May

14,

RESOURCE COMMITTEE

Pursuant to Standing Order 68, Dwight Ball, MHA for Humber Valley,

substitutes for Jim Bennett, MHA for St. Barbe; and John Dinn, MHA for Kilbride,

substitutes for Keith Russell, MHA for Lake Melville.

The Committee met at 9:00 a.m. in the Assembly Chamber.

CHAIR (Brazil): I would like to welcome everybody to the Resource

Committee Estimates review on the Department of Natural Resources. We do have a

couple of replacements. Mr. Dinn will be replacing Mr. Russell, and Mr. Ball

will be replacing Mr. Bennett.

This is the review Estimates meeting that was rescheduled from last week. On

behalf the committee, I would like to pass on our condolences to Ms Jones and

her family on the passing of her father.

As you know, the process is we will give the minister an opportunity, if he

wants to do an interlude. If not, we can go directly, but I do ask the committee

first to introduce themselves. Then I will ask the minister and his staff to

introduce themselves.

I do want to remind the staff particularly, if the minister refers a question

to you, that you identify who you are for Hansard as it is being recorded. If

anybody on the committee has a problem hearing, ear sets are ready to go.

Sometimes the acoustics here are not exactly perfect.

I will ask the committee to introduce themselves for the record.

MS PERRY: Tracey Perry, MHA, Fortune Bay Cape La Hune.

MR. DINN: John Dinn, MHA, Kilbride District.

MR. CROSS: Eli Cross, MHA, Bonavista North.

MR. BALL: Dwight Ball, MHA, Humber Valley.

MS JONES: Yvonne Jones, MHA, Cartwright L'Anse au Clair.

CHAIR: Also, any staff.

MR. LETTO: Graham Letto, Researcher.

MR. LONO: Simon Lono, Official Opposition staff.

MS MICHAEL: Lorraine Michael, MHA, Signal Hill Quidi Vidi.

MR. MORGAN: Ivan Morgan, Researcher, NDP caucus.

CHAIR: Minister.

MR. KENNEDY: Jerome Kennedy, Minister of Natural Resources, and Minister

Responsible for Forestry and Agrifoods Agency.

MR. BOWN: Charles Bown, Associate Deputy Minister of Energy.

MR. MOORES: Len Moores, CEO, Forestry and Agrifoods Agency.

MR. DEERING: Keith Deering, Assistant Deputy Minister, Agrifoods

Development Branch.

MR. EVANS: Jim Evans, Assistant Deputy Minister, Forestry.

MR. LIVERMAN: Dave Liverman, Assistant Deputy Minister, Mineral

Resources.

MR. IVIMEY: Philip Ivimey, Departmental Comptroller.

MS MACLEAN: Heather MacLean, Director of Communications.

MS SHUTE: Tracey Shute, EA to Minister Kennedy.

CHAIR: Okay. Just to go through the protocol, what I will do after the

minister does his intro on the department's Estimates, I will then go to the

Opposition, then to the Third Party, and I normally try to move it back and

forth around fifteen-minute intervals just to keep the consistency going, if

that is fine with everybody.

Mr. Minister.

MR. KENNEDY: Thank you, Mr. Chair.

I am not going to make any introductory comments. I want to use the time that

we have. I will open it up to the floor. I will answer certain questions and the

ADMs or the associate deputy minister responsible will also take some of the

questions.

CHAIR: Okay.

Before we start, before I turn it over to Mr. Ball or Ms Jones, I want to

call for the first head.

Line 1.1.01 is what we will discuss.

MR. BALL: Thank you, Mr. Chair.

I agree with the Minister, I think we will just get right into the Estimates

right now and use the time that we have available to us. If it is okay, we can

start with the line-by-line questioning and get into some of the finer details

for a few minutes.

CHAIR: Exactly, go ahead.

MR. BALL: Thanks.

What I will do is I will refer to, as you mentioned, 1.1.01. I will try to

use the same type of reference numbers that we have had here.

If we can, I would like to go to 1.2.01. That would be General

Administration. If we look at the Salaries line there, 01, we had a budget last

year of about $2.2 million and we spent about $2.8 million. I would like to

question that, just to see what that was all about.

MR. KENNEDY: Thank you, Mr. Ball.

The variance here was due to salary payments, severance, and leave

entitlements associated with the retirements of a former deputy minister and a

secretary to an assistant deputy minister, as well as the resignation of a

former assistant deputy minister, royalties and benefits.

MR. BALL: Okay.

That was a full $600,000?

MR. IVIMEY: Yes, that is correct. That would have been the full $600,000.

MR. BALL: Okay.

The next page would be about $100,000. Line 1.2.02.01, Salaries went from

$957,000 budgeted

MR. KENNEDY: I am sorry; I have lost you, Mr. Ball.

MR. BALL: Okay. Page 12.4 of the Estimates book that we are following

along, if that might help. It is under General Administration, 1.2.02. Again, it

is Salaries. Last year it was a budget of $957,000, it was revised to $809,000,

and this year we have budgeted just over $1 million. Could you explain what is

going on in that?

MR. KENNEDY: Yes, thank you.

In terms of the variance in the Salaries between the budget and revised, they

are due to vacancies within the department during the year within the division.

A financial officer, for example, and a department audit officer.

In terms of this year, there has a re-profiling of funds within the

Information Management and registry functions. There has been, I think, some

switch or change with the Department of Fisheries and Aquaculture.

Phil, can you explain that a little?

MR. IVIMEY: Yes, I can clarify that there.

What we did for next year in the budget is that there were certain positions

that were formally in the Energy branch that were part of our Information

Management Division. Those three positions were moved from the Energy branch

into the Administrative Support Division.

Right now, the Administrative Support Division, for this current upcoming

budget year, will house all of the positions and all the functions related to

our Information Management and registry functions within the department. That is

what accounts for the difference between last year and to next year.

MR. BALL: Okay.

The vacancies that you had last year, are they filled now?

MR. IVIMEY: They are currently not filled right now but they are in the

process of being filled.

MR. BALL: When do you expect them to be filled?

MR. IVIMEY: I would expect them to be filled some time within the

upcoming year.

MR. BALL: Okay.

The next one under Capital, 1.2.03; it just looks to me like a lease but I do

not know. The budget of $2.8 million, you actually spent just about $1.2

million, with a budget of $4 million. That would be 1.2.03.07 Property,

Furnishings and Equipment.

MR. KENNEDY: We are at 1.2.03.07 Property, Furnishings and Equipment, Mr.

Ball?

MR. BALL: If we go down to Administrative Support, 1.2.03.07 Property,

Furnishings and Equipment, it was $2.8 million to $1.2 million, the revised

amount, and we have a budget of just over $4 million.

MR. KENNEDY: Yes. There is a delay in the tendering of the foreign animal

disease laboratory project at the Provincial Agriculture Building on Brookfield

Road. It was budgeted $1.8 million in 2007. There was $232,000 spent in

2011-2012 on design work. The 2011-2012 expenditures consisted of $500,000 that

was budgeted for the purchase of equipment, and $670,000 for the replacement of

vehicles that were repaired during the year. So that is where the variances are.

There was less money spent than was budgeted.

This year, we will be looking at the finalizing of the construction of the

project. That is why you will see the increase. Also, there will be the annual

budget allocation of $500,000. That should make up the difference there.

MR. BALL: Will that project be finished this year?

MR. MOORES: Yes, that is the target to finish it, this year.

MR. BALL: Yvonne, do you have questions on any of that?

MS JONES: Not on that section.

MR. BALL: I guess the next area for me would be in Forest Management,

2.1.02, Operations and Implementation. Line item 01, Salaries, we had about

$600,000 or $700,000 increase from the budget to the revised amount in

2011-2012. It seems we are back to some normal budgeting for this year. Could

you just explain the revision in last year's budget.

MR. KENNEDY: Yes, there was a variance due to the salary payments,

severance, leave entitlements for several employees in the forestry regional

operations who retired, including the Regional Manager of Administration, as

well as additional salary costs associated with seasonal and temporary

positions. Treasury Board approval was sought during the year for the transfer

of funds.

In terms of the details, if you need any details, Mr. Ball, I am sure Jim can

give you the details.

MR. BALL: Are all the positions filled there now?

MR. EVANS: No, we still have some vacancies, but we are reviewing them on

a need basis.

MR. BALL: In line 04, Supplies, in the same category, $827,000 budgeted

last year, back to a normal budget this year, and we spent about $1.2 million.

MR. KENNEDY: Jim, do you want to take that? It is my understating that it

is cost associated with fuel for vehicles and field equipment but is there

anything to

MR. EVANS: Yes, we have 500-plus staff across the Island and it is

related to delivering the services and programs throughout the year. There is a

wide range of services throughout the districts in Labrador and on the Island.

It is just the cost of operating, basically.

MR. BALL: Under 2.1.03, Silviculture Development, the overall budget

looks like it seems to be down about $700,000 or $800,000 here. We seen an

increase in salaries, but I guess the big question for me would be under 06,

Purchased Services. We have about $7.8 million; we only spent $4.5 million last

year. That is under Silviculture Development, 06, Purchased Services. We went

from a budget of $7.8 million revised amount to $4.5 million, and then back to

$6 million this year.

MR. KENNEDY: Yes, it is my understanding that the variance was due to

savings that resulted from the Public Tender Act in competition with

silviculture projects coming in for lower than estimated. Also savings from the

Corner Brook Pulp and Paper silviculture program was less than approximated. Of

the $3.3 million in savings, $760,000 was transferred to Grants and Subsidies.

Also there was a wood harvesting assistance program with Nordic Economic

Development on the Northern Peninsula where $500,000 was transferred to cover

the cost of several pieces of equipment. All transfers that require Treasury

Board approval certainly were sought. That is where you should see the variance

and then it is expected to be lower.

This year I do not know, Jim, if you can add as to why we expect it would be

lower. That was the projected budget this year is less than the projected budget

in 2011-2012.

MR. EVANS: The variances in this current budget is due to a re-profiling

of approximately $395,000 to Purchased Services; $519,000 from Purchased

Services to Supplies; $133,000 from Purchased Services to Property, Furnishings

and Equipment; as well as $50,000 from Purchased Services to Transportation and

Communications. There is an additional $700,000 as a cost-saving initiative.

MR. BALL: Could you explain to me what impact this will have on

silviculture in general? There was one thing that was mentioned about last year,

the fact that some of the money went to Grants and Subsidies. Any idea what that

type of grant and subsidy would be for $3.5 million, I think the number was?

MR. EVANS: Could you repeat that, please? You mean the impact on

silviculture in the Province?

MR. BALL: Yes, okay, let us start there.

MR. EVANS: Okay. With the reduced harvesting levels on the Island now and

in Labrador related to mill closures and the sawmill production being lower,

there is less of a need right now for silviculture projects. That is the

reasoning behind the reduced budget for silviculture at this time.

MR. BALL: Okay. I thought the minister mentioned when we went from $7.8

million last year down to $4.5 million that some of that money was into Grants

and Subsidies. That would have been outside the silviculture program, would it

be? Give me an example of what that would be.

MR. EVANS: Yes, it was $760,000 transferred to Grants and Subsidies for

the Nordic Economic Development Corporation on the Northern Peninsula.

MR. BALL: Yes, okay, I remember that.

Under Capital, 2.1.04, Resource Roads Construction, Purchased Services again,

we budgeted $600,000 or so almost less last year, and budgeted it down this

year. Is that the same thing? With less forestry, is that the answer?

MR. KENNEDY: Yes, in the Public Tender Act there was a variance due to

lower-than-anticipated expenditures in relation to public tenders for resource

road work that were completed during the year. There was 128 kilometres of road

constructed in 2011-2012 and we anticipate 117 kilometres in 2012-2013. The

Public Tender Act again resulted in savings.

MR. BALL: Good.

So it is not that we are doing less forestry resource road work. We are just

getting better value for the money.

MR. KENNEDY: Yes.

Some of that, Mr. Ball, as you are well aware, we can see it in the

construction industry if there is work out there then the bids can be more

competitive, but it is the timing of the work. What we find is that if there is

not a lot out there, you will get a better bid. In this area there is probably

less I do not know if it would be less or more competition

Jim, how would you describe what we have here in terms of the building of the

roads and why the Public Tender Act has resulted in savings?

MR. EVANS: The equipment is more efficient now and there is more

competition for the bids on the roads. That is why they are lower than normal.

MR. BALL: We should encourage some of those contractors to get into

paving, then.

MR. KENNEDY: We would love to see the same. That is part of the problem.

MR. BALL: The next

section as we go with Forest Management here is

2.1.05, the diversification program. This is the end of it for now. We are $2.2

million less than we had budgeted for last year under Loans, Advances and

Investments.

What is the future for that? Obviously, there is no future for this year, but

where do we see this going? Is there any work being done on replacing this

program?

MR. KENNEDY: What you are seeing here is there have been a number of

companies, and then there are four companies that have been significantly

assisted or offers of assistance: Sexton Lumber, Holson Forest Products,

Burton's Cove Logging, and Cottles Island Lumber. We are seeing some

diversification in terms of the pellet industry, but a lot of it still depends

on Corner Brook Pulp and Paper. As everyone is aware, there are discussions

ongoing between the company and the unions in terms of the pension solvency

issue, but also in terms of trying to reach an agreement.

The forest industry can be rather tenuous. It is a very important industry.

It employs a lot of people, especially in the western and northern areas of the

Province. We are still trying to attract industry.

It is hard to tell how well they are doing because, for example, with Holson,

part of it was finding the markets in Europe and then getting the product to

market. Jim would probably have a better perspective in terms of the state of

the industry, but certainly in terms of the newspaper industry's influx the

pellet industry is moving along. I do not know, Jim, in terms of the status, if

it is going as good as we would like it.

MR. EVANS: I will start with the sawmill industry. We have four major

sawmills in the Province now. Lumber prices have been down and markets have been

poor I guess or strained. We do see lumber prices creeping up a little bit now.

The four mills are doing reasonably well and I think they are well positioned

for the future with the investment the Province has provided to them.

The pellet industry Holson Forest Products has a pellet mill. They are not

selling any off Island right now. They have produced some. They are struggling a

little bit with markets and some operational issues. Cottles Island Lumber has a

small pellet plant, produces a smaller number of pellets, and they sell them in

the local market. There is another one in Bishops Falls. It is very small but

just sells in the local market as well.

MR. BALL: I guess the question is, though, when you look at the

opportunities, in particular, in Central and Western Newfoundland I do not

know, I could not give you a list of what the opportunities would be in

forestry. All I would say is that when we find something, it has a tremendous

impact in Western and Central. When I see the program now and there is no money

allocation for it, if there was somebody who had an idea that could actually

work, how would you support it from this year's budget?

MR. KENNEDY: Right now, this is the end of the Forest Diversification

Program. What I would say to you, Mr. Ball, if there is a situation arises or an

opportunity arises then that is something we will certainly seize and take

advantage of. At that point, if it means that seeking Treasury Board approval to

transfer monies, we will certainly look at that.

CHAIR: Ms Michael, I know we are out of time. If it is okay, could I let

Mr. Ball go on to finish the last two sections in the Forest Management?

MS MICHAEL: Sure, I am fine.

MS JONES: I have questions there, too.

MR. BALL: No, you can just switch.

CHAIR: Okay we will go back then, because Ms Jones also has some

questions.

Ms Michael, the floor is yours.

MS MICHAEL: Thank you very much.

I want to go back, but before going back I just wanted to just ask further on

the last answer that you gave, Minister. So, you are open to things but you will

not be putting another plan in place at the moment with regard to the

diversification, is that correct?

MR. EVANS: That is correct, yes.

MS MICHAEL: Okay.

MR. KENNEDY: The other thing that Mr. Moores pointed out, there is also

funding under IBRD, who play a significant role in the forestry industry also.

MS MICHAEL: Okay, thank you.

Could I go back, because there were a couple of questions that did not get

asked. The first one would be 1.2.03. In 1.2.03 I was curious about the

professional subheads 05 and 06, Professional Services and Purchased Services,

where nothing had been budgeted, but in one case, $240,500, and in the other,

$254,500 were spent. Obviously a one-time expenditure, could I have an

explanation of that?

MR. KENNEDY: Yes, in terms of 05, the $240,000 was in relation to design

work carried out at the foreign animal disease lab project at the Provincial

Agriculture Building on Brookfield Road. So that resulted in that expenditure.

Then, under Purchased Services, there was a former RCMP detachment at Barachois

Brook, which was acquired by Transportation and Works in 2011, and it has been

renovated and refurbished for use of the Forestry and Agrifoods Agency.

MS MICHAEL: Okay, thank you very much.

I am just curious. How come the design work was not seen as being needed,

because that was part of the project that was covered under 07, right?

MR. KENNEDY: Yes, it was.

MS MICHAEL: You just did not anticipate the design work?

MR. DEERING: Yes, this was originally budgeted under 07, and I guess had

to be re-profiled a little bit later on during the project cycle to 05, so it

could be appropriately paid out of that account.

MS MICHAEL: Oh, good, thank you very much, that helps having that

explanation.

Subhead 2.1.01, I think some questions were asked there. Under Purchased

Services, which is subhead 06, there was $755,700 less to spend than budgeted.

MR. KENNEDY: Subhead 2.1.01.06.

MS MICHAEL: That is right.

MR. KENNEDY: The Purchased Services, yes. There was a re-profiling of

$349,000 from Purchased Services to Transportation and Communications because

there had been increased helicopter time and travel expenditures associated with

inventory, data, acquisition, and field activities.

We then had a couple of smaller re-profilings, but $75,000 was added for

forest research which was approved as part of 2011-2012. My understanding is

that there was another $500,000 in forest research that was to be phased in

during a three-year period. Phil, is there any comment there?

MR. IVIMEY: That is correct, Minister, that in 2011-2012 the budget

approved an additional $500,000 for forest research and that was to be phased in

over a period of three years. I believe last year we saw an increase of $150,000

and then the increase again this year, and then you will see an increase again

in the following year to bring us up to that total of $500,000.

MS MICHAEL: Okay, but that is part of why the Purchased Services was less

than budgeted by over $700,000? I am just trying to get a full picture here that

is all.

MR. IVIMEY: Yes, I am sorry. The variance that I just explained then,

that was the variance from last year's budget 2011-2012 to 2012-2013.

MS MICHAEL: Okay.

MR. IVIMEY: The reason for the variance in 2011-2012, the approximately

$700,000 you speak of, the variance there was due to approximately $150,000 in

payments for forest research projects. They were originally budgeted as

Purchased Services but we instead paid them as forest research grants. That was

money was transferred from Purchased Services to Grants. As well, we also had

higher than anticipated savings there related to vehicle maintenance, repairs,

and other promotional activities during the year.

MS MICHAEL: Okay.

MR. IVIMEY: It was approximately $150,000 was used for research grants

and then the other $500,000-odd was just savings from vehicle maintenance and

repairs.

MS MICHAEL: Okay, that seems high for the savings on vehicle maintenance

and repairs. Has that affected the budget for this year? Are you budgeting less

in that area?

MR. IVIMEY: No, we will not be budgeting less in that area. It is just

that for this year we just had higher than anticipated savings with our vehicle

repairs.

MS MICHAEL: It just happened that way.

I wonder, Minister, if we could have a list of what is covered under Grants

and Subsidies in that section, under subhead 10. Last year $1,285,400 was spent,

which was well over what was budgeted. I would like to see a list of I think

some of it was reallocation. I think that was just explained, but it would be

good to have a list of the grants and subsidies if we could have that, please.

MR. EVANS: Yes, that is no problem. We have a list for you.

MS MICHAEL: Okay, thank you very much.

Under 2.1.02.06; again, there was about $200,000 more spent than was budgeted

last year. Could we have an explanation of that?

MR. KENNEDY: Yes. It is my understanding that the variance is due to

higher than anticipated expenditures in relation to vehicle repairs,

maintenance, including snow machines and ATVs.

MS MICHAEL: Okay.

So in one place we saved money on vehicle repair and in another place we

MR. KENNEDY: Yes.

MS MICHAEL: Okay, very good.

Thank you very much.

I think I can go from where we were. I will just get myself organized here.

We are into 2.2.01, starting with subhead 01 Salaries; we spent $363,400 less

in salaries. Could we have an explanation?

MR. KENNEDY: It is my understanding the variance was due to a smaller

insect control program and reduced survey levels, giving a reduction in the

major forest pest populations last year. It was just simply a reduction in the

work required.

MS MICHAEL: Would these be temporary positions then?

MR. MOORES: Primarily, they are temporary positions when the spray

program gears up.

MS MICHAEL: Right.

You anticipate, though, having it back up to normal in this year's budget.

MR. MOORES: We will do our egg counts now and some sampling before the

year starts and if the populations are high we will have our spray program. If

they are not, we will adjust accordingly.

MS MICHAEL: Okay.

You have to be prepared for the potential.

MR. MOORES: That is right.

MS MICHAEL: Thank you.

In 03 Transportation and Communications, I note that the revision last year

was $462,600 less than the budget. Would that be related to the answer you just

gave me, I wonder?

MR. KENNEDY: Yes, it would, because there would be less helicopter and

aircraft time required.

MS MICHAEL: Right. Thank you.

Subhead 04 Supplies; again, quite a bit of money not spent in that area,

$765,000. Would that also be related to the same ?

MR. KENNEDY: Yes. Again, less pesticides, insecticides required during

the year, but obviously we have to prepare for the upcoming year.

Len, I do not know, is there any way of knowing from year to year as to how

much will be required or does it

MR. MOORES: We do our egg survey counts in the fall. So, by sometime in

early winter we get an estimate of what the populations could be. Then we do

another survey in the springtime before we spray to see, when the eggs hatch, if

we have our populations where we think they will be.

Last year it was a small year. It was an anomaly that insect populations were

down. For example, last year we sprayed 4,800 hectares, but the year before we

sprayed 58,000. So, it just happened to be a year where the populations were

down.

MS MICHAEL: The weather probably was a factor there, I would imagine,

that terrible summer we had. Do we know what the reason was? Because I just find

that interesting from an ecological perspective.

MR. MOORES: For sure, some of the impact on population decline is with

weather.

MS MICHAEL: Right. Okay, thank you.

Subhead 10, it is a small subsidy $6,000. What would come under that? What

would be covered by that $6,000?

MR. EVANS: That subhead, funding is required to the main membership in

the Spray Efficacy Research Group, or SERG it is called, and they co-ordinate a

lot of the research and development for insect protection and disease control.

MS MICHAEL: Okay. Thank you very much.

I think I may have gotten that answer last year, now that I think about it.

Moving on to 2.2.02.03 Transportation and Communications; we under spent by

$456,000. Could we have an explanation?

MR. KENNEDY: Yes. Again, it is variance due to the less than anticipated

travel and transportation, such as chartered aircraft and helicopter time due to

lower than anticipated fire activity during the year.

MS MICHAEL: Right. Also related to the lousy summer I suspect, as well.

Subhead 06 Purchased Services, there we were $71,000 over budget.

MR. KENNEDY: Yes. The variance was due to higher than anticipated

expenditure associated with radio and tower maintenance, fire, weather

forecasting services, and vehicle repair and maintenance.

MS MICHAEL: Okay.

Subhead 07 Property, Furnishings and Equipment, we were $77,000 over there.

MR. KENNEDY: Again, higher than anticipated expenditures for mobile radio

equipment, accessories required for new and replacement vehicles and other fire

related equipment during the year.

MS MICHAEL: Okay.

So, more things breaking down, it sounds like, than you anticipated. I see a

nod over there.

Moving on then, unless do you want to ask questions on some of those that I

just did? Why don't you do that, on the ones I just did?

CHAIR: Thank you, Ms Michael.

Ms Jones, you can ask some questions on Forest Management.

MS JONES: Thank you.

Just to go back to the Forest Industry Diversification strategy, can you give

us a list of the operators who took advantage of the capital funding?

MR. KENNEDY: Sorry, what section?

MS JONES:

Section 2.1.05, the diversification program. Can you give us a

list of how many operators accessed money under the program? Can we get a list

of that?

MR. KENNEDY: I can give it to you now, or we can provide it.

MS JONES: It does not matter.

MR. KENNEDY: There is a three-year period, so there were funds dispersed

over a three-year period. Do you just want 2011-2012, or would you like the full

three years?

MS JONES: No, the full program.

MR. KENNEDY: In 2009-2010, Sexton Lumber received $2.75 million; Holson

Forest Products, over a three-year period, received $8.3 million; Burton's Cove

Logging over a two-year period, 2010-2011 and 2011-2012, received $3.8 million;

and Cottles Island Lumber, there was $2.2 million originally budgeted for

projects but they did not avail of the money.

The total amount would be $14.86 million. As I have indicated, there was $2.2

million budgeted for Cottles Island.

MS JONES: Okay.

You had a report done by Halifax Global a few years ago talking about

value-added products and export markets. I think there were ten recommendations

that they made in that report. Can you give me an update on what recommendations

have been implemented and where that is?

MR. EVANS: Some of the recommendations MSR lumber, machine stress-rated

lumber, there have been trials on those, and certainly the biofuels from a

pellet perspective and briquettes. Some of the value-added aspects would be in

siding, log siding type things, fencing, decorative lumber for housing, trim,

these types of things. Some of the marketing initiatives as well have been

incorporated.

MS JONES: You guys talked about bioenergy a few years ago when the

Abitibi mill closed. You talk about converting some government buildings to

bioenergy and things like that. Did anything ever happen around that? Is it

still being planned? Is it off the books? What is the status of it?

MR. EVANS: No, the plans still have not been initiated. There were two

projects identified and there has been no action on them to this point.

MS JONES: What projects are they?

MR. EVANS: One was Wooddale Tree Nursery and the other was College of the

North Atlantic in St. Anthony.

MS JONES: Any reason why nothing has happened to date?

MR. EVANS: I think it is mainly due to funding and some operational

concerns as well.

MS JONES: Okay.

I have a couple of questions around the Holson Forest Products in Roddickton.

In addition to the money under the diversification agreement, they also received

a loan. Is that right, a $10 million loan?

MR. EVANS: The loan was part of that $8.3 million.

MS JONES: Okay.

MR. EVANS: They received an additional $1 million from the Green Fund.

MS JONES: Okay. The $8.3 million was actually a loan, not a grant?

MR. EVANS: Seven million dollars was a loan, I think that is right

OFFICIAL: (Inaudible).

MR. EVANS: That is correct, yes.

MS JONES: Okay.

I know you said that this particular operation was having some trouble with

markets. I have been told they have been shut down now for the last month or

more. Can you tell me what is going on, or the reason why it is shut down, or if

that is even correct? That is the information I was given.

MR. EVANS: Yes, that is correct; the pellet plant has been shut for

approximately a month or so, having some operational concerns. They are trying

to ship the pellets in bags to St. Anthony for shipping. There have been some

concerns with that, as well as some operational concerns in the pellet plant

itself. The sawmill is operating; it has been running for about a month now.

Apparently they are doing well with their lumber being sold.

MS JONES: Okay.

Back in 2009 you guys actually announced that you were going to hire a

consultant and go out and develop this market strategy for the sawmill industry,

and the pellet industry, whatever. Did that ever get done?

MR. EVANS: Yes, that was the Louis Guay report. That again was a type of

marketing strategy for pellets, value-added solid wood products, and some other

different products like decorative trim and fencing and these types of things.

MS JONES: Okay, but that would have been helpful in the case of the

Holson Forest Products. I am thinking they have market issues and we already did

the study. Was there anything in there that could have helped them?

MR. EVANS: I think most of their problems right now are in the operation

and in the plant itself. They do have markets identified, but I think the

operational issues and transportation in these bags are what is causing them

issues right now.

MS JONES: I also heard that they might be selling out their operation to

a European company. Can you tell me anything about that?

MR. EVANS: I have not heard anything definite on that. I know they have

been discussing with different people, but I have not heard anything definite.

MS JONES: Just before I move off that one as well, did you guys do the

rebate program on the wood pellets again this year? Is that being done?

MR. EVANS: The question was this year?

MS JONES: Yes.

MR. EVANS: No, it was not reinstated this year; it finished last March.

MS JONES: Okay. Did you get much of a take-up on that program?

MR. EVANS: Yes. The total rebate over the three-year period was $327,000.

The average rebate was $582 per rebate, over the three-year period.

MS JONES: How come you discontinued the program, Minister?

MR. KENNEDY: We looked at it this year and it simply became a budgetary

issue. I think while the take-up was good, it was not exactly what we had hoped

it would be. It was just part of the budget process.

MS JONES: Okay.

There has also been some calls for a wood pellet operation in Central

Newfoundland, and I know that the Innu Nation in Labrador is also been

approaching the government with an integrated sawmill and pellet operation

concept. Can you tell me if there is anything being considered or look at on

either one of those?

MR. KENNEDY: There are issues or there is interest in Central

Newfoundland, in the Grand Falls Windsor area. The Innu Jim, the integrated

sawmill, could you speak to that?

MR. EVANS: Yes, we are waiting for a detailed business plan for the

Labrador proposal. The anticipated date was May 31, but I have been told they

are looking for a month's extension.

MS JONES: Okay.

Is there any forest activity going on in Labrador at all commercially now,

any sawmilling, anything at all?

MR. EVANS: It is very little. There are some small sawmills in different

parts of Labrador, but very little from a large-scale commercial perspective.

MS JONES: Where are they too? Are they in Lake Melville? I do not know of

either one that is operating. I do not know if Postville is open now. They were

all closed.

MR. EVANS: Yes, well I am saying they are operating. I would suspect that

they would start sometime in June-July, on small-scale basis and an as-need

basis.

MS JONES: You said there were four major sawmills in the Province today.

What is the total number of commercially operated sawmills that we have? We have

four major ones. Is there more besides that?

MR. EVANS: I do not have a number right here; I do not know if anybody

else does. I can get that information for you, if you like. It would be an

estimate at this point.

MS JONES: Okay, that would be good.

Can you also tell me how many sawmills closed up over the last ten years in

the Province? Can you get that information for me as well?

MR. EVANS: Yes, for sure.

MS JONES: Earlier this year, the loggers on the Northern Peninsula, they

put in a request for an extension to their woodcutting permits. Is anything done

on that yet?

MR. KENNEDY: Are you talking about the Nordic Development Association and

the funds that were set aside? All of the money had not been utilized by the end

of the year. I think approximately there was about $700,000 or $800,000 set

aside, and my memory says there was around $500,000 spent. So what we indicated

to them, if there was a market, for example, in Holson Forest Products, then we

would certainly invest further money. A letter was sent to them to that extent.

MS JONES: Okay.

I have a couple of questions around the Abitibi stuff. I do not know where it

falls to in here or wherever it falls. One of the things, I just wanted to get

an update on what was happening with the mill out there, and if there was any

plan by government on a go-forward basis are you still looking for an

additional operator? Are you looking at dismantling it?

MR. KENNEDY: Well, there is, as I have indicated, interest expressed, but

this interest has been expressed for some time, so we are waiting still to see

where that goes. Len, perhaps you can give an update on the overall status of

the mill.

MR. MOORES: We have a proposal, as you know, that we are considering and

if everything was successful they would like to be on site. So, we are really

waiting for that proposal to work its way through before there is any decision

made on the actual facility itself, if it would be dismantled or sold off in

parts or whatever we would do with it. Until that

part is done, I think we are

just sort of doing a status quo on the current facility.

MS JONES: So you do have an active proposal then?

MR. MOORES: That is correct.

MS JONES: Okay.

Do you want to give us any details around that, what they are proposing, what

they are looking at?

MR. KENNEDY: This has been ongoing for some time. Discussions have been

taking place for probably a year now and it is a proposal to establish a sawmill

wood pellet plant on the Abitibi site.

MS JONES: Okay.

Currently, the government is still maintaining, I guess, doing whatever

maintenance, security, all of that stuff with regard to that infrastructure

are you?

MR. MOORES: That is correct. We have contracted out the security, the way

I understand it. In terms of maintenance, it is basic maintenance for the

particular facility. There is nothing major in maintenance, unless it is a

safety issue that we would be dealing with.

MS JONES: Can you give me any cost on what the cost is to government to

maintain and secure that particular site?

MR. KENNEDY: I think that comes under Transportation and Works; the

security is provided by Transportation and Works and also the maintenance. So

they would be the ones that would be able to provide you with the details on

that issue.

MS JONES: Okay, thank you.

About a year ago you guys were negotiating an agreement with Enel with regard

to Star Lake, the hydroelectric project. You completed that negotiation and you

publicly announced an amount that you were going to buy it out for and so on.

Did the deal ever get concluded? Was that all completed? Where did it go after

that?

MR. BOWN: Yes, that is correct. That was publicly announced last year. We

did conclude the settlement arrangement with Enel.

MS JONES: Okay.

You guys were still doing the negotiations with Fortis, right?

MR. BOWN: That is correct.

MS JONES: Where is that to now?

MR. BOWN: We continue to still have discussions with the Exploits River

Partnership, or Fortis.

MS JONES: So do you expect to conclude the negotiations or settlement

with Fortis within this fiscal year?

MR. BOWN: It would be our intent to do that at the earliest convenience.

CHAIR: Ms Jones, if I could suggest we go back to Ms Michael. Can I then

surmise that we are finished the sections from Minister's Office to Forest

Management, under the headings, the budget lines?

MS MICHAEL: No.

CHAIR: You have some additional questions? Okay, I will go back to Ms

Michael to conclude on that.

MS MICHAEL: Thank you very much, Mr. Chair.

I just have a couple of more general questions, more program questions,

programmatic but related to budget as well, under forestry. With regard to the

silviculture program, did we reach our goal last year with regard to the number

of seedlings that were planted, and the area that was hoped to reach? It is

usually about 1,000 to 1,100 hectares every year being thinned. Did that happen?

Where are we with regard to that program, on target?

MR. MOORES: Yes, we reach our program targets for silviculture every

year.

MS MICHAEL: Right. I understand that we have been told that you are

working on a provincial sustainable forest management strategy. Could we have

the status of that strategy?

MR. EVANS: Yes, that is correct. We have concluded public hearings on

that, and we are doing some other hearings with Aboriginals and

industry-specific groups. So that is on target, and the plan is to have it ready

for mid-2013.

MS MICHAEL: Very good, thank you.

Again, with regard to the silviculture, where hectares of land were

reforested under the funding to Corner Brook Pulp and Paper, did they receive

funding in the last fiscal year with regard to the silviculture program?

MR. MOORES: Yes, under an agreement with the Province last year to

support the industry we covered Corner Brook Pulp and Paper's silviculture cost.

MS MICHAEL: Right, okay.

How many hectares in total, and the amount of money do you have that at

your fingertips or can we receive it at a later date?

MR. EVANS: Do you mean the Corner Brook Pulp and Paper?

MS MICHAEL: Yes.

MR. EVANS: Corner Brook Pulp and Paper was $2.5 million.

MS MICHAEL: Okay.

How many hectares in total were related to the Corner Brook Pulp and Paper

reforesting?

MR. EVANS: I would have to get that for you. I do not have that right off

of the top of my head here for the Corner Brook Pulp and Paper specifically.

MS MICHAEL: Okay, but if we could have that, I would appreciate it.

MR. EVANS: Yes.

MS MICHAEL: Thank you very much.

Under the pulpwood diversification, I know we have had the explanation around

why there is no money in there right now for the coming year, but I am curious

around the initiatives with the Model Forest. Were there initiatives entered

into with the Model Forest program in 2011? If not, what are plans in the future

with regard to the relationship with Model Forest? Because I am impressed by the

Model Forest work and wondering what is going on with them.

MR. MOORES: We are into, as you are aware, a relationship and partnership

with the Model Forest. We do partner on projects. The details of which

particular projects this past year I am not aware of, but we can get you that

list of projects that we were involved with at the Model Forest time.

MS MICHAEL: Would that have come under the Forest Diversification?

MR. MOORES: No, it would not have. It would come under a different area.

MS MICHAEL: That would have been separate, okay.

I do know that there were some efforts being pursued by the AMEC consultants

with regard to ISO 14001, the environmental standards. Are there funds in the

budget to continue the work around environmental standards in this area?

MR. EVANS: Yes, there are funds and we are pursuing ISO 14001.

MS MICHAEL: Very good.

The strategic plan that you have in place around this outlined the process

will continue for adoption of an Environmental Management System for Crown

tenures. I presume that is still part of that.

MR. EVANS: Yes, that is correct.

MS MICHAEL: Okay, thank you very much.

They are the last of my general questions in the whole forestry area, so I

can move on then if you want to move ahead.

CHAIR: If we could, I would like to first adopt those and then we can

move right into the next section.

MS MICHAEL: Sure.

CHAIR: I will see if I can get a call for a motion to adopt

section

1.1.01, Minister's Office.

MS PERRY: So moved.

CHAIR: Moved by the Member for Cape La Hune Fortune Bay.

All those in favour, aye'.

SOME HON. MEMBERS: Aye.

CHAIR: Those opposed?

Passed.

On motion, subhead 1.1.01 carried.

CHAIR: Inclusive from sections 1.2.01 and concluding to 2.2.02 Forest

Management.

MR. DINN: So moved.

CHAIR: Motion made by the hon. Member for Kilbride.

All those in favour, aye'.

SOME HON. MEMBERS: Aye.

CHAIR: All those against, nay'.

Those sections are carried.

On motion, subheads 1.2.01 through 2.2.02 carried.

CHAIR: Ms Michael, back to you please.

MS MICHAEL: Thank you very much.

Moving on to 3.1.01 Land Resource Stewardship Administration; subhead 01

Salaries under spent by $191,000. Could we have the explanation please?

MR. KENNEDY: Yes, there were some vacancies within the division and there

was the late filling of two positions during the year.

MS MICHAEL: Okay. Thank you very much.

Under 3.1.02, an extra $55,000 was spent.

MR. KENNEDY: Sorry?

MS MICHAEL: In 3.1.02 Limestone Sales, there was an over expenditure of

$55,000. It is just one line item, Supplies, and under Supplies there was an

over expenditure of $55,000.

MR. KENNEDY: Yes, that is related to a demand for the agricultural

limestone due to an increase in land clearing.

MS MICHAEL: Okay.

So you just go back to the $441,800 this year? It is the same.

MR. KENNEDY: Yes, that is correct.

MS MICHAEL: Okay.

Under Land Development, which is 3.1.03, I am just curious about subhead 10

Grants and Subsidies. Nothing had been budgeted but $50,000 was spent. I would

like to know what that was about.

MR. KENNEDY: The variance here was due to $50,000 being spent from the

$100,000 budgeted and transferred from purchased land for legal land survey

assistance due to a lower than expected uptake in the program.

MS MICHAEL: Okay. Thank you.

Section 3.2.01, first of all subhead 05 Professional Services, you did not

require very much. I am just wondering: What would be the professional services

under that head, please?

MR. DEERING: This funding is required for the hiring of consultants and

other professional services required to properly carry out the mandate of the

division, including continuing growth of diversification, aggressively marketing

the full amount of homegrown products, and supporting research and development

initiatives.

MS MICHAEL: It does not seem like you require a lot of services, though,

under that line. The money is there but you do not require a lot of services

from the looks of it.

MR. DEERING: That is sort of fluid on a year by year basis. It could be

to the full amount next year and it may be less as well. It depends on what is

identified throughout the year.

MS MICHAEL: Right. Thank you.

Under 06 Purchased Services, there was an over expenditure of $41,000. Could

we have an explanation on that?

MR. KENNEDY: Again, we have a variance due to higher than anticipated

expenditures associated with vehicle repairs, maintenance, leased vehicles

required for projects, as well as rental of office and storage facilities.

MS MICHAEL: Okay, thank you.

Then the next one, subhead 10, could we have an explanation of the grants and

subsidies here? Last year it was under spent by $1 million, but this year we are

still up to over $1 million. The amount has gone up to $1.4 million from

$753,500. Could we have an explanation of what exactly gets covered in these

grants and subsidies?

MR. DEERING: This piece is mainly attributed to $1.5 million that we have

for the Cranberry Industry Development fund. Over the past few years there has

been less than the amount of uptake we would have liked to have seen in this

area. That is mainly attributed to the fact that the federal government also had

a program which was very closely aligned with ours. In fact, many of the

operators who would have been eligible for this funding wound up taking

advantage of the federal program.

The federal program expired last year, and we now expect this is the final

year for our program. We do expect that more folks will take advantage of the

provincial program this coming year.

MS MICHAEL: Okay.

Actually, that was the question I was going to ask: What the status of the

funding for the cranberry industry was? This is the final year for provincial

funding is what you are telling me.

MR. DEERING: That is correct.

MS MICHAEL: Okay.

We may as well pursue that a bit then, since we are there. What is your

assessment of how successful this has been? Did you set goals, and were those

goals met?

MR. DEERING: Well, our original goal was to bring ourselves to

commercialization stage, and our own estimate was that we needed to develop the

industry to about 500 acres to justify secondary processing within the Province.

Currently, we have reached about half that. I am not sure we will achieve 250

acres with the program that we have left this year but I guess any ongoing need

to re-evaluate further extensions to the program will have to be evaluated after

this year.

MS MICHAEL: Right.

Do you anticipate in this coming year with the $1.4 million that has been

allocated, that there will be new ventures coming onboard or would you expect it

will be more expansion of current operations, or both?

MR. DEERING: The possibility exists and the criteria of the fund permit

new entrants into the cranberry sector, but, that being said, we do anticipate

there are more than enough current operators who could make use of that funding.

MS MICHAEL: Okay, thank you.

You may have answered this last year, although I do not have a note saying

that we asked the question last year. Under subhead 02, the provincial revenue,

what is that provincial revenue? I note that last year the budget said

provincial revenue of $554,700 and we only got $50,000 under provincial revenue

there. Could I have an explanation of that line?

MR. DEERING: Originally when the program was developed, we had

anticipated that farmers would reimburse the Province for the cost of the

cranberry plugs, the seedlings that we use. In fact, the Grand Falls program

which was a vast majority of the area that we had developed, free seedlings were

provided to those farmers.

MS MICHAEL: Okay, thank you.

That will not be done this year I take it, from the looks of it.

MR. DEERING: It is the same intent for this year, to provide free

seedlings to the Grand Falls folks, yes.

MS MICHAEL: You still have in there provincial revenue of $454,000.

MR. DEERING: Yes, we do. Again, that would conditionally depend on

development in other parts of the sector outside of the Grand Falls area.

MS MICHAEL: Okay. Thank you very much.

Let's move on to 3.2.02, it is only a small amount. No, I do not need to do

that one.

Section 3.3.01, it is still agriculture; Salaries, subhead 01, under spent by

$279,000. Could we have an explanation please, Minister?

MR. KENNEDY: Yes. The variances are due to vacancies within the

department or within divisions due to retirements and then timelines to fill the

positions through the competition process.

MS MICHAEL: Looking at the budget for this year, I assume it looks like

you do plan on filling positions.

MR. KENNEDY: Yes.

MS MICHAEL: Has that process begun yet, the process of hiring?

MR. DEERING: Many of those positions have already been filled. We had one

agriculture rep position in Goose Bay that has been filled, two agriculture

development officers in our headquarters in Corner Brook, as well as a clerk

typist position in Pynn's Brook which has already been filled since these

numbers were imposed.

MS MICHAEL: Okay, thank you very much.

Subhead 05, Professional Services, $168,000 was budgeted, only $80,000 was

spent, ant this year the estimate is $18,000. Can I have an explanation of what

was anticipated under that and why it has gone down so much?

MR. DEERING: We had budgeted $150,000 in 2011-2012 for the development of

a new entrants' strategy. We had gone out and had a call for proposals from

consultants. In fact, our consultant came back with a low bid price of about

$68,000. We have managed to get that piece of work done for far less than we had

anticipated.

MS MICHAEL: Okay.

MR. DEERING: For this coming year, again the $18,000 is for professional

fees for our agriculture initiatives including the Agrifoods and Garden Show,

just administrative costs related to our agrifoods fairs.

MS MICHAEL: Okay, thank you very much.

Subhead 3.3.02, Agriinsurance and Livestock Insurance, again under the

Salaries, subhead 01, under spent by $95,000 was this a single position?

MR. KENNEDY: Two of the four agriculture inspector positions were vacant

within the division during the year.

MS MICHAEL: Okay, thank you.

Under the federal revenue, there was under $100,000 received from the federal

government and this year it is back up to what was estimated last year. Why not

that $100,000?

MR. DEERING: Yes, the revenues that we obtain are dependent on the amount

of claims that go forward throughout the year for livestock and crop insurance.

MS MICHAEL: Okay.

MR. DEERING: This is just related to less than substantive claims gone

forward.

MS MICHAEL: Okay, that is great. Thank you very much.

Subhead 3.3.03, all I want here of course would be: Could we have a list of

the grants and subsidies that go out under the agriculture initiatives, where it

goes, and the amount of money for each grant?

MR. DEERING: Yes, it is quite a substantive list for this particular

program. We have in excess of 100 different grants that we have issued, but we

can prepare a spreadsheet for you outlining a

summary.

MS MICHAEL: That would be great; it gives us an idea of where the money

is going, where in the Province it is going, et cetera. Thank you very much. Of

course, we get an idea of what the initiatives are, too, I would assume, with

that.

Again, 3.3.04, the same request we are down slightly there, though, I would

like to ask you about that first. The estimated grants last year were

$3,276,000, and it was revised to $3 million so why down to just $3 million

this year?

MR. DEERING: This was related to our cost-savings initiative within the

branch, we were required to achieve a 3 per cent cost savings, and we found some

of it here.

MS MICHAEL: Okay.

MR. DEERING: On your original question, I do have a list that I can

provide you now on this particular fund, because there were only three

applicants

MS MICHAEL: Well, that would be great.

MR. DEERING: this year. This particular fund is mainly targeted toward

the larger-scale initiatives. We had provided $388,027 to New World Dairy for an

anaerobic digester project; we had provided $385,795.58 to Riverbend Dairy it

is a new entrant in the dairy program; as well, we had an ongoing relationship

with the Dairy Farmers of Newfoundland and Labrador over the last three years on

land development initiatives and this past year was the last year of that

agreement. This past year we would have provided $2,476,027.85 to Dairy Farmers

of Newfoundland and Labrador for the land development piece.

MS MICHAEL: Thank you very much.

Subhead 3.3.05, the Growing Forward Framework, I note that the money goes

down again this year from the federal government. Where are we with the Growing

Forward where are we in that whole process of that federal-provincial

initiative?

MR. KENNEDY: Yes, there was a Federal-Provincial-Territorial ministers'

meeting just outside of Ottawa approximately a month ago, at which time one of

the major issues being discussed was the Growing Forward 2 program. We are

looking at the finalization of that program when the ministers meet; I think it

is in the Yukon in September.

MS MICHAEL: The program is designed to continue until 2014. Is that still

the intent?

MR. DEERING: Yes, the intent is to have the multilateral framework for

the new agreement as well as the bilateral negotiations completed by the

September meeting, as the minister had noted. The current agreement expires in

2014 as you suggested. Growing Forward 2, the successor to the current

agreement, will be a five-year agreement.

MS MICHAEL: For clarification for myself, with the announcement made last

year with regard to the AgriFlexibility Fund, is that fund part of Growing

Forward, or is that a separate piece of work and piece of money?

MR. DEERING: No, that piece is separate from Growing Forward.

MS MICHAEL: What exactly gets covered under the AgriFlexibility Fund?

MR. DEERING: There are two initiatives for us covered under

AgriFlexibility currently. One of them is the foreign animal disease lab piece

that we have referenced already a couple times this morning. The second part for

us is our research and development fund. We have a separate subhead for that a

little bit later on in the Estimates notes here. Of course that piece is

cost-shared with the feds under the AgriFlexibility Fund.

MS MICHAEL: Thank you very much.

Moving on then to 3.3.05, this is not a question well, it is a question,

but everything else is pretty straightforward. All of the budget lines are

fairly consistent. Under Grants and Subsidies, as usual, one, could we have a

list of the grants and subsidies under the Growing Forward framework; and was

the drop in the federal funding part of the plan? Is it less money each year

from the feds or is that going to be part of the renegotiation that happens for

September?

MR. KENNEDY: One of the problems we raised at this meeting is some of the

provinces are much further ahead in terms of their agriculture and agrifood

programs. We are still trying to ensure food security and enough supplies for

our own purposes. They are moving more into the innovation,

whereas we are

saying we still have to develop the program.

We were given a one-off there a number of years ago in terms of the increased

monies received. That has resulted in us receiving a larger share than the other

Atlantic Provinces. There are still some issues that we have to look at there,

but in terms of the decrease, I think that is just the way, Keith, that it was

set up, isn't it?

MR. DEERING: That is correct. When the deal was negotiated back five

years ago there was a declining amount. Currently, this amount that you see here

represents the same amount that the other Atlantic Provinces get, but in the

first two years of the program we actually received more than the other Atlantic

Provinces.

MS MICHAEL: Okay.

Will that be part of the renegotiation or is this the standard now and you

will accept this standard?

MR. KENNEDY: No, our position is, as we build our industry we need that

to continue with that sustained level of funding.

As Keith indicated, while the amount we received this year is the same as the

other Atlantic Provinces, we had received more money in other years and our

position is that this should continue.

MS MICHAEL: Right, that should continue. Well, that is good to hear. Good

luck at the negotiating table on that one.

I have no more questions on the Agrifoods if

MR. KENNEDY: The only point, Ms Michael, I would make on the Growing

Forward, you asked for a list of the grants.

MS MICHAEL: Right.

MR. KENNEDY: Keith, isn't there hundreds of these?

MR. DEERING: We headed up about 150 projects in 2011-2012; 600 projects

in total throughout the life of the agreement. We could prepare a spreadsheet

with a

summary of the amount of money that was allocated to each project.

MS MICHAEL: Right. That would be good. I do not think that is too hard to

do electronically.

Okay, thank you very much. I would appreciate that. I am sure the Official

Opposition probably would as well.

I do not know if Dwight might want to go back to that area. Why not go back

and get the questions finished?

MR. BALL: (Inaudible) with the line items. I did have some questions in

terms of the department itself. I do not know, Lorraine, if you had any but the

lines items I am okay with.

MS MICHAEL: I will ask one more question, if that is okay, under this. I

do have a more general question as well.

In 2011, there was and I do not know where in last year's budget to tell

you it was $71,194 allocated for agritourism. I am interested in knowing: Is

there money allocated for agritourism this year, and where is it in the budget?

MR. DEERING: We do have a staff person that works in our production and

marketing division who is dedicated towards agritourism projects. We do have a

small amount of money for that person to work with farmers on agritourism

issues. That would be located in that is embedded within 3.2.01.10 Grants and

Subsidies.

MS MICHAEL: Okay, great.

I think we have asked for a list of those grants and subsidies. That would

give us an idea then of the types of initiatives that are covered under

agritourism. The list would actually indicate that. If so, then that is all I

want to ask.

Thank you.

CHAIR: Thank you, Ms Michael.

Mr. Ball.

MR. BALL: I have some general questions in terms of, number one, the

total farm receipts from last year. There has been a decline of 4.5 per cent

over last year.

MR. KENNEDY: All right. Is this a general question or ?

MR. BALL: It is not a line item, no. It is just a general question in

terms of the agricultural industry.

MR. KENNEDY: The farm cash receipts?

MR. BALL: Yes.

MR. KENNEDY: My understanding is, and Keith will outline the details, but

the farm revenues on a cash basis last year I think were about $125 million, or

close to $125 million. They are broken down in terms of dairy, chicken, eggs,

fur, greenhouse, vegetables and other industries.

MR. BALL: We have seen a decline, have we not? Is there anything that we

attribute to the decline?

MR. KENNEDY: Is there a decline Keith?

MR. DEERING: I am not aware of any specific decline that we can attribute

any dynamic to at this point. The number tends to it seems to have been

steadily increasing over the last few years. I am not sure I can attribute any

decline to any specific (inaudible) at this point. It has been steady growth in

agriculture.

MR. BALL: In terms of new entrants to the system, have we had many in the

last few years at all?

MR. DEERING: Yes. There is a young farmers' forum that operates in

Newfoundland. They meet quite regularly. Their objective of course is to foster

the interest of new entrants into the industry.

I would be guessing if I tried to put a specific number on it. It is in the

range probably of about ten or fifteen new entrants per year over the

cross-section of the various sectors.

MR. BALL: Are there any special loans or credit available to young

farmers that would help with succession plans at all to get into farming?

MR. DEERING: Yes. There is a specific component contained within our

Growing Forward Agreement that is set aside for new entrants' initiatives. They

are qualified for $5,000 in funding to set up operations and do business plans

and these sorts of things.

MR. BALL: I know a few years ago there was some discussion about farm

loans and I think the number was around $10 million or something. I am not sure

whatever happened to that. Did it ever come to fruition at all?

MR. DEERING: No, we are still working with and having discussions with

chartered banks and the Farm Credit Corporation on the redevelopment of that

particular program.

MR. BALL: Okay.

I have one question. With the AG, in his report this year there were some

questions around the three commodity boards and the role that government plays

with the Farm Industry Review Board. Their role was to monitor those commodity

boards?

MR. KENNEDY: Len or Keith can speak to this, but it is my understanding,

because I was concerned when I saw the Auditor General's report, they do not

report. I cannot direct them in terms of their spending.

Essentially, we looked at it and said: Well, the Auditor General is finding

these issues. Then it was coming to us as a department, but we had no control

over the spending of these boards. I think we wrote a letter indicating that to

the Auditor General. I am not sure if we sent a letter to the boards also, but

we did express our concern.

MR. BALL: Yes, okay.

The Farm Industry Review Board, maybe you could explain, where do they fit

into all of this? Is that a monitor of the three boards and no government

involvement at all there? Is that what you are saying?

MR. MOORES: The Farm Industry Review Board is a co-ordinating board and

it manages the other three commodity boards that are in place. The Farm Industry

Review Board also manages any complaints about farms that the public might have.

They have an appeal process where they would hear about complaints and make some

decisions around those complaints.

MR. BALL: Who makes those appointments to the board?

MR. MOORES: The minister makes those appointments to the board.

MR. BALL: Okay. That is pretty much it.

Oh, maybe just a question or two on the fur industry. We have been reading

reports; obviously there have been some issues over the years. This is all local

knowledge for me because I have a number of those in my area. It seems to be

stabilized a little bit now. Is there any plan that we can actually grow this

industry again?

MR. MOORES: The fur industry is like a commodity industry. The market

goes up and down, as you are aware. It was down for awhile, and right now prices

are really good. Some of the fur industry farmers look at, like anything, when

the markets are good that is the time to consider expanding. There are some

issues around expansion that the departments work with the industry on to make

sure they do not get too large in terms of some of the environmental factors

that could creep in.

MR. BALL: Is there any reason that you have seen because when you look

at Nova Scotia they seem to have some success, at least from what I have been

told, more success than what we have been having at least. The industry is

fairly large there compared to us. Is there anything that they are doing

different or anything that we can learn from them at all?

MR. MOORES: Not that I am aware of. I think our fur industry is pretty

progressive in how they are trying to develop the industry in a sustainable way

and I think they are progressing at a pace that they are comfortable with.

MR. BALL: I am okay to move along to the Mineral Resource Management. I

have a few line item questions there not a lot, actually.

CHAIR: Okay, go ahead.

MS MICHAEL: (Inaudible).

CHAIR: You just have a few questions left on the

MS MICHAEL: Just under Animal Health, do you want to finish that now and

get that done before moving on?

CHAIR: If Mr. Ball would give us leave and then we can sign off on that

one.

MR. BALL: Yes.

CHAIR: Thank you.

Ms Michael.

MS MICHAEL: Thank you.

There is not a lot. Subhead 3.4.01.04, Supplies were over budget by $141,000.

Can I just have an explanation of that, please?

MR. KENNEDY: Yes, the variance was due to an increased leave of

pharmaceutical products required during the year.

MS MICHAEL: Was there anything special that happened that required that,

any special disease or anything?

MR. DEERING: I guess this year we had an increased occurrence of rabies

in Labrador, and although we had sufficient pharmaceuticals on hand to deal with

that, we thought it would be wise to restock our pharmacy in case we had a major

problem.

MS MICHAEL: Right.

With regard to that, I take it because it is in Labrador there is probably no

danger of that moving into the Island, is there? Or is that something that is

being monitored?

MR. DEERING: There is always a risk and we do see Artic foxes and other

small critters move across the ice from Labrador onto the Island from time to

time, but as you suggested, we are closely monitoring that activity,

particularly in Southern Labrador.

MS MICHAEL: Okay, thank you.

Still under that major head, line 10, Grants and Subsidies, again could we

have a sense of what gets covered there, where the Grants and Subsidies go under

this head?

MR. DEERING: About $110,000 of this particular piece is for the SPCA. We

provide $50,000 to the St. John's branch, as well as $10,000 to each of the

other local branches throughout the Province. In this case, as well, for this

year, $2,500 was contributed to the Newfoundland and Labrador Veterinary Medical

Association annual conference.

MS MICHAEL: Okay. Thank you very much.

Under Agrifoods Research and Development, heading 3.5.01.01, Salaries, this

year the estimate is $181,400 more than last year's budget. Could we have an

explanation?

MR. KENNEDY: The variance in salary for this year is in relation to a

vacant agricultural technician position and in terms of next year, there will be

three temporary positions added to ensure the operation of the FP agricultural

research initiative under the Canada-Newfoundland and Labrador AgriFlexibility

Agreement.

MS MICHAEL: Okay, thank you.

Again line 10, Grants and Subsidies, I note that last year there was no

budget, then $317,400 appears in the revision, and that is going up to $450,000.

Could we have an explanation of what is happening there?

MR. KENNEDY: Under line10, Ms Michael?

MS MICHAEL: Yes, line 10.

MR. KENNEDY: This is related to the Canada-Newfoundland and Labrador

AgriFlexibility Agreement and the creation then of the agricultural research

initiative has broadened the program so now there is grant payments to farmers,

agrifood processors, university organizations and provincial government

departments. These were grant payments that were not originally anticipated.

MS MICHAEL: Right because of the AgriFlexibility program that you

announced part way through that budget year. Okay that is helpful. Thank you

very much.

That ends my questions around the Agrifoods Development.

CHAIR: Thank you, Ms Michael.

If I could have a motion to adopt the heading Agrifoods Development,

subheadings 3.1.01 to 3.5.01.

MR. CROSS: So moved.

CHAIR: Moved by the Member for Bonavista North.

All those in favour, aye'.

SOME HON. MEMBERS: Aye.

CHAIR: Those opposed?

Motion carried.

On motion, subheads 3.1.01 through 3.5.01 carried.

CHAIR: Now we will go back to Mr. Ball, starting under the Mineral

Resource Management heading.

MR. BALL: Thank you, Mr. Chair.

For my first question, you could go to 4.1.03.05, Professional Services. We

had $1,070,000 last year; we spent $580,000, so there is a variance there. We

actually budgeted for $899,000 this year.

MR. KENNEDY: Yes, the variance, Mr. Ball, there were lower than

anticipated expenditures associated with the Voisey's Bay Long Harbour

projects, as well as lower than anticipated expenditures associated with the

orphaned and abandoned mines dam safety report. Essentially, the expenditures

were less than expected.

MR. BALL: Is there any reason why you expected more?

MR. KENNEDY: Sorry?

MR. BALL: What was the reason? Why the savings?

MR. KENNEDY: Dave, do you want to answer that?

MR. LIVERMAN: Part of this was the way that work on the orphaned and

abandoned mines dam safety work was done. The services for vegetation removal

were actually done under Purchased Services so that relates to item 06, where

you will see a substantial increase there. That reflects the vegetation removal

property of that assessment which was moved to line 06.

MR. BALL: Okay.

Line item 10, Grants and Subsidies, it was pretty much on budget last year

but there is $340,000-odd decrease this year. What was the reason for that?

MR. KENNEDY: There is a $340,000 cost-saving initiative in the Mineral

Incentive Program.

MR. BALL: What would those Grants and Subsidies be used for there? Could

I have an example?

MR. LIVERMAN: There are three separate programs there. The bulk of the

money goes to the Junior Exploration Assistance program. It is an incentive

program to encourage mineral exploration. They go to a number of junior mineral

exploration companies who are exploring across the Province. The amount that

they are eligible for depends on what they are doing, but it is in the order of

$100,000.

The second part of that is Prospectors Assistance which is much more on the

local scale dealing with individual prospectors who are out exploring their

claims. The grants there, there are more of them, but they are smaller. They are

in the order of several thousand dollars.

The third area is in Natural Stone Assessment. That is, again, exploration

for uses of natural stone of various sorts. That is a relatively minor part of

the program.

MR. BALL: Okay.

Is there any work done with schools in that regard, in this area? Do you work

with the Department of Education at all there?

MR. LIVERMAN: We do a substantial amount of work with schools, but it

does not fall under Grants and Subsidies. It was under new funding, which we

obtained for the geological survey. Three years ago there was an outreach

geologist position created, and that position does substantial work with schools

across the Province.

MR. BALL: Okay, thank you.

Under 5.1.01, Energy Policy, we have seen about $150,000 or so this year

versus last year's budget. Is that the 3 per cent? Is that what that is?

MR. KENNEDY: (Inaudible).

MR. BALL: Okay, it is?

MS JONES: (Inaudible) the other section.

MR. BALL: Okay, sorry. We are into Energy now, sorry.

Purchased Services, 4.1.03; sorry about that.

MR. KENNEDY: Okay, Purchased yes, got you, okay.

MR. BALL: It was budgeted last year $102,000, we spent $445,000, this

year we have $702,000.

MR. KENNEDY: That is in relation to the orphaned and abandoned mines,

there was more money spent. This year we have added approximately another

$600,000 for the continued maintenance, safety of the orphaned and abandoned

mines.

MR. BALL: Can we have a list of those mines?

MR. KENNEDY: Sorry?

MR. BALL: Could we have a list of those mines?

MR. KENNEDY: Dave could speak to this. I have seen a number of them, and

a lot of them were mines that were closed down and left years ago.

Unfortunately, we are left with the maintenance and safety, but it is preferable

to continue to ensure the maintenance and safety.

Dave, do we have a list of those mines?

MR. LIVERMAN: We do not have a comprehensive list, this is work which we

need to do. We are dealing with 150 years of mining. We are well aware of the

major issues and that has been the focus of the program, dealing primarily with

safety issues. Over the last ten years there has been substantial work done

there, but a project that we are trying to move forward is to do a more

comprehensive inventory of some of the smaller orphaned and abandoned mines

which may require work.

MR. BALL: Okay.

If we could go back to 4.1.01, line 06 Purchased Services. We were at

$364,000 last year, actually spent $380,000, and we have increased that about

$100,000, or about 25 per cent this year.

MR. KENNEDY: Yes. What we are looking at this year, there have been

greater expenditures associated with promotional activities. Such as, there was

an event in China, a China mining event, and the PDAC conference in Toronto

where the Province has a significant presence. Then in terms of this year, this

will be more in relation to planned operational requirements and field work.

MR. BALL: Back up to line item 04 in Supplies, $252,000, we spent

$286,000, and this year's budget is for $327,000.

MR. KENNEDY: Again, there were slightly higher than anticipated

expenditures required for field work during the year.

MR. BALL: Field work. This year the plan is to continue

MR. KENNEDY: This would be further planned and operational requirements

in field work for the 2012-2013 fiscal year.

MR. BALL: Okay.

What field work? This is survey work, I am taking is it?

MR. LIVERMAN: This is part of the geological surveys, geological mapping

work, and geoscience mapping work. There would be, this year, possibly eight

field crews in various parts of the Province conducting mapping work in support

of the mineral industry and mineral exploration. They vary in their nature as to

exactly what they are mapping and where they are, but it is a longstanding

program that is very well supported by the mineral exploration community.

MR. BALL: Just as an example I would imagine, I am assuming that is

fairly important to the overall departments. What is the level of importance

with it? What would you do with it when it is done? I guess it is never done, it

is always updated, but who would use it?

MR. LIVERMAN: Well, I can give you a specific example. A typical project

would be a geochemical sampling. We would send a crew out to take samples of the

surface soils or lake sediments. They get analyzed geochemically in the

laboratory. Those results are released publicly.

If there is an indication of mineralization say we get very high copper in

one of those samples, then that almost immediately will result on a mineral

exploration company staking a claim and then doing further exploration in that

area. The work there results very frequently in substantial investment by

private industry.

MR. BALL: I would say a great place to put some more money.

I am done with the Mineral Resource

MS JONES: I have a question.

MR. BALL: Yes, Yvonne has a question there.

CHAIR: Okay.

Go ahead, Ms Jones.

MS JONES: My question is around the exploration incentive program. What

companies are now being subsidized for exploration activity in the Province?

MR. LIVERMAN: We are currently reviewing this year's applications. We can

certainly provide a list of last year's grant recipients or incentive recipients

if you would like to see that.

MS JONES: Thank you, I would appreciate that.

MR. LIVERMAN: Okay.

MS JONES: Can you give me any update on what the status of the power

purchase agreement with IOC is with that mine in particular? I know they are due

to expire in 2014.

MR. KENNEDY: There have been discussions ongoing. I have met with the

President of IOC. Charles has been involved in ongoing discussions.

As I think you are probably aware, IOC and Wabush Mines were provided with a

block of power called a TwinCo block which is approximately 225 megawatts of

energy. They were provided that power at the same rate as Hydro-Qubec at a

quarter-cent power; $2.50 a megawatt hour. So, discussions are ongoing as to

what the appropriate price should be.

MS JONES: Okay.

That will not be concluded in the next few months, will it?

MR. BOWN: We continue to have discussions not only with IOC but also with

Wabush as well. There was an off-taker in that same agree. At the same time, we

are talking to other existing and perspective mining operations in Labrador

West.

MS JONES: Okay.

That would be my next question: Is there any existing power purchase

agreements with any of the mines right now in Labrador, in particular?

MR. KENNEDY: No. What we are waiting for, and this is my understanding

both Charles and Dave can elaborate on it is sort of a Catch-22. We have all

of these companies that are doing feasibility studies and other exploration in

Labrador West who are not at the stage yet where they have decided to proceed,

other than one or two that are either proceeding or in the process of

proceeding. So, they need energy, but at this stage they are not ready to sign

power purchase agreements.

We have indicated to them that when they have decided I think I have

indicated in the past, I have met with most or all of these companies. When they

are ready to proceed we will certainly look at providing them the power. Nalcor

is also in ongoing discussions with them.

MS JONES: Okay.

I am just wondering if the government has had any representation from Alderon

Resources with regard to their Kami Project in Labrador West.

MR. KENNEDY: I met with Alderon back in, it could have been December or

January. We met with the President. They outlined in their discussions where

they were seeking to go. They indicated again, they needed power. They then

approached Nalcor and have had discussions with Nalcor. My understanding is they

are a little further advanced or that they are more further advanced than other

companies in that area.

Dave, do you want to speak to that?

MR. LIVERMAN: They are right now undergoing the environmental assessment

process. That does move them a little bit ahead of some of the other plans and

advanced exploration projects.

MS JONES: In terms of Alderon and the Kami Project in particular, are

they going to do any pelletization in Labrador at all or is it all going to be

going outside to Quebec?

MR. KENNEDY: It is my understanding and again, Dave will speak to this

generally the way it is working in China right now is they do not want the

pelletized product. It is non-pelletized.

Dave?

MR. LIVERMAN: The current demand, the large part of the demand from China

which is driving a lot of the development, is for just iron concentrate or the

direct shipping ore, which is also coming from the new mines at Labrador Iron

Mines and the new ones in other mining which is in construction in the Menihek

area. The large demand right now as opposed to the traditional demand for

pellets, which was largely the North American market, is purely for concentrate.

Alderon have not formally provided a development plan or indicated their

final intentions in the area. We are still waiting for that. The preliminary

indications would be that the market they are looking to serve would be that of

China, which would be concentrate only.

MS JONES: What about the European market? Are we selling much of our iron

ore into the European market now or is it mostly all going to China and India?

MR. LIVERMAN: IOC and Wabush are selling both to the North American

market and to Europe.

MS JONES: That is why they still have a demand for pelletization in their

operations, is it?

MR. LIVERMAN: Yes, indeed. There is a price differential between

concentrate and pellets. In previous years, that price differential was

substantial. That has now declined. So the price differential when you are

looking to market your product is much less than it used to be. That is, again,

driven largely by the Chinese market.

MS JONES: Okay.

The thing is they can get almost as much for concentrate now as they can get

for pelletization.

MR. LIVERMAN: That is correct, yes.

MS JONES: In terms of allowing the concentrated ore to be going out of

Labrador, because we have a lot more mines coming on stream now, even though it

is what the market dictates, is there a different royalty regime that we put in

place because of that, or how does that work? How do we gain, as a Province, if

we are losing the jobs and the operations?

MR. LIVERMAN: Export of any mineral product, whether it is under the same

royalty and taxation regime right now. So, there would not be any difference

there in terms of export of an unprocessed product versus a processed product.

The details of whether processing would occur in Province or not would be once a

mine has advanced to the stage where it is going to advance and then at that

point there would be discussions between the company and the government as to

how the policy would be applied.

MS JONES: Minister, is that something the government is looking at, a

different royalty regime for the shipping of concentrate as opposed to processed

ore, or pelletized ore?

MR. KENNEDY: I think there are two ways to look at this. One is you say

there are less jobs, but these companies, my understanding, is the concentrate

is the way they want to go. We have the Labrador Iron Mines, basically, with a

direct shipping iron ore project ongoing right now. We have the IOC looking at a

concentrate expansion. We have Tata Steel looking at direct shipping of iron

ore. So if they are not going to be allowed to ship the ore, then some of them

are not interested, from what I understand, to pelletizing because of the

Chinese market. We have not made any final decisions on this.

The only one I am aware of right now and Dave can correct me if I am wrong

that is actually sending out concentrate would be Tata Steel. Is that correct,

or are IOC doing it also? (Inaudible) I meant the Labrador Iron Mines.

MR. LIVERMAN: Labrador Iron Mines are exporting direct shipping ore. IOC

is dominantly exporting pellets. As you know, Wabush Mines produces concentrate

which then is pelletized in Sept-Iles.

MS JONES: What about New Millennium or Tata, are they exporting anything

yet?

MR. KENNEDY: It is my understanding, they have not when I met with Tata

they were still, again, in the feasibility process. They are currently

commencing construction, but I am not aware of them shipping.

Dave, are they shipping anything? They have not started yet, have they?

MR. LIVERMAN: Tata Steel Minerals Canada has two projects. The direct

shipping project is undergoing construction right now. They have just started as

the weather has improved in the Menihek area. They have another major project

which is in feasibility. That would be resulting in the production of material

which would require pelletizing, but there has been no decision as to how that

would take place at this point. That is at a much earlier stage. They are still

in feasibility.

MS JONES: I understood that IOC had their pelletization shut down right

now, that they were shipping pretty much all concentrate.

MR. LIVERMAN: I am not aware of that. As far as I know, the pellet plant

is still operating.

MS JONES: Okay.

My question is around royalty, it seems like that is going to be the way of

the future in terms of mining in Labrador, that we are going to see a lot of

this going out, extracted and sent out. My issue is not about stopping that from

happening, it is about: How do we gain something else from that in terms of

additional royalties or a different royalty regime for ore that is not

processed? I just wanted to know if that is something the government is

considering at all or not.

MR. KENNEDY: We are in discussions with these companies but until they

come to us with their proposals as to what they are doing and looking for power,

it is really somewhat preliminary at this point. I can assure you that we will

extract the best value we can from these companies in terms of the natural

resources of the Province. However, we also have to look at the enormous

economic benefits that can follow $10 billion to $15 billion worth of mining

developments. Not only in terms of the economic value to the area in terms of

jobs created but also in terms of value to the Province in ensuring that we can

continue to put money into our social programs and infrastructure programs.

MS JONES: The other question for me is with regard to mining in Labrador.

We have been watching for years a lot of the mineral going outside of Labrador,

especially railed down to Quebec and shipped through Sept-Iles. We know that the

future, the next 100 years of mining in Labrador is going to require a

tremendous amount of infrastructure, whether that be in railways and ports or

whatever the case may be. We already know there have been discussions and

agreements being reached and negotiated between the mining companies, the

federal government, and the Government of Quebec to build additional rail

capacity and port capacity in Sept-Iles.

My question is: Has the Province looked at doing any kind of a feasibility

study on rail and port to support the mining industry in our own Province?

I do not know if it is feasible to do or not, but I certainly think it

warrants being looked at. We are not looking at twenty years of activity. We are

looking at 100 years of activity. I just wanted to know where you were on that.

MR. KENNEDY: At this point it is all somewhat preliminary because a lot

of these companies are in discussions and in feasibility. None of them, in my

discussions, have raised the prospect and I have basically met with all of the

major players at this point. None of them have raised this issue of a railway

across Labrador, for example, to Happy Valley-Goose Bay.

Is that correct, Dave? Has there been any discussion of that from the mines?

MR. LIVERMAN: Infrastructure is a concern for any development, for sure.

Under the previous year's Budget, there was a government-commissioned report on

infrastructure addressing specifically railway and port needs. That is available

from the department. It is too big to put on the Web site in its entirety, but

the executive

summary is there. That is certainly a useful report to inform

government as well as companies developing in the area.

MS JONES: Can I get a copy of that report, Dave?

MR. LIVERMAN: Yes, certainly. We will provide that.

MS JONES: Thank you.

What requests do you have for new mines in the Province right now? How many

are you currently negotiating with for new permits for development of mines?

MR. KENNEDY: The ones that are in development right now we have our

mines that are operating are the fluorspar mine in St. Lawrence, we are

looking at Tata Steel and Alderon, and there is a peat development in Gander

Bay. Those are the ones that are in development.

Then we have the ongoing feasibility studies and the companies we have talked

about in Labrador West. We have the question of whether or not Voisey's Bay will

get into underground mining in Voisey's Bay. Secondly, then, we have the

Paladin, the potential uranium development is it around Rigolet or Makkovik

and Postville area?

MS JONES: Postville and Rigolet, yes.

MR. KENNEDY: Yes. Those are the ones that I am aware of. Dave is there

anything else?

MR. LIVERMAN: No, that is accurate. The sort of mark for us is when they

have passed environmental assessment and are submitting actual development

closure and rehabilitation plans for approval. Currently, the mines which are at

that stage are Tata Steel Minerals Canada, which are entering into construction,

and Newspar which is the St. Lawrence fluorspar mine. The other companies which

are moving towards that have not reached the stage of formally permitting the

mine itself.

MR. KENNEDY: The other company I forgot to mention, I have met with and

had discussions with Grand River Ironsands out of Happy Valley-Goose Bay.

MS JONES: I just had a question there on them. Where are they anyway? Are

they in any kind of a permitting or a development phase yet? Are they still

doing exploration? What is the story with them?

MR. KENNEDY: I met with a lot of these companies early in my tenure as

minister. I met with Grand River within the last month or two. They outlined

their plans at that point, but part of the issue was the access to power. In

terms of the actual status

MR. LIVERMAN: Probably the best source of where they are would be their

Web site right now. They have not moved into making a formal development

decision. They are doing a fair amount of exploration which is planned this year

which we know about through permitting. I believe they have extracted a bulk

sample for some test smelting. They have not moved to formally permitting, and

they have not moved to environmental assessment yet either.

MS JONES: Okay. Those are all the questions.

CHAIR: Okay, thank you Ms Jones.

I move to Ms Michael.

MS MICHAEL: Yes, just a couple. Ms Jones has covered almost everything

that I had down in my notes so I will not go over it again; we have the answers

that we need. I just would like to go back to two points in particular. One has

to do with the notion of the railway, access from the west to Happy Valley-Goose

Bay. I was not surprised because you said it but surprised by the fact that

companies that you have met with, Minister, have not brought up at the issue.

At the joint councils meeting in Labrador that took place in Happy

Valley-Goose Bay, and the Official Opposition was there as well, there was a guy

from a small company. I am trying to remember which company it was and Yvonne

might remember who was actually doing some strong lobbying around the railway

issue. He came and sat at our table for example for one whole lunch. I am sure

he must have spoken to the Official Opposition as well, I do not know. He was

certainly pushing the whole notion of the railway to Happy Valley-Goose Bay. I

do not know if they met with them either.

MR. KENNEDY: There is an issue with, for example, the Labrador Iron Mines

from Schefferville to Lab West, because my understanding is that railway is

owned by the Aboriginal groups.

MS MICHAEL: Right.

MR. KENNEDY: So there are issues of capacity on that part of the line.

There is no question about that. I cannot remember if Tata raised that. There

are issues of capacity, but none of these companies and I think Dave has been

present at most of the meetings. I do not remember, Ms Michael, of anyone

raising the issue, of any company raising the issue of building a railway to

Happy Valley-Goose Bay. All of the companies have raised issues of access to

power.

Dave, are you aware of anyone having raised that issue?

MR. LIVERMAN: Nobody we know has formally raised that issue with us. The

report I referenced earlier does look at sort of very much order of magnitude

costs for rail options moving to the Labrador coast, and does look at port

issues on the Labrador coast as well where the issue of it being ice-free is

very important for year-round shipping. At this point, none of the companies who

have talked to us have looked at the avenue of coming east from Western

Labrador.

MS MICHAEL: Would it be your position that you would wait until a company

presented that idea? Would you be open to looking at feasibility without a

company approaching or would that be something you would wait for a company to

bring to the table to actually look at the feasibility?

MR. KENNEDY: Well, the problem at this point is that we have companies

now, I do believe that a lot of these companies are very serious about their

development. I do not think these are frivolous discussions at all, but until

such time as they come forward with their full proposal, then we will know who

is doing what in terms of what capacity we have, and we will certainly look at

all options. There have been concerns raised about capacity on the line, but as

I have indicated, no one has raised it at this point going the other way

officially with me, in any event.

MS MICHAEL: Right, thank you.

Then, just one more point this is not so much a question; this is just to

add my voice to the discussion around the royalties. Because I did raise the

issue of mining royalties in the Estimates with the Minister of Finance. One of

the things he did acknowledge, of course and this is in the country, too, not

just here in Newfoundland and Labrador there is a great difference between the

royalties that we get from oil companies and the royalties that we get from the

mining industry.

As the Minister of Finance pointed out, one of the reasons for that has been

the concession to the mining companies because of the jobs they create. I am

assuming the Minister of Finance is talking with you as well and this is part of

the discussion, that that argument gets lost when you look at concentrate going

out and not pellets.

MR. KENNEDY: There is no question that the issue of royalties, compared

to what we receive from oil, is an issue. It is one we will certainly be

engaging in but there is going to have to be a lot of discussions with these

companies because if they all proceed then there is the issue of power, there is

the issues of other infrastructure and there will be discussions on the issues

of royalties.

What the general approach seems to be from these companies is that it has to

be economically feasible in order for them to proceed. So you have to balance in

terms of getting the maximum value that we can for the Province ensuring that we

benefit from our natural resources. How do you get the best benefits? We will be

looking at everything, Ms Michael.

MS MICHAEL: Minister, is that discussion happening among your provincial

and federal counterparts across the country? Because it is not just here that

the mining royalties are low. We are in the ballpark. We are in the national

ballpark with regard to our royalties. Are the ministers from the various

jurisdictions in joint meetings discussing that at all?

MR. KENNEDY: One of the interesting aspects and we have energy

meetings. I have had an energy meeting. I have been here approximately six

months now. I have had an Atlantic Province's energy meeting, and there is the

FPT as scheduled. There has been an FPT agriculture meeting. In terms of the

mining, I do not think there has been one, Dave, in the last couple of years of

FPT meetings.

MR. LIVERMAN: There is the annual FPT Energy and Mines Ministers'

meeting, but the more specific mines-related ministerial level meetings, that

tends to be an annual event. They are officials meetings.

With regard to the taxation issue, there is an officials working group which

involves every Province of the country, which I sit on, which examines taxation

and royalties.

MS MICHAEL: Okay.

Are these questions being raised in that subgroup as we are raising them

here?

MR. LIVERMAN: They are, and other provinces are examining them as well.

MS MICHAEL: Right.

MR. KENNEDY: I should point out also, is that Quebec has a very

aggressive policy in terms of their Plan Nord. They are actively seeking

companies and offering everything from power to other benefits. This is an issue

that we have to be competitive with. Unfortunately, we have a neighbouring

province that will certainly do what they can to get the business.

MS MICHAEL: I see; competition.

These are all my questions.

Thank you very much on the mining.

CHAIR: Thank you, Ms Michael.

Mr. Ball.

MR. BALL: Did you want to vote on this, on the mineral?

CHAIR: No, you can keep moving through.

MR. BALL: It will come down to almost some policy, I guess, on how we

develop the royalty regime versus the primary processing versus secondary

processing. I do understand the companies have to be viable before they can make

this kind of investment, but when you establish a royalty right now I think

the discussion would almost have to be inclusive of all the benefits that would

be required so that we can actually maximize the benefits. Because I think in

terms of grading and purity when you look at the Labrador West area, from what I

have been told, is that you see a big variance from one mine to another in terms

of what the percentage purity is of things like iron ore anyway.

One thing about the railway that I have heard is there seems to be some

discussion on the ability to loop which would mean they would add a whole lot of

capacity to the line, except we have some jurisdictional rights on one side

versus the other. I do not know how we would overcome that legality, but

obviously it is something that would enable us to add a lot of capacity to that

area if that option was available to us.

I would like to move on to 5.1.01, that is the Energy Policy. The big one is

the grants and subsidies.

MR. KENNEDY: I am sorry, we are moving to 5 ?

MR. BALL: I am sorry, 5.1.01.

MR. KENNEDY: Okay.

MR. BALL: That being the Energy Resources and Industrial Benefits

Management.

MR. KENNEDY: Okay.

MR. BALL: The big question would be the grants and subsidies. I

understand we had a budget last year of $2.6 million. This is being associated

with the New Dawn Agreement, I understand.

Could you give me some idea of where that is? Was it a condition of the New

Dawn Agreement that we actually had to transfer over the $40 million or could

government have actually managed it themselves? I understand that is gone to

Nalcor now.

MR. KENNEDY: This is the result of the agreement that related to the

Upper Churchill redress agreement, as I am sure a lot of people are aware. There

was the flooding of the traditional Innu burial grounds during the development

of the Upper Churchill. This agreement was signed between the Province, Nalcor,

the Innu Nation, Mushuau First Nation I guess that would be Natuashish and

the Sheshatshiu Innu First Nation.

There was a $2 million payment for 2011-2012, and that was the first payment,

with $39.9 million then representing the net present value of the future

financial responsibility for this settlement. There was money available this

year, so we transferred it to Nalcor to disperse the funds. You are right, it

could be done through the Province but where they are dealing with the Innu

Nation in various areas, it was provided to them for the payout. It would

essentially be a trust payment over twenty years.

MR. BALL: The key for me there was that it is net present value. I would

imagine there is going to be an annual transfer of funds based on this

agreement. Nalcor is responsible for that investment. What happens, for

instance, if that is How long is this agreement for?

MR. KENNEDY: This would be up to 2041.

MR. BALL: Okay.

There will be an annual transfer, I guess?

MR. KENNEDY: Yes.

MR. BALL: It seems to me, it is a little unusual. At the end of the day,

it stops with government anyway. Why you would actually take all the money and

put it simply because we had it, we could have set up our own trust with the

company. Why we would actually transfer all the money or write one cheque when

we could have done it and accepted all our responsibility to 2041 with that

agreement?

MR. BOWN: That particular portion, the Upper Churchill Redress portion of

the New Dawn Agreement required that the payments be made from Nalcor. It is the

government's responsibility, but the way it was done as an accounting function

is that it be done through Nalcor. It will be a payment of $2 million per year,

plus interest until 2041. After 2041, I believe it is a 5 per cent net profit

interest they take.

We made the payment this year through Nalcor. Because the funds were

available, it was decided financially it would be best to take the net present

value of that, put it in a trust fund for this year, and then have the payments

made from that fund for any subsequent year. That way you would not be drawing

down on the current budgets for each of those subsequent years until 2041.

MR. BALL: Okay.

The condition that Nalcor make the payments was at a request of the group,

you mean, or a request of government?

MR. BOWN: No, it was in the actual agreement itself.

MR. BALL: Okay.

What would happen if at some point, in terms of the net present value, the

money was not there? Who is responsible for that liability? Would it be Nalcor

or government?

MR. BOWN: The government has made the undertaking that should that amount

be insufficient as we approach 2041, that the government would top up that trust

fund.

MR. BALL: Okay.

Back to 5.1.02, Petroleum Development, Purchased Services, 06. We had

$62,000, we are at $62,000 this year, but we put an extra $40,000 into that. Can

we just have some idea of where that $40,000 was spent?

MR. KENNEDY: Sorry, I have lost you, Mr. Ball.

MR. BALL: Sorry, 5.1.02.

MR. KENNEDY: Okay, sorry.

MR. BALL: It is $40,000 extra in some Purchased Services.

MR. KENNEDY: Purchased Services, okay. Yes, I have these.

MR. BALL: Yes, that allocation, the extra $40,000, that went where?

MR. KENNEDY: Subhead 5.1.02.06, Purchased Services, the budget was

$62,000, went up to $102,000.

MR. BALL: Yes.

MR. KENNEDY: This dealt with the relocation of the core and geological

cuttings from a derelict building to a modern facility in St. John's. It was

necessary to avoid degradation of the cores.

MR. BALL: Okay.

That is pretty much it for me. I really do not have a whole lot except for

the Royalties and Benefits which would be under 5.1.04 no, that is fine, that

is okay.

I will ask the question: Last year we had the overall budget being $3.763

million and the total would be $3.1 million. That is a $600,000 difference, but

that is throughout the whole budget here, right?

MR. KENNEDY: Yes.

MR. BALL: It would be made up of professional services by the looks of

things here and transportation and communications; there are a number of things.

MR. KENNEDY: Yes, okay.

MR. BALL: I am okay with that. I do not know if this is the place but I

had some board member questions later. It will come more as we move into the

other like C-NLOPB and all that, I do not know where I would ask that.

MR. KENNEDY: Yes.

MR. BALL: Do you want to go through the line items?

MR. KENNEDY: Whatever way you want to handle it.

MR. BALL: Do you want to go through the line items and then I will ask

those questions, Yvonne? Lorraine, did you have any line item questions there?

MS MICHAEL: I have a couple, but Yvonne can go ahead if she wants

(inaudible).

MR. BALL: Is it line item, Yvonne?

MS JONES: No.

CHAIR: Okay, Ms Michael, you do the line items and then we will go back

to the generic conversation.

Ms Michael.

MS MICHAEL: Under 5.1.04.03, the budget was for $202,600, we under spent

by $80,000, and we are going up from the estimate by about $20,000 but still

below last year's budget. So, just some explanation of the variations that are

happening there in Transportation and Communications.

MR. KENNEDY: This related to the less than anticipated requirement for

travel expenditures and shipping fees to oil industry trade shows, as well as

less than anticipated out-of-Province travel with other interest holders in the

federal government. So that is what led to the lesser number, then this year it

has been added for funding to the various trade shows.

Charles, is that a fair assessment?

MR. BOWN: Yes.

MS MICHAEL: Okay, thank you very much.

Under 05, Professional Services, it was under spent last year by $353,000. In

general, what would be the professional services that would be required here,

and why would it have been so under spent last year?

MR. KENNEDY: It is just the delays in terms of getting professional

services contracts in place and receiving information of interest holders, that

affected the amount of work that was done through the year, so that resulted in

the lower than anticipated expenditure.

MS MICHAEL: Okay.

I am wondering: We had an issue over the years, as we all know, with regard

to the backlog regarding to the collection of royalties, have we caught up on

that now?

MR. BOWN: Yes, as I have reported here in previous Estimates and actually

as we cover every year in the Auditor General's report we report to the

Auditor General on this every year we have made great progress actually in

moving forward in our backlog.

I believe we said one of our biggest issues was recruitment and retention in

that particular division because, obviously, we are in the oil and gas

marketplace and we are losing our staff. We have caught up to 2004. We will have

2005 out shortly and by the end of this year, we will have 2006 and 2007 out. So

we are making great progress now with our full staff in place.

MS MICHAEL: That is good to hear. I thank you for repeating it again, but

I think it is good to have it on record where we are. That is great, thank you.

I appreciate that. It is good to know.

Under 5.1.05, Energy Initiatives, 05, Professional Services, we have gone

down by $500,000 this year. Just an explanation of that, please. Last year it

was $1,055,000, both budgeted and spent; this year it is down to $500,000.

MR. BOWN: This relates to the winding down of the initial funding that we

had under the Energy Plan. This is the remaining funds that we have available to

us. So you would see in all of these accounts now you have less money this year.

MS MICHAEL: Yes, I can see that.

That would not be the explanation, though, in 06, Purchased Services. What

was it that was a purchased service in 2011-2012 that is not this year? I guess

if I had gone back and looked I would find that out what that was for, but if

you could remind us.

MR. BOWN: That is funding that we had allocated under our Energy

Efficiency programs.

MS MICHAEL: All right.

There is no more money for the Energy Efficiency programs under this head?

MR. BOWN: That is correct. We had a number of small initiatives.

MS MICHAEL: Yes.

MR. BOWN: This would not be the broader ones. These would be small,

targeted initiatives and we do not have those funded for this year.

MS MICHAEL: Okay, thank you.

That is all, Mr. Chair.

CHAIR: Thank you, Ms Michael.

Ms Jones, back to you now for some general discussion and questions.

MS JONES: Yes, just a couple of questions on this section. One is with

regard to the acquisitions or the equity position of the Province and the 5 per

cent share that Nalcor bought in the oil industry. How much have we invested in

that 5 per cent right now?

MR. BOWN: What you are talking about is the 4.9 per cent we have in

Hebron, the 5 per cent we have in White Rose, and the 10 per cent we have in

Hibernia South.

MS JONES: Yes.

MR. BOWN: There are two classes of expenditures there, so one would have

been the acquisition costs, and then we have our ongoing capital and operating.

I do not have a detailed breakdown for the ongoing capital and operating. That

will come out in Nalcor's annual report, which is due out very soon. Our initial

investments were in 2008 and 2009 for Hebron and White Rose. If I recall

correctly, the Hebron cost was $110 million and our cost for White Rose was

approximately $30 million.

MS JONES: What about Hibernia South?

MR. BOWN: Hibernia South, we back-ended into that one before the project

started, so actually we went in there

MS JONES: At the beginning?

MR. BOWN: We are responsible now for the costs going forward,

whereas the

other ones had already made investments.

MS JONES: Okay.

I have a question with regard to the Old Harry project; there was a lot of

talk about it about a year ago. I am just wondering: What is happening with it

now? Has anything progressed in terms of who has ownership, what percentage,

where that all is?

MR. KENNEDY: The Province has retained an expert to look at the legal

issues, because it is essentially an international law issue in terms of the

boundary dispute. There are a number of different ways of measuring in

international law how the boundary should be set, and that work is ongoing.

There have been environmental concerns raised in the Old Harry project,

primarily coming from a number of groups in Nova Scotia and Quebec, which has

affected any development in that area, and we have one company operating out of

our Province which has been caught up in that, and the issue has also been

before the C-NLOPB.

MS JONES: Okay.

Any possible timelines, do you think, on settling any of that?

MR. KENNEDY: Well, there is a process set up I guess it would be under

the Atlantic Accord, similar to the process that was utilized a number of years

ago when Nova Scotia and Newfoundland and Labrador had the boundary dispute,

where a board was appointed and a decision was rendered, presentations were

made. If we get to that stage that is the route it would go.

MS JONES: Okay.

I think that is it

MR. BALL: I have a couple of questions, Mr. Chair.

CHAIR: Mr. Ball.

MR. BALL: Okay, thank you.

Parsons Pond any plans to go back to Parsons Pond now in the immediate

future, or what have we learned from that experience?

MR. BOWN: The initial three-well program that was planned there, Nalcor

drilled two of those wells so one would have been in the northern portion of

the two blocks that they purchased, and one in the south. They made a

determination based on the known geology of those two holes that it really was

not necessary to do the third hole, because it would have told them what they

already knew. Obviously, they did find some gas when they were there. It is very

tight shale formations. They are continuing to do some geoscience analysis of

those drilling cores, and they have not made the determination yet on when the

next step is going to be.

MR. BALL: How long do you think the process will take before you make

that determination?

MR. BOWN: That determination will be made by Nalcor. Also, I believe they

have three or four partners with them in that project so it will be made at the

partnership level.

MR. BALL: I said I was going to ask a question about C-NLOPB. It was more

about our board member. We have had that position now vacant for quite some

time. It is probably not even Budget related so if the Chair wants me to move

on, I will.

We do not have a board member there right now and we all know sometime this

fall we will be looking for a new Chair for that board. I am just wondering: Are

there any plans to appoint the board member?

MR. KENNEDY: I know the representations have been made to the federal

government from the Province that we are now currently into the six-month

process under the Accord act whereby the Chair, prior to the expiration of the

Chair's term which I think will be November of this year, there has to be a

process engaged in for the appointment of the Chair. It can either be done

through agreement with the Province and the federal government, or there can be

a process followed where I do not know if I would call it a competition

process, but there is certainly a processed outlined in the act.

That same process does not exist for the Vice-Chair, and essentially there

has to be, in my understanding, a federal and provincial agreement. There is no

resolution of that matter as we now speak.

MR. BALL: I will just move on then.

When we did the 2007 Energy Plan, obviously that was quite the celebration

when you think about it, being some of the first in the country to have an

Energy Plan as comprehensive as that. To date, I still do not understand, we do

not have a natural gas royalty regime in place. There seems to be some

significant work being done in BC and other provinces on this.

Is there any reason why we struggle with developing natural gas in this

Province?

MR. KENNEDY: The answer at this stage is quite simple. What has happened

in the United States with the shale gas revolution, which took place around 2008

or 2009, has driven the price of natural gas down significantly. In the last few

weeks, natural gas was selling for less than $2 per million BTU.

What we are told by the companies I have met with who have ownership interest

in the natural gas offshore is that it is not economically feasible to develop

the natural gas at this point and they would require a minimum $10 to $12 range

per million BTU in order to develop it. At this stage, we have no interest being

expressed by any of these companies to develop the natural gas even though we

have approximately I think it is 10 trillion or 11 trillion cubic feet

OFFICIAL: Tcf.

MR. KENNEDY: Yes, discovered with approximately another sixty tcf. That

is the reason at this stage, Mr. Ball, there is just no interest in developing

the natural gas offshore.

MR. BOWN: Can I add to that?

MR. KENNEDY: Go ahead Charles.

MR. BOWN: We did provide the oil companies with a natural gas royalty

framework. They are aware of what our royalty approach would be. There is

sufficient information to them to do their own project economics. They have not

come back to us, as the minister has said, with any proposals to develop gas.

They have sufficient information on which to do their project economics.

MR. BALL: The federal government's share in Hibernia has been the subject

of a number of letters during provincial campaigns and discussions with Prime

Ministers over the years. Where are we with that now? Is this something that we

are actively pursuing? I know at one time we were willing to give fair market

value of that. Is that still the position of government?

MR. KENNEDY: The 8.5 per cent equity stake is certainly something that

I do not know if you would call it equity stake. The 8.5 per cent that the

federal government owns in Hibernia is still an issue up for discussion. There

have been discussions between the Province and the federal government with our

position being that the federal government has gotten back more than its share

of their investment. The intent of the Atlantic Accord was that the Province

would be the principal beneficiary of our natural resources. On that basis we

have approached the federal government, but to this point there has been no

resolution.

MR. BALL: Okay.

If we can, I know we pretty much have thirty minutes left here right now, and

probably the biggest subject on most of our minds will be some questions around

Muskrat Falls. Are we okay to move into that right now?

CHAIR: I will go back to Ms Michael, if she has some questions leading up

to that, and then we can sort of divide it between the two groups, if that is

fine.

MS MICHAEL: Yes, I do. Thank you very much.

CHAIR: Okay, Ms Michael, we will go back to you.

MS MICHAEL: Just coming back to the offshore safety authority. I am just

interested, Minister, are there any discussions going on with the federal

government with regard to the independent offshore safety authority that was

recommended by Wells and which the provincial government has said that they

back? I know you continue to say that, and I am glad about that, but are there

any talks going on at all with the federal government?

MR. KENNEDY: As the Premier, I think, indicated when the report came down

- I do not know if she was the Premier at the time - we were fully supportive,

as a government, of the Wells recommendation. There have been discussions

ongoing.

Do you know, Charles, in terms of I will ask Charles to provide a further

update, but our position is still the same.

MR. BOWN: Yes, we continue at an official's level to have discussions

with the federal government. To provide some context for you, from the federal

government's perspective they operate in a number of jurisdictions. The National

Energy Board operates north of 60. They have the Nova Scotia Offshore Petroleum

Board as well, and now you have an emerging jurisdiction in Quebec.

The federal government is looking for a solution that obviously fits all the

jurisdictions. That is similar to other files we share with the federal

government. Their perspective is all of Canada, and other jurisdictions as well,

but we continue to have discussions with them.

MS MICHAEL: Right.

You probably cannot answer this question but I am going to ask it anyway. May

I assume that at least there is discussion going on? That there is openness in

the sense there is discussion going on around the possibility of an independent

offshore safety authority or authorities, whichever.

MR. KENNEDY: We are pushing for it.

MS MICHAEL: Okay.

MR. KENNEDY: Our position has not changed.

MS MICHAEL: Okay, thank you.

With regard to the Wells inquiry itself, how many of the recommendations in

the inquiry would be under the jurisdiction? I do not want in numbers, but give

me an idea of what would be the recommendations that would come under Natural

Resources, Minister, that is part of your file and that you are working on.

MR. BOWN: By and large, all the recommendations come under the

jurisdiction of the Offshore Petroleum Board.

MS MICHAEL: Right.

MR. BOWN: Because, again, the board is the single authority for the

co-management of the offshore.

MS MICHAEL: Right, I remember that. Most of them were directed that way.

MR. BOWN: Yes.

MS MICHAEL: Are there any discussions that happen between government and

the C-NLOPB or do you leave it to the representation on the board to bring

forward government's thinking?

MR. BOWN: We have regular briefings from the board on how they are moving

forward with the implementation of the recommendations, absolutely.

MS MICHAEL: Okay.

Well, I will not ask the next one. I will ask them instead of asking you. I

will not ask you how satisfied you are with where things are. I will not ask you

on that one.

With regard to the C-NLOPB and the issue around the audit, could you give us

an update? Again, you probably have no authority in this area, but do you have

an update on the whole issue around the auditing of the C-NLOPB and the refusal

to let the Auditor General look at their books?

MR. BOWN: Yes, we have kept in close contact with both Canada and with

the Offshore Petroleum Board on this partic