Resource Committee

2019-06-20

Newfoundland and Labrador — Committees

PDF Version

June 20, 2019

Pursuant to Standing Order 68, Derek Bennett, MHA for Lewisporte - Twillingate,

substitutes for Derrick Bragg, MHA for Fogo Island - Cape Freels.

Pursuant to Standing Order 68, David Brazil, MHA for Conception Bay East - Bell

Island, substitutes for Lloyd Parrott, MHA for Terra Nova.

The

Committee met at 9:08 a.m. in the Assembly Chamber.

CHAIR (P. Parsons):

Good morning, everyone.

Are we

read to start, Minister?

MS. COADY:

Absolutely.

CHAIR:

Okay.

So what

we'll do, we'll first start off, of course, by having everyone introduce

themselves. We'll start with the minister and the department.

MS. COADY:

Thank you very much.

I'm

Siobhan Coady, St. John's West, Minister of Natural Resources.

MR. LOMOND:

Ted Lomond, Deputy Minister.

MR. SNOOK:

Corey Snook, Assistant Deputy Minister for Energy Policy.

MR. TRASK:

Doug Trask, Assistant Deputy Minister for Royalties and Benefits.

MR. CANNING:

Perry Canning, ADM, Mining.

MR. IVIMEY:

Philip Ivimey, Departmental Controller.

MS. NOSEWORTHY:

Tanya Noseworthy, Assistant Deputy Minister of Corporate and Strategic Services.

MS. GILLIS:

Heather Gillis, Director of Communications.

MR. WHITE:

Keith White, Executive Assistant.

MR. BRAZIL:

David Brazil, Conception Bay East - Bell Island.

MS. DRODGE:

Megan Drodge, Researcher with the Official Opposition Caucus.

MS. COFFIN:

Alison Coffin, MHA, St. John's East - Quidi Vidi.

MR. MORGAN:

Ivan Morgan, Researcher, NDP Caucus.

MR. LOVELESS:

Elvis Loveless, MHA, Fortune Bay - Cape La Hune.

MS. STOODLEY:

Sarah Stoodley, MHA, Mount Scio.

MR. BENNETT:

Derek Bennett, MHA, Lewisporte - Twillingate.

CHAIR:

I'm Pam Parsons, MHA for the District of Harbour Grace - Port de Grave. I'll be

chairing the session this morning.

The

minister has 15 minutes to introduce the Estimates and the Members speaking

immediately in reply to the minister has 15 minutes, all other Committee Members

have 10 minutes to speak. We can all refer to ourselves by name instead of

portfolio or district or department, per se.

Minister, when you're ready.

MS. COADY:

Thank you very much.

Good

morning, everyone, on this beautiful spring morning. I'm very pleased to be here

again and happy to both recognize my colleagues that are sitting here with me,

the great team at Natural Resources.

As you

can appreciate, Natural Resources does generate a tremendous amount of the

revenues for government and does generate a lot of the economic activity for the

Province of Newfoundland and Labrador. In fact, in the last couple of years, we

have been responsible for about $8 billion in new economic activity. So, it is a

very small but mighty team at Natural Resources, and I'd like to thank them for

all their efforts.

There

has been a tremendous amount of focus and growth and development over the last

number of years, and this is a team that works very, very hard on behalf of all

of Newfoundland and Labrador.

The

Department of Natural Resources is really focused on – I like to call it – three

things. It's focused on oil and gas, and then, of course, both the development

from the regulatory side of things as well as on the benefits and royalties. We

are also responsible for mining, all the mining activities in the province. We

are also responsible for electricity and energy development, including renewable

energy.

That is

kind of the way I'd like to present the efforts of the department. As you can

appreciate, as I said, a great team at Natural Resources that contribute greatly

to the growth and development of our natural resources industry.

There

are a lot of positive impacts of the oil and gas, and mining sectors; they are

very well-known in the province. Our mining sector is making impressive gains.

Notably, the forecasted production value of minerals for 2019 has grown an

incredible 47 per cent since 2016, to $4 billion in value, and there is over

6,000 person-years of work.

Our

offshore is a major source of revenue and employment, and as of this past

December, over 7,000 people were employed in the industry in the province and

over 90 per cent of those people call Newfoundland and Labrador their home.

The

last two years there have been $18 billion – I said $8 billion – $18 billion in

investments announced for both mining and oil and gas. As you know, for oil and

gas, there's $4.3 billion in work commitments in our offshore, with eight new

entrants in the last three years.

From a

revenue perspective, despite operating on a minimal core operating budget, which

we will review here today, the department brings in significant provincial

revenue sources. In 2018-19, offshore royalties are estimated to total

approximately $1.06 billion, with the mining taxes, royalties, permits and fees

totalling another $75 million. It is estimated for 2019-2020, both will bring in

an estimated $1.2 billion in combined revenue.

The

'19-'20 Estimates for the Department of Natural Resources is $559.8 million;

however, it's important to note that while the department's 2019-20 Estimates is

$559.8 million, when funding for items such as: Nalcor Energy capital; Oil and

Gas corporation of Newfoundland and Labrador; Canada-Newfoundland and Labrador

Offshore Petroleum Board; the Innovation and Business Development Fund; the

diesel subsidy rebate; Mineral Incentive Program; o rphaned

and abandoned mines;

and salaries are excluded, the department operates on a minimal budget of $3

million for the core operating budget of Natural Resources. So when I say small

but mighty, I mean it.

Over

the past several years, through the zero-based budgeting process, the department

has realized savings within its core operating budget through detailed analysis

of many areas in the department, including cell phones, office supplies, land

lines and costs related to offsite record management, Iron Mountain.

comparison to the 2018-19 core budget, the proposed budget for 2019-20 operating

expenditures has increased by $260,000. The majority of the operating increase

was the addition of a new geoscience exploration funding – $250,000 – dedicated

to airborne geophysical survey, a modern time and cost-effective means of

collecting detailed geoscience information.

The

department has not experienced significant growth in its base operating budget

over the past 10 years; however, there have been various one-time investments

for arbitration settlements or other surveys.

Despite

significant Mines and Energy sector growth over the period, the number of

permanent employees in the department has not increased. There are currently 165

permanent positions, which is below the 2005-2006 level of 167. So roughly

around where we were in 2005-2006.

As of

April 1, 2019, there are 147 active employees in the department. The department

has experienced some turnover, mostly through retirements over the last number

of years. There were six retirements in 2018-19 and three additional retirements

since April 1. Vacated positions are filled when necessary, reprofiled to meet

emerging skill requirements and are reviewed for possible attrition; long-term

temporary positions that are vacated, no longer required, for example.

This

past year, a lot of activities happened in the Department of Natural Resources.

In the Oil and Gas sector, we did a sector development plan called

Advance 2030 and that is a very

comprehensive plan that was developed with 150 stakeholders across the spectrum

of the oil and gas industry to grow our oil and gas opportunities in the

province.

We also

have produced Mining the Future, again, working with stakeholders, Mining

Industry NL included. The mining division has done a comprehensive plan on how

to bring more opportunity in the mining industry in Newfoundland and Labrador,

and you'll see some investments based on the recommendations coming out of the

Mining the Future report.

Currently, in Energy, we are developing a renewable energy plan that will look

at the future energy requirements of the province in terms of renewable

opportunity. We have also done an expression of interest for renewable energy

opportunities to offset diesel usage, especially in rural and remote

communities.

It's

been a very active year for the Department of Natural Resources and we

appreciate the opportunity to come today to talk not only about our

expenditures, but any policy items that you wish to discuss. We're quite proud

of the work that we're doing in Natural Resources and proud to tell you some of

the things that are happening.

I've

offered to my colleagues an opportunity for briefings anytime, but during the

summer might be a great opportunity to delve into more depth on some of the

things that we are doing. And I know that, in the large part, you're supportive

of the activities of growing and developing the mining, oil and gas industry,

and continuing to expand our opportunity in renewable energy.

Before

I conclude, I'd like to thank the Table Officers for their hard work. I know

that this has been quite a marathon over the last number of days. I know

colleagues opposite and my colleagues have been spending a lot of time in

Estimates. So I can appreciate how dedicated you've been. The Pages have been

here morning, noon and night. Before I conclude and turn the opportunity to you,

I wanted to conclude by saying thank you for everyone for being here and for

your interest in Natural Resources and for the continuing growth of them in the

province.

Thank

you very much.

CHAIR:

First, obviously, we'll be going in and reviewing and questioning Executive and

Support Services. We will have our first speaker, and could I remind everybody

to identify themselves before they speak.

CLERK (Hammond):

1.1.01

MR. BRAZIL:

Thank you, Madam Chair.

I thank

the minister for a very thorough introduction and outlining the template of the

department. No doubt, us in the Opposition – particularly the Official

Opposition – have the utmost respect for the staff at Natural Resources, but

particularly, the importance it plays in generating not only revenue, but the

potential in our province here for developing the mineral industry. Be it the

oil and gas, the mining industry and any other type of industry that will

develop over the next decades as we move forward.

I'll

get a couple of the basic housekeeping issues out of the way just to have it on

record. The minister has already agreed to supplying a copy of the briefing

binder to us here in the Opposition, so we appreciate that. That just makes it a

little bit easier for us as we go through our Estimates and we get into budget

debate. If there's something for clarification, rather than drag it out here, we

can easily get that through an email or just a quick question in the House.

One of

the things I want to start with because we've been having some discussions over

the last number of years about zero-based budgeting – I just want to reaffirm or

clarify if your department is still based on your budget lines when you put your

budgets together.

MS. COADY:

Thank you very much.

As we

go through the Estimates and as we provide you with the book, you'll see where

we have moved money around in a category based on the zero-based budget. So

absolutely, without hesitation, zero-based budgeting is done throughout the

department and in any entity that we are involved with.

MR. BRAZIL:

Okay, I thank the minister

for that.

Is the

attrition plan still being followed and, if so, what are the changes for the

last year and for this year?

MS. COADY:

Thank you very much.

The

number of current permanent employees is 165, which is, as I said earlier,

similar to the numbers we had back in 2005-2006. We have 13 temporary employees

and four contractual. The current number of employees in the department is 147 –

I'm giving you all the information –

MR. BRAZIL:

Yeah, fair enough.

MS. COADY:

– four 13-weekers and mostly

backfills while waiting for competition. So what happens is if we have to

backfill a position while we wait for competition.

New

positions created in '18-'19, there have been zero incremental positions but

there have been two reclassified. New hires in 2018-2019, they are new hires to

government, not people who've moved in different positions but new hires to

government, there have been three. We have a total of 20 vacancies. Many are in

active recruitment. We have had a number of recent retirements.

It's

interesting, I remember the first day I was minister one of the first things

that I was told as I came into the department was we've got a lot of retirements

coming up over the next number of years, and we have, so we're starting to have

a renewal within the Natural Resources Department. One of those vacancies is a

parliamentary secretary, the department doesn't currently have one and some are

unfunded temporaries.

The

attrition target for '18-'19 is one position. That was an industry development

officer position and that had been vacant for a number of years. So we have

given up that position. That is our attrition number and our target.

MR. BRAZIL:

Okay.

MS. COADY:

So as I keep saying, it's a

fairly small and compact department. We're not Transportation and Works with a

I'm looking at it now, sorry.

So,

you're correct. It is a variance due to severance and leave costs associated

with a former employee – a long-time employee of the department. It's a

retirement, so that's why it was over. It was at the payment of her severance

and leave costs.

MR. BRAZIL:

Yes, fair enough.

MS. COADY:

So, as you see, the Salaries

are back in line in '19-'20. The only thing that's different is the step

increases –

MR. BRAZIL:

Yes, for management.

MS. COADY:

– that you're seeing. That

is why it is $183,000.

MR. BRAZIL:

Yes, it makes sense. I

appreciate that.

You

actually mentioned it, but I want to take it a little bit further. I noted that

when you came in, it was noted there would be a number of retirees, and,

obviously, these are very high-level, qualified individuals who have great

experience in helping develop Natural Resources and getting it where we are.

there a process in mind of addressing the knowledge loss there in recruitment or

moving people within the system or additional training?

MS. COADY:

Yes to all of that. I will

say that there is a concern about knowledge loss. Obviously, we are concerned

about that, but we're also hopeful because you're bringing in people with new

skills and new ideas. As we evolve in our industries, things are evolving in

their skill sets required. While we lament and are concerned about losing

knowledge, we're also excited about being the recipients of new information.

We're

trying to make sure that we have good succession planning. It is critical to the

department and we work on that every day. We see a lot of growth within our

department. For example, as one person may move up to be the assistant deputy

minister, the next person who is a manager will move up to be director, so it's

succession planning. So you give them growth opportunity.

Now

you're starting a lot of renewal in the department, so you're trying to give a

lot of these young people good opportunities for advancement; they want that.

That kind of advancement is very important, and making sure that we have a good

plan for succession. There is going to be loss of knowledge, we recognize that,

but we're trying to mitigate that as best as possible.

MR. BRAZIL:

Yeah. That's a reasonable

approach.

I do

note, because there are certain aligned departments, Natural Resources would be

a direct one, Health would be one, Education and even Transportation and Works

in the engineering division, sometimes if you lose a resource, that may have an

impact on eight or 10 other staffing people, depending on the relationship

that's part of that.

I know

when I was in TW and that became an issue, particularly around specialized

engineering specialties that we needed, that we went out beyond the norm, not

just doing public advertising but trying to find partnerships, be it the

university's engineering department or other special agencies that would have a

direct link to be able to encourage people to be part and parcel to it.

So, I

just encourage, because your department and the expertise there is so important

to the ability for our province to excel and open up new markets here, having

people come in who are already knowledgeable where possible. I do like the

approach of within, you already have a knowledge base who would then move and

part of the whole mentoring process there.

MS. COADY:

I would say – a little later

on we might get into this a little bit more – we are undertaking in the

department, especially in the Mines division, a continuous improvement process,

which is streamlining some of the processes – which is streamlining, not some –

is streamlining process within the department and really making, I think, a huge

difference on process. It also helps to address some of that lost-content

knowledge because the process is now changing, as well. We're improving it.

I'm

sure the ADM for the department will be happy to talk about some of that, as we

move forward, but even things like a quarry permit; it could take up to six

months, now it's taking a matter of – I think it's three weeks, Barry, somewhere

in that – three weeks. That's because we investigated every single thing that we

were doing and finding improved processes to do it.

MR. BRAZIL:

No, it's a good approach.

found, too, that looking at other jurisdictions, particularly in Atlantic Canada

or sister provinces, that some of the processes they use there, or some of their

employees. Not that you're trying to pull their employees away, but there may be

a connection that there's an expat who lives in Nova Scotia who's doing

something in the mining industry or in the offshore industry that would be of

value here. It's an opportunity to bring people back to where we are. So, every

process that works and benefits the department, obviously, benefits the people

in Newfoundland and Labrador.

Under

1.2.01, Executive Support, in '18-'19 there was a savings of $111,000, yet the

budget for '19-'20 is near the budget of '18-'19. Can the minister explain the

vacancies in '18-'19 and if you look at '19-'20, we anticipate being back to

basically where we were. We have had some movement within our ADMs, new ADMs.

Corey is a new ADM in the department, for example. He was a former director

who's moved to become the ADM, but that's a change, and we have one vacancy, an

ADM in Petroleum.

MR. BRAZIL:

Okay, thank you.

Under

T&C, last year $84,000 was budgeted and $120,000 spent. What caused this line to

go over your budget?

MS. COADY:

A lot of hard work, mostly

related to oil and gas development work. As you know, we do have a new plan for

oil and gas development; it's not because of that, but we are doing a lot more

promotion, a lot more outreach to companies to come. We've been able to attract

8 new entrants in Newfoundland and Labrador in the last number of years, and

they are now actively pursuing exploration offshore Newfoundland and Labrador.

It was

things like going to Houston. The federal-provincial-territorial meeting was in

Iqaluit last year. When we go to a federal-provincial-territorial meeting, we

have to take oil and gas, as well as Mines ADMs, as well as Energy.

The

deputy minister had to go to Aberdeen for a conference, an exhibit. We've been

to Norway and a Guyana trade mission. We've signed a memorandum of understanding

with Guyana to help – as you may know, Guyana has made some major discoveries in

the last number of years; we wanted to make sure our supply and service industry

in the province has an opportunity to grow outside of the province as well. We

now have 10 companies that have joint ventures in Guyana. So it is that type of

work, again, advancing supply and service opportunities, attracting investment

into our province.

We do

anticipate kind of coming back down to – what I'm going to call – the normal

level of activity this year.

MR. BRAZIL:

Fair enough. You'll get no

opposition – no pun intended – from the Opposition when it comes to trying to

find ways to drum up new partnerships and new business. For the amount of money,

it's minimal for an investment, but it could be great dividends.

Not to

sound like I'm nitpicking, but I would like to know, because we don't get that

information and we wouldn't, where our partnerships are trying to be developed

and how we're reaching out to other jurisdictions to improve the potential for

development here or to find new partners as part of that.

MS. COADY:

Happy to have an ongoing conversation during the year.

I'll

just give you another example, BHP is a new entrant to our offshore. They made a

large bid last year, single largest bid in the history of offshore Newfoundland

and Labrador. We engaged, on an ongoing basis, with BHP to encourage their

interest in the province. Those kinds of activities are ongoing, but we are

anticipating rightsizing back down to the $85,000 investment in that area this

year.

MR. BRAZIL:

Yeah, makes sense.

Under

Supplies, and I know it's a small amount of money, but my intent here is just to

find out if there's a new office open, from $7,100 to $11,000 for basically

supplies. Maybe we opened a new office somewhere to try to – or it just happened

to be additional needed supplies within the existing structure.

MS. COADY:

Yeah, it was because we did those two big events last year, the two documents

that I mentioned: Advance 2030 and,

as well, we also did the Mining the Future. So we did have extra anticipated

supply expenditures for some of those things.

MR. BRAZIL:

Yeah, fair enough.

I've

only got a number of seconds left, I'll leave it at that under that heading and

then I'll come back. I may reiterate some other things also.

MS. COADY:

Thank you.

MR. BRAZIL:

Madam Chair, I'm good there for that heading.

CHAIR:

Thank you.

We'll

move on to our next speaker, Ms. Coffin.

MS. COFFIN:

Thank you very much.

I guess

I have a couple of funny little questions and, other than that, I have one

overarching question that was just prompted by your response earlier.

Provincial revenue under Administrative Support, it's $5,000. What on earth is

that?

MS. COADY:

industry.

I'm

wondering now how are you addressing the issue of occupational health and safety

and human resource and relationships like that from other countries? Because I

know that we have very different standards than you can find in a lot of other

countries. I'm just wondering now, how do our standards jive with that of

countries that we are engaging to do oil exploration?

MS. COADY:

We're talking about the

supply and service industry from Newfoundland and Labrador doing joint ventures,

and I'll use the example of Guyana. The companies from Newfoundland and Labrador

would have to maintain their standards, and so we would anticipate that these

companies, who do have joint-venture partners in some of these other counties,

would apply our standards, Newfoundland and Labrador's and Canada's standards,

those requirements, and ensure that they are bringing best practice.

One of

the things that I think is very important and helpful to Guyana is helping them

to develop the standards that will improve their development of their offshore.

When Newfoundland and Labrador was first beginning its development of oil and

gas, we looked to Norway for a lot of assistance and help and making sure we

were doing the right things. One of the things we're working with Guyana on is

to tell them some of our best lessons, so Newfoundland and Labrador companies

going to Guyana would continue with their best practice.

MS. COFFIN:

All right, thank you very

much.

CHAIR:

Thank you.

Any

more questions on this particular subhead before we move on?

MR. LANE:

Yes.

CHAIR:

Okay. First of all, Mr.

Lane, we'll have to get leave from –

MR. LANE:

Yeah.

CHAIR:

If we can get leave?

Okay,

go ahead, Mr. Lane.

MR. LANE:

I have some more general

questions, so I'm not really concentrating on the heads, per se, just some

general questions I want to fit in where I can.

first question relates to local benefit agreements. Trades NL, as you would know

– I believe you have met with them, I have met with them and I believe all

parties have met with them – what they are saying is something that a lot of

people have been saying for a long time, that there has absolutely been a sense

that we have not necessarily been benefiting to the degree that we should, as it

relates to our natural resources, when it comes to negotiating, whether it be,

say, deals with big oil and so on.

Royalties are great, obviously going into the governments coffers to help pay

for things. But I think a lot of people would say that we would be, perhaps,

better off from an economic point of view if you had to give and take there to

give a little – if you have to take away a little bit from the royalty side or

equity stakes and concentrate more on ensuring that as much work as is humanly

possible is done by Newfoundlanders and Labradorians here. That's what I think a

lot of people would say should be happening.

So I'm

just wondering what your thoughts are on that and if there would be any shift in

how things are currently done to try to ensure that more work is done. If we

have issues around capacity, which we always hear about we don't have the

capacity, then would there be consideration to build capacity?

other words, if you're doing projects now, why could not part of it be, we're

going to take so much of those royalties or part of the deal is going to be that

we're going to build capacity from this project so that when the next project

comes along we would have increased capacity? I think about the gates at

Argentia and there are other things as well where we should be investing so

that, yeah, we might not have capacity to do it for this project but we're going

to invest now so that when the next one comes up that excuse is off the table

because now we have increased our capacity.

I know

that's a mouthful but you know what I'm saying, I think.

MS. COADY:

Absolutely.

Under

the Atlantic Accord Newfoundland and Labrador, its employees and workers, are

afforded full, fair and first opportunity. That's under the Atlantic Accord, and

any company that comes into the Province of Newfoundland and Labrador has to

abide by that: Full, fair and first opportunity has to go to Newfoundlanders and

Labradorians.

If you

look at the offshore oil, well over 90 per cent of employees are Newfoundland

and Labrador employees, so I think that's very important to note. I do meet

regularly with Trades NL, I consider them a partner in the continued growth

because they are looking for new opportunities and I think that's an outstanding

partnership to have, is to continue to grow that. They have been involved with

Advance 2030 and been involved with

some of the discussions that we're having around supply and service development,

for example. One of the new roles of OilCo, the new oil corporation, is in that

supply and service development which would require a lot of the members of

Trades NL, so it's very important.

As you

know in the oil and gas industry – and I'll turn this over to the assistant

deputy minister – we do have benefits agreements that are required and we do

maximize benefits. First and foremost, there has to be full, fair and first, and

C-NLOPB actually monitors, administers and reviews contracts by companies to

ensure that that full, fair and first opportunity is afforded to Newfoundlanders

and Labradorians. But in addition to that, we also have the benefits agreements.

Benefits agreements go above and beyond what I'm going to call that full, fair

and first to say, in addition to what is full, fair and first, these benefits

must accrue to the province.

So we

have benefits agreements with all oil and gas, as well as mining companies. So

full benefits agreements with them. I'm going to turn to Doug just in case

there's anything new you wanted to add or additional you wanted to add to that.

MR. TRASK:

So as the minister has indicated, we have benefits agreements and we are one of

the few jurisdictions in the world that actually have that. So we have

recognized we got to compete globally for investment. We are dealing with some

large companies that have alternative investment opportunities, so we need to

ensure we maintain a competitive environment.

At the

same time, when we negotiate these, we are trying to maximize those

opportunities. We also have the Innovation and Business Development Fund: $6

million a year over 10 years, per year. It is $60 million where we will be

investing in capabilities of companies, infrastructure, things that will

position us for the long-term opportunities that are there.

MR. LANE:

Thank you.

appreciate what you're saying, but by the same token, we say that, but there are

all kinds of work going on, say, in Houston, in Texas and other parts of the

world as it relates to fabrication and stuff of all these, related to our

offshore and, at the same time, we got Bull Arm out there sitting idle.

while I appreciate what you're saying about an investment fund and so on, I

guess the bottom line of what people are saying is that if we're going to sign

an agreement with an oil company and there's work to be done, that once Bull Arm

is filled to capacity and Marystown is going and all of our facilities are up

and running and there are Newfoundlanders working, doing that work, doing that

construction work on modules and stuff like that, then you can go to Houston and

then you can go wherever. But as long as ours are sitting idle, then there

shouldn't be work leaving the province.

I know

it's not as simple as snapping your fingers and just making that happen. I know

there are negotiations. But I think that's what Newfoundlanders would expect of

our resources, that our facilities are up and running at full capacity and then

you can talk about sending work away to other parts. But when people are sitting

back and they're on EI or they're having to go to Alberta or whatever and then

there's work being done in other jurisdictions related to our offshore, I think

it puts a real bad taste in Newfoundlanders and Labradorians' mouths. I guess

that's the point.

MS. COADY:

Thank you.

I hear

your frustration and all that, and echo that as well. I want 100 per cent of the

work to be done in Newfoundland and Labrador, but I also recognize two things:

we are continuing to capacity build here. Some things we want to ensure that are

here, and some things that will always be done outside of the province just

because doing them once would not make it competitive, would not make it – we

would not be able to continue to develop that expertise.

So we

have to be careful that what we're doing is developing the expertise that is

essential to Newfoundland and Labrador, like subsea, for example. We do have

Newfoundland companies that do work all over the world themselves; that do bring

work in. I think Technip here has brought in work, I know Cahill has brought in

work as well.

We're

trying to develop not only our opportunity to maximize our benefits by local

companies with a local opportunity, but grow their expertise. That's why Doug

was right to mention the Innovation and Business Development Fund. We want to

grow it so we can attract more work to Newfoundland and Labrador; more work here

that could be coming from Houston, or other countries, and doing the work right

here.

I'll

use a good example. This past winter we just did the thruster change out on the

West Aquarius, I think it's the first time we've ever done that kind of work,

and that was done in Bull Arm. West Aquarius is a drill rig, an exploration

drill rig, that is now active offshore. We're crossing our fingers that they

find something, but that's the first time we've done that type of work here in

Newfoundland and Labrador.

It was

a competitive bid between Bull Arm in Newfoundland and Labrador, and I think

there was other bidders from other parts of the world that that rig could have

gone. We were able to attract it here and now we're looking at other rigs to

come in there.

there's a lot of work. I know that people sometimes see a module that might be

being built elsewhere under benefits plans, but that's what we're trying to

achieve, maximize our expertise in this province and then not only do our work,

but also attract people from around the world.

I think

there's a real opportunity in subsea development for that as well. That's one of

the things you'll see in Advance 2030 ,

as us being the subsea experts.

MR. LANE:

Thank you.

CHAIR:

The Member's time has

expired.

Are

there any other questions, particularly for this subhead, before we move

Okay.

MR. BRAZIL:

Thank you, Madam Chair.

Under

the Geological Survey, Salaries, comparing last year to this year, decreased by

$193,000. Can the minister explain and outline why?

MS. COADY:

Certainly.

This is

under the Geological Survey, that's a variance due to lower salary costs as a

result of attrition management. Again, what you're seeing is some move and

changeover within that department.

MR. BRAZIL:

Would that equate –

MS. COADY:

We've had long-term employees that have moved on, and you'll see evolution of

the survey.

MR. BRAZIL:

I do realize salary bases are different in some line departments by the

expertise and the background, would that equate to one salary, two salaries or a

combination of two or three?

MR. LOMOND:

Our average is $65,000. So you can do the math on that. Now, in some cases, that

may be a case of somebody retiring and leaving at a top step and a new employee

coming in and starting at a bottom step. So it doesn't equate totally to

positions in and out.

MR. BRAZIL:

Okay. So we wouldn't know if it's two or three employees, it could be half of

That's a variance due to the higher than anticipated field supply expenditures

during the year. A lot of that came through the laboratory materials and

consumables such as argon gas. There was a change last year in terms of what we

were able to do.

I think

over 200,000 chemical tests last year were done in the laboratory and some of

that work was because of a certain field program that was being done. They're

not anticipating that change this year.

MR. BRAZIL:

Okay.

Noting

that over the last number of years there's been a substantial decrease in the

Supplies, and one of the concerns that I would have, because I'm a real believer

in the geological importance here and the work we do around that. Would this

have an impact here because we're lowering the Supplies or is it a total

separate entity there that wouldn't have an impact on that?

I just

want to be reassured that that's not – because I see the geological importance

to the department in offshore oil or in the mining industry also.

MS. COADY:

Certainly.

As you

can note in the Supplies, there is an increase for this year of about $6,000.

I'll just turn to my ADM of Mines just to get that reassurance. I think that

last year was a particular set that required some extra money in that supply

area.

I'll

turn to the ADM for his reassurance.

MR. CANNING:

Thank you, Minister.

don't see an issue going forward. The geological survey is critical to our work.

In fact, if you look at the map of Newfoundland and see where the geological

survey finished off their work, you pretty well see where exploration activity

stops. We're very keen to make sure that they have the capabilities necessary to

conduct all their efforts.

I would

also say that last year some of the funds for Transportation and Communications,

for instance, a significant help at the time, especially as we do survey work,

the scientific work, in the Labrador region.

MR. BRAZIL:

Thank you.

MS. COADY:

May I add something here?

MR. BRAZIL:

Yeah, sure.

MS. COADY:

I think this will help

reassure you a little bit as well.

If you

look under Professional Services, there's almost a $200,000 increase.

MR. BRAZIL:

Next question.

MS. COADY:

Oh, okay.

MR. BRAZIL:

No, that's good. Perfect.

MS. COADY:

I'm anticipating because I'm

excited about this.

We're

putting in some extra money for airborne geophysical work. This is new this year

and it is really coming out of the Mining the Future. It helps improve process

data capture and improves the way work is being done in the geological survey.

So I want to reassure you that we are actually doing more on the geological

survey and putting a new investment there to do that airborne geological survey

so that we can have both drones …

I'll

allow my deputy minister to give more details.

MR. BRAZIL:

Yep.

MR. CANNING:

Thank you, Minister.

The

airborne survey that we're planning, hopefully it'll be funded, will enable the

geological survey to better target where they do their field work. They'll get a

sense of where to do this work and also within the Mining the Future program

we've also agreed to have an external advisory committee with industry and the

scientists, including folks through CNA and Memorial, to really target where we

should do this field work and how we can really improve our capture of

scientific information.

The

other point I would make, with respect to Supplies, we did find an issue in some

of these supplies how it was coded in terms of, if you look at Purchased

Services, it's down a little and what we found is in the supplies we were

purchasing, because some of these supplies have laboratory issues like argon gas

and the like, some of the other points should have been captured under Purchased

Services rather than Supplies.

We just

started an end-to-end review of that to make sure that our coding is absolutely

correct. Net on net, the dollars were spent according to the budget, but some of

the coding issues we have discovered so we're going to fix that too. We've got

an end-to-end review going through our continuous improvement program to take a

look at the full capture of when something is purchased, how it's coded, how

that is cross-checked in the future and ensuring that we are coding correctly.

Net on

net, the dollars expended last year were expected to be expended and we do have

enough sufficient budget allocated for this fiscal coming to do the work that

we're required to do.

MR. BRAZIL:

Okay, perfect.

Under

Grants and Subsidies, the $352,000 grant was not given out. I understand that

was a negotiation with the federal government to try to channel that back

through C-CORE as part of that. Has that been achieved? Have you been able to

put that proposal in play for this year?

MS. COADY:

You are exactly correct. Due

to the C-CORE project, it was a slope stability project and it didn't proceed

through the Defence Research and Development corporation. So this is a flow

through. Literally, we were working with C-CORE so that they could get their

funding. It has to come through a department, but I understand that funding

didn't happen. C-CORE got other funding for other projects that will show up in

under other Estimates, but that particular project didn't advance.

MR. BRAZIL:

But our understanding was,

from conversation I had, that was one of the priority ones that would have been

a benefit to the projects that we were moving forward. What was the excuse –

what was the rationale Defence gave in not funding it? Sorry.

MS. COADY:

I will allow the deputy

minister to deal with that.

MR. CANNING:

Thank you.

This

was an important project for us. It was coastal erosion and it was going to be

funded through DND. The C-CORE application was not accepted, but we're going to

continue working with groups as we have with CNA and Memorial to achieve federal

funding, where possible, to continue research. We were disappointed but we

partnered up with C-CORE to try to achieve that.

We do a

lot of work, by the way, on coastal erosion through our Geological Survey. We do

a lot of drone surveys and working to understand better climate change and the

impacts of climate change in coastal regions, especially, so we're hoping to

gain that effort, to really extend our expertise internally.

MR. BRAZIL:

Again, I 100 per cent support what those entities are doing and the value here.

Has

there been any consideration that we take it on ourselves in that project? I

know it's adding financially, but for the out benefits, would it work somewhere

in our budget lines?

MR. CANNING:

We are going to be doing some coastal monitoring programs using our drones this

summer and we'll continue using whatever resources and capabilities we have to

extend our knowledge in coastal erosion, so that's in our Geological Survey work

plan for this fiscal.

MR. BRAZIL:

Okay, thank you.

I got

one quick question here before I pass it on. We were intrigued last year; the

minister had talked about a hand-held device, an app. That was the plan to try

to put in play. How close are we to making that happen?

MS. COADY:

We do have certain applications, hand-held apps for certain things. I know that

we have one for Bonavista, for tourism, geological tourism, but I'll allow the

assistant deputy minister for Mines to go further.

MR. BRAZIL:

Yeah. And the costing for something like that as we move forward, if we know.

MR. CANNING:

Thank you, Minister.

Dr.

Alana Hinchey with the Geological Survey has been developing a system with a

local company here with an app on tablets, as you go out in the field and

capture data. The whole purpose of this is to ensure the accuracy of data

transfers as you're doing the research in the field, and then you have it on

your tablet and then you can download it into the system. The faster and more

accurate our data capture is, the more able we are to develop our current

research documents that we send out to the industries around the world to

achieve their interest and hopefully their investment.

I think

we're pretty well near the end of that development, and there may be a

maintenance cost over the next couple of years to maintain that and tweak that

and improve it. They've done some really incredible work to get the tablets in

the hands of field geologists, using this app to capture that data.

MR. BRAZIL:

Thank you.

MS. COADY:

I will say, as well, I have copies of the current research of the Geological

Survey. It's quite a tome, but it is produced by the department, and this is

really important for attracting global investment in our opportunities for the

mining industry. I have copies for you, if you would like. I think it is

important that we all to know that the department does produce incredible work

like this and it is available globally and, importantly, to ensure that we are

attracting the right investment in our mining industry.

MR. BRAZIL:

Thank you.

CHAIR:

Thank you.

We will

move to our next speaker.

Ms.

Coffin.

Ms. Coffin :

Thank you very much

Before

I start, I must apologize; I should have thanked you all for coming and all the

hard work you've put into this. I know that getting ready for Estimates is a

very grueling process that takes a considerable amount of time, so I appreciate

your professionalism and your dedication to this. Thank you very much.

First

question, let's jump off on the Geological Survey part. I noticed that, in the

description here, a lot of the activities associated with Geological Survey are

pretty similar to a lot of the stuff that's being done in the department of

Geophysics in Memorial University. So it would make sense if we are talking

streamlining activities and enhancing research capacity and shoring up the

foundations of Memorial University, perhaps it would make sense if we could look

to maybe incorporating a lot of this work into Memorial University. Instead of

having those redundancies that we are seeing, maybe you can actually work with

the university where maybe this piece is housed at the university and you can

talk about data sharing within the university so that they have access to really

good data so they can, of course, publish which, of course, improves the

reputation of the university.

Has

that ever been considered?

MS. COADY:

Thank you for the question,

Certainly, we work with Memorial University on an ongoing basis and we have

great partnerships with Memorial on a lot. I would say most of the Geological

Survey work is done by people who've graduated from Memorial University, as you

have heard of Dr. Alana Hinchey and others.

So,

yes, there is an ongoing discussion and ongoing connection between Memorial

University. A lot of the work that's been done in the Geological Survey is

really targeted. And this comes from Mining the Future. It's a true opportunity

that we have in Newfoundland and Labrador and very focused on, because we are

trying to attract investment, the types of research that will attract the

investments. We are very focused on growing our industry and not just doing the

geological work because it's an important, valuable part of the research and

knowledge of Newfoundland and Labrador.

But I

will turn to the ADM so he can add to this.

MR. CANNING:

Thank you, Minister. Thank

you for the point, it's important.

Just

recently, at the mining conference, we heard Memorial speak very clearly about

how they are helping companies improve their performance and recovery of ores.

We actually toured one mining company with Memorial University. We work closely

with Memorial. They are a critical partner. It's interesting because when I meet

with federal and provincial and territorial colleagues, they're trying to stitch

together academia with the departments and with industry, and we're doing it.

If you

look at the hyperspectral scanning process, we will be the first in the country

to have this system at the level it will be at, and clearly it's Memorial and

CNA working with industry; not only working with them, but industry contributing

and encouraging this partnership, so this is a critical piece.

If we

look at our capability to compete with the world, it's through our brain power

and our capacity to think through issues and find solutions to complex issues,

because once we do it internally in our province, that's something we can

export.

MS. COFFIN:

Excellent, I appreciate

that.

Certainly that's where my mindset is. What I am suggesting is that perhaps we

strengthen that relationship and look at, while we are only 500,000 people, if

we're going to be doing the same stuff, let's all do it together and share that

information. There are lots of ways in which we can do that.

MS. COADY:

I think that's an

outstanding suggestion we're continuing to strengthen.

As the

ADM mentioned, we do this hyperspectral imaging project that we're working with

both Memorial University and the College of the North Atlantic on. Further on

that, because it is in another estimate, that's through Tourism, Culture,

Industry and Innovation, it digitalizes our provincial core samples to produce

new, advanced data, and I think this is going to really revolutionize and be

able to put it online.

It will

really advance this province, and we're working with Memorial and CNA on that.

MS. COFFIN:

That's excellent. I'm really

happy to hear that.

One of

the things you may want to consider as well is in the new intellectual property

and collective agreements at the university, one of the key problems they're

having right now is saving these core samples.

MS. COADY:

Yes.

MS. COFFIN:

There's no capacity to store

this information and there's a lot of compliance across funding agencies all

across Canada where those things need to happen.

So, as

we do this, you also need to include the added burden on the university and

funding that capacity. If we are going to grow our industry in this particular

area and add those resources, we also need to add that additional capacity.

Moving

on from there, can we have an update on the potential gold resources in Central

Newfoundland? Has there been an uptake on that information?

MS. COADY:

Certainly a lot of uptake on

it. The geological survey – and the ADM will give you further details, but if

you follow along where the geological survey is, that was when we had that

massive – I'm going to call it – gold rush where a lot of staking was done in

Central Newfoundland. I can tell you that the advancements are continuing in

that, but I'll allow the deputy minister to give you an update on those gold

resources that are really exciting.

MR. CANNING:

Thank you, Minister.

The

gold in Central Newfoundland is certainly driving a lot of exploration; tens of

thousands of drill metres being drilled. If you look at Marathon, they have a

pretty significant camp in the area of Valentine Lake and they're actually

moving into an EA process because they've determined that they're mine ready in

terms of moving forward their investments to create a mine.

It was

interesting listening to other smaller companies exploring in that area at the

recent Baie Verte Mining Conference, and you really got a sense that it's

actually charged up a lot of exploration activities.

The

exciting news about this is that for most mines and most exploration, these are

in rural parts of our province. These provide opportunities to those parts of

our province, and they actually provide good jobs and opportunities, and a real

future.

One of

the reasons I like the Baie Verte Mining Conference is that it's small mining

companies and communities and governments and academia all working together to

try to figure out how we can best squeeze an ounce of gold out of a certain

amount of rock. That's what they're doing in the work I referenced Memorial was

speaking of there was how to recover more and find more economic.

So, in

terms of Central Newfoundland, I would say that things are progressing very

well; a lot of exploration activity. Again, Marathon is moving strongly, but all

of this, the genesis of this effort, these investments are our geological

surveys work.

MS. COFFIN:

Good. Okay. That's nice to

see that we're putting all of those things together.

As a

follow-up, gold mining is not the most environmentally friendly process. Is the

department doing any work on how to ensure gold mining can be done without

endangering our environment?

MR. CANNING:

Thank you for the question.

The

environment is critical. We get one environment. It's our collective

environment. So, it is of deep concern for us, and as companies discover gold,

or whatever mineral, they have to go through a very strong process that requires

them to demonstrate how they're going to ensure the least impact and be

sustainable in terms of the environment.

So,

just because people discover things, it doesn't mean they will have an easily

gated process out through the environmental assessment process. I feel we have

very robust systems of environmental assessments, and we will see.

terms of our work, of course, Memorial is still doing work that I referenced

earlier, but I understand the questions around gold mining and other types of

mines. I would say that gold mining is one thing, but we can never get to a

green economy without the riches of the earth. It is not possible to achieve the

greening of the economy without things like rare earths that we see on the coast

of Labrador and cobalt that we see coming out of Voisey's Bay for electric

batteries.

So,

each mineral plays a part, and we don't discourage the exploration of one

mineral over another, but it's up to the companies and their investor community

to demonstrate and commit to a sound, environmentally responsible practice and

program for their project.

MS. COFFIN:

This is good to hear. I'm glad we are very concerned about the environment and,

certainly, I see that there's a huge opportunity for our province to be leaders

in environmental stewardship. The more rigorous our environmental protection, I

think the more likely we are to become world leaders in that area. That is a

huge growth potential, given societies, as a whole, concerned about climate

change and environmental issues. So, certainly, I think, in addition to the

mining, we have potential that perhaps we are not recognizing.

While

we do have very strong environmental concerns about the project, the fact is

Eagleridge is currently exploring for gold in the Salmonier watershed. Can the

minister give us an update on their activities? Have they begun drilling? Yes,

let's start with that.

MS. COADY:

I'm going to allow the assistant deputy minister to answer on that, if I may.

This is an exploration project. It is not a mining project. Sometimes you'll see

in the media that there's a confusion. It is an exploration project, not a

mining project.

MR. CANNING:

Thank you, Minister, and thank you for the question.

It is

an exploration process and in achieving exploration permits, there is a referral

process to multiple departments. It's one thing to build a road, it's quite

another to go through the process to achieve your permits for exploration.

So, as

a company submits permits, they're completely reviewed and referred to multiple

departments across a broad spectrum of government for the feedback before

permits are issued. So, it's not exploration starts immediately. There is a

process to get approved for that.

MS. COFFIN:

Okay.

Why

won't the government authorize an environmental assessment of their activities,

notwithstanding the Supreme Court ruling?

MS. COADY:

If I may, the environmental assessment process doesn't rest with the Department

of Natural Resources. We do the permitting on exploration or permitting on

mining, but the environmental assessment process rests with the Department of

Municipal Affairs and Environment.

MS. COFFIN:

Okay, I'll talk with them about that then.

CHAIR:

The Member's time has expired.

Mr.

Brazil, do you have anything else for this subheading?

MR. BRAZIL:

Yes, I do.

First

thing, can you provide us with a copy of the projects that are going to be

undertaken this year on the Geological Surveys? You can just provide that later

on with your additional information.

Last

year in Estimates, the discussion around the Labrador Trough, can the minister

give us an update on what projects are going on there and any discussions on

sharing information with Quebec because of the geographics, please?

MS. COADY:

Thank you.

first I'll go to the geological information sharing. As you know, last year

Newfoundland and Labrador had made an agreement with the Province of Quebec

where we're going to start to make sure we're developing the geological

opportunity in Labrador with knowledge sharing. There have been ongoing

discussions within the department between the geologists in Newfoundland and

Labrador and the geologists in Quebec to make sure that we understand and share

that information, because the Trough does sit mostly on the Labrador side, but

we do share it with Quebec. Sharing that information and data will help us

develop better resource as we move forward.

I can

tell you that, as you know, Tacora is now in the process of restarting. I

believe their first shipment is coming soon. So their first shipment of ore is

coming soon and they've been just moving along gangbusters. As you know, I think

there are 240 positions in the Wabush area. So that's pretty exciting. IOC has

expanded and now has the Moss Pit and we're very pleased to see their continued

growth and development. Tata has now hot commissioned their plant, and that's

very exciting. And as you know, Alderon did a project restart and is continuing

to go out there and seek investment to start their processes.

So it

is an exciting time in terms of iron ore and development of the Trough. We would

like to see even more development in the area, obviously, and are continuing to

work to do just that. I'm going to turn to the assistant deputy minister to see

if there are any further things you want to add.

MR. CANNING:

Thank you, Minister, and thank you again for the question.

I grew

up in Labrador and the Labrador Trough is critical. It has massive iron ore

resource through that area. Bear in mind, whether you're in Schefferville with

Tata or Wabush with Tacora or Lab City with IOC, the railway is critical.

The

shipping port of Sept-Îles is critical for us. So the capacity to entertain the

production volumes is also critical. The sharing of information between the

geological surveys of Quebec and Newfoundland and Labrador is also important.

They did share before but we want to improve that, because what you discover

over here might give you a signature of what you might find over there.

That's

the issue with being able to share this – and we're in an excellent position.

Dr. Alana Hinchey, I've referenced earlier, she's fluently bilingual, she's been

over to Quebec City meeting her colleagues, so what we hope we will see is a

joint plan to do more scientific research on both sides of the border up along

the Trough areas.

that's what we're working toward, and we're working toward making sure that

there are no barriers to shipping down through the Quebec North Shore and

Labrador railway, on to the port of Sept-Îles. Does that help?

MR. BRAZIL:

Yeah, perfect.

I just

want to note a few comments there in a general context because I support exactly

where things are moving forward. I could look at the little changes in

transportation and supplies, but that's immaterial. I was out at the mining

conference and was truly impressed with the partnerships, the industry, the

components to it, and did get a real eye-opener about the potential for the

seismic on land, particularly, and the use of drones and the ability that they

have.

I know

it's a first-time very expensive partnership or investment by certain companies,

and I saw some of the potential entities that could be involved in here and some

of the pieces of equipment, but being taken through it and then doing some

research when I came back to see how viable it is and realizing where it works

in other jurisdictions – in some jurisdictions, particularly down through South

America, 80 per cent of their geological exploration is based on the seismic

that's done on land through drones and that.

So I

see the value there, and I truly encourage the department to find whatever ways

to partner, and if it means supplying particular training or contracts, or even

grants – because we see what we did with the seismic and the benefits a

generation later, or a decade later, to now negotiating. The power we have in

comparison; I see the same. But I also see it from an environmental point of

view that if you already know, before you go to explore, you would know what

footprint that's going to make from that perspective.

wasn't my first one there, but it was my first one as the critic to really sit

and talk to people; I had breakfast with some, and I went and saw a couple of

sites and had a real understanding, and saw how technology could address some of

the fears that we have around the environmental, it could address some of the

big economic investments we have to put upfront, not knowing what the return

would be.

But

particularly, it puts us in a power broker's position by knowing in advance,

when companies come in to bid on a parcel of land, what the value of that would

be before we move it on. So, I was impressed with the mining industry themselves

and the association itself, but I do acknowledge and want to give kudos to the

partnership. I did hear a lot of positives for the department's partnerships

with the mining industry.

The

only concern and it may not be directly with you because there might be other

line departments was from – I sat and had grand conversation with a number of

prospectors who talked about the ability to, in a more equitable and a more

time-efficient way, speed up their ability to get licensed, their ability to get

access to parcels of land for exploration and that. Because without the

prospectors identifying what's there, the rest of it is moot, it's not going to

happen, and it won't happen in a timely fashion, as part of that.

Being

new to that part of it, because my knowledge would be coming from a mining

community and at one point I lived in Labrador and these type of things, knowing

already-established things, but to get to that phase, what that would mean. So,

I see the full partnerships.

What I

did like was nobody felt they were segregated, that the department put more

emphasis on this line item when it came to a particular part of the industry

than the others. But I do think maybe it's through how we assess the

applications for prospecting or some of the initial things in training or some

of the things we do with our college systems to be able to encourage more

students to be aware of that.

I had a

great chat with some members of the college system out there about a centre of

excellence around mining exploration and some of the new pieces of technology,

which could be even drone technology and these type of things. So I think we

have a great opportunity here to foster the survival of rural Newfoundland and

Labrador, not just by the footprint we do when we go in and dig and take the

minerals out and the manufacturing and these type of things but in the R &D part

of it.

So,

what I saw out there, the development partnerships, the competition is not among

groups – I mean, just after the dinner I had a foreign company or an owner of a

company come up and talk, while I was talking to somebody else who supplies

drilling equipment who lives in that area, in the Baie Verte area; cards were

exchanged and they were going to meet the next morning and these type of things.

I think

we have an ability to do that in that industry, as we have done it through Noia

and those in the oil and gas industry, fostering what the mining industry does

and the organization to be able to move that, but we need to find – and it could

be simple things. It could be instead of five forms there are four. It could be

the safety licensing for prospectors is done a certain way. It could be working

with municipalities or with Transportation and Works to find access roads are

upgraded in a safe manner. It could be working with Environment to ensure that

the footprint is not disturbed and if there's wildlife during the exploration

process, it's all done part and parcel, but also working with – and I had a chat

with a couple of mayors – the municipalities, to know their parameters because

some of it overlaps –

MS. COADY:

Yes.

MR. BRAZIL:

– Crown Lands to Municipalities. I think, it was an eye-opener for me. We have a

great opportunity to explore and develop the mineral thing without it being

offensive to any other sector of our society: municipalities, outfitters, the

environmental needs and concerns and also ensure that local content, that the

local businesses are given an opportunity. If they're not equipped now to do it,

we work towards getting them equipped through training or some kinds of

necessary investments.

On that

heading, I'm quite happy where we're going with it and I just encourage you to

keep moving it to the next level.

Thank

you on that.

MS. COADY:

If I may just comment on that.

MR. BRAZIL:

Yeah. Sure.

MS. COADY:

I want to thank you for that. We're very pleased to be modernizing the

geological survey, which I think is very, very important. We have new tools and

techniques, especially with drones as you talked about. This year we're asking

you for an investment, of course, in the ability to be able to data capture in a

different way. That's pretty exciting for us. That's for the airborne

geophysics.

Just to

speak a little bit about the prospectors. We're going through this continuous

improvement process to streamline and to try to improve that process. There is

an investment, of course – I think it's Education – for a mining centre of

excellence in Grand Falls-Windsor. I also will say that one of the things the

department has been doing over the last couple of years is moving towards this

industry facilitator.

As you

said, a lot of times in government there are more silos so that if something

comes to my desk and I work on it and then I move it to your desk but it may not

have crossover, it may not come back. So, we're moving towards a model of

industry facilitators where if I have your application, then I'm going to follow

through and make sure my colleague in another department has moved that through

as well.

We are

making those improvements. Is there more work to be done? Absolutely. That's why

we designed or developed the Mining the Future plans, that we have a plan to

make sure that we are doing some of the things that we're talking about. I'm a

business person and so the planning is very important for me to make sure that

we have that plan and then we can say, okay, yes, we've accomplished that or we

haven't and we have to do more.

appreciate that encouragement and support for the department to continue to work

in that and encouraging us to continue to modernize and improve our processes.

Thank

you.

CHAIR:

Ms. Coffin, did you have something?

MS. COFFIN:

Thank you very much.

I'll

jump off on the geological surveys and drone use. Can you tell me how often, and

what's the prevalence of your drone use in surveying? This is a good thing; I

just want to know how much is being integrated into that.

MR. CANNING:

It's been quite integrated. In fact, the geological survey team that uses the

drones are actually being recognized as experts in their field. Just last year,

they were invited over to Nova Scotia to a conference with Atlantic Canadian

scientists who show how they have incorporated drone technology.

As an

example, if you look at the drone usage that was used over in Bonavista for the

geopark that is trying to be progressed – ultimately, I think this year UNESCO

is going to be here to do an assessment whether Bonavista will become an

internationally recognized geopark, but this is due primarily to the ability to

use those drones. Last year, when there was flooding on the Humber River in the

Deer Lake area, we dispatched our team over to fly their drones to see what

erosion was occurring on the turns and ebbs in that river so we could better

inform area respondents to some of the issues that were going on and certainly

community leaders. So I would say very integrated.

MS. COFFIN:

Wonderful. That's very reassuring. Thank you.

Let's

see, can you update me on the work being done on orphaned and abandoned mines?

MS. COADY:

Go ahead.

MR. CANNING:

That would be the header on Mineral Development but we can do it now if you

prefer?

MS. COFFIN:

Are we not in Mineral Development? We're in the twos, yes?

CHAIR:

It's in the twos. Yeah, that's fine.

MS. COADY:

It's under 2.1.03. We made a considerable investment in orphaned and abandoned

mines as you know. I think we have a number of orphaned and abandoned mines.

Prior to 1991, the legislation didn't require closure and reclamation plans.

Since that time, of course, they do and we're very strict around that.

2016, in that first budget, we made investments. So over the last number of

years – sorry, in 2016 we made $300,000 and then it went to $690,000. Last year,

it was a $1.1-million investment and this year it's going to be $760,000, so a

total four-year commitment of $2.44 million. It's a four-year plan. We have a

full risk registry being developed and maintained to make sure we have control

of those assets, and appropriate levels of mitigation are ongoing.

I will

ask the assistant deputy minister to give you more details on those levels of

mitigation.

MR. CANNING:

Thank you, Minister.

Let me

just touch on the risk registry for orphaned and abandoned mines. We never had

one prior to the last year and a bit, so we spent pretty well a year – because

to develop a risk registry requires risk profiling, it requires a risk matrix

and all in sundry of those tools. We worked with MAE and our department.

MS. COFFIN:

MAE?

MR. CANNING:

Oh sorry, Municipal Affairs

and Environment.

MS. COFFIN:

Thank you.

MR. CANNING:

We also reached out across

the whole of the country and we formulated a risk registry process. We're going

through each one of these assets to identify what the unmitigated risk is and

what the mitigated risk is to be able to hold ourselves accountable for

achieving the mitigations.

As the

minister said, prior to 2000 there was no requirement for the rehabilitation,

closure requirements and financial assurance to achieve cleanup of mine sites.

You cannot do a mine in this country today without having that in place. That

was a big issue as we worked toward developing the Canadian Minerals and Metals

Plan across the whole of the country.

With

respect specifically to the key ones here – and there are a number of orphaned

and abandoned mines – some have tailings ponds and some are old workings. The

old workings we're going to profile those in the risk registry later. We're

going to obviously ensure that we have a full understanding of the risks

associated with those that deem the highest risk.

I think

we have completed now Gullbridge, Buchans, Rambler, Minworth; each has been

repaired. Hope Brook was repaired in 2004. This year, Whalesback will be worked

upon and then we have a number, as I said, of the working areas that we'll

profile, but they don't have tailings ponds with affluent.

MS. COFFIN:

Okay. Thank you very much.

Can we

get an update on the progress in the underground mining operations at Voisey's,

please?

MS. COADY:

Certainly.

Things

are progressing rather well in terms of actions required under the development

plan. As you know, Voisey's Bay made a significant investment to go underground.

They are progressing on their milestones. It is anticipated I think first ore

from the underground mine is going to be – what year? 2022, so it is

progressing. They are making progress under the development plan.

MS. COFFIN:

This is good to hear. How is

Canada Fluorspar doing in St. Lawrence?

MS. COADY:

They've done more shipments

of their fluorspar.

I'll

get the assistant deputy minister to give a brief update.

MR. CANNING:

For Voisey's Bay in December, they achieved 15 per cent. So, they were compliant

with their plan and

schedule for the underground so members would have this

knowledge. They were challenged a bit with equipment and temperature and

conditions. I think they've addressed that.

Now,

one of the things that Vale is doing to really improve their construction is

what's called hot transferring of teams. So, one team flies in a plane that's

going to replace the construction workers; they actually have a hot handover,

and then when that team is finished up, they get back on the plan. So, you don't

lose a transfer of knowledge and information as you hand over shift to shift as

new teams come in.

CFI,

they did have some issues with respect to material in their filters, and that

was causing some clogging and the likes. They were challenged with some clay in

that area and they've been working through that. We have regular updates.

Tomorrow we have our next regular update. We meet with them every couple of

months, and in between, we send down our engineers, as we do with other sites,

to check in.

They've

made their first shipment. I understand that they also are looking for a

terminal to be able to ship the material.

MS. COFFIN:

Lovely. That's great to

know.

The

price of iron ore is recovering. It's very good news, of course. We are still

susceptible to external factors there.

Can we

get updates on the following initiatives? You've already spoken about Alderon.

How about Julian Lake and Quest Rare earth

and Strange Lake

rare earth , as well – perhaps not as related, but an update on the Scully

Mine, as well?

MS. COADY:

Thank you.

I gave

a little update in the Scully Mine earlier, that's Tacora. So, Tacora made their

first shipment yesterday, I understand; made their first shipment I think it was

OFFICIAL:

I think it's tomorrow.

MS. COADY:

It's tomorrow? Okay. Within

this week. So, it is progressing and we're very pleased to see that progress. We

work very hard with Tacora to make sure that they were up and operational. So,

we're very pleased to see.

You

asked for Search Minerals. They're undergoing environmental assessment at this

point in time. I think they were close on it.

MR. CANNING:

Yeah. So, in fact, before this session was rescheduled, I was to meet them this

morning to get an update, so they're progressing through their EA process.

MS. COFFIN:

Good. Nice to hear. I look

forward to hearing (inaudible).

MS. COADY:

So, that was Tacora and Search. What was the first one?

MS. COFFIN:

Julian Lake.

MS. COADY:

Julian Lake, nothing progressing there. We are having internal discussions as to

how we proceed.

MS. COFFIN:

Okay. Good.

Thank

you.

That's

all my questions for this section.

CHAIR:

Okay. Thank you.

MS. COFFIN:

Thank you.

CHAIR:

Mr. Lane, did you want to –?

MR. LANE:

So, over and above all of the projects that have been mentioned, is there

anything else on the horizon?

I can

remember – I'm going to go back maybe five or six years ago – there were talks

that there was uranium deposits in Labrador and all that stuff. I near heard

anything about that after; just sort of dropped off the radar, but I can

remember at the time being told there's a big uranium find in Labrador. Is there

anything to that?

MS. COADY:

Well, I think under the former government, they put a moratorium on uranium

development, did they not?

OFFICIAL:

(Inaudible.)

MR. LANE:

If they did, why?

MS. COADY:

Well, there is nothing active at the moment – using that term with uranium.

There is nothing active at the moment.

There

is a fair amount of focus on rare earth minerals, of course, and we just talked

a little bit about that. Rare earth minerals are used in wind turbines. It's

very much for – what I'll call – the new economy, the green economy. Most of the

rare earth minerals are in China. There's been a lot of interest in developing

rare earth minerals of a different source. Of course, in Newfoundland and

Labrador, we do have rare earth minerals and that's why there is a development

and a growth in that particular opportunity.

MR. LANE:

So, again, just wondered

about the uranium mine, I'm just curious, what's the deal on that?

MR. CANNING:

As with most minerals, it is

commodity price driven, so you tend to see the interest go up as the price goes

up. Right now, I think the uranium prices aren't that attractive to a lot of

folks. So, the one thing about mineralization, it just doesn't disappear. At

some point, if the commodity price comes around, it could shift the interest.

MR. LANE:

Yeah, okay, but there is

something there, I guess, is my point.

MS. COADY:

Oh, yeah.

MR. LANE:

Yeah, okay. Just curious.

Minister, not really about minerals per se, but I have a number of general

questions, so I'll just take the opportunity to ask a couple here.

The

Energy Corporation Act , we talked

about that, I don't know if it was last year or the year before, and, of course,

when Nalcor wasn't releasing the information on the embedded contractors and

then you brought a piece of legislation to the House that did make some

amendments to the Energy Corporation Act .

I can recall, at the time, I supported it, but it didn't go far enough based on

what the former Privacy Commissioner was saying that it wasn't a change that was

required. You had indicated there would be further changes, but nothing did come

forward.

I'm

just wondering: What is the status on the

Energy Corporation Act ? Will there be any changes in the future to move more

toward a model similar to ATIPPA where the Privacy Commissioner can determine

That's what we will do.

MR. LANE:

Okay, I –

CHAIR:

Further questions in this

(inaudible).

MS. COADY:

– and then I'll get into

that. Is that okay?

MR. LANE:

I guess I was just using the

sections for general questions, because as we get into the next

section I have

10 minutes and I have more than 10 minutes' worth of questions and I'll never

get an answer.

MS. COADY:

Oh, okay. I was just trying

to figure out the Table process here.

MR. LANE:

Yeah.

CHAIR:

That's what we're going to

do.

MR. LANE:

While I had five minutes, I

was just trying to –

You do?

MS. COADY:

Okay, so I can give a brief

answer.

We are

right now in the middle of an inquiry that's giving a tremendous amount of

information to the public about the Muskrat Falls Project. I do anticipate that

as things evolve on the Muskrat Falls Project, it will likely involve some

changes to the Energy Corporation Act .

I can't say when or what they might be because we're in a moving environment

right now.

We have

a commission of inquiry looking into the Muskrat Falls Project. We're about 97

per cent complete on the Muskrat Falls Project; we're looking at the transition

from development of the project into operations. So, there are a lot of moving

parts right now and all I can say is active and keenly interested in continuing

to look at the Energy Corporation Act

and what changes may be required.

MR. LANE:

Okay. Thank you for that.

That

will be all I'll have under this section, but I have more questions on the next

one.

MS. COADY:

Now I understand what you're

trying to do.

MR. LANE:

Nalcor is really what I want

to talk about.

CHAIR:

Okay.

Mr.

Brazil.

MR. BRAZIL:

A couple of quick ones here,

Minister, under Mineral Development, 2.1.03. Professional Services – last year's

budget went over by $140,000; Purchased Services was down dramatically. Just a

quick explanation so I get my head around what the savings were or the added

expenses?

MS. COADY:

Okay, so 2.1.03,

Professional Services?

MR. BRAZIL:

Yes.

MS. COADY:

That was due to contracts

for work related to the orphaned and abandoned mines; they came in slightly

higher than estimated. It was additional engineering work that was done, but

then if you look at the next line down, by doing that extra engineering work it

last question on that: Have any changes been made to the Vale Development

Agreement?

MS. COADY:

No.

MR. BRAZIL:

Madam

Chair, I'm good on that.

Okay, before we move on, Minister, would you like to stop to take a five-minute

bathroom break or did you want to keep going?

MS. COADY:

Sure we can, if that's –

MR. BRAZIL:

Five or 10 minutes.

MS. COADY:

Five minutes you want? Sure.

go? Okay.

CLERK:

3.1.01 to 3.1.08 inclusive.

CHAIR:

Mr. Brazil.

MR. BRAZIL:

Thank you, Madam Chair.

Under

Grants and Subsidies, Minister, outline how much was used last year and forecast

for the upcoming year for both the diesel subsidy and the CF(L)Co trust. Can you

just outline the differences there and how it's going to be allocated?

MS. COADY:

Certainly, I'm just moving my page.

The

diesel subsidy, the Estimates for 2018-2019 were $2.3 million; we think it is

going to be $2.2 million. The funding is required to provide a subsidy to offset

MS. COADY:

So, based on the requirements –

MR. BRAZIL:

Yeah.

MS. COADY:

– how the subsidy works. Based on the requirements throughout the year it was

lower than anticipated. It has been trending lower. We had budgeted $2.3

million. It has been trending lower so we budgeted $2.2 million this year.

MR. BRAZIL:

Yeah, fair enough. That's what I'm trying to get at. Is it because we're using

less because of population, or is it the price is down or the delivery mechanism

is more efficient, we're getting better quotes on the pricing?

MS. COADY:

As you know, it's based on diesel consumption.

MR. BRAZIL:

Consumption, yeah.

MS. COADY:

It's diesel, so it depends on the price of diesel.

Does

everybody understand what the subsidy is? Maybe I should just say –

MR. BRAZIL:

Yeah, clarify hopefully.

MS. COADY:

– into the record. The

subsidy for Labrador diesel system residential customers reduces their rates to

those paid by residential customers on the Labrador Interconnected system for

their basic monthly charge, as well as the Lifeline Block. The Lifeline Block

ranges from about 1,000 kilowatts in winter months to 750 kilowatts in summer

months and was established to serve basic lighting and power needs.

Consumption above the Lifeline Block is billed at higher rates, which they still

do not recover the full cost of the service. It's based on the fact that in

isolated and rural communities you have diesel consumption. As I said, the

department has now gone out to look for opportunities to replace that diesel

with other green energy possibilities.

MR. BRAZIL:

Okay, good. That leads into what I was going to ask and it may not be. I know

there's roughly 20 communities or so that are on the –

MS. COADY:

Yes.

MR. BRAZIL:

– system itself and you did answer. I was going to ask: Are there some immediate

communities that could be taken off the diesel and put on to some other supplied

energy?

MS. COADY:

Certainly, we have been working with the Nunatsiavut Government on this and

looking at possibilities for both wood stoves and some other means of green

energy provision.

I will

ask Corey Snook, assistant deputy minister, to add to this.

MR. SNOOK:

Thank you, Minister.

The

efforts being made to reduce diesel consumption are – I think you said to remove

it all entirely, take diesel out altogether. That's not being done right now.

It's about least-cost reliable service. It's very remote and, as of now, diesel

remains, worldwide, the most effective reliable source of power for off-grid

systems.

Ultimately, you want to get to a place – and the minister, in her mandate letter

as well, talks about reducing diesel – where the diesel is gone but you take

incremental steps. We're working with Nunatsiavut Government who has their

Energy Security Plan. We're supporting them and they're trying to look at

putting in wind with some battery storage around it, but diesel would still be

the backbone for now.

Similarly, the minister issued an expression of interest document in April that

looks at the rest of the isolated diesel systems south of Nunatsiavut region, so

costal Labrador and the Island. The idea is to seek expressions of interest from

interested parties who want to put in alternatives to reduce diesel consumption.

MS. COADY:

If I may, I'll say one thing, I've been pressing at the federal, provincial and

territorial meetings that I think one of the ways Canada can reduce its

greenhouse gas emissions and address climate change is by taking all rural and

remote communities off diesel in the country. I've been pushing to have a

national strategy and I think there has been some good work done at federal,

provincial and territorial meetings to find new means of providing energies to

these rural and remote communities.

It is a

great opportunity for us to do just that. That's why the department has moved

ahead with this expression of interest with Hydro to see what other forms of

energy provision there are.

MR. BRAZIL:

Fair enough. That's a good approach.

Let's

talk a little bit about the net metering. How many applications have you had?

I'm curious to see if there's any benefits to that, particularly in the remote

and isolated areas?

MS. COADY:

Certainly we have a net metering policy. I know that both Hydro and Newfoundland

and Labrador Power have had applications. I'll allow the assistant deputy

minister to give you an update.

MR. SNOOK:

Yes, so annually they provide reports to the Public Utilities Board on net

metering uptake. The numbers have been – I don't have the number in front of me.

Probably we can very easily get that. It is available in diesel communities as

I'm going to say there was a lot of excitement about it, but there hasn't been

as much uptake as would've been thought.

MR. BRAZIL:

No, and I agree, I spoke to a couple of companies who are connected in my

district and I said, look, go for it, there's a process. I haven't heard

anything, so I didn't know if it was over encompassing or they haven't gotten to

it yet or it was the flavour of the day at the time because there was some

discussion and people haven't moved it to the next level. If you could share

that, I'd appreciate it, just out of curiosity also.

Under

Petroleum Development here, the revenues. Because I'm new to this one, I'm just

curious to see where the revenues come from under that heading? There's not a

substantial difference from last year, but I'm just curious to see what that

covers.

MS. COADY:

Easy enough. It is delegate

fees for the Offshore Technology Conference. As people attend the technical

conference in Houston – OTC it's called – the department charges about $700 per

person, roughly, to participate in the meeting space and booth space and

utilization of the networking registration fees. That's where it's captured.

MR. BRAZIL:

Okay, I was just curious because I wasn't quite sure what (inaudible).

MS. COADY:

Yeah.

MR. BRAZIL:

Seismic; as I mentioned at

the opening here, I'm a big proponent and a big supporter. Can you give us some

details of this year's seismic program? How much is set aside? Is there a

backlog of seismic data to be analyzed? Is all the information collected now

analyzed and ready to be released?

MS. COADY:

Thank you for the question.

This is a very important question.

It's

not necessarily showing here, but –

OFFICIAL:

3.1.06.

MS. COADY:

What is it?

OFFICIAL:

3.1.06.

MS. COADY:

3.1.06. Allow me to tell you

kind of what's – I'm just going down to the Oil and Gas Corporation.

Of the

monies there, there are three things, I guess, in terms of the seismic data.

There's the processing of the 2018 program data, and there's about $5 million

just for the processing of the data so that we can get to a point where we can

go and have the independent validation. You recall we have the validation and

information done by our geologists at OilCo, but then there is also the

independent verification by Beicip-Franlab. I always get that name mixed up.

Then

there's new data, so they're out there doing 2-D and 3-D seismics. Most of the

3-D now is off the coast of Labrador because, of course, what happens – and this

has been standard over the last number of years – is looking at where the next

bid round will come. You know that coming up in the years to come will be

Labrador, so it's been staged so that there is both 2-D and 3-D seismic data

available before the bid round. I think that really does drive interest in our

offshore. You can tell from last year's bid round in one particular area where

there was a very significant bid, it was because of some of that 3-D seismic

work.

There's

$20 million in new data seismic this year, which is equivalent to last year.

Then, of course, there are some monies for resource assessment and that type of

thing as well.

MR. BRAZIL:

Okay, fair enough. I

appreciate that.

CHAIR:

Okay, thank you.

Moving

on now, Ms. Coffin.

MS. COFFIN:

(Inaudible) wonderful. Let's see, where will we start?

You

mentioned earlier that you're going to be doing some projections of Newfoundland

and Labrador renewable energy needs. Can you give me a little bit more detail on

that, please?

MS. COADY:

It's not projections of renewable energy needs; it's more that we're developing

a renewable energy plan. We do have a lot of wind in our province, we have a lot

of opportunity for other, tidal. There are all kinds of other renewable energy

opportunities. We're developing a plan for that and so working with both

industry and other proponents to develop a renewable energy strategy – plan. I

won't call it a strategy; it's a plan. That work is getting under way.

It's

not necessarily looking at how much do we need in the province because, of

course, once Muskrat Falls is on stream, we're going to be about 98 per cent

renewable energy in the province and that other 2 per cent is the diesel that

we've just talked about. It is how do we integrate renewables, how do we

encourage renewable growth?

MS. COFFIN:

Okay, so if we're going to grow that renewable energy, where are we selling it?

MS. COADY:

It could be in multiple ways. I'll allow the assistant deputy minister to give

his view because he's been very heavily involved in this. It could be in

multiple ways. You could use it here in the province as our energy needs grow.

There are opportunities around data centre development and other developments in

the province that we might be able to integrate and require some new renewable

energy on the grid as time progresses.

Secondly, offsetting the diesel use that is occurring in about 20 communities

around the province, so utilizing that renewable energy for that. There's a

possibility of selling it outside the province. As you know, Nova Scotia is

looking to get out of utilization of coal for their energy requirements, so

there's a possibility for that. We're looking at what it is we need to do to

encourage renewables development in the province.

Maybe

I'll turn to the assistant deputy minister who's pretty keen on this as well.

MR. SNOOK:

Thank you, Minister.

I think

in addition to those things the minister mentioned, you'd look at

electrification of space heating. Currently in the province, there's still quite

a bit of people, businesses and institutions using home-heating fuel or

heating-fuel oil to heat their space. If you could find ways to switch out into

electric heating, that would be a good new market, also electric vehicle use.

The

renewable strategy is a very long-term view of the province. It's not

necessarily one, two, five, 10 years out; it's sort of a transformative, how do

we see ourselves farther out. So what role will electric vehicles play and how

do we support the growth of electric vehicles.

The

minister mentioned, as well, exports. Yes, Nova Scotia has coal; in addition,

New Brunswick has fossil fuel burning. All around us in the neighbourhood there

are provinces and utilities that have aging fossil-fuel infrastructure that they

want to ultimately get out of. Those are some additional points.

MS. COFFIN:

From that, can we have a demand forecast? I know these transitions had all been

talked about before we engaged in our last renewable energy project and some of

these demand forecasts were significantly altered in recent years. I'd certainly

like to look at that.

I'd

also like to see any projections for the export market, because remember the

things that we just discussed there. Given the fact that we have a renewable

energy project that is three sizes too big, perhaps it would be a little more

prudent to talk about how we're going to use that most effectively and most

efficiently before we go on and try and develop alternative renewable resources.

MS. COADY:

I think that perhaps you're thinking that we're looking at developing renewable

energy projects. That's not what the purpose of the plan is. It's to look at –

we do have renewable energy opportunities – what are we doing with them? How do

we maximize them?

This is

not about a project per se. If you're looking for demand forecasts for the

future for use of Newfoundland and Labrador's energy opportunities, we can

certainly, I'm sure, get that through Newfoundland Hydro and – through the

Public Utilities Board. All that information would be available.

The

department is not doing any demand forecasts for energy as part of this

renewable energy. It's not a project, it's a plan to kind of look at: What are

we doing with wind energy in the province? What are we doing with tidal

opportunities? How do we consider offshore wind opportunities? I don't want to

give the impression that this is a project that we're going to be funding. It's

not. We have this opportunity. How are we maximizing it in the province of

Newfoundland and Labrador?

MS. COFFIN:

Okay, I think all of those pieces are tied very importantly together, the plan

and how we might develop future things. It's hard to develop a future renewable

energy project, whether it's being done within the province or by government, or

if it's encouraging private sectors to come in. If we have a plan, that's all

well and good, but if they have no places to export that energy or that

opportunity is not there for them, then even though we have a plan to develop

it, no one will be at all interested in it if there's no way in which they can

sell it. That's the only reason why I'm saying some of these plans are a little

incongruent.

Moving

on, let's talk about the Ramea project right now. There's a problem with fuel

cell technology, how to store the excess electricity generated. Has that been

solved?

CHAIR:

Corey.

MR. SNOOK:

Thank you, Minister.

The

Ramea project was established to take wind and, when it's not needed in the

community, to convert it to hydrogen, store it in a tank, and when the demand

picks back up, converts it into electricity using a generator. The generator was

provided in-kind from Natural Resources Canada as part of the project, and the

generator never did meet the expectations for the unit. It hasn't produced

electricity through the hydrogen aspect of it. Newfoundland and Labrador Hydro

is reassessing how to move forward with that project, whether it's hydrogen or

other storage mechanisms.

MS. COFFIN:

Yes, I know that hydrogen

storage has been a significant problem in the development of that type of

technology. So it'll be interesting to see how that develops. If we can sort

that out a little bit better we're going to be leaders in that field, and

that'll be impressive.

MR. SNOOK:

I would say the storage

hasn't been a problem – just to be clear. Creating the hydrogen and storing it,

it hasn't been a problem. It's reconverting that from a hydrogen gas back into

electricity; that was the challenge.

MS. COFFIN:

Okay. Interesting.

Interesting.

Let's

see here now. We're doing all of the threes, yes?

Thank

you very much.

Let's

talk about Petroleum Development, Royalties and Benefits. An ATIPP request was

published asking for projected Hebron royalties per year from 2018 to 2060. The

information was denied because there's Cabinet confidence. The oil resource

belongs to the people of the province.

Do we

not have a right to know what those royalties are going to be? Perhaps you could

tell us a little bit about the royalty regime and the time to payout?

MS. COADY:

I would have to get that

information specific to the project for Hebron. I don't have it with me in

Estimates.

MS. COFFIN:

Then you should get it. We'd

love to have it.

Thank

you.

MS. COADY:

Well, just one moment,

please.

So,

there is – if you've been denied under ATIPPA, which I would have no knowledge

of who the proponent is or even whether it has been filled, I could only assume

that it's because it's commercially sensitive information. We can probably give

you an estimate.

OFFICIAL:

(Inaudible.)

MS. COADY:

No?

I'll

find out what we can possibly give you in terms of projection. And you

Okay. No, I look forward to

seeing that.

2014, the Auditor General reported government could be missing out on royalty

revenue from offshore production due to overdue or incomplete audits of the

companies involved.

Can you

give us an update on that? Is it still a problem, and how far are we behind on

that?

MS. COADY:

Thank you. That's a very important question.

I can

say that we do have a full audit function team under the ADM for benefits who

has been diligently working to get them up-to-date. I know we're working on 2015

at the moment, which has been good. I think when the Auditor General made

indication – because we don't have even information yet from companies on 2018.

maybe perhaps the ADM could give you a fulsome update.

MR. TRASK:

We're currently working on 2013 and 2014 audits. They'll be completed this year,

and we've started work on 2015. So we've caught up where we were behind. There's

no risk of missed years. We are now back on schedule.

takes time to get the information from those companies in order to audit it. So

there is a lag there. You'll never be at the year that you are currently

operating or the year previously because of the audit trail that's required.

MS. COFFIN:

I understand. Yeah, it takes a lot.

MR. TRASK:

But we are caught up.

MS. COFFIN:

Good. This is good to hear.

So any

outstanding amounts, would they be expected to be paid retroactively with

interest?

MR. TRASK:

Correct.

MS. COFFIN:

Wonderful.

MS. COADY:

Thank you.

One

thing I think was really interesting, under the Generic Oil Royalty Regime we

made it a requirement that the audit function would be done here in St. John's,

Newfoundland and Labrador. We now have a budget in this appropriation because

our team has to travel to Calgary, because that is the headquarters of most of

these oil and gas companies, but we've now made it, under the Generic Oil

Royalty Regime, a requirement that it's done here. So they won't have that

expense in the future.

MS. COFFIN:

Well, that's nice to know.

How

many audit companies here in Newfoundland and Labrador are large enough to be

able to handle something like that?

MS. COADY:

This is not through audit companies. We have chartered accountants working for

the Department of Natural Resources who do the audit.

MS. COFFIN:

Okay. Good to know. Good to know.

Thank

you very much.

CHAIR:

Okay. And we can come back to you again if you have more questions.

MS. COFFIN:

Oh, I'm sorry.

CHAIR:

I certainly can, so no problem.

MS. COFFIN:

Thank you.

CHAIR:

We'll move on now. I'm being cognizant of time.

Mr.

under way or completed.

MR. BRAZIL:

Good.

MS. COADY:

So, good progress. And I do

thank all of our partners in that, federal-provincial governments. It's been

Noia and CAPP and PRNL and ACOA and a whole bunch of people coming together. I

think it's very important to see that progress.

Thank

you for the question.

MR. BRAZIL:

Okay. I can get a copy of

that?

MS. COADY:

You can have my copy.

MR. BRAZIL:

Oh, yeah. There's a copy

there for me, perfect.

MS. COADY:

We'll give you copies now,

quick question here on the future of Bull Arm, where we are when it comes to any

additional maintenance or upgrading that's needed to keep it functional, that

hopefully we get a partner down the road in the near future.

MS. COADY:

There are maintenance

requirements, obviously, and security requirements that are funded through the

oil and gas company. We are diligently working to ensure the best use of Bull

Arm.

The

question becomes, as we do more offshore Newfoundland and Labrador, most will be

done in deeper water. So that'll be an FPSO versus a gravity-based structure.

So there is ongoing discussion.

As you

know, we went out for an expression of interest on the use of the Bull Arm site.

The fabrication we have let, as I mentioned earlier, for some upgrades to the

West Aquarius and we are hopeful for more work. Different fabrication companies

may be able to use that site for that type of work.

The

question is, should it become a supply and service basin, Bull Arm? How do we

maximize that usage? That is under active review and discussion, and of course

working with those that came forward on the expression of interest.

MR. BRAZIL:

Fair enough. It makes sense.

questions under 3.1.03.

MS. COADY:

Yeah.

MR. BRAZIL:

It's all the same heading; I

thought it was different headings.

The

C-NLOPB is fully cost recovery from the industry. What accounts for their

increased operational costs? The provincial portion has increased from $9.4

million to $11.2 million. Can you explain the costing there, when our

understanding is it's supposed to be cost recovering from the industry?

MS. COADY:

Certainly.

It's

all cost recovery, so I don't want people to misunderstand and think that it's

going to cost us anything.

There's

a cost in there for one-time transformational costs, that is software and

maintenance on an exploration and resource management software that they needed,

and that's about $700,000 – $657,500, I think, if you want to be specific.

There

are also some new employees that were require: a safety officer, a compliance

officer, a certification engineer, some new positions that were required in the

C-NLOPB, but allow me to tell you that we've made some governance changes. You

saw it in Advance 2030 , where we

talked about a renewing and modernizing governance.

MR. BRAZIL:

Yeah.

MS. COADY:

I think you'll be pleased to hear that we've actually now split the CEO and

chair into two positions. So, there is the CEO position, which is continuing to

be held by Scott Tessier; his contract has been renewed as CEO. He will be CEO,

but now there's – I call it an independent chair. It's very important under

governance rules to have that tension and to have that oversight by a separate

body.

So, up

to this point, it was always chair/CEO. Now, we have a part-time chair; we've

been recruiting for that and hope to have that finalized very soon. The acting

chair at the moment, which was appointed by the board, is Roger Grimes, from the

board itself. Both the federal and provincial governments have been actively

recruiting for a chair and decisions will hopefully be in the near future, but

the CEO will remain as Scott Tessier.

thought it was very important to separate those two roles.

MR. BRAZIL:

I won't say I'm 100 per cent supportive but I can see the merits there of the

understanding or the rationale. Fair enough.

MS. COADY:

Nova Scotia has a separate, and it certainly is something that's industry

standard now, to separate out those roles.

MR. BRAZIL:

Two positions, yeah.

MS. COADY:

So, Mr. Tessier, who's going through, doing some of the day-to-day activities

now, has someone he reports to in terms of the board. I know as chair he always

reported to the board, but now he also reports to the chair as well.

MR. BRAZIL:

Chair of the board, yeah.

Any

other positions vacant on the board right now?

MS. COADY:

On the board right now, yes, there's one provincial position, and we're actively

recruiting for that. We anticipate that fairly soon. I know the federal

government has positions that are just coming out.

MR. BRAZIL:

Yeah. Perfect.

Has

there been any push-back with the industry with the additional cost, or do they

see the merits of …?

MS. COADY:

Well, they also know that one-time transformational cost for the software is one

time. Obviously, we, in general – the global we, I'll call it – have to keep

costs down. We all have to be mindful of being globally competitive, so we're

mindful of it.

Over

the last number of years, before it was recovered from industry, when the

Province of Newfoundland and Labrador was responsible for the cost, we were

very, I guess, directive or very concentrated, concerned about making sure those

costs were as low as can be. We continue in that for industry sake, so we

continue to monitor and make sure the costs are as low as possible as a jointly

managed board.

MR. BRAZIL:

Okay, great.

Under

3.1.04, Royalties and Benefits, the Salaries seem to be a savings of $275,000

from last year. Can you explain where they come from?

MS. COADY:

Certainly.

Royalties and Benefits, there are about 27 positions, and the difference, of

course, are variances due to vacancies within the division during the year. As

you can see, there's a salary adjustment coming back up to – what I'm going to

call –normal levels, but there's an ebb and flow. With 27 positions, there are

changes, leaves, that type of thing, but we anticipate being back up to full

complement, I think, very, very soon. You're actively recruiting, I think?

MR. TRASK:

The Benefits division had

quite a bit of turnover, which all those positions have now been filled. In the

Royalties division, there tends to be some movement between Finance and

ourselves. They're temporary; they get filled, and people move back and forth

between those two departments.

MR. BRAZIL:

Okay. I just got one quick last one on that; it's a two-fold one.

The

Professional Services and the Purchased Services, can you just outline some of

the services that are being contracted there or the purchases that are

necessary?

MS. COADY:

Just looking to get more details, which I don't seem to have. Do you have them

right there?

Let me

give you some details. Sorry about that.

MR. BRAZIL:

No problem.

MS. COADY:

I just can't find them on my page here.

So,

you're looking at Purchased Services?

MR. BRAZIL:

Yes.

MS. COADY:

Okay.

MR. BRAZIL:

Purchased and Professional.

MS. COADY:

So, I'll do Purchased Services first, $188,400. That's FMI contracts for

employee development, $4,800; Xerox, $8,400.

MR. BRAZIL:

Yes.

MS. COADY:

Under Royalties and Benefits, there's $100,000 for software called PIRA, which

is the oil market price forecasting software. There's Platts, which is the oil

price verification software. It's an official source for Newfoundland royalty

agreements, the Platts is. There are photocopiers and an audiovisual and room

rental for the Oil and Gas Industry Development Council.

MR. BRAZIL:

Okay. I'm good.

CHAIR:

Okay.

Moving

on to the next speaker. Do you have any more?

MS. COFFIN:

Let's move on to Innovation

and Business Development. I noticed that it has $6 million in budget, but only

$3 million spent. I understand that's full-cost recover.

Can you

let me know why we didn't spend $ 3 million? I see that it looks like it's been

rolled into the next year. Where is that money going?

MS. COADY:

Sorry, I'm just catching up. I couldn't hear you when you first spoke.

3.1.05,

we allocated $6 million a year for the next 10 years in this Innovation and

Business Development and supply and service development area. It was brand new

last year. We spent $3 million which was good. We were able to give – and I'll

give some of the – this has been publicly released.

For

example, we gave money to Petroleum Research for enabling subsea tieback for

marginal field developments; to NEIA for exploration of clean technology

opportunities within the oil and gas sector; to Scanmudring services for Grand

Banks demonstration of services; to Kraken for demonstration of some of the

underwater robotics; to Noia for enhancing the economic potential of offshore

oil; and the Fisheries and Marine Institute for expansion of the Holyrood Marine

Base. That was the $3 million in total that we spent.

The

other $3 million we've been able to roll forward just because it was a brand new

program. It was just up and running and we were just starting to get the

applications in. It's jointly administered with TCII, Tourism, Culture, Industry

and Innovation, because they actually have the industry liaison workers and the

analysis there. We didn't duplicate those efforts; we actually used the skill

set of TCII.

It's

going quite well. We're quite pleased with what's been happening in terms of

getting more supply and service, more information and really working to drive

that. We've allocated $3 million in this budget for a Digital Ocean Innovation

Centre to really help with both subsea development and innovations around the

industry and working with the oceans cluster and Memorial University.

MS. COFFIN:

Good. Thank you.

Can you

give us an update on the timeline for the separation of the Oil and Gas division

into its own entity?

MS. COADY:

I'm not quite understanding

MS. COFFIN:

The moving to the Oil and

Gas Corporation, can you give me a sense of the –

MS. COADY:

Oh, I'm sorry. The

corporation –

MS. COFFIN:

– timeline there, please?

MS. COADY:

– I thought you said

division.

That

has been progressing. We're making sure we're doing all of our due diligence on

that. I'm going to get the assistant deputy minister to give you an update.

We're

anticipating it to be probably completed by this fall and we're really working

now on making sure the shared services are in place to help with some of those

costs. We're also making sure, for example, that the employees, because they're

transferring over from Nalcor into the new oil corporation – to make sure that

we're doing things effectively and properly for those employees.

Perhaps, Doug, you can give us more of an update.

MR. TRASK:

Happy to do that.

As we

know, I guess the legislation went through the House in March. It's still yet to

be proclaimed. Then, we went into an election so, really, we couldn't progress

things over the last while, the last two months, really. There's still progress

being made internally. There's a working group established to facilitate that

transition.

As the

minister has indicated, we foremost want to ensure we respect the rights of the

employees that are transferring from one organization into the new Crown

corporation. That will continue over a period of months, I would say. There will

be various parties – OCIO, Finance, Justice, HRS – involved in that process. The

move is to also try and share services within government. Things that can be

done more cost effectively will be, through that shared-services model.

MS. COFFIN:

Good, that's reassuring as

well. Thank you.

Minister, your mandate letter tasked you with pursuing options for exploration

of offshore natural gas. Has three been any progress on this? Any hope for

future marketing of that resource?

MS. COADY:

Yes, thank you.

As you

may know, natural gas has been very, very low in terms of price and value in the

last number of years, but we are continuing to develop a framework to ensure

that as we move forward with gas development, we have a good framework in place.

It was part of the efforts under the Oil and Gas Industry Development Coun

Document details

Collection	Newfoundland and Labrador — Committees
Citation	2019-06-20
Type	committee
Volume / chapter	committees_standingcommittees_resource_ga49_19-06-20rcdepartmentofnaturalresources.html
Language	en
Format	html
Source	PROVINCIAL
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