now because of the provincial government reduction in" employment opportu nities and INCO 1tbacks, the hiring at ManF or, what is the turnover and what are the new hir es, and of those !W hir es are they coming from northern Manitoba or southern Manitoba or outside of Manitoba together, and related to that too would there be - I don't know if you have any figu res in that gard - whether they would be native persons or not? R.

HALLGRIMSON: Well, I can give you for 19 78 the levels of employment. The high is 1,10 7 1d a low of 887. The low periods would essenti ally arise out of reduced activity in the Woodlands vision, depending upon cutting and hauling of wood. This is much the same as it has been in e past. As far as the rate of tu rnover, I don't have any figur es on that. I could obtain that for u. �.

McBRYDE: Do you have a further breakdown in terms of mill, sawmill, woodlands, and Manfor 1odlands contracted? t HALLGRIMSON: Yes, do you want those figures? t McBRYDE: Yes, if you have them. t HALLGRIMSON: In woodlands, our own forces, a high of 264 and a low of 244; contract, 1igh of 210 and a low of 51. l. McBRYDE: And sawm ill and mill? 1. HALLGRIMSON: Pulp and paper, 370 high; a low of 346. Sawm ill, 226 high; a low of 217 . 3 machine plant, a high of 17 and a low of 16 . In the construction division, there are 8 employees, h, and a low of one. In real estate, there is one person.

In corpo rate there is a high of 11 - re are 11 people throughout the year. :. McBRYDE: The corpo rate is your sales staff in Winnip eg, and yourself? 67

Public Utilities and Natural Resources Tuesday, April 17, 1979 MR. HALLGRIMSON: No, there is myself; we have some corporate staff that apply to all . divisions. There is a comptroller and a corpor ate purchasing manager and a corporate industrial relations manager, myself, and a director of finance, and then there is a traffic manager. This is what we refer to as the corporate. But the sales staff would be inc luded in the divisions. MR. McBRYDE: You mentioned real estate. What does ManFor have left in terms of real estate? MR. HALLGRIMSON: We have five apartment blocks and approximately 20 housing units.

TherE are 24 suites in each apartment block. MR. McBRYDE: I wonder, Mr . Chairman, if Mr. Hallgrimson would get me some figures on thE earlier question I asked and maybe send them to me at a later date, in terms of the turno ver anc the sour ce of new emplo yeess, whether they are northern Manitobans, or Manitobans, or Canadians or offshore or whether they are Mexicans. MR. HALLGRIMSON: I would have to undertake to provide that information to you. I think yo1 mentioned something about native employment.

We of course do not keep records of people': ancestry but our best estima te is that approxim ately 30 percent of our work force is native. MR. McBRYDE: That estimate would probably vary depending on section, quite consid erably, wit sawmill being high and ... MR. HALLGRIMSON: The sawmill has a high level of native emplo yees. MR. McBRYDE: The other question, I wonder if your in dicators of labour- management relation: do you have figur es in terms of grie vances, walkouts, etc.?

My general imp ression is an imp rove labour- management relation over the last couple of years and I wonder if you have figur es thl would bear out my assumption on that? MR. HALLGRIMSON: I don't have any figur es with me but I would agree with you. I think 01 labour relat ions at the present time are quite good. We have gr ievances of course and we ha\ arbitrations but other than that, I think things are in pretty good shape. MR.

McBRYDE: In light of that question and answer, it is, I suppose, encourag ing, and that tt board should probably receive some congratulations in management, at a time whE labour -management rela tionships, following an attitude set by the provincial government, a wors ening, that that particular operation, a Crown corpora tion, the labour-management situati< seems to be imp rovi ng. I think that's an encouraging sign. Mr.

Chairman, the other question relates to the woodlands division, and I wonder how the figur' are stacking up in comparing Manfor woodlands, Manfor cutting operations, and contractor cutti1 opera tions. One, is Manfar using that as a yardstick to help measure their own efficiency a1 effectiveness; and secondly, how does it compare in cost per cord between contracting out a1 your own cutting opera tions? MR. HALLGRIMSON: I don't know whether I have any breakdown of that cost. Und oubtedly ' use our own cost as a factor in dete rmining what we pay independent contractors.

We certail wouldn't pay anybody any more than what it is costing our own opera tion. lt is difficult to comp� the situations because even if there are private contra ctors, we still incur the costs of opening the area, the roads and matters of that nature, so it isn't always that easy to compare them. \ basically try and encourage as many cont ract operations as we can get. We would prefer to he more cont ractors than we do have - the big one of course is Moose Lake, the biggest ind epend1 contractor there. MR.

McBRYDE: One advantage of having contracts on a fairly simila r basis is that assist management to determine their effect iveness in terms of their own operation, to compare it "' outside. Of course that comparison would break down if you have non-union contractors. Do ) have any non-union cont ractors still in the woodlands division? I know it is required within the Mar cutting area, the terms of the agreement. I understand there was a non-union cutting operat outside of the ManFor limits that was supplying wood to ManFor. 68

Public Utilities and Natural Resources Tuesday, April 17, 1979 IIR. HALLGRIMSON: As you have pointed out, of course, on our specified area, our colle ctive 1greement provides that the independent contr actors have to adhere to the union contract. I'm 1ot aware of the situation you mention; could very well be. I think there was some wood purchased 1 the Duck Mountains and we entered into that arrangement because the wood there was larger 1nd we were getting a higher percentage of saw logs. But outside the area, I don't know that we hould be delving into the affairs of our supplier, if he is not unioni zed.

That is a matter between 1im and the unions, not us. We can't control that. IIR. McBRYDE: lt relates to you in the sense that what action does the union take when you go 1Utside and use non-union help? lt has a very di rect rela tionship then to your opera tion, if the union 1ade a decision to take some action because of your action. In the contr acts with Moose Lake and Mistik Creek, I assume it is still in operation even though was sold by the government; I'm assuming they are still producing.

Have those quotas been 1creased, or the amount that you are willing to purchase from those people changed now that 1e market is improved? IR. HALLGRIMSON: Well, I can't speak with certainty about Mistik Creek, but Moose Lake, we re looking to them for more wood this year and in the future. lt is an area that we would hope ) cut more wood in in the next few years and ther efore we are looking more to Moose Lake to rovide that. IR. McBRYDE: In the past there was always a limit up to a certain amount you purch ased from 1em. IR.

HALLGRIMSON: lt is negotiated each year but I' m saying that the volu mes, in the present ontract, would be much hig her than it was a couple of years ago. IR. McBRYDE: Would it be higher than they are probably capable of achieving at this time? IR. HALLGRIMSON: I don't know. I would hope that when we enter into a contra ct we use our ood judgment in that regard, and in that way we expect that they would be able to do it. IR. McBRYDE: Could you just summarize for me the present situation of your hauling operations, ho is doing the hauling?

That is, is it all local truckers who have one or two trucks or are there ill any large cont racts with outside trucking firms and is ManFor in any hauling itself? IR. HALLGRIMSON: Well, to answer the last question first, we don't do any hauling ourselves. would say that essentially the hauling of ground wood is done by local truckers of varying sizes. �uess some have prospered and have two or three or four trucks, others have one truck. Essent ially is done by local truckers. I don't know of any large outside firm in there. IR.

McBRYDE: lt has been two or three years, I think , since you have had an outside contractor. rhat is the present situation in terms of the owner-operators of skid ders? Are you encouraging :!Ople to move in that direction? R. HALLGRIMSON: Yes. R. McBRYDE: Is the union star ting to represent owner-operators or has that not been negotiated lt? I understand that part of the strikes in Ontario relate to that particular issue so I wonder if )U could just sort of clarify exactly what the situation is at ManFor and where it is moving. R.

HALLGRIMSON: Of course out in the woodlands we have also always been on a piecework tsis; we have never had hourly workers cutting except, I think, with some larger machines, it may tve been in that area. But essentially, the cutting is on a piecework basis. We have encouraged ese cutters to own their own skid ders and have helped finance them as we feel and find that is a much more sati sfactory situation to have them owning the skid ders. 69

Public Utilities and Natural Resources Tuesday, April 17, 1979 MR. McBRYDE: At the last spring annual meeting of the Woodworkers Union, the IWA, the issue was related to negotiating for the machines or machine rates. Has that come about now? MR. HALLGRIMSON: No, that would be outside, it wouldn't be negotiated by the union. MR. McBRYDE: And this time it is not? " MR. HALLGRIMS ON: No, I don't think there's been any change in that respect. MR. McBRYDE: Mr .

Chairman, then I'v e a couple of general questions to the min ister resp onsi ble The Conservative government has appointed one person from The Pas, one resident of The Pa! I think, to the board. Is there any consideration being given at this time to increasing board memben from The Pas or The Pas area? MR. CHAIRMAN: Mr . McGill. MR. McGILL: Well, Mr . Chairman, I think the question of regional representation is not one tha the government has concerned itself with.

The appointment to which you refer, 1 believe, was mad• about a year ago, and when appointments are made from time to time, the question of th• contribution that individual members or candi dates or people who might be willing to serve on th1 board, would be consid ered as well as their area of residence. MR. McBRYDE: The mi nister or to Mr. Hallg rimson.

There was consideration being given at on' time to the possibility of having an employee or em ployees on the ManFor Board, similar to wha has happened in one Crown corporation, similar to the type of operation in British Columbia, an' I wonder if that is still under consideration or that idea has been abandoned? MR. McGILL: Well, Mr. Chairman, I think perhaps I'l l refer that question to Mr . Hallg rimson. I knm that that is a su bject that has come up before, and that some research has been done on it - Mr . Hall grimson. MR. HALLGRIMSON: Yes, I think it goes back two years or so.

At that time this was discussec and in fact there were meetings with the employees, but nothing has transpired since that. lt's ne under active consideration at the present time. MR. McBRYDE: Thank you for your answer. To the minis ter then , the questions that my colleague asked in regard to the possible sale of ManFor, the possibility of offers being considered.

I wondE if the minis ter could just give us some indic ation that if that eventuality ever came to pass, an I'm personally fai rly doubtful that it will, but if that eventuality ever came to pass, I wonder if th minister coul'd give us some assurance that the same thing wouldn't happen to the Man For operatio1 as happened to other operations that this government has sold, that have actually ceased operatio1 and is no longer functioning, no longer provide employment. A couple of these and smaller onE in Northern Manitoba, then of course the Lord Selkirk.

I wonder if the mi nister could give us sorr indication whether part of his consideration when he said whether the offer was acceptable • reasonable or whatever, would be a guarantee in terms of operation, whether he would even � further because of his previous comments, whether he would say that they might consider an off, to purchase, if in fact expansion was involved.

I wonder if the min ister could give us some indicatic of what . his thinking is on that Mi ght that be a condition, that expansion would have to be invo lve Would there be a guarantee or part of the purchase agreement that in fact the operation wou have to continue at its present level? MR. McGILL: Mr. Chairman, it's very difficult to respond to the hypothetical situations that tl Member for The Pas describes here. As I said, there have not been firm offers received. I ha• also said that the employment levels in The Pas area, and the number of jobs provided by tt operation is an imp ortant consideration.

I think to get into the hypothetical and the possibility any firm offer to purchase being made by somebody, who had intentions of shutting down tl 70

Public Utilities and Natural Resources Tuesday, April 17, 1979 ; so remote as to be almost not worth considering. The value of such a plant is a fairly important mount of money, and I can't conceive of anyone simply making a purchase with the idea of shutting own the opera tion. This would not be consistent with our basic interests in the provision of jobs nd employment in The Pas area. IR. McBRVDE: Yes, Mr.

Chairman, the reason I asked the question and I'm ver y pleased with 1is minis ter, even if he stands alone with his concern about employment in Northern Manitoba, ecause certai nly the opera tions that have been sold off, have closed down, were the small northern perat ions that empl oyed native people from remote communities. And those operations have been old, and there doesn't seem to be any criteria involved, and that's what I'm concerned about, 1at the government is making basically political decisions without criteria involved.

In one case, 1e operation had made a profit for the last two years on an opera tional basis, and in fact returned profit to the province on sale, and that profit was just put into general revenue and not reinv ested 1 employment creation in Northern Manitoba. In the other case, it was a subsid ized operation. was sold off, and it just closed down because the people that bought it, it didn't seem feasible > them to operate any more with a loss of jobs. Some of the others that have been sold off continue to operate, like related to ManF or Mystic reek Logging Operation.

I understand it's continuing to operate, and that's a good sig n. it's roviding the employment and it doesn't matter to me whether it's a government operation or a rivate opera tion, as long as reasonable employment is provided in Northern Manitoba. So I'm leased that that's one criteria that the mi nister wants to consider is the continuation of employment The Pas area, and I would like to get him to urge his col leagues to have that kind of consideration so. But the other criteria, the only criteria that I can det ermine from the sales that have taken place > far, seem to be political criteria.

If the operation was started under the NDP, then it's to be >Id off, and if the operation was started when the Con servatives were in office, then it's to be �pt. With the Lord Selkirk being an exception to that because the government was satisfied enough at somehow the NDP were labelled with that operation that they could sell it off. I think the political 'iteria in the case of The Pas would be different because people still connect the Churchill Forest dustries with the Conservative government, and ther efore the lik elihood of selling it off is much ss because there's no political mile age.

And I would ask the minis ter once again if he would consider least outlining some minimal criteria on which a decision would be based, or whether there in et is no such criteria, and they' ll just await an offer and then perhaps establish some criteria, make it a political decision at that time? R. McGILL: Well, Mr.

Chairman, again when a firm offer or firm offers are received, they will l considered in a serious and in a very regular fash ion, and I have pointed out to the member at we are anxious that the operation be continue d, and if an offer were received from some potential 1rchaser that in dicated that employment would not only be maintained, but might in the future crease, that, of course would be a factor that would weigh in favour. R. McBRVDE: I want to, Mr.

Chairman, thank the minister for his answer and thank Mr . lllgrimson and the ManF or Board and management because this par ticular operation of course critical to The Pas region, and it must function effectively and it must continue its opera tion. >, thank you to the gentleman in front of us. R. CHAIRMAN: Mr. Brown, to be follo wed by Mr . Walding and Mr. Doern. �. BROWN: Well, Mr. Chairman, most of the questions that I was going to ask already have en asked and have been answered. I would just like to go a little bit further into the cash profit :ture.

We had an updated figure here of $2.6 mil lion, but did I understand Mr. Hallgrimson right ten he said that this did not take into account depreciat ion and interest. t HALLGRIMSON: Yes, that's correct. t BROWN: So both of those would be substantial amounts of money, I presume. Taking preciation and inter est into account, do you still feel that you would be coming up with a profit ttement at the end of the year? l. HALLGRIMSON: Mr . Brown, in order for us to show a profit after interest and depreciation, would have to have a cash profit of about $10 million. The depreciation amounts to about $5 71

Public Utilities and Natural Resources Tuesday, April 17, 1979 mil lion and the interest is between $4 and $5 mi llion a year. So I think things would have to im prove considerably before we could get to that stage. I think our interest and depreciation compared tc other companies is very high, considering our produc tion. The figur es here which, 1 think, are rather pertinent in that regard ... as a percentage of sales, our interest expense is eight percent of the sales compared to Abitibi 1. 8 percent, Domtar 1. 4 percent, Consolidated Bathurst 3. 1 percent, anc Donahue Lim ited 1. 6 percent.

The depre ciation as a percentage of sales in our case, is 9.6 percent and these other companies that I referred to are roughly in the range of three to four percent And if you take the two combined, our interest and depreciation is 17 .6 percent of sales, comparec to 4, from 4 to 6 percent. So I think we have a burden, which I don't think is normal and 1 thinl it would require a rather good year in order to cover that.

We did cover it one year, in 19 74, anc if thin gs continue it might well be every year, but I think in normal time s that it would be impossibh to generate that much cash flow, considering our productive capacity. MR. BROWN: Well, thank you, Mr. Chairman. I just wanted some clarification on that point. I woul4 just like to say that I am very pleased that things are looking quite a bit more favourable tha1 what they have in the past, and hopefully this trend is going to continue. MR. CHAIRMAN: Mr . Walding. MR. WALDING: Thank you, Mr . Chairman. I believe Mr .

Hallgrimson indi cated in answers t previous questions that the market for our pulp in the U.S. is very strong at the moment and th� there is a high demand for it and no difficulty in selling it at all. I believe you indica ted to th Committee on a previous appearance to us that your American sales were dealt with by an agen Are you still deal ing with that same agent for pulp sales in the U. S.? MR. HALLGRIMSON: Yes, Mr. Walding. We have an agent who effects our sales, both in pul and paper. MR. WALDING: Does he also handle your lumber sales in the U. S.? MR. HALLGRIMSON: No, they do not.

The company that handles our pulp and paper is a conce1 by the name of Price and Pierce that are quite well known. They are not in the lumber busines We sell our own lumber in the States from Win nipeg. MR. WALDING: I see. Have Price and Pierce developed what I might call "regular" custome for your pulp and paper in the States or do they sell it on a sort of job lot basis from time time, wherever they can sell it? MR. HALLGRIMSON: No, essentially I would say that they have developed customers, regul customers. We probably have about 10 customers in the States. MR.

WALDING: That being the case and the market being so strong, why do you not sell direc to the purchasers? Why do you go through a middleman and pay him commissions and . ? MR. HALLGRIMSON: Well, the problem there is that of course it isn 't always this way. You knc just maybe two years ago we were having difficulty in selling our product down there, and y just don't dump agents overnight. I guess if we were satisfied that it was going to continue indefinit there wouldn't be any point in it.

There is one feat ure, as far as they are concerned, tho ugh, tt assume the credit risk and we col lect simply from them rather than from the customers. E essent ially I would say, in response to your question, that, yes, perhaps right now we could I it could very well be in two or three years' time or even sooner that we might need the servic of somebody to market. MR. WALDING: Is that under consideration by your Board at the moment? MR. HALLGRIMSON: No, it is not, but it's something that we would keep in mind. We had age in Canada at one time and we changed over to our own sales staff. MR.

WALDING: 1 noticed somewhere in the report you listed sales costs, that one of the cc was duty. Is there duty on pulp, paper or lumber going into the States? 72

Public Utilities and Natural Resources Tuesday, April 17, 1979 IIIR. HALLGRIMSON: There isn't on pulp but there is on paper - 4 percent. III R. WALDING: And on lumber? lt'IR. HALLGRIMSON: I don't think there is any on lumber; I'm not quite sure of that. I can't emember just off the top of my head. 1 don't recall now what the situation is with respect to umber. III R. WALDING: What would account for the amount of $700,000 in discounts for the year,

Schedule I? IIR. HALLGRIMSON: Well, e in the U.S. certainly there is a cash discount for payment within a :ertain length of time. Yes, there is a discount allowed in the States. There is some al lowed in �anada, too. IIR. WALDING: That's for the payment of accounts within a certain time . fiR. HALLGRIMSON: Well, there are some volu me discounts, too. IR. WALDING: Oh, I see. Okay. Now, I wanted to ask you about other answers that you had iven to the Committee this morning. I think you said that there were 900,000 cords a year could ,e cut and used but you actua lly used 350,000 cords.

What propor tion of that would go to pulp nd paper and what to lumber? IR. HALLGRIMSON: Pulp and paper would be about 275,000 or so, and 55,000 cords in the lumber 1i ll. What it is is that it takes two cords of wood, approxim ately, to make a ton of paper and one ord of wood to make a 1, 000 board feet of wood./ board IR. WALDING: I see. So would the paper mill running at capacity 375 cords a year is as much s can be used in tha t . . . IR. HALLGRIMSON: Yes, about 350 or thereabouts is what we're using. IR. WALDING: But when you mentioned the lumber mill, is that the 11 -acre building that's on 1e site? IR.

HALLGRIMSON: Yes. IR. WALDING: How many saw lines are there in that building? R. HALLGRIMSON: Two saw lines. R. WALDING: Are they being used to capacity with this 55,000 cords? R. HALLGRIMSON: Yes. R. WALDING: So in order to increase your capacity you would have to put another saw line ? R. HALLGRIMSON: d No, you could add shif ts to that. We're not opera ting around the clock anything, so we could add. There are two shif ts now. We could have three shifts, if we wanted R. WALDING: What is the capacity for expansion in that building, in terms of extra saw es? t. HALLGRIMSON: Unlimi ted, unlimi ted.

I mean, we could have a number of saw lines. t. WALDING: What is it then that is prevent ing you from increasing your produc tion of lumber? ficul ty in sales or the difficul ty in logs? t HALLGRIMSON: The amount of saw logs that we get out of that 350,000 is approximately 73

Public Utilities and Natural Resources Tuesday, April 17, 1979 55,000. The only way you would get more saw logs would be - if you cut 700,000 you'd get 11 0,000. You could double the sawmill if the capacity of the pulp and paper mil l were doubled. MR. WALDING: I'm not sure that I follow you. What does the supply of saw logs have to do with the paper mill? MR. HALLGRIMSON: Because your cutting program applies to both. They have to be kept ir balance. I mean, we can't go out north of The Pas and pick out saw logs, just cut saw logs.

WE have to be clear-cut; we get a certain percentage of saw logs and it's very low there because o the size of the wood. What I'm saying is that with our present needs in the mill, being roughl y 300,000 cords, wE get 55,000 cords of saw logs that we can put through there. We can put through smaller stuff bu our productivity goes away down and we have to process so many logs. We are virtua lly processin! poles at that point. MR. WALDING: Yes. Now, I understand. MR. HALLGRIMSON: Now, if we in crease the capacity of the pulp so that you use more, the1 you would get more.

I'm saying that if you doubled it in theory you'd double the number of sa\ logs tha t he gets and you can increase that. MR. WALDING: Yes. MR. HALLGRIMSON: So that is the limiting fac tor, not the size or even the equipment. MR. WALDING: Now I follow. Have you been advised by the government that the auditing is t be done by someone other than the Provincial Auditor for this year? MR. HALLGRIMSON: No, the Act under which we are inco rporated the Provincia l Auditor is deeme to be our auditor and until that's changed he is our auditor.

Now, if he chooses to do that wor through somebody else, of course I guess it is something for him to decide but our statemen· would have to be signed by the Provincial Auditor. As tar as we were concerned, he would t the al!ditor. MR. WALDING: You might have heard that the government has made certain announcements th some Crown corpora tions and organizations are to be turned over for auditing to private auditir companies, including some that are presently in the position that you are, where their Act requin the Provincial Auditor to do it.

Have you had any discussions or conversations with your Mi nist or with the government on this matter of an outside auditor doing the auditing work? MR. HALLGRIMSON: Oh yes, I am aware of that. I have had discussions, both with the Provinci Auditor and with my Min ister, and until the law is changed, of course, that is the situa tion. I ha no views on that. If the Auditor chooses to do this function through other people tha t, of cours is open to him. MR. WALDING: Perh aps it was unfair of me to ask Mr. Hallgrimson that. I'd like to dire ct t same question to the Min ister, through you, Mr.

Chairman, whether it's the Mi nister's intention have ManFor's books audited by a private auditing company in the future? MR. CHAIRMAN: Mr. McGill. MR. McGILL: Mr. Chairman, that certainly is under considera tion. But, as Mr. Hallgrimson has qu corr ectly pointed out, the resp onsib ility still lies with the Provincial Auditor under the Act and Ul the Act is amended to provide some other resp onsibil ity he will continue to have that resp onsibili Now, he may choose to use a contractor to carry out some of the duties, but he still has the ultim• resp onsibil ity. MR.

WALDING: 1 realize that the Provincial Auditor has that resp onsi bility under the Act, I Chairman, but it has not stopped the Min ister of Fina nce from making public statements in · past saying that other Crown corpora tions would in tact be audited by private companies and t' the government had to create who they would be and it was only a matter of negotiation as as tees were concerned. So what the Min ister says is not enti rely accurate. I will ask the Mini � 74

Public Utilities and Natural Resources Tuesday, April 17, 1979 Jain, has the government made any decision on handing over these auditing functions to a private >mpany? R. McGILL: Well, in principle I think that decision has been announced by the Mini ster of Finance 1d negotiations are being carried out, but the question placed to me by the member was whether e Provincial Auditor was still resp onsible. He is still responsible. He will continue to be responsible r the audit until the legislation is changed. R.

WALDING: Can I ask whether any private auditors have been examining ManFor's books or lking to their accounting staff about financial matters of ManFor? r:l. CHAIRMAN: Who is that question directed to, Mr . Walding? r:l. WALDING: I believe Mr. Hallgrimson could answer that. !t HALLGRIMSON: Well, yes, I can answer that, Mr. Walding. I had met, on one occasion, with o members of the Dunwoody firm. They had not examined our books.

I think that pretty well licates the extent of their inv olvement, as far as I am concerned. �- WALDING: So this was at a meeting between yourself and the accounting firm. �- HALLGRIMSON: Yes. t WALDING: lt didn't involve any, would we say, accounting or reviewi ng of the accounts? t HALLGRIMSON: lt did; I'm sorry, I didn't intr oduce Mr . Paul Desmarais, who is our Dir ector Finance, and he was also present during these conversa tions. I. WALDING: I see. Was there any indication given to you of the fees that they might �rge? I. HALLGRIMSON: None whatsoever. t.

WALDING: Can you tell the Committee how much ManFor paid for the annual audit by the >vincial Auditor for this year under discussion? 1. HALLGRIMSON: For the fiscal year ended September 30, 19 77, it was $62,000, which inc luded veiling expenses up to The Pas. :. WALDING: And for this annual report ending September, 19 78? . HALLGRIMSON: We haven 't received it as yet. . WALDING: 1 wanted to ask you about the real estate division. You mentioned, I believe, five 1rtment blocks and 20 some odd housing units. Are they all rented? .

HALLGRIMSON: We have a vacancy rate; I can't tell you exactly what it is, but there are ancies . . WALDING: Could you give me an appr oxima te figure? . HALLGRIMSON: 15 percent. , WALDING: Are all of the tenants emplo yees of ManFor? . HALLGRIMSON: No, they do rent to outsiders. WALDING: Can you indicate what percentage of the tenants would be ManF or >loyees? HALLGRIMSON: 1 can't give you a precise figure. Certainly a substantial part of them would If you would like that information, we could make it available. 75

Public Utilities and Natural Resources Tuesday, April 17, 1979 MR. WALDING: No, that is accurate enough. Has your real estate division sold any of its housin! units? MR. HALLGRIMSON: Oh, yes, from the time that receive rship took place, I think at that time W4 had over 10 0 houses and we have disposed of these units over the years. MR. WALDING: Can you tell me how they have been sold? MR. HALLGRIMSON: In many cases, it has been through our own emplo yees or the real estat, depart ment, the y have effected those sales.

I can't say that we haven 't used an agent; there caul, have been local agents involved in earlier years. But we obtain appraisals on the properties an sell them for what we consider to be . . . MR. WALDING: You have obtained this appraisal before it was sold? MR. HALLGRIMSON: Yes. MR. WALDING: Who would the appraisal have been done by? MR. HALLGRIMSON: lt would have been done by probably some local real estate person. MR. WALDING: Would you have received the appraised price or something close to it in mo of those cases? MR. HALLGRIMSON: I would say that we did, yes. MR.

WALDING: You didn't put any of these properties up for public bid? MR. HALLGRIMSON: Never, no, never at any time. The bulk of them were, I would say, sold probably 19 74 or 19 75. MR. WALDING: lt is rather interes ting. We were dealing with another public agency a few da ago who dealt with real estate sales in a quite different manner. I wanted to ask you about another building on the complex, a rather large building full of son very expensive machinery. I belie ve it was previously termed the James Bertram Building Company, wh atever it was. Can you give us an update on that?

Is any of that equipment bei1 used and if so, what is it being used for? Is it standing idle; is it rusting or is it being maintaine is it being depreciated or has it been written off? MR. HALLGRIMSON: If you will turn to

Schedule 7, there is a statement covering what we coL term the engineering division. This is what is known as the James Bertram Plant. We curren employ ... 1 think there are about 17 to 18 people in the plant. The sales figur es set out the which in dicate that over 50 percent of the work is done for other divisions, but there is some ott $246,000 work done for outside parties, being a total of $8 11 ,000.00. There was a cash loss thE of $13, 000 compared to $1 47,000.00. These are, as you can see, very modest figures.

The decisi was made that rather than to continue to mothball the whole opera tion, that we would try a operate it on a modest scale and util ize the machinery that was in it and this is what is being do1 lt is not in any way of course being operated in the manner in which it was conceived and wh was rather grandiose, I would suggest, a $10 million facility to manufacture paper machines. lt � rather ambitious and over the years there were attempts to try and in terest somebody in 1 operation of it, without any success, and so this is what is being currently done. lt is of cou' an excellent facility for the pulp and paper mill and the other divisions to have located there, I rather expensive.

MR. WALDING: I assume that this $800,000 of sales would be far below its capacity. Do you hi any estimate as to what percentage of capacity tha t would be? MR. HALLGRIMSON: I have no figur es but I'm sure that it would be considerably higher if work was obtainable. MR. WALDING: I notice that there is no depreciation on this page. Is that done separately 76

Public Utilities and Natural Resources Tuesday, April 17, 1979 this division, or has the cost been written off? MR. HALLGRIMSON: The cost would be in with the carried ... lt is carried in our depreciation figur es and on Page 2, the notes to the financial stat ements, it is indica ted that the machinery :>lant was valued at $500,000 on the basis of an estima ted useful value to the int egrated operations :J.t January 7, 19 71. So it was written down and is included, our deprecia tion, or our capital cost :>r whatever you want to term it, only incl udes the sum of $500,000 for that facility. The figur e on

Schedule 7 doesn't include any depre ciation. VIR. WALDING: If you can confirm just one last question, Mr. Chairman, can you confirm then hat the total accumulated deficit for ManFor has now topped the $10 0 milli on mark, $101 nill ion? VIR. HALLGRIMSON: The capital deficit? VIR. WALDING: Both, capital and operating - capital at $61 mil lion; operating deficit of almost )40 mill ion. III R. HALLGRIMSON: That's correct, if you include the operating deficit, yes. III R. WALDING: No further questions, Mr. Chairman. IIR. CHAIAN: I have three persons on the list: Mr. Doern, to be followed by Mr. Gour lay, and llr.

Hanuschak. Mr . Doern. IIR. DOERN: Mr. Chairman, when people are shopping nowadays in supermarkets and so on and :>cal gr ocery stores and convenience stores and so on, I guess they are confronted with three types 1f bags. There is sort of a cheap paper bag which is guaranteed to fall apart before you get out 1f the store.

There is a good quality bag, which I hope is yours, and then there is the plastic bags ihich are becoming ever increasingly more common for fruit and other produce and in some cases ou are getting a large plastic bag, more like a shopping bag from the downtown stores, that are 1eing used and so on.

I just wonder, at present, if you could give us any idea of what these bags ell for in terms of, if you get down to an individual bag iri an individual store, the larger type 1a t somebody carries gr oceries out of, I'm just wondering if you had any idea what that is worth, ne or two cents or five cents, or if there is a price available? •R. HALLGRIMSON: I think the cost for the average kraft paper bag, a good one, is three to :>ur cents a bag.

I think the cost, and I would exclude the inferior bag that you talk of - I'm ot sure which one that is - but plastic bags, I understand, cost approximately the same but it �qui res three plastic bags to carry the groceries that you can get into two paper bags. So the ost is about 50 percent more. You have hit on a point, there is no question about it. there seem :> be more of these plastic bags around undoubtedly and plastics have been a thr eat to this industry >r quite some time, in all aspects of the kraft paper industry. But the price of plastics of course influenced by the cost of oil, being a derivative.

IR. DOERN: What I am interested in is, over the past few years, I guess there was a time when 11 the smaller bags were paper and then they went to kind of a clear plastic and now they are 1to a kind of a cloudy plastic bag and as I say, these sor t of shopping bag type of things that re given away that I think most people don't like. They prefer a good quality paper bag.

But I as also wondering if, project ing into the future in the next decade or so, whether you are able 1 antic ipate further competition and encroachment into your market by this other type of product? mean, I don't know what is happening in the U.S., but for example, is a greater share of the 1arket now the larger plastic bag? For instance, your basic market, I assume, is a large paper 3.g and not small paper bags? R. HALLGRIMSON: That's right, we're not ... R. DOERN: You are making the large paper bag that most people carry their groceries out of e store in. R.

HALLGRIMSON: We make the weights, the so-called carry-out sack, what they call carry-out tcks. These are the heavier gr ades and that varies from 50 pounds to 70 pounds. You mentioned 77

Public Utilities and Natural Resources Tuesday, April 17, 1979 the U.S. Pla stics don't seem to be the th reat there as much as the y are here, for some reason They don't seem to be much of a factor but they are here to some extent and to answer you1 question, I guess it is something that could displa ce some of our market for these carry-out sacks But I would think that cost would be an inhib iting factor. MR. DOERN: So I assume you are watching this as a trend. I was also wondering whether yo1 have any alterna tive possibilities in terms of shifting into other qualities of paper or a di fferent typ1 of stock.

Do you have that abil ity or does it involve all sorts of expensive new capital equipm ent' Le t's say if the kraft paper market disint egrated or declined sign ificantly, can you shift you production into gl ossy papers or other papers, newsp ring, whatever, that would be salable and tha would keep the plant going? MR. HALLGRIMSON: Well, to shift into newsprint or glossy papers as you mentioned, to a differer type of paper, of course would involve a heavy capital expenditure. I should explain that all Ol product doesn't go into grocery bags.

The other use that it's put to is for heavier indu strial bag where there are a number of plys, and that's called multi-wall paper. So if there was a deterioratio in that market - I don't think it's ever going to disappear - but if there was a fall-off in th< particular use then we would probably try and develop more business in multi-wall. MR. DOERN: Not knowing much about the pulp and paper business or what goes in in terms 1 what comes out, are you li mited by the type of trees that you have to the end product, or is just a case of the machinery?

You can use any trees to make, say, pages for Maclean's magazin or does the type of product that you cut down limit the end use of what can be set ? MR. HALLGRIMSON: No, the wood up there could be used to make newsprint or pulp, or whatevE The quality of the wood is very good and there is nothing ... But it's the machinery that is di fferer And if you're at Pine Falls they make newsp rint; the y don't make kraft paper. MR.

DOERN: Can you tell us at this point in time, since we once had a magic figure of $10 0 milli1 to build this plant with the various problems associated with it, at this time how much has the tol Capital in vestment been in your opera tion, from start to 19 79; do you have that figure? MR. HALLGRIMSON: If you look at Statement 1 on the assets side, the land, building, machine1 roads, logging facilities and equipment are set up at $10 2,608,000.00. To that you would have add the Capital deficit of $61 million.

That is a figure which represents what was considered be the cost in excess of its fair market value, I guess. So that would be $16 3 million, total expend to date. And that would include interest from receiv ership up to the time that this company to over the assets in 19 73. MR. DOERN: So were there write-offs, then, for the pre-19 73 period and from now on whate' moneys are invested, in terms of Capital, will be paid back and paid off? MR.

HALLGRIMSON: Well, what we can do in the future, of course, will depend upon what c be done, but I would say in answer to your question about write-offs, that technically speak there was no write-off. That's why you have this Capital deficit effect. They issued shares for full amount of the amount that was expended by the MDC plus interest up the date that this comp< took it over. MR. · DOERN: So there is no recapitalization or new capitalization? MR. HALLGRIMSON: Well, they issued shares for $161 million, but we couldn't put that up an asset because it wasn't worth that at the time.

So that's why you have this $10 2 mil lion fig1 So it's in excess of $15 0 million. MR. DOERN: Is any of your product shipped through Hudson Bay? MR. HALLGRIMSON: No. MR. DOER : Have you ever tried to ship any through there? MR. HALLGRIMSON: Well, we have thought about it but the shipping season being what it would be kind of difficult to develop markets on the basis of sort of a one-shot shipment in 78

and August. Public Utilities and Natural Resources Tuesday, April 17, 1979 MR. DOERN: Of your foreign sales, is some of it shipped from here to Montr eal and then . ? MR. HALLGRIMSON: Montr eal and St. John, New Brunswick. MR. DOERN: Year around? lftR. HALLGRIMSON: Yes. III R. DOERN: That's continuous? III R. HALLGRIMSON: Yes. III R. DOERN: But you don't feel you could ship some of that through the Bay? III R. HALLGRIMSON: No, we ship it each month. �R. DOERN: Then why couldn't you ship a couple of boat loads out every summer from Hudson 3ay? IIR. HALLGRIMSON: Well, I guess you could.

You could make those maybe one or two shipm ents; don't know, depending on the size of the boat. IIR. DOERN: Well, can you give us an idea of what a monthly shipment might be to Europe or :ngland? IIR. HALLGRIMSON: lt would be around 1,10 0 or 1, 200 tons. That's not a boat load, you know. :'s not a substantial load. �R. DOERN: Well, Mr.

Chairman, I just redi rect that to the Min ister and say to the Mi nister that assume that one of the objectives of any Manitoba government is to util ize the Port of Churchill nd that I would ask him to carefully examine that possibility of making a number of shipments uring that short and all too short shipping season with a view to encouraging the util ization of 1e Port, which benefits the people in the area and the people of the province because just in iscussing this briefly with Mr . Hallgrimson I don't think it's out of the question.

We would have J have the economics but certainly the government should also attempt to utilize that Port, and 1is seems like a logic al place in which to do something new or to break some new ground. So I would ask the Min ister if he would consider that and look into that. IR. CHAIRMAN: Mr. McGill. JR. McGILL: Mr . Chairman, the question of utili zation of the Port of Churchill is one, of course, 1at is of int erest to the gov ernment. There may well be some technical problems in the handling f this particular product at the Port.

My general knowledge of Churchill operations would ind icate 1 me that it's pretty well geared to the handling of grain and that the volume of other products hich are going through by way of outbound shipping is relatively small. If some impr ovement could e made in that dir ection, certainly it would add to the value of our Port and to the general revenues btained from that sort. R. DOERN: My final question to the Chairman is concerning their operation with energy mservat ion. I think they're rather proud of their endeavour here using bark and sawdust to replace I.

I'm just wondering if you could give us some general figu res of how much you have inv ested Capital equipment and how soon you will pay this off. And also whether you intend to do anything rther here, whether there is any expansion of burning some of your waste product to generate ectricity or steam. R. HALLGRIMSON: Yes, Mr. Doern. There are two phases to this project, one of which has been •mpleted, and it was at a Capital cost of $5 11 ,000.00. Phase Two hasn't been comp leted but 11 further imp rove our ability to burn hog fuel, and that is at a cost of $223,000, making a total oject cost of $734,000.00.

Phase One was completed late last year, permitting hog fuel to be 79

Public Utilities and Natural Resources Tuesday, April 17, 1979 fired since December 24th, 19 78. Phase Two is scheduled for completion in the early summer of 19 79. When complete, it i� expected that this system will displa ce consumption of 1. 6 mil lion Imperial gallons of Bunker "C' with 40,000 tons of hog fuel. After netting out the cost of each and taking into consideration additional costs of opera tin{ the system, savings in the order of $1 10 ,000 in the first year are expected .

They will in crease ir future years since, according to our resea rch, Bunker "C" prices will be rising faster than will ou costs of hog fuel and system operations. We expect the project to pay for itself in 3-% years. MR. DOERN: You said 1. 6 mil lion gallons of Bunker "C". Is that per year? MR. HALLGRIMSON: Yes. MR. DOERN: Thank you, Mr . Chairman. MR. CHAIRMAN: Mr. Gour lay. MR. GOURLAY: Thank you, Mr. Chairman. A question to Mr. Hallgrimson.

I think you mentione, earlier that some saw logs had been del ivered to The Pas from the Duck Mountain area and I wa just wondering about the possibility of raw materials coming out of the Porcupine area to The Pa: or is that raw material scheduled to go to other markets? MR. HALLGRIMSON: Yes, I did mention this. I don't think we have anything coming out of th Porcupines at the present, nor do we have any intention of devel oping that. I think that particul� area most of the forestry rights have been given to other ind ividuals. MR. GOURLAY: That's all I had, Mr . Chairman. MR. CHAIRMAN: Mr . Hanuschak, then Mr .

Minaker. MR. HANUSCHAK: Mr . Chairman, who is the insu rer of ManFor's properties? MR. HALLGRIMSON: We have a broker by the name of Marsh McLennan who effects our insuranc and it's held by various companies, including ... Lloyd's of London in fact carry some of it. . I can't even remember the companies. There has been a number of companies. MR. HANUSCHAK: Does the Manitoba Public Insur ance Corporation carry any insur ance? MR. HALLGRIMSON: Yes, they have. They don't sell any insur ance, except of course on real esta and 1 think they have the insurance on the real estate. MR. HANUSCHAK: I see. Thank you. MR.

HALLGRIMSON: Oh, here I have a ... There is Lloyd 's, Commonwealt h, Si mcoe and Er Allanda le, Royal, Canadian Indemnity, MPIC for our trucks and trailers, etc., and also for real estal So there are a number of companies and this is done by our brokers going out and getting quot from time to time on a competitive basis. We, of course, have quite extensive premiums pay. MR. HANUSCHAK: Now, you say that MPIC has the real estate insur ance. Does that include real estate, the plant building or just the residential ? MR. HALLGRIMSON: Just the residential. MR. HANUSCHAK: I see. MR.

CHAIRMAN: Can 1 go on to another person? Mr. Mi naker. MR. MINAKER: Mr. Chairman, just a few questions. One, what is the greater capacity of the plc Mr. Hallgrimson, in terms of tons of paper? MR. HALLGRIMSON: Well, when it was built the rate of capacity was 350 tons, but, as you kn1 80

Public Utilities and Natural Resources Tuesday, April 17, 1979 ; you refine the procedu res and also impr ove certain systems you very often exceed that and 3 are now at a stage of producing 380 tons per day, which comes out to roughly 12 8,000 tons year. R. MINAKER: Mr. Chairman, there is usually a rule of thumb of how much a plant would cost build in the present day on a ton basis. With that kind of capacity, what would it cost to build new plant like that? Do you know offhand, sir, roughly what it would cost? R. HALLGRIMSON: Well, when it was built it was about $10 0,000 and now I think it's around ,00,000.00.

R. MINAKER: $300,000.00. �- HALLGRIMSON: Yes. �- MINAKER: You say it's $300,000 for a ton . t HALLGRIMSON: Yes. t MINAKER: To build a plant. t HALLGRIMSON: Yes. t. MINAKER: Thanks very much. t. CHAIRMAN: Can we adopt the report? The report as adopted. (Agreed) Committee rise. 81

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Collection	Manitoba — Debates (Hansard)
Citation	31-3-pu3
Type	hansard
Volume / chapter	31st 3rd hansardpdf pu3.pdf
Language	en
Format	pdf
Source	PROVINCIAL
Identifier	41f9b4ec28295cb1eda647488b2131ed17d290e9

Source file is stored in the law ingest library (pdf).