1992 Legislative Session: 1st Session, 35th Parliament

HANSARD

The following electronic version is for informational purposes only.

The printed version remains the official version.

Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)

MONDAY, MAY 11, 1992

Afternoon Sitting

Volume 3, Number 1

[ Page 1393 ]

The House met at 2:06 p.m.

Prayers.

A. Cowie: Today in the House we have 25 students from St. George's and their teacher Catherine Mori. St. George's is in Kerrisdale, in my riding. I would ask you to welcome them.

Hon. A. Edwards: I would like the members of the Legislature today to join with me in welcoming the Hon. James Downey, who is the Minister of Energy and Mines and of Northern Affairs and of Native Affairs in Manitoba. With him is his special assistant, Jim Berry. Please join me in making them welcome.

D. Streifel: It is my pleasure today to introduce to the House 13 students from Cade Bar and Nicomen Island schools in Mission. These students are on an alternate program. They are accompanied by Gillian Feenstra, Sherry Jost and Charles Weber. I bid the House make them welcome.

Hon. R. Blencoe: Visiting the House this afternoon are senior representatives of the Commonwealth Games. As members are aware, Victoria, on behalf of British Columbia and all of Canada, will be hosting the fifteenth Commonwealth Games in August of 1994. We are only 829 days away. Today, as part of our preparations this week, we are delighted to recognize key people from the Commonwealth Games Federation. They will be meeting with officials of the Victoria Commonwealth Games Society and all three levels of government. In the galleries this afternoon we have Mr.

Arnaldo de O.Sales of Hong Kong, chairman of the Commonwealth Games Federation. We have Mr. Sharad Rao of the Netherlands, honorary legal adviser to the federation, Dr. Ivor Dent, who is vice-president for the Americas and for the federation, and Mr. Barry Nye of Toronto, president of the Commonwealth Games Association of Canada. I ask all members to join me in welcoming them to the chamber today.

P. Dueck: It is my pleasure to introduce about 90 grade 11 students. I'm not sure whether they're here at this time or whether they will be in the galleries later on this afternoon. They are from the MEI in my constituency. They will be accompanied by Mr. Reimer, their teacher. Would the House please join me in welcoming these students.

B. Simpson: I am delighted this afternoon to welcome students from Sir Charles Tupper Secondary School. They're under the directorship of Miss Bryce, their teacher. I ask the House to join me in giving them a warm welcome.

Hon. A. Hagen: Hon. Speaker, it gives me great pleasure to introduce to the House members of your riding and very good friends of mine, Joanne and Don Manley, who are visiting us today.

D. Mitchell: Hon. Speaker, my colleague the member for Vancouver-Quilchena earlier welcomed the group from St. George's School that's here today. I'm going to meet with the class later this afternoon; I'm looking forward to doing that. In particular, one member of the class is a constituent of mine and also a friend. I'd like to ask the House to welcome Taleeb Noormohamed.

In addition, while I'm on my feet, if I could also welcome another very good friend of mine who is visiting the House today. In the gallery, from the great community of Squamish, is Mr. Don Cochrane. Could the House welcome both these individuals today.

F. Garden: Visiting in the gallery is a very important member of my constituency of Cariboo North, Dr. John Havens, of Quesnel. He has been a doctor in our community for almost three decades. He and his wife, Dorany, are very active in the Quesnel Environmental Society. I ask the House to welcome them today.

C. Serwa: Hon. Speaker, I'm pleased to make an introduction on behalf of my colleague from Peace River North. Joining us today in the House is a group of students and teachers who have travelled the furthest. They are from the Toad River School, Mile 422 on the Alaska Highway. The students are accompanied by teachers Tom Fulton and Gary Reichl. They are here to tell us about the celebration of the fiftieth anniversary of the construction of the Alaska Highway. Would the House please make this group welcome.

M. Farnworth: Hon. Speaker, it gives me great pleasure to introduce a number of students from my former junior secondary, Mary Hill Junior Secondary. They are accompanied by their teacher Mr. Sawkins. They are watching in the gallery. I'd ask the House to please make them welcome.

Introduction of Bills

PETROLEUM AND NATURAL GAS

AMENDMENT ACT, 1992

Hon. A. Edwards presented a message from His Honour the Administrator: a bill intituled Petroleum and Natural Gas Amendment Act, 1992.

Hon. A. Edwards: It's my pleasure to put before the Legislature today this bill, which proposes minor administrative amendments to the Petroleum and Natural Gas Act. Specifically, the amendments are intended to clarify the taxation treatment for petroleum development roads, to simplify the administration of Crown royalty collections and interest calculations and to enable the Crown to make regulations governing the proper abandonment of oil and gas wells and the restoration of well sites.

I move the bill be introduced and read a first time now.

[ Page 1394 ]

Bill 39 introduced, read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.

[2:15]

WASTE MANAGEMENT

AMENDMENT ACT, 1992

Hon. J. Cashore presented a message from His Honour the Lieutenant-Governor: a bill intituled Waste Management Amendment Act, 1992.

Hon. J. Cashore: This bill amends the Waste Management Act that came into force in 1982. It refines the act to ensure that it provides a more comprehensive framework for protecting the environment. The bill is a result of discussions with a wide range of groups. These consultations have identified necessary improvements and corrections to the Waste Management Act. The amendments reflect this government's commitment to improved and strengthened environmental standards. I commend this bill for your consideration and urge its passage.

I move that the bill be introduced and read a first time now.

Bill 29 introduced, read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.

Oral Questions

REDUCTION IN FOREST HARVEST

W. Hurd: A question today for the Minister of Forests. Last week the outgoing chairman of the Forest Resources Commission predicted inevitable reductions of almost 46 percent in the forest harvests in this province. Can the minister tell the people of the province by what percentage his ministry has reduced the harvest already, and how far they have to go?

Hon. D. Miller: I would point out that Mr. Peel, in responding to the

article in the Sun, claimed that the

article was misleading. I guess if it was, there's a lesson there about talking to journalists about some of these issues. Mr. Peel was also quoted in the Times-Colonist of Saturday, March 14: "The forest industry should be allowed to cut more trees, not fewer, the chairman of the B.C. Forest Resources Commission said Friday."

The difficulty we have in some of the Forests debates is that information -- and it's fine to hypothesize about some of these things -- that is taken as gospel and is misleading makes it very difficult to have an intelligent debate.

The answer to the member's question is that there is no target with respect to the annual allowable harvest in this province. As the Forests critic, the member should be aware of the process. If he's not, we have offered him a briefing with the chief forester. Annual allowable harvests are determined....

The Speaker: Could you wind up your comments, minister.

Hon. D. Miller: Well, the member asked me about the establishment of the annual allowable cut for the province, hon. Speaker, and I was just about to explain how that is arrived at. That was the specific question that the member asked me.

The annual allowable harvest in this province is determined on a planning-unit basis -- timber supply area or tree-farm licence. It is the responsibility of the chief forester to establish that annual harvest level after examining all the factors that would contribute to it, including the nature of the area, the age-class distribution of the standing timber on the area, the classification of soils, and any constraints that might exist for wildlife or for other aesthetic reasons. At the end of the day, having done that work, the chief forester establishes an annual allowable harvest.

The Speaker: Thank you, hon. minister.

Hon. D. Miller: There is no magic number. You don't work from the number backwards.

W. Hurd: The minister hasn't answered the question. We asked him how much he intends to reduce the harvest in this province.

Perhaps he's got some comments on job statistics. The industry has provided us with the statistics of 39,000 jobs lost across the province, with a 15 percent reduction in the provincial harvest. Since this government will soon be presiding over more job losses than the number of trees, what revenue loss projections and job loss predictions is his ministry making for the forest industry in this province?

Hon. D. Miller: I can tell the Liberal Forest critic that if his party were in power, there would be no jobs. I will quote a letter from the Liberal Environment critic, which says: "There should be no logging in ancient forests in British Columbia." The Liberal Party would shut down 90 percent of the forest activity in this province if the Liberal Environment critic's policy held sway in the Liberal benches. I've never been able to figure out whether that's their official policy or whether it's the policy of the Liberal critic. I don't know what the policy of the Forest critic is.

The Speaker: A final supplemental.

W. Hurd: It appears that we have no hope for statistics from the Minister of Forests, so a supplemental to the Minister of Finance -- minister of defence. With mining hitting a brick wall in this province and with forestry job losses destined to triple, my question -- since the Minister of Forests can't answer it -- is about revenues, upwards of $1.5 billion in lost revenues. How can the minister boldly predict a 3 percent growth rate in the provincial economy when two industries, which generate $15 billion in exports, are in full retreat? Who is going to pay the taxes in his budget, and where is this 3 percent rate of growth going to come from?

[ Page 1395 ]

Hon. G. Clark: Unlike the Liberal Party, we believe there's a future for the forest industry in British Columbia. We don't believe it's a sunset industry. We believe that we can in fact create more jobs and generate more wealth by being prudent managers of the Crown resource, and we intend to do that.

KEMANO 2 PROJECT

L. Fox: My question is to the Minister of Environment, Lands and Parks. The minister will be aware that on Friday a federal court of appeal overturned an earlier decision which would have allowed the Kemano 2 project to proceed. Given that the original agreement was signed in 1950, and in light of the assurances given by the Premier when he was opposition leader and yourself recently in a meeting in Price George, as well as the election promises of the members for Prince George-Mount Robson and Prince George North, can the minister tell this House and the people of the Nechako Valley what this government's position is with respect to this project?

Hon. J. Cashore: This government stands by its commitments. The fact is that the court decision came down at 7 a.m. on Friday morning. We have been in close consultation with our legal advisers in government, and we're also in the process of consulting with the various parties involved in this situation: those who are the subject of the appeal and those who were bringing the appeal to bear. As well, we are in consultation with people along the river and the native people. The type of review that will follow is subject to the discussions that will take place, and is pending a further announcement from government.

L. Fox: The minister is well aware that the issue is much more pertinent on the east end of the river than it is to the west. Can the minister assure me and the residents of the Nechako Valley area that their concerns will be given a higher priority than those of the unions in Kemano, who are concerned about their jobs?

Hon. J. Cashore: The concerns east and west are of importance. I don't think the hon. member should be getting into a divide-and-conquer approach on this simply because that's where his riding happens to be. I'm aware that when this hon. member was the mayor, he took a totally opposite position to the one that he's taking now. This is not the type of a situation where it's good leadership in the province to try to panic into putting forward a process on this that is not the best process. It behooves government to do its consultation properly and to come out with the best possible way of dealing with a most difficult situation.

The Speaker: Final supplemental, hon. member.

L. Fox: If the minister had done his homework, he would have found that the statement he made with respect to my position while I was the mayor of the community is incorrect. However, aside from that, is the minister now prepared to stop the delay with respect to dealing with the water problems in Fort Fraser and thereby live up to an earlier agreement made by government and particularly his ministry to supply that community with water -- as well as the program to institute the much-needed improvement to the sewer effluents entering the Nechako from the district of Vanderhoof?

Hon. J. Cashore: If this member had done his homework, he would know that I made a major announcement with regard to water policy in this province on Friday. We're moving with dispatch to address a number of issues that have to do with water quality and sewage treatment. I would suggest that this member do his homework and inform himself with regard to the important initiatives we are taking. I would be glad to meet with this member to deal with the specifics of the particular situation he's dealing with here. If this minister would like to meet with me in my office with staff, I'd be glad to arrange that.

MINING INDUSTRY

D. Jarvis: To the Minister of Energy and Mines. Windy Craggy is under environmental review. The Tatshenshini is under a parks review. The entire province is under an energy policy review. Do these measures, in your opinion, speed up and simplify the mine development process?

Hon. A. Edwards: It's a pleasure to answer the member's question. Our approach to policy is to involve the people of the province and to make sure that they have the opportunity to have a say about the resources that belong to them. We are very pleased that you are suggesting and noticing that we are doing reviews and approaching policy in a broad, general, inclusive sense.

D. Jarvis: I take it from the circular answer that the minister means no. On March 14 the Premier promised to speed up and simplify the mine development review process: "My government will encourage mine development and the jobs it generates." Does the minister disagree with the Premier, or has she done something that we don't know anything about?

Hon. A. Edwards: I try not to do anything you don't know about, sir. I certainly would respond that the Premier is right. We believe that mining is a very vibrant industry, that it's going to continue in British Columbia and that it's going to be important to the economy. We are following our promise and the Premier's promise to deal with the process of review of mine developments.

We had one of the members circulating in the province with our proposal for assessment -- a new process of assessment that will unify the activity that goes on; that will speed it up, we hope; that will be sure to see that the people of the province have their say; and that will co-ordinate it with the federal process. I hope the member will participate in that process.

[ Page 1396 ]

D. Jarvis: Again to the Minister of Energy and Mines. Since taking office, this government has watched mines close, investments disappear and entire towns begin to dry up and evaporate, and in every situation your government's response has been to commission another study. Does the government have any direction of its own, or are they studying that question as well?

Hon. A. Edwards: We study a lot of things over here, but we act as quickly as possible. When we decide to make a move, however....

Interjections.

The Speaker: Order, hon. members. I cannot hear the hon. member's answer.

Hon. A. Edwards: When we do decide to make a move, of course, the Liberals frequently are willing to delay that all for six months. They've already put in two hoist motions which would cause considerable delay and more study for issues that we've studied a lot.

I would like to suggest that there's no way this government is able to influence what happens on the world commodities market, and that is one of the major problems for the mining industry today.

[2:30]

TATSHENSHINI WILDERNESS AREA

G. Farrell-Collins: A question for the Minister of Environment. The opposition notes that the Tatshenshini wilderness area is now tied up for three years in a parks study. Will this latest study be independent of the mine development assessment review process? Will it also be independent of Stephen Owen's Commission on Resources and Environment, which were both announced earlier this year?

Hon. J. Cashore: What the opposition fails to recognize is the masterful job this government has done in putting forward processes that dovetail beautifully.

G. Farrell-Collins: I'm sure the doctors and teachers of this province are thrilled with the dovetailing of this government.

Supplementary to the Minister of Energy, Mines and Petroleum Resources. Is she confident that the mining companies will hang in there for an additional three years while overlapping studies on the Tatshenshini limp to a conclusion with three different timetables?

Hon. A. Edwards: We are sure that we are addressing the very difficult issue of the Windy Craggy mine and the Tatshenshini proposals in the most effective manner possible.

Ministerial Statement

NOVA SCOTIA MINE DISASTER

Hon. A. Edwards: I rise to ask the House to join me in expressing sympathy and condolences to all those who feel the loss of 11 lives in the Nova Scotia mine disaster. We feel this even more acutely in light of a slide in B.C.'s Greenhills mine earlier today in which a life may have been lost.

I therefore propose to send a telegram to the Mines minister of Nova Scotia and the mayor of Plymouth as follows:

"We share your sorrow at the loss of 11 lives in the Westray mine disaster and pray that you will reach the other 15 while they are still alive. Please extend the sympathy of the people of British Columbia to the families of the miners involved. Our hopes are with you, as is our respect for those who deal daily with such risks."

D. Jarvis: We in the Liberal party also wish to express our sorrow over the death of the 11 miners in Nova Scotia. We can only hope with all of you that the remaining 15 will be reached successfully.

C. Serwa: What makes this message so particularly meaningful is that the mining industry has played a significant role in the province of British Columbia. Mining disasters, both in hardrock mines and in coal-mines throughout the province of British Columbia, are part of our history. The methane gas generated from coal-mines, which is what caused the explosion, has affected the minister's area, the Crowsnest Pass area -- Fernie, Natal, Middle Town, Michel -- and the Vancouver Island areas of Ladysmith and Nanaimo.

When the message is sent -- and we support that message; we share in the sorrow and the grief -- the understanding is there, because it has been a major and significant part of the early history of British Columbia.

Hon. G. Clark: Hon. Speaker, perhaps by leave I might ask that you convey on behalf of all members of the House the sentiments expressed by all three parties today.

The Speaker: If it's your wish, I will be pleased to do so, hon. members.

D. Mitchell: On a point of order, hon. Speaker. It is with respect to the management of the order paper of this Legislative Assembly. In particular I would refer to the written questions on the order paper, questions 1 to 32.

In this House we are now well into the estimates process -- the review of spending estimates of the government which were tabled along with the provincial budget. We are making progress, but the progress has been limited. We have not had answers, despite repeated statements of the government that we can expect answers in due process. We have not had answers to any of the questions, questions 1 to 32, on the order paper.

I would point out that if this government wishes to save itself some wear and tear, it could answer the questions on the order paper and avoid getting into a lot more serious trouble. So, hon. Speaker, I appeal to you. Our duties and responsibilities as elected members are being impeded by the fact that this government, which claims to be an open government, is refusing to answer these questions. I appeal to the Speaker to give

[ Page 1397 ]

some guidance to the House -- in particular to the government members of this House -- with respect to the traditions and practices of answering questions when they are placed on the order paper.

The Speaker: It may not be a point of order, but I will allow a comment on it from the government House Leader.

Hon. G. Clark: I was simply going to say that it is not a point of order. Because of the rules of this House, of course, I couldn't interrupt a point of order with another point of order, or I certainly would have done so. All members know that questions on the order paper.... You have question period when you can ask similar questions, or ask when they would be answered. It is certainly not a point of order to raise it at this time.

Orders of the Day

Hon. G. Clark: Hon. Speaker, I call Committee of Supply, both sections.

The House in Committee of Supply B; E. Barnes in the chair.

ESTIMATES: MINISTRY OF FORESTS

On vote 41: minister's office, $377,000.

Hon. D. Miller: To assist me in answering as completely as possible questions from the members opposite, I would like to introduce my deputy, Mr. Phil Halkett, and from my financial branch, Mr. John Dowler.

Just to open and sort of put some cast on these estimates, I have just a few introductory remarks. The estimates for the Forest Service are comprised of four votes, 41, 42, 43 and 44: 41 for the operation of my office; 42 for the administration and delivery of Forest Service programs; 43 for the operation of fire suppression in our forests; and 44 to allow the Forest Resources Commission to complete its final task.

The expenditure request for the Forest Service in those combined votes is $530 million. When combined with special account expenditures, the overall total is $624 million. Revenues for this fiscal year, on the other hand, are forecast to be $665 million.

The forests represent more than the source of timber that drives the heart of our economy and creates some 200,000 jobs in British Columbia. Today we view our forests as watersheds, habitat for fish and wildlife, forage for our ranching industry and an essential scenic backdrop valued by visitors and residents alike. Today we are entering an age of limits. Our natural resources, although still substantial, are not as endless as we once thought. Population growth, along with new values and expectations, are requiring us to harmonize seemingly contradictory forest uses.

As my colleague the Minister of Finance has pointed out, British Columbia also has its fiscal limits. Simply put, spending more money is not in itself the answer to the challenges facing us; we have to work smarter with the resources we already have. Only by doing that can we deliver on the forest management commitments we have made to British Columbians.

In preparing this budget, we have carefully reviewed and reset our forest priorities with these natural and fiscal limits as our guide. Our government is committed to fair, balanced and open forest management that builds on trust and creates less conflict. These estimates provide the means to make good on our commitments by creating a better balance of economic and environmental values through public involvement and consensus-building, by doing a better job of ensuring that our forest practices are economically and ecologically sustainable, by getting the Forest Service back into the woods, by being fair with our aboriginal peoples and by getting more value in jobs from our resource.

We have established the Commission on Resources and Environment to begin a process that will lead to a better balance between the economy and the environment. The government intends to move beyond valley-by-valley conflicts. With public input, we intend to reach a consensus on how and for what values our forests should be managed. Our goal is to balance preservation of our environmental heritage with the need for stable forest communities that are home to many thousands of British Columbians.

Let me assure the people of British Columbia that the Forest Service stands foursquare behind the commission. Cabinet has already acted on recommendations from the Forest Service and has redirected timber-harvesting in some areas to allow Mr. Owen time to begin his difficult task.

We are moving forward on several fronts to improve the way we manage forests. Most importantly, I am committed to ensuring our harvest levels are sustainable. To assist in that important objective, we will be conducting a provincial review of timber supply between now and the end of 1994. This review will provide the chief forester with more appropriate information for ensuring the sustainability of allowable annual cuts.

With my colleague the Minister of Environment, Lands and Parks and other resource ministries, an extra $10 million will be spent on updating our inventories to ensure they reflect all forest values and effectively support land use planning. These new inventories are essential to help us review harvest levels.

This government is also committed to developing a forest practices code. The objective of the code is to ensure that the management of our forests is based on sound ecological practices. It achieves the high standards we expect for stewardship. The Forest Resources Commission will soon be making recommendations to me on the framework of a code. The Forest Service staff will prepare the technical aspects and guidelines that will form the code.

We also need to set better targets for the renewal of our economically valuable forests. Thousands of families in hundreds of communities are dependent on our forests. Their long-term future depends on effective forest renewal. We will ensure that private sector

[ Page 1398 ]

reforestation obligations are met, and will not allow haste to make waste in our reforestation efforts. We have deferred some silvicultural objectives while our inventories are updated and our reforestation goals better identified. This government intends to take careful aim before it starts spending precious taxpayers' dollars. We will renew the forests, but in a cost-effective manner.

It also pleases me to see our new Natural Resource Community Fund bring a stable source of funding to deal with problems facing resource-dependent communities. I know that this initiative will be welcomed by communities facing difficulty from the high dollar and weak commodity prices.

[2:45]

These estimates will ensure that my staff get more mud on their boots. The Forest Service will make 150 percent more inspections this year than in 1989-90 in all phases of forest management, from planning the harvest through to ensuring effective reforestation. Not only will they do more monitoring, but they will also begin to enforce the high standards of forest management our government is setting. This reflects a commitment I made to my staff: I will let them do their jobs, and thereby restore the morale of and public trust in the Forest Service.

We are taking steps to better involve aboriginal people, who have for too long been largely ignored in forest management. The Forest Service is looking at new and creative ways to involve aboriginal people in forest planning and management, and ensure that they gain meaningful employment opportunities. As well, we are committed to getting more value from our resources. To that end, we are reviewing various resource fees. We have also reduced the risk of revenue loss in marking, scaling and log movements through tighter controls.

We must move the forest sector away from a focus on commodity production to value added. We will ensure the small business forest enterprise program works to its potential. My colleague the Minister of Economic Development, Small Business and Trade and others will identify markets, products and processes that can provide opportunities in Far Eastern markets and elsewhere to our small business enterprises. The Forest Service will then provide the wood.

We, as you know, are now faced with a serious trade threat in the form of the U.S.-initiated countervail action against Canadian and British Columbia softwood lumber exports. This interim measure, finding a subsidy of some 14.48 percent, threatens our wood-processing industries. Along with other provinces, the federal government and industry, we will fight and persevere against this unfair American action.

[M. Lord in the chair.]

We are indeed in the midst of change. Our challenge is to recognize the limits of our resources and economy, and start doing a better job of managing our forests. We must work together to create a proper balance of forest uses that recognizes the diverse demands of today and respects tomorrow's needs. We must restore the public's trust, and we must balance jobs in our forests with preservation. There are no easy answers to these complex forest challenges. We all know that there are some hard choices ahead. How we make those choices is critical. They cannot be made in the back room by a select few.

Choices this critical must be made collectively, using the best information and involvement processes we can muster. I am under no illusion that the Forest Service can do the job alone. That is why we are working actively with other ministries, with agencies such as CORE and with the public.

The initiatives that I've outlined here today form the basic building blocks for renewed forest management in British Columbia. With that, I'd be happy to try to answer any questions that members may have.

W. Hurd: In response to the opening statement on estimates from the Minister of Forests, certainly the opposition is impressed with some aspects of the budget. Certainly the commitment to inventory is welcomed as being a matter of great concern to the people of the province. But it's also important for us, as we prepare for these estimates, to consider some of the issues in the Forests ministry over the past four or five months. We've seen significant reductions in the annual allowable cut. We've seen concern expressed about continued employment in this industry.

We've had expressions of concern by companies in the industry about security of access to timber. In light of some of these issues that we intend to explore in the estimates, it's important for us to consider where the industry is going in this province and how it will be able to fit into the new realities announced by the minister.

It's also interesting to note that in assessing the state of the forest industry, we also have the benefit of the Peat Marwick Thorne review, which had a great deal to say about the management of resources in this province. In some of its findings and conclusions, the report talks about the inadequate information that the ministry has been working on and the fact that we have experienced difficulty in fully implementing integrated resource management. We've exposed ourselves to criticism from the public over policies and actions.

I think the report of the Forest Resources Commission echoes some of these sentiments. The Peel report states that: "Sadly, the state of renewable forest resource inventories in this province is inconsistent at best and woefully inadequate at worst." After reviewing the inventory data, the commission concluded that data on stand dynamics and growth rates is woefully inadequate indeed. As a result, reliable computer projections about the future timber yields in these forests cannot be generated.

When one considers the hundreds of millions of dollars spent annually on forest renewal, this failure to provide reliable growth and yield projections is quite disturbing. The FRC report goes on to state that "the commission believes that the current state of inventory information is a disgrace, given the importance of all renewable forest resources to the people of British Columbia. It is imperative that inventory deficiencies be addressed as quickly as possible." The Peat Marwick report essentially says the same thing, but goes further in explicitly stating that the

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province will have to incur additional costs to develop adequate resource inventory.

Given the massive onslaught directed at the state of our province's inventories not only by the Forest Resources Commission but also by the Peat Marwick report, my first question to the ministry is: what impact does the decreasing of the Ministry of Forests inventory budget by $0.5 million plus inflation have when even the Peat Marwick report recognizes that additional funds will have to be directed towards developing inventory information? Can he advise us what percentage of the $10 million corporate initiatives or sustainable development fund will be available to the ministry immediately, given the rather urgent state of inventory in this province?

Hon. D. Miller: The member raised some very interesting points in his comments, and I realize he closed with a specific question relative to inventory. It clearly is a very important topic. I just want to make a few remarks before I get to the specific....

With respect to just the timber inventory itself on a provincial basis, I think it's been acknowledged that there's a reasonable degree of accuracy with respect to that inventory. Where we have more difficulty -- and I think this was pointed out fairly well in testimony to the Forest Resources Commission two years ago -- is in terms of the inventory as it applies to a much smaller area. I might add that when you start to deal with the smaller local areas, you also encounter more difficulties when you deal with those other values that we plan for in this ministry and that we think are very important.

I've talked about some of them in the past -- the values such as wildlife and maintaining habitat and biological diversity; planning for, for example, fisheries values; the aesthetic values that people hold so dear in this province; the need to ensure that sufficient areas are set aside in one status or another so that their unique qualities are preserved, often for scientific reasons, but sometimes really for aesthetic or recreational reasons. The lack of information in terms of that specific inventory has been acknowledged in the past.

We have moved, despite the reduction that you've noted, to combine with the Ministry of Environment, Lands and Parks to equally share that $10 million to get on with more of that inventory work. Clearly, if you accept the premise -- and I hope members are clear in understanding -- that the basis for forest land management planning in this ministry is to plan for all of those values, it is entirely compatible and makes a lot of sense to have the Ministry of Environment as equal stakeholders in that inventory process, so that we're not just looking a timber, but at those other areas as well.

The short answer to your specific question is: we have allocated an additional $10 million this year to be split between our two ministries to do some of that very vital inventory work.

W. Hurd: A question about inventories, then. My understanding is that the most deficient data is on timber supply areas in the province, and that the state of inventory on tree-farm licences is somewhat further advanced. Some would argue that we actually have a fairly good handle on what's available on tree-farm licences in this province. In light of that information, I'm just a little confused as to why earlier this year we had such a drastic reduction in annual allowable cuts that affected tree-farm licences on the Island.

Was that the result of areas that were taken out of the TFLs in the past few years, or is it a case of the licence-holders not managing the cut appropriately? What specifically did the ministry identify as being the reasons why the TFLs on the Island were subject to such dramatic reviews? And is there anything in the estimates from the ministry that would allow us to assume that there is going to be some analysis of TFLs as far as inventory is concerned as well as the timber supply areas?

Hon. D. Miller: I want to try to respond to the question on a broader basis and then come to the particular. There has been forest management in British Columbia for a very long time. If you go back perhaps 50 years, I suspect there may have been some acknowledgement that we were not in such bad shape as we appear to be today. But in establishing the management regime at that point -- some 50 or 60 years ago, or maybe even longer -- there were certain premises accepted as fundamental and, in fact, at the time viewed as being very progressive.

I'm sure the member is aware that forest policy in this province has been established generally following a major royal commission: the Fulton commission -- I think it was in 1910 -- the two Sloan commissions and the Pearse commission. Nonetheless we started out with an acknowledged system of forest land management planning which at its basic level said: here is the forest we have available to us, and we should harvest that forest on a sustainable basis -- in other words, over the rotation periods, which vary depending on where you are in the province.

We should, at the end of the first harvest, then move into the second harvest or the harvest of the second growth. That's why when you look at any reports dealing with forestry, you will see two numbers: the annual allowable cut and the long-run sustained yield, which was established based on the premise that I've outlined.

But things have changed. We got about halfway down the road when things changed, and we discovered that we had not built in the flexibility to allow us to deal with a range of issues which, in some cases, had not even been thought of, such as the overwhelming demand we face today -- I guess you could characterize it as changing societal values -- for more parks and wilderness to be set aside.

There are scientific arguments -- and I really respect them -- that suggest an appropriate amount of our old-growth ecosystem needs to be set aside, so that we can study those areas in terms of their biological diversity and learn from them about how the forests grow and what's contained within them. There is the need now to do far more than we did in the past with respect to the issues of wildlife, so that we have to manage the forest land base to allow those wildlife habitats to remain intact and so we don't have a serious negative impact on them.

So there is a full range of issues that were not factored in at the beginning -- with all due respect to

[ Page 1400 ]

those pioneers who thought it was important to establish a scientific basis upon which forestry was practised. That, as any student knows, came from some of the European foresters who came to North America and made such a contribution to the development of forest management in North America.

[3:00]

The real difficulty we're having now is that, having embarked on a management regime in the first instance, we've had to make some serious readjustments to accommodate for these new issues. In the main, where you see a fairly significant reduction in annual allowable cut, it is because these new factors are now being put into the equation to determine those cuts. It's very difficult to speak to every particular supply unit, whether it be a timber supply area managed by the Crown or a tree-farm licence managed by the licensee, which requires the chief forester to approve the management working plan and thereby establish the annual harvest.

I think the majority of the conflict we're seeing in the province is because we're having to make these kinds of changes. Naturally enough -- and overshadowing all of that -- we have developed a forest industry in the province that has certain requirements, and as we make these adjustments, it's obviously having an impact. If we didn't make a single change, I think we would still be going through some very difficult times. If you look just at the issue of current allowable harvest versus current industrial capacity, you can see there is a significant gap between the two.

So in terms of TFL 46, the 29 to 30 percent reduction had to do with the factors that I talked about and the fact that the Forest Service has introduced, over the years, new regulations that we think are important. As I said, some of those have to do with wildlife habitat issues and leave-strip requirements along fishery streams. You know that we now have new and improved fish-forestry interaction guidelines to guide harvesting on our coast to look at the areas of biological diversity and green up.

For example, new regulations for my ministry do not allow progressive clearcuts but instead require, prior to clearcutting an area adjacent to an existing clearcut, that the original or existing clearcut has to green up to a certain point before you can access the adjoining one. Those are the kinds of factors that resulted in those.

You will also note that there is no particular target with respect to the annual allowable harvest established by the chief forester. There has been a range of reductions: 14 percent in one case; 29 percent in the case that we're discussing; and, in the case of the Mid Coast timber supply area, as much as 34 percent. Each of them is a unique planning unit. They must be managed for their own unique attributes and the unique problems that might be associated with the range of issues that I've touched on.

If you want to get very technical and specific with respect to any one of those, the chief forester has already indicated to me that he'd be more than pleased to take the time to go into more specific details with either you, your colleagues or any member of this House.

W. Hurd: Further to the issue of inventory and annual allowable cuts, my question pertained to the link between those two issues and the type of tenure that's involved. I think that when we're talking about tree-farm licences in this province, we're talking about a significantly higher level of forest management and intensive forestry. The annual allowable cuts are surely a function not only of how many trees you have in inventory, but also how many you're willing and able to grow.

Regarding inventories and setting annual allowable cuts for the future, I'm wondering whether there's going to be some analysis by the ministry of the tenure that produces the best level of intensive forest management and enables cuts to be incrementally increased over the period of the normal licence agreement, which in this case is 25 years. I understand the issues you're raising about competing values and about the fact that some of these licences at times don't allow for an integrated approach to resource management.

It seems to me that we have a fundamental dichotomy between managing the resource for integrated use and managing it intensively in terms of producing the best possible yield per hectare.

I'm wondering whether, in league with the inventory analysis that it is making a commitment towards, the ministry intends to analyze the various types of tenure available -- even if they're shorter in licence length than a tree-farm -- in the hope of encouraging more intensive forest management of some of these lands, to at least mitigate the effects of some of these rather significant reductions in annual allowable cut.

Hon. D. Miller: That's a good question in terms of a fundamental issue that we need to discuss a little more in this province. First of all, dealing with tree-farm licences.... I've heard it said -- sometimes by the holders of tree-farm licences; sometimes not -- that the general level of management, say, with respect to inventories, is higher than it is on the TSA lands -- in other words, the Crown-managed lands. I don't accept that.

In my part of British Columbia, you could point to what used to be TFL No. 1, the first massive tree-farm licence allocated back in 1948, or perhaps '49 or '50 as being one of the more poorly managed forest areas in the province. I don't really want to get into the details of that, but it has generally been acknowledged that the management there was far from desirable. I don't think that any particular form of tenure has a monopoly on good management or poor management. There are certainly tree-farm licences that are well managed, as there are timber supply areas.

The argument around management, leaving aside the nature of the tenure, has been that forest lands need to be managed on an area basis, and I don't think anybody quarrels with that. The argument from the forest licence-holders -- with some of the thinking in the previous administration's foolish approach to the tenure issue, which was simply to reallocate the remaining Crown forest lands into tree-farm licences and to wash our hands of them -- is that because they don't have a particular area within the licensed area,

[ Page 1401 ]

the management somehow suffers, even though they have chart areas.

Getting back to the issue of intensive silviculture, or incremental silviculture -- which I think is what you're really getting at -- it's interesting to note that any studies I've read say that there has not generally been a higher level of expenditure on forest lands in incremental silviculture, not only on tree-farm licences versus timber supply areas but on private lands. The member must be aware of the managed forest unit classification of private land. Some companies have very extensive private landholdings.

Even on their private lands, where there has never been an argument about the right of that company or the private landholder to receive the benefit of their investment, there has never been a significant level of investment into forest land in British Columbia.

Various debates have taken place around that topic. If I can characterize one aspect of those debates, it would go something like this. The natural forests of British Columbia -- which did not receive investment by anyone, but were simply there; nature had provided -- were so extensive that we had not reached the point in the economic evolution of our industry where it made any economic sense to put additional money back into the land base, because of these extensive natural forests. I regret to say some of that thinking is still extant in the land.

The other argument.... There's certainly a range of opinion. Some major forest companies argue that there is no tangible benefit from making those investments; it's not quantifiable. Other companies.... Weyerhaeuser, for example, has a little pilot project on tree-farm licence 35 in the Kamloops area. They say -- and from the numbers that I've looked at -- there is a quantifiable benefit in their particular circumstance by increasing the amount of money they invest, per hectare, in the land. They can point to some obvious gains on the yield side; in other words, they can harvest more timber. I think it's a function of a particular area and, again, things like age-class distribution, etc.

In my view, what has eluded British Columbia is a policy that would see a greater level of investment. We've made a significant investment of the taxpayer's dollar. The first forest renewal program was for $300 million, equally shared between the province and the federal government, and we're now working on a much smaller level. So the taxpayers have made some significant investments in the land base. But we have yet to develop a system whereby tenure-holders are prepared to make the investments that are possible and the gains that are realizable. That's something I'm acutely aware of. It's a complex area.

I don't think it's an easy policy to develop. It ties in with issues such as tenure and others. It is certainly uppermost in my mind as an area that needs a lot of work.

We can make the gains. If you look at the Scandinavian countries -- look at Sweden -- they harvest from their forest land base. While it's not quite as high as our harvest level, they have half the land base of British Columbia, and they virtually harvest the same as we do. It's because they put a lot of money into their land. They do that by charging one heck of a lot more for their wood. And there are some differences between us and Scandinavian countries who have their market virtually on their doorstep versus British Columbia that has markets around the world. Obviously some of our costs are extremely high too.

Perhaps I haven't answered all of the member's questions, and been a little too wide-ranging. If I haven't, I'd be pleased to hear from the member.

W. Hurd: Continuing to canvass the issues surrounding tree-farm licences, I'm sure the minister would agree there's an expectation in this province that somehow the tree-farm licence concept, which is the longest license the ministry offers, will protect employment in the communities and will provide some measure of stability and supply. What I'm hearing from the unions, for example, and from people in small-town British Columbia, particularly on Vancouver Island, is that somehow the concept has not achieved that goal, and that there should be some requirement on the part of the companies to guarantee levels of employment in manufacturing facilities that are serviced by tree-farm licences.

I'm sure the minister is also aware that the industry is able to borrow money based on its access to secure timber. One of the biggest measures of security they have is a tree-farm licence. I'm just wondering how he sees achieving some measure of community stability in areas on Vancouver Island where we have seen significant reductions in the cut, which the minister has quite correctly pointed out were unavoidable given the amount of wood being consumed.

I'm just wondering whether the idea of what tenure is best for the various timber supply regions of the province is really going to impact on decisions by the ministry as to how to secure employment and economics in some of these small towns in British Columbia. Are we going to see continued erosions in the cut while the inventory process unfolds? This is a question of concern to many members in this House who represent small ridings in British Columbia.

[3:15]

Hon. D. Miller: I agree with the member when he suggests that there was a quid pro quo -- an understanding that in return for the allocation of these long-term tree-farm licences, the companies who received them had an obligation to provide employment and stability in communities. What's unavoidable is the changing nature of the industry over time. We went along for some time in British Columbia with a fair degree of comfort and a feeling that things really wouldn't change that much. Where there was a large sawmill, there would always be a large sawmill and where there was a pulp mill, there would always be a pulp mill.

I suppose the first real shock for many British Columbians in the forest industry was in 1981, a very, very difficult period -- because of the international marketplace, because of the recession and because of the interest rates, which I think in that time approached nearly 20 percent in North America and worldwide. This caused the forest industry in B.C. to re-examine

[ Page 1402 ]

their operations. In fact, I recall it vividly because I happened to be working in a pulp mill. At the end of the day, in many, many communities and in many, many companies, there were severe declines in employment. It came as quite a shock to people in the communities that you have talked about. All of a sudden men and women who had worked all of their lives, who had never gone to the state for a penny, were out of work.

That process has continued from that time. If you look at the overall numbers in terms of employment in the forest industry, there has been a decline, and it appears that it will continue; although it is being mitigated, and I'm more and more optimistic in the manner in which it's being mitigated.

The licence-holders do have an obligation. We could go and look at all of them and say that some have performed better than others. In fact, on Friday and Saturday I'll be going to Port Alberni to meet with people in that community to discuss the performance of that licensee, and to listen to the community and their ideas about where they think there may have been deficiencies and where they think there might be more opportunities for employment.

I want to talk about that openly with the community and I want to talk about it with the company, because it's certainly my view as the minister, and it's the government's view, that we expect the maximum performance out of licence-holders. We expect them to be aggressive. We expect them to have an investment program.

I want them to look into the future and be able to tell me with some -- not absolute -- degree of certainty: here's where we're heading, here's where we think the kind of employment opportunities exist, here's where we think we can add more value to the very valuable forest resource in this province. We'll be looking at those kinds of things.

We will also be continuing to promote the development of secondary manufacturing, the so-called value-added sector, often referred to as remanners. I can tell the member that the

section 16.1 sales that encourage the development of that

section of the industry are having some impact.

I took great pleasure in touring a mill in Prince George on Friday, a mill that is all of the things I think we talk about when we talk about value-added. It is taking those valuable forest resources -- the very fine wood that's grown in this province -- and producing finished products to send to the German market; making finished wooden windows and doors that are the finest you'll find anywhere.

We're starting more and more to see the development of that industry since the establishment of the

section 16.1 sales, which are short-term sales, but which provide entrepreneurs a mechanism to get some financing, to get into the marketplace and to get some leverage in terms of supplies for their milling requirements.

About three weeks ago when I was in Kamloops and met with the association that represents the value-added manufacturers, they informed me that they now -- in that region -- produce forest products with a value that they estimate to be in about the $100 million range, and they're employing in excess of 500 people in that value-added sector. We can see that it's growing; it's developing. I think the market potential is clearly there. We have indicated our desire to assist entrepreneurs on the marketing side.

Certainly the Premier's and my visit to Japan has encouraged us that there is more and more market potential. My conversations with individual operators in the value-added program convinced me that there is more and more potential, whether that be in the Asia Pacific markets, the European markets, or indeed the United States market, where we now see that the value of the renovation market is equivalent to the value of the new-home construction market. There will be more and more opportunities. British Columbia has the resource; that is unparallelled.

We're encouraging entrepreneurs, through our programs, to get into the business of producing more value.

W. Hurd: Returning briefly to the issue of tree-farm licences and timber supply, I'm glad the minister brought up the example of tree-farm licence 35 at Kamloops. I understand that the proposal put forward by the company would see an approximately 50 to 60 percent increase in the annual allowable cut in exchange for an enhanced silviculture regime.

It occurs to me that if that type of incremental advantage were to be gained from other tree-farm licences in the province, would not such a tremendous accomplishment on one tree-farm licence lead the ministry to believe that when it comes to timber supply and annual allowable cuts, there is an avenue for the ministry to pursue to increase the timber supply quite dramatically over the longer term?

The minister has already noted that on one of the votes for silviculture we've actually seen another reduction in the current fiscal year, and I believe what amounts to a reduction in a five-year forest and range resource plan as well. This gets into a philosophical question, but is it feasible for the ministry to ever have the resources to attain the kind of incremental silvicultural advantages that seem to be the case in one tree-farm licence in this province?

Hon. D. Miller: Certainly in the case of TFL 35.... I must say, hon. member, that when I was the forests critic, I used that example in quizzing the then Minister of Forests. The tables have shown -- and I can't recall the specific numbers in those tables -- that they can realize some immediate gains. I'll go back to what I said earlier though. I would caution that that is not applicable in every case. It really is important that people understand that it's a function of the land itself and an assessment of that land in terms of issues like the age class distribution of the stands that exist at this time.

There are some areas, whether they be timber supply areas or tree-farm licence areas, where you would not realize immediate gains, simply because increasing.... By the way, I should also say, whether that is incremental or not, that my sense of it is that it is simply enhanced stewardship -- and perhaps there is no tight definition about that.

What Weyerhaeuser is doing in that case is simply a number of things that are fairly basic. They are getting their trees into the ground faster. Rather than wait two years, as normally may be the case, they're getting those

[ Page 1403 ]

trees in the ground a year ahead of what they would normally do. I think they are doing some spacing, some very modest incremental silvicultural methods or activities, and you can see the gains. In some other areas, to do that very same program would not lead to an immediate increase in the annual allowable cut. Every area is unique, but I would caution the member to understand that. In addition to the policy that I talked about.... In the case of Weyerhaeuser, they would pretty clearly like the Crown to participate with some money. There has not been a policy framework to work within.

On the other side of the coin, companies say: "We're prepared to do it, but we can't ensure that we will be the beneficiaries." Let's say there is an increased yield. Should companies be allocated that increased yield free of charge? Those kinds of policy issues have unfortunately not really been dealt with in the past. I assume the obligation to deal with them myself. The development of intelligent policy takes at least some reasonable amount of time.

In other cases, though, I have to tell you that there are major companies -- I think Fletcher Challenge is one of them -- that argue that from a strict economic point of view, there is no return on investment. They make the other argument. They feel that the Crown may be able to assume the investment, and there might be a gain because the Crown can write off societal costs. In other words, if we do it, and we create some employment, and we're not putting money out on the social service side or on the unemployment insurance side, then that can be deducted from the investment in the first instance.

It might make sense there. I don't know whether that's true or not, but I do say that we need to develop some policy that will allow us to get on with it.

The other thing we need to talk about is the economics of it. I'm not certain how widespread the applicability is in B.C. There needs to be some work there. I would like to be able to get a heck of a lot more for our wood products than we currently obtain. If you can't generate the money that you require for that investment program from the harvest and sale and manufacture of the product, then I guess the question you have to ask yourself is: should we do it simply because it's the right thing to do? In other words, should we draw money from sources other than the basic wood supply itself?

I hope I've answered the member's question.

W. Hurd: Just referring briefly to the Forest Resources Commission and the chairman, Mr. Sandy Peel, I am aware that there are some dramatic changes suggested in the tenure system in the province and in the allocation of wood supply. In my reading of the estimates, it would appear that the revenue estimates for the ministry are projected to rise in the current fiscal year. Is that the result of any anticipated change in tenures or in wood supply allocation? The estimates would indicate that we are seeing an increase in revenues. I am just a little bit confused, if that's the case, as to where that money is going to come from with the industry in the depressed state that it's in.

Hon. D. Miller: The answer is no. We have some confidence in the industry. I certainly wouldn't want to be all doom and gloom when it comes to discussing the forest industry in British Columbia. There are certainly producers out there -- sawmillers, harvesters and others -- who are making good use of the resources of this province, are providing jobs and economic benefits in communities and are selling products into a market where they make money.

We have, however, been through some pretty tough times. That's not entirely predictable. Certainly the countervail issue is viewed as a very serious threat. I take that very seriously in terms of what could be the negative consequences and the fact that the countervail action is so patently unfair. If the member would go back and look at some previous reports from the ministry and at some previous estimates, he will note the dramatic rise in revenue obtained from the forest industry, primarily from increased stumpage, and the fact that we shed an old program called

section 88, whereby the Crown essentially paid for road building and reforestation, and made those an obligation of the licence-holders. There has been a massive increase in revenue obtained from the forest industry. That was a direct result of the 1986 countervailing-duty action brought by the United States.

[3:30]

It's so patently unfair for the U.S. to be once again alleging subsidy when, in fact, we fully introduced the measures that they wanted us to introduce in 1987. By their own testimony, having done that, we were not subsidizing in any form within this province. Those revenue measures will remain in place. That's why I'm baffled when I deal with people in the U.S. who continue to allege subsidy.

But the revenue side is not related to the broader issue of the tenure system. I'm aware of the recommendations made by the Forest Resources Commission. I have been very careful in my remarks concerning them. I have not embraced the report, for a variety of reasons. In dealing with the major tenure-holders in this province since I have been the minister, I have advised them that it's my view that the status quo in this province cannot prevail, for a variety of reasons. I had previously indicated my unhappiness with the distribution on the industrial side; I thought that we had skewed the distribution.

As much as possible I'd like to see the marketplace as the regulator and the price-setter. We'd got to a position in this province where that was not happening. So we have to look at the issue of tenure and the issue of our domestic system obtaining resource rents for that particular resource.

But in doing so -- and I think the hon. member would agree -- we have a responsibility to do that in conjunction with the major players in the industry, both large and small, and we have to undertake that review so that it causes the least possible disruption. The last thing we need in this province, having gone through the gut-wrenching debates with respect to land use and having gone through the very traumatic issues of the countervail, is to simply charge in like a bull in a china shop and say we're going to make everything right that's been wrong. If you take that approach, then

[ Page 1404 ]

you're only going to cause further economic upheaval. When that happens, those who really pay the price are the people down in those communities in B.C. working in those mills or in the bush and relying on those activities for the economic well-being of their communities.

We do intend to approach it. We intend to approach it in an open manner with a timing that is suitable, bearing in mind that it is a very difficult issue that should have been addressed some time ago and needs to be looked at very carefully.

W. Hurd: Just returning briefly to the revenue picture, is in fact the revenue projected to go up for the current fiscal year in Forests? I realize that people like to call into question the Liberal research these days -- whoever got that impression? -- but our reading is that there's been a increase in revenue of some $66 million projected for the current fiscal year. The issue of whether or not the revenue is actually raised raises some other interesting points, but maybe I could have that confirmed one way or the other first.

Hon. D. Miller: Well, yes, going back to it, we are projecting revenue increases on timber sales, on the small business forest enterprise program; and it's our expectation that the second quarter.... I think there's been some bearing out of that most recently, although it's been a difficult year because of the countervail issue. There's been some difficulty on the market side; it's tended to fluctuate more rapidly than it normally would because of these unknown factors. There was a rush of buying earlier last month and prices went up considerably.

They then tapered off again, and most recently -- and I don't know if the hon. member may have seen some of the press reports -- there has again been a rush on the order side.

It's been fairly erratic, but nonetheless we've seen some growth on that side, and so we have forecast some relatively modest increases in growth during the second quarter and the rest of the year. That accounts for the revenue increases. The specific numbers you cited were some $60 million, and we're looking at not quite that, but I believe we're looking at some $23 million; in that neighbourhood overall.

W. Hurd: With respect to stumpage revenue, we're projecting a significant increase for 1993 over 1992. Does that $23 million figure you've indicated assume stumpage revenue increases as well?

Hon. D. Miller: Yes, hon. member. We're looking at some areas of increase and some of decrease -- increases on the non-competitive stumpage; in other words the tenured stumpage. The member may be aware that the system in British Columbia, under the old agreement which we're still following in practice even though that agreement has been terminated, calls for adjustments to be made quarterly based on sales in the previous quarter, so there are quarterly stumpage adjustments made in the province.

Our forecast, which is aligned with and extrapolated from growth forecasts, would see an increase in the total billings on the non-competitive stumpage. There's some increase on rentals and fees. We are forecasting some increase on the small business program upset stumpage. We don't forecast an increase -- in fact, perhaps some decreases in other areas -- but, on balance, as I indicated, we're forecasting a growth which would see an increase of slightly less than 3.5 percent in terms of the percentage change when I look at the total revenue side.

W. Hurd: I'm still a little bit vague about the stumpage revenue increases. Our reading seems to indicate either a large increase in stumpage rates during the fiscal year or somehow a massive increase in the harvest level, which we know isn't going to happen.

With respect to the harvest level for regulated timber in 1991-92, our figures indicate that the annual allowable cut was approaching 75 million cubic metres, while the actual amount of timber harvested that corresponds with this figure was only 64.85 million cubic metres. I understand that this information was supplied by the ministry itself. We understand that the commitment level of regulated timber for '92-93 is expected to be between 72 million and 73 million cubic metres.

According to the five-year forest and range resource plan, the government expects the harvest level to approximate the commitment level over the program period. As I mentioned, are we assuming revenue increases based on increases in stumpage during the current fiscal year, or are there increases in the cut in some areas of the province? I'm having trouble rationalizing the seeming discrepancy in revenues and in cut.

Hon. D. Miller: Other than the increases that would come about in the manner that I indicated -- in other words, the quarterly adjustments -- there are no programs to increase non-competitive stumpage. The variance in the harvested volumes is really as a result of economic factors. On tenures, companies have the flexibility to harvest to plus or minus 50 percent in any given year of a five-year plan, but over the five years of the plan must be within 10 percent of the annual allowable cut established in the initial management working plan.

It's not uncommon to see a variation at a time when the market side is down. If you track that over time, you will typically see that an increase of prices and volumes on the market side will see an increased level of harvesting. But they must be within the target over the five-year period.

I think, hon. member, that that explains your question. There are no plans to increase non-competitive stumpage beyond the system that is currently in place. Any increases would come through increased volumes and the quarterly adjustments that are made.

W. Hurd: Just a brief question about the five-year range and resource plan. The $10 million special fund that is being shared by the ministry is, I understand, being split between Tourism and Energy and Mines, not just between Forests and Environment. Is that the special fund to which you were referring earlier? Are there other ministries that share in the revenue?

[ Page 1405 ]

Hon. D. Miller: I indicated earlier that it was a fifty-fifty split. In fact, there's a fifty-fifty management of the fund between my ministry and the Ministry of Environment, Lands and Parks. Given the thrust of that and the need to do some better inventory on those other values, Tourism would be involved in that exercise.

W. Hurd: Just another quick question regarding the $10 million fund. In the ministry estimates are you guaranteed a certain amount of that funding during the current fiscal year, or is it a situation where the ministry has to apply for funds or give a project list? The ministry having access to the funds is of considerable importance when we debate whether the budget for inventory in the overall budget is actually increased. Is there a figure that we're looking at in terms of the ministry's access to this $10 million fund?

Hon. D. Miller: I can't give you a number here, but I want to reinforce the need to plan on an integrated basis. The harshest criticism that has been levelled in terms of the forestry debates we've had in B.C. is that we don't account for all of the values that are contained within our forests and that we have to manage those forest lands not just with one or two values in mind, but to determine what the range of values is and, beyond that, how we can use those to benefit society.

[3:45]

The fund is managed by this ministry and the Ministry of Environment. I can't give you a precise dollar breakdown. The notion behind the fund, the establishment of the Commission on Resources and Environment and the Cabinet Committee on Sustainable Development is integrated resource management. All the players have to be at the table. Decisions that we make in forestry have impacts in Environment, in Tourism and for water, and we need to have those people involved in the program.

At the end of the day, similarly, the program that would see 25 Ministry of Environment biologists established within 25 district Forest Service offices around the province will lead to a better planning capability. That's really at the heart of the issue of forest land management planning -- to have all of the players. We've also made some major commitments with respect to the public.

That's the premise behind the fund. In terms of the precise details, that's an ongoing management issue that is being worked out between people in my ministry, the Ministry of Environment and other ministries as well who feel that they have some bearing or some stake in terms of the issue.

W. Hurd: In view of the fact that 13 ministries have some overlapping jurisdiction on forest lands in this province, no one could argue with the need for further integration.

Since the minister did mention the Commission on Resources and Environment, perhaps I could ask a series of questions about the role of the commission. There has been a generous funding allocation to its work during the current fiscal year. There seems to be a growing perception on the part of the public that somehow the areas that have been set aside, particularly the log-around areas and the parkland study areas, are somehow going to be considered directly by the commission. That isn't the mandate of the commission.

I'm just wondering about the financial commitment of the Minister of Forests to this commission and exactly what the ministry anticipates it's going to receive from the Owen commission. Are they going to provide reports on an ongoing basis, an annual basis or when the work is completed?

Hon. D. Miller: My sense about the commission -- I want to give you this in all frankness -- is that their primary mandate is process. If you look at the history of Mr. Owen's decisions when he was the ombudsman -- in particular, a couple of decisions, one relative to the use of pesticides and the other on integrated resource management and dispute resolution mechanisms -- Mr. Owen himself is very cognizant of the process. I also think that at the heart of many of the disputes in this province is a lack of trust, if you like, or a lack of public confidence about the process.

So in a sense Mr. Owen and the commission's prime responsibility is to develop new processes that fit for British Columbia. At the same time, having recognized that we have evolved to the point where there are a number of very contentious areas in the province, Mr. Owen will be reviewing those contentious areas. He will be reviewing all of the information that has been supplied with respect to them and the processes that have been used to arrive at certain decisions -- in some cases, I should say that decisions have not been arrived at yet -- and will be making recommendations to government. Government will then be in a position to make decisions.

Mr. Owen feels very strongly that recommendations from the commission should be made available to the public, so there will be an opportunity for the public to know what specific recommendations the commission has made with respect to any particular area.

I just want to add that I think we should not try to confine Mr. Owen's commission too tightly in its work, nor should we try to confine too tightly or draw absolute lines with respect to the relationship between the Ministry of Forests or the Ministry of Environment and the commission. We are evolving, and I think there's a need to be in constant communication. Certainly that's the message I have conveyed to Mr. Owen and to my staff and in meetings involving a broader group. We need to be in constant communication with respect to our respective roles; this process, as do all processes that are initially started, tends to have an evolution.

There may be precise questions that there may not be absolute answers for. But in the broader context, the commission is absolutely fundamental to examining the land use planning process, to making recommendations to government on that in the larger context, and also to examining areas on Vancouver Island and in the interior that we have in some cases deferred, so that we can make some final decisions with respect to those areas at the end of the designated time-frame.

It's a bit of a new thing and long overdue. I think it's well accepted by all sectors, and it's going to require a

[ Page 1406 ]

commitment not only on the part of my ministry and the officials in my ministry, but of all the other ministries that have some bearing on these issues, the interest groups with issues at stake, the companies, the working people represented through their trade unions, and organized groups with a strong interest or perhaps a prime mandate to deal with issues such as wildlife, recreation or wilderness. All of us collectively have to bring our best will to the table to make this thing succeed.

I think the will is there, I think it will succeed, and I think that at the end of the day, with an improved public process, we will have regained a degree of public confidence, which is really at the heart of a sound government.

W. Hurd: There are a number of issues regarding the Commission on Resources and Environment that I'd like to canvass. Some of the questions could probably be more appropriately addressed to Mr. Owen himself. As it pertains to the Ministry of Forests, I note from the general terms of reference and duties for the commission that (1) is: "To independently and publicly advise cabinet on legislation, policy and allocation decisions related to all land use issues and processes in British Columbia." I notice, however, that Mr.

Owen has said publicly that it's not his role to mediate or mitigate individual areas of dispute in the province or specific issues like the Carmanah or other so-called hot spots in the province. He's made it abundantly clear that it's still going to be up to the various ministries to make decisions on those individual areas. Can the minister assure the province that while the Owen commission is completing its work, decisions on land use matters within his ministry will not grind to a halt, and that we'll still see decisions being made from a forestry perspective for the benefit of the people of the province?

Hon. D. Miller: Yes, we do intend to.

I want to go back and say that if this process is to work -- and it's for British Columbians that the benefits lie -- it is extremely important that my ministry has a good working relationship with the Commission on Resources and Environment. We will still make the daily decisions with respect to forestry issues. It may be that some of those might result in some contention. That's unpredictable.

We have also said that where, in our judgment, it's important that the commission be fully apprised of what we intend to do -- and we're very sensitive to this -- we will consult with the commission. We have no wish to head off on our own. We're very sensitive to the fact that the commission has a particular mandate with respect to process, and we need to have that good working relationship. My staff know that they have to consult. We will make the routine decisions that we always make. As I said, that has been an ongoing process.

I don't think anybody can say that since the establishment of the commission we've made decisions or held up making decisions because of the commission, with the exception of those areas that were outlined as contentious by myself and by the Minister of Environment, Lands and Parks. We intend to do our job, bearing in mind the sensitivity of land use planning and the fact that the commission does exist. It's important that they understand what we're doing as well.

W. Hurd: To continue to canvass some of these issues raised in the general terms of reference, I note item 3: "To ensure the effective, integrated management of the land and natural resources of British Columbia through the coordination of comprehensive natural resource inventories; impartial expert and scientific data and analysis; the proper consideration of economic, environmental and community interest; the land use planning and management of local governments...." Returning to (

a) and (b), the comprehensive natural resource inventories, is it your anticipation that the commission will actually be engaged in these types of activities, or will they by receiving this information from the Forests ministry as it proceeds through its silviculture and inventory activities?

Hon. D. Miller: It's my information, and it would seem logical as well, that the information is obtained through the line ministries. Mr. Owen will naturally want to look at the information-gathering process and the information itself. He may want to consider whether it's of sufficient quality that it may need to be looked at again. But the information would be supplied from the appropriate agency.

With respect to the general issue of forest land management planning, although there have been difficulties and although our systems that were established many years ago did not really take into account some of the demands currently being made with respect to preservation of particular areas or other issues, it's not all bad out there. The Ministry of Forests takes its responsibility extremely seriously to plan activities on that forest land base. If you peruse the estimates book or go out to any district office in this province, you'll see how seriously we take it. We plan for wildlife.

Just to illustrate, I commend the very capable people in the Cranbrook district office, where I attended the opening of an expanded office. The displays that the people in that district office set up for the local people and the schoolchildren went right across the board in the full range of areas that the Ministry of Forests manages and, believe me, takes extremely seriously. In some areas we are acknowledged world leaders. It's my fervent hope that if we do our job right, we'll be acknowledged as world leaders in the area of forest land management. I think we really have that within our potential.

[4:00]

We manage for wildlife. We manage for range. Some of the most difficult issues in this province are managing the interaction between range, wildlife, timber and water -- extremely complex management issues carried out by my ministry in conjunction with other ministries like the Ministry of Environment, Lands and Parks. We put out fires for wildlife sometimes, not necessarily to save trees but to benefit certain areas of wildlife habitat. We have a recreation program that is the best-kept

[ Page 1407 ]

secret in British Columbia, in my view. I forget what it is now -- maybe somebody could tell me -- but it's a very modest budget. We manage a recreation program in British Columbia that accommodates 40 million visitors per year. It's bigger than our parks system -- an outstanding program managed by the Ministry of Forests. When you look at the areas of silviculture and harvesting, there is some outstanding work being done in this province by the Ministry of Forests and by the Ministry of Environment.

I really think that we need to acknowledge areas where we do well. After all, if all we do is be negative and criticize.... Over 4,000 men and women work for my ministry, dedicated British Columbians who are out there trying to work on behalf of the public and protect the public's interest. They're no different from you or me; they care about this province. They need to be given some encouragement when they do a good job. Believe me, there are many areas in this province where they do an outstanding job. [Applause.] I'm pleased that some of the members opposite recognize that.

In some ways, perhaps, we'll feel our way with respect to the commission. We will provide the information we have within our ministries. We will leave it to Mr. Owen, as is his responsibility, to act in an independent fashion in evaluating information and seeing where there may be some deficiencies. He has gathered a very able staff from a wide variety of disciplines and backgrounds -- some from large resource companies and some from the trade union movement. Some were from my ministry, and I'm sorry to see them go, because they were very outstanding and capable people.

He has gathered together a very competent team of people in the resource management field. He's a very independent an able person himself. I'm sure if he feels that some of the information we have is deficient, he won't hesitate to tell us, and we won't hesitate to try to improve the kind of information that we give him.

W. Hurd: I certainly share some of the minister's hopes and praise for the commission on resources and the economy. There are some disquieting notes, though. I refer specifically to an open letter which Mr. Owen sent to various stakeholders on March 11, 1992, in which he points out:

"British Columbia is perhaps the world's most extraordinary piece of real estate, and we have a responsibility to manage it wisely. We have failed to do so in the past through our carelessness and our greed. As a result, we have depleted our natural resources and degraded our environment, putting the health and wealth of our society at risk. Confronted with this danger, we distrust our governments and dislike each other; we must change our ways."

There's not much left to say. I'm sure some of the minister's own staff come in for a mention in that general sweeping statement.

Returning briefly to the commission and its work, will the commission advise the ministry of how it intends to proceed, in the way of what hearings it will hold? I assume there is an ongoing dialogue with the CORE group, particularly as it pertains to the log-around areas on Vancouver Island and how swiftly they're dealt with. As we know, the disagreements on those particular hot spots are not likely to go away. I'm sure that some on the other side of the fence on Vancouver Island would agree wholeheartedly with Mr. Owen's opening statement in his open letter.

Hon. D. Miller: First of all, I'd like to correct the member -- not an admonishment -- and simply remind him that it's the Commission on Resources and Environment. I believe you said "the commission on resources and the economy."

The member has really confirmed what I had previously said. It is absolutely fundamental that people in my ministry, or any ministry, who have some bearing on the work of the commission realize that it's a two-way street. There needs to be open communication between the commission and the ministry. If there's any suggestion that what we might be proposing to do would have some bearing or be of some interest to the commission, we have a responsibility to advise the commission, and we will do that.

In the very short time that has elapsed since the commission was established, I believe that Mr. Owen has been working extremely diligently to attract the capable staff that I talked about and to establish a relationship with the ministries. In fact, I've already indicated that a couple of the staff Mr. Owen has hired come from this ministry.

We need to communicate. It is absolutely essential. I know there may be times in the future when incidents might arise where the commission will be unaware of something that my ministry has done, or my ministry may be unaware of something the commission has done. We're human, and those kinds of things happen. But we are making a very honest and sincere attempt to maintain a very good two-way dialogue. If we can do that and if we get the kind of broader cooperation that I talked about earlier between the interest groups, Mr. Owen's commission will be viewed as a success.

Again, as someone who has been involved with government for a long time, at the heart, I go back and say that what keeps our system going is the degree of confidence that the public has in us as politicians. I'm not saying that any one of us is more or less virtuous than the other -- but in us, collectively, as politicians. It is amazing, when you actually think about the democratic system, how important that is, and that without the trust in the system and in the men and women we elect as representatives, our system soon breaks down.

We understand that, and we will do our best to work very diligently to move forward and gain more public confidence and to resolve some of these issues that have been outstanding for far too long.

W. Hurd: I suppose there's not much point in revisiting too many other issues on the Commission on Resources and Environment, since there have been no hearings held yet. We only have the terms of reference and a rather excellent board of directors that certainly, as the minister has indicated, bring a wealth of experience to the job they've been handed. Some would say it's a job that they will need all their experience to handle. The Liberal opposition wishes the minister and the Commission on Resources and Environment good

[ Page 1408 ]

luck, certainly as it pertains to some of the hot spots on Vancouver Island.

Maybe I can return briefly to a general discussion on the budget and, in particular, some of the issues surrounding the forest resource development agreement which, as the minister knows, was hailed a few years ago as a major commitment to reforestation in this province, involving the cooperation of two levels of government -- the federal and the provincial. Our reading of the forest resource development agreement is that there was a projected increase in the second year of the program of some $9 million. In reviewing the estimates, we see that that particular increase is deferred.

We're wondering where the increase was deferred to and when it will reappear. We're wondering as well about a few other issues pertaining to the forest resource development agreement. Have any new agreements -- or existing agreements -- been reached with the federal government? Is the minister predicting any cuts in the funding under the forest resource development agreement?

Hon. D. Miller: I suppose it depends on how you phrase it. It's going to be spread over five years versus four, so there is naturally a reduction in the annual amount. Another way of looking at it perhaps could be to characterize it as a deferral. Nonetheless, that is what's happening. There is $24.5 million, as the member will see in the estimates book.

W. Hurd: In terms of the research budget, we've noted that some research was funded through the forest resource development agreement and some through the forest renewal initiatives program. We note that both those programs plus the budget allocation for forest renewal have decreased. Is this sort of a triple financial whammy from Treasury Board, or is forest renewal in this province not a real priority in the coming fiscal year?

Hon. D. Miller: Forest renewal is a priority; there's no question about it. I was being scrummed outside before I came into the House this afternoon, and a reporter said: "You could really use three times your budget for forest renewal." I said I'd be quite happy to get it.

But we all know, as legislators, that the budget is arrived at through a series of taxation measures and revenue from various sources, and that there are limits to the ability of both the taxpayer and those revenue generators to contribute, given some of the economic constraints we face.

In looking at the issue of silviculture, we have approached it from a fundamentally sound basis. That is that our primary obligation is to establish new forests on areas that have been harvested or burnt or for whatever reason denuded. We still have some catching up to do with respect to our backlogged NSR lands. I'm not sure what the absolute number is, but between 200,000 and 300,000 hectares of NSR lands still need to have a new forest -- a young forest -- established on them.

Getting the new forest in the ground is the number one priority; and the number two priority is going at that new forest in its respective stages to see how we can increase the kind of growth and yield we talked about in some of our earlier discussions.

In talking to people around the province who have a strong interest in forestry and forest resources, I've gotten this sense that they were very pleased that the government was able to maintain the budget it has for the Ministry of Forests. It does not allow us to do all of the things that we would like to do. We would certainly love to have lots more money, but the facts of life are that lots more money is not available. My staff are working very hard with what they have. If we have to stretch out a program or defer over a longer period of time, then so be it. It may take a year longer or whatever, but the program will be accomplished.

Those are the kinds of ordinary constraints that every member of cabinet has had to face with respect to the budgeting process and the final impact of what we do in establishing a budget, what impact that has on the men and women of British Columbia and their ability to pay their share. Those are pretty tough decisions. I know the members opposite appreciate the process. As I said, I'm pleased in the larger context to have maintained a budget that allows me to do most of what we had targeted for in the previous year.

[4:15]

W. Hurd: In terms of the provincial commitment to the forest resource development agreement, I assume there is a requirement as to what type of projects are eligible for funding, and that's spelled out in the agreement.

Hon. D. Miller: I'd have to get you some details. The primary emphasis in FRDA 1 was backlog; the primary emphasis in FRDA 2 was stand-tending. In terms of the specific programs, I can either undertake to get that later in the estimates, or I would be happy to provide the member with an itemized list from my ministry, whichever he may prefer.

W. Hurd: Just visiting silviculture briefly, in 1988 the past government decided that basic silviculture should be the cost of the licensee, and now I believe they have to develop a ministry-approved silvicultural plan and follow it through. Does the minister know the total cost of this basic silviculture, which is now carried by industry? When will the Forest Service be free of its pre-1988 outstanding commitments? How much of the current budget is pre-1988 commitments on basic silviculture costs?

Hon. D. Miller: In terms of the absolute detail, I don't have it. By the way, that was a move that was long overdue to have licence-holders accept the basic cost of reforestation. It would depend to a large extent on the kinds of areas that are being operated in. You're looking at the cost to industry of accepting that regime. In terms of the individual operator it obviously depends on the nature of the area that you're working in and things like that. We will try to get a global cost here somewhere. I can't get it for you out of the information I've got. Again, any gaps in terms of detail that we encounter in

[ Page 1409 ]

the estimates I would be more than pleased to make notes of and provide you that by letter after the estimates.

W. Hurd: In terms of the inventory of provincial forests -- and as far as the strategy goes -- since old growth is basically a known commodity, is the emphasis going to be on assessing second-growth stands? If so, is there any plan for a more specific growth-and-yield inventory of second-growth forests, because we know that they grow at different rates? It would seem, in allocating funds, particularly out of the $10 million special fund, that special attention should be paid to second-growth forests in the province. Are the second-growth areas going to be a priority in terms of this inventory of provincial forests?

Hon. D. Miller: They will be more and more a priority. I should say that the research branch of the ministry does do extensive research on those areas, as well as research done at the academic level and by private companies. There is a fair degree of research. I think the issue is really economic, as we discussed earlier, in terms of how you make that investment. There's a lot of research, and that is a constant and ongoing process.

Just to give you some small example of the pretty clear impact of stand-tending, when I was in Cranbrook, one of the displays that the silviculture people in that district office had laid out was to show three examples of, I think, a larch, all the same age and all of different sizes. One was a very stunted, short tree that had mistletoe on it, and this obviously constrained its growth. Another was very long but nonetheless very small in diameter. The other one -- and I think they were all in about the 20-year age category -- was a fairly substantial, good, sound tree.

This was to demonstrate, in terms of forest land management, that it's often preferable to get those diseased trees out, to do the kind of spacing that allows higher growth rates or greater mean annual increments.

There's a body of work available that can tell you what you can expect in terms of growth rates using certain incremental silvicultural techniques. I think we've got a lot of information there that would allow us to proceed. What we don't have a lot of is money or a policy that would encourage private investment in that kind of activity.

W. Hurd: To continue canvassing some of the expenditures and issues in the budget, you mentioned that there was an increase in revenue projected in the small business program. Are you anticipating that the program will be expanded, or is that increase assuming an increase in basic stumpage under the small business enterprise program? If it's a change in the stumpage formula, is that an across-the-board increase for the entire small business program or just for certain types of licences?

Hon. D. Miller: We're looking at essentially the same volume. We anticipate that increased competitiveness for the timber being put up for bid will result in additional revenue.

We talked earlier about stumpage. I clearly indicated that non-competitive stumpage increases as a result of the formulas to establish stumpage that we have now. It's nothing new; it's just the existing formula. Obviously that would apply to the basic stumpage that we calculate for small-business timber sales as well. That, coupled with the normal.... It is a very aggressive program. There is aggressive bidding for timber sales. We anticipate that kind of growth and revenue increase.

W. Hurd: Just a quick question about remarks the minister made earlier on the need for an industrial strategy in the forest industry, and in particular the enhancement of value-added opportunities and secondary manufacturing. Are there any program funds available under the ministry operation to work with the Ministry of Economic Development, Small Business and Trade with regard to identifying opportunities in the various timber supply areas and possibly to expanding some aspects of the small business program to encourage greater investment at a time when, as we know, the economy is in somewhat of a slump?

It's to the advantage of the Ministry of Forests to foster this type of economic development. With his current budget, is the minister planning to identify any opportunities to work with the Ministry of Economic Development on these types of issues?

Hon. D. Miller: Certainly I have expressed very strong interest in looking at the industrial side of our forest sector. My trip to Japan and Korea convinced me -- I've talked about it before -- that there are increasing market opportunities. I don't think British Columbia suffers from a shortage of entrepreneurs who are able to use their talent and ingenuity to develop products. I talked about the window and door manufacturer in the Prince George area, and there are many others throughout the province. I have had some discussions -- not enough at this point -- with people from the B.C.

Trade Development Corporation with respect to how we can assist those, in some cases, very small manufacturers to have access and information about international markets.

I was very pleased to take a well-balanced group of people on my trip to Japan that represented the largest industries -- MacMillan Bloedel -- and that also represented the smallest industries -- an individual who manufactures log homes in Williams Lake. All of them said that they thought there were greater opportunities in their particular sector. So we have made some commitments with respect to that. It's not directly my responsibility as the Minister of Forests, but I have a very keen interest in the industrial side. In the future, when we have more time, I want to travel and look especially at some of those markets so I know where some of those opportunities are.

We think that the smallest entrepreneurs probably need some assistance on the market side more than anywhere else. Our program 16.1 is a good first start in terms of encouraging the development of that sector.

[ Page 1410 ]

This is off the cuff, I suppose, to some degree, but I think that we need to start educating our public. I suspect that a lot of British Columbians don't think we have much of a value-added sector in the forest business, when in fact it's pretty significant. We have some of the best natural resources in the world. Our wood is second to none, and we've got some manufacturers producing the finest finished products that you will ever see.

There is a market out there, and we need to do what we can to assist. So I think the program or the approach that we've taken is the correct one. We will continue to do what we can to work with the private sector and through B.C. Trade and the Ministry of Economic Development to enhance opportunities for that sector. Those people know what they're doing; I wouldn't even begin to tell them what they should be doing or how to do it. They know that, but they could use some help on the other side.

W. Hurd: Revisiting some of the issues in the small business forest enterprise program, the previous government was convinced that small business enterprises could be fostered in this province with a licence arrangement that supposedly guaranteed access to timber to run these plants. As we know, the success ratio was somewhat uneven, partly as a result of the recession, but also as a result of the failure in some cases of the smaller entrepreneurs to follow through on commitments for plants and the actual value-added facilities they had originally proposed to the ministry.

Is the minister intending, during the current fiscal year, to monitor or to audit the success of the small business forest enterprise program in this province in order to determine that the plants the operators claimed would be built will in fact be built? Is there any plan by the ministry to look at the small business forest enterprise program -- in particular the licence arrangements -- and to strengthen it through the licensing arrangement or the tenure system in some way in order to secure the future of this particular value-added segment in the industry, which has had an uneven experience with the existing small business program?

Hon. D. Miller: I think there has been a relatively good experience. It's my sense that when you actively go out and develop policies specifically designed to give a leg up or to promote the shifting of direction -- I'm talking about a shift from a traditional high-volume commodity product to a more value-added type of product and a lower volume, obviously -- there will be failures.

[4:30]

It's the nature of risk-taking in our kind of economy that there will be failures, and I don't think there's anything wrong with that. When little kids get up on their legs, the first thing they do is fall over, right? I don't know if I can equate a child walking with the economy; that's rather unique. I don't know if anyone has tried that before.

Certainly there will be failures. But I'm satisfied that the program has induced some very sound enterprises and that it's growing and building. I cited the case of the Kamloops region, which now has value-added or remanufacturing facilities that produce products to the tune of about $100 million in total value and employs more than 500 people. If you really take the time to go around B.C. and look at some of these plants and the things that they're producing, whether it be log homes, windows or doors, they're attaining an extremely high value for the resource of the province.

It's to be expected that new ideas don't always work; there will be failures. But the program is fundamentally sound. Even though there are failures, the wood doesn't disappear. If we have allocated a sale and there has been an inability to carry through for whatever reason, because the person was too ambitious or their plans were not as well thought out as they thought.... By the way, we give those plans a very rigorous scrutiny; we don't want to set anybody up for failure. If there are failures after you've awarded a licence, I would only point out that it's the normal course of business.

The wood then reverts back to the Crown, and we have the opportunity to put that wood out to other 16.1 sales and give other people the opportunity to do the same thing. I'm encouraged by what I've seen so far.

I have a strong commitment to that program. It's producing some very good results in B.C., and maybe it's time we started looking at showing off some of the things we do very well. I would like to think about a major exposition in Vancouver sometime in the following year that will allow all of these small manufacturers to gather in one place and show off the kind of products that we make and invite some people from around the world to take a look at what we do so well in B.C.

W. Hurd: I have some additional questions that I wanted to ask, but I note that the forestry critic of the third party has been patiently awaiting in chambers. He may have some issues that he wants to go through with the member.

L. Fox: It's an unexpected pleasure to have that courtesy afforded to me by the Liberals.

I just want to follow along in the small business program. One of my major concerns has been that the stumpage formula has not been as susceptible to and does not recognize the opportunities that may exist in order to add value to the sawmills. In my understanding of the formula, if a sawmill does add its value, that comes back and later adds value to the stumpage. If I'm not correct in that, perhaps you would correct me, but that seems to be my assessment of it.

Hon. D. Miller: I want to say that we charge a relatively high stumpage in this province across the board. The Americans are out to lunch in suggesting that there are subsidies. No question about it. I visited a mill owner in Prince George not that long ago. Here is a very sound operation, taking wood that is junk -- garbage that nobody else wanted to touch, small junk wood, which is found in pockets -- paying a very high stumpage. Reforesting. Their obligation. Very good, sound little mill, and they're turning that junk wood into finished-wood products -- all the things we want to do in this province. That operator is paying the kind

[ Page 1411 ]

of stumpage.... The Americans couldn't do what he's doing; they're not smart enough. They wouldn't have the capability or the ingenuity to do what this operator is doing in northern B.C., perhaps in your riding. I want to say unequivocally that any suggestion that we use our stumpage -- our economic rent system -- to subsidize industry is baloney.

My own theory, and I'm sure it's not one that the industry would rush to embrace, is that we induce economic efficiency by having the right charge for the raw material inputs, and we don't do ourselves any favour by having low stumpage. It may have been appropriate at some point in terms of our early development, with the tremendous cost of accessing the interior and northern parts of our province and developing the infrastructure that would allow harvesting and industrial development to take place. Perhaps you could argue it may have been appropriate. But what forces economic change is some pressure. Your feet have got to be a little bit close to the fire; the trick is knowing how close.

That's why we can see value-added manufacturers developing more and more. But we still need to have industrial enterprises that can use the very low-value wood. British Columbia contains vast supplies of very low-quality wood. It's referred to by some as pulp quality. I know we can have debates about that; I know there are some people who, because of changing economic circumstances, are now using what was considered pulp quality to make finished wood products. That's a normal evolutionary process in the forest economy.

We need to have those kinds of enterprises, whether they be pulp mills or medium-density fibreboard or whatever they might be, that can utilize low-quality fibre and make a product and employ people and provide the benefits to the economy that they do.

We need a variety of interests. Anybody who thinks that British Columbia has a single homogeneous forest all of the same kind and all capable of being made into the same product doesn't know what they're talking about. We need to have the ability to maintain the right economic rent, and we need to have an industry that's capable of using the profile of our forests. I really regret, in terms of the economic debate, that our friends in the United States -- and I consider them my friends; we share this continent and should be friends and have good trading relationships -- sometimes look at British Columbia and make a dangerous mistake of oversimplification.

L. Fox: I guess I did give the minister an opportunity to get up and sound off against the Americans. I certainly take no issue with the words that he chose to use; I support what he said. But I guess my concern was....

Maybe I can give you a little background on my perception of the industry, particularly in the northern interior, as at this point I don't really have an understanding of the industry in the south. In the interior it's been the smaller independent sawmills that have been the innovators in terms of getting a better value out of the wood.

In the past, prior to the stumpage difficulties that have been forced on us by the U.S., there was some incentive for an independent to step out there and spend some money in terms of developing new ideas, new technology and so on, as did the sawmill in Vanderhoof that you just spoke of. There was incentive for him to do that. He was not immediately handicapped by an increase in the stumpage formula because he was now getting more value out of the product.

But it seems to me that today the formula and the way it's put in place is kind of counterproductive to those new ideas and innovations that would add more value to the product.

I well understand the 16.1 and the category 2 area of the small business enterprise program and what it has done. I understand some of the difficulties that those entrepreneurs have faced. But I really think it's important that the stumpage formula somehow recognizes the opportunity for, particularly, an independent sawmill to be innovative about what it achieves out of that raw forest product without immediately being penalized for doing so by having a stumpage increase. That was the issue that I was trying to address.

Hon. D. Miller: I think the member is reinforcing what I've said. There needs to be some relative certainty. That debate over how much is always the difficulty and the dilemma that governments face, I suspect. We have to know what we're dealing with. I've already given you my general theory -- and I believe it to be the correct one -- that there's a direct relationship between input costs and the value you add. I don't accept the notion that low input costs provide any inducement to add value. They don't.

It points out too that it's a complex issue. One cannot apply something to one situation and then turn around and say that it applies equally to another situation. We've got to be able to be flexible in this province.

What we want ideally is to utilize the resource in the most efficient manner; to plan the extraction of the resource in the best possible manner, consistent with maintaining those other very important issues, such as environment, wildlife and recreation; to have manufacturing plants turning that wood into products that are useful around the world; and to be able to sell them at a cost that allows them to compete in the international marketplaces, which they must do.

It's a complex business and begs for some understanding, which is why I get so angry when I deal with issues like the countervail, because I think there has been a complete lack of understanding. It's why I occasionally -- only occasionally -- get angry about some issues in B.C. where I think there has been a failure to understand the situation.

I know you understand the situation with respect to your constituency and the mill there. I know the difficulties. I met with those people last week. I will continue to meet -- as I've done, really, with all sectors in the province since I've been the minister -- to listen to their concerns, to act where I can and to be pretty straightforward in saying where I can't act. I will continue to work with people in your constituency and others to try to resolve these kinds of issues.

[ Page 1412 ]

L. Fox: I want to ask a question with respect to the small business program itself, a program which I really believe is misnamed. It should be called the surrogate program or something similar. I'm extremely concerned about us and about the climate that the program has now developed into. The intent of the program initially was to give entrepreneurs and individuals who wanted to get into the logging business an opportunity to bid on smaller stands of timber, which they could log and market to the local mills. In some cases mills in another community were prepared to pay a higher dollar for it.

But it now appears that it's an extension of our present quota section, in that if you don't have a large sawmill that comes in with its arm around you, helps you bid and guarantees you a price at which you can afford to bid, then, as a small business person, you don't have an opportunity to take

part in that process.

I would suggest that the surrogate bidding part of that is something that industry would much rather I didn't speak about. But I have talked to a lot of small loggers who are running out of wood, and they're running out of the opportunity to go to work, because they don't have, and can't get, an arrangement with a larger sawmill.

Has your ministry looked into this program? Do you have any recommendations or suggestions as to how we might really make this a small business program?

[4:45]

Hon. D. Miller: There have been a couple of reviews of the program. I'm mindful that the member who preceded you used to wax eloquent about the small business program and the small logger, and I think that Mr. Kempf probably had a fair following as a result of his endeavours and his statements about the small logger in B.C. Like all members, I was so disappointed and upset to see that former member from northern B.C., who purported to defend the forest industry of this province, sitting in front of a congressional committee in Washington, D.C., attacking British Columbia and the men and women such as the ones who work in your constituency.

Interjection.

Hon. D. Miller: But he used to talk about this issue. Maybe I digressed.

Even if you were able to identify surrogate bidding, and let's say you were able to do that -- if you've got any good ideas, let me know, because I don't know if it's possible -- you would still have the same result. People would still bid up the timber to its highest degree. I suspect that there would probably be no variation.

[E. Barnes in the chair.]

Where does the timber go? The timber goes on the market and presumably the highest bidder buys it. If that's the local mill down the road or in the adjoining constituency, and outside the timber supply area, ordinarily.... I know that the member is a free-enterpriser.

Interjection.

Hon. D. Miller: He wasn't arguing against free enterprise.

Normally that means you should sell whatever you're selling to the highest bidder. In the case of the Crown's resources, on the small business side, it would clearly seem to be in the Crown's interest, generally, to sell the timber at the highest possible value. Having sold it at the highest possible value, it sometimes follows -- but not all the time -- that it will then be used for its highest end use. From a theoretical point of view, it's not a bad program. I appreciate the feelings of some members of the small business community.

I suspect that that is probably just a normal result of having competitive bidding. When you have competitive bidding for anything, on any given sale there's one successful bidder and there might be five unsuccessful. That's simply a fact of the available timber. If timber supplies were endless, I don't know how you could be competitive. You'd have to have some other system. I don't know if you can identify or correct surrogate bidding. I don't think it would make a difference in the overall scheme of things with respect to the end price that the Crown received on those bids. I'll leave it at that.

I think we've got some others, in terms of the shift, to the transition to the more value-added. We've got an industry that has evolved and has certain demands. We've got some other complexities and problems there in terms of that shift. We're trying to help that along through 16.1 sales. In terms of the direct-bid sales, in

section 16 we realize a reasonable degree of revenue for the Crown. We spend a lot of that money going back in and doing the kind of good, sound forestry work, road building, engineering and silviculture that needs to be done, and by and large the program is viewed as a success. There are constant demands that we increase it. We currently dispose of between nine and ten million cubic metres, about 12.5 percent of the provincial annual allowable cut -- about 1,500 timber sales every year and about 2,100 firms and individuals registered in the program to bid on those timber sales.

L. Fox: It's too bad the min