Manitoba Committee Hansard — 28 March 1989 (Education Committee, Sitting 9, 34th Legislature, 1st Session)

34-1-ed9

Manitoba — Debates (Hansard)

MG-8048 First Session - Thirty-Fourth legislature of the Legislative Assembly of Manitoba STANDING COMMITTEE on ECONOMIC DEVELOPMENT 37-38 Elizabeth 11 Chairman Mr. H. Pankratz Constituency of La Verendrye VOl. XXXVII No. 9 - 9 a.m., TUESDAY, MARCH 28, 1989 Printed by the Office of the Queens Printer, Province of Manitoba ISSN 07 13-9 969

MANITOBA LEGISLATIVE 4$S.EMBLY Thirty-Fourth Legislature Members, Constituencies and Political Affiliation NAM E ALCOCK, Reg ANGUS, John ASHTON, Steve BURR-=LL, Pllrker CARR,J.mes CARSTAIRS, Sharon CHARl-ES, Gwen CH-=EMA, Gulzar CHORNOPYSKI, W!lliam CONNERY, Edward Hon. COWAN, Jay CUM .. IIItGS, Glen, Hon. DERKACH, Leonard, Hoo. DOER, Gary DOWNEY, James Hon. DRIEDGER, Albert, Hon. DRIEDGER, Herold, L. DUCHARME, Gerald, Hoo. EDWARDS, Paul ENNS, Harry ERNST, Jim, Hon. EVANS, Laurie EVANS, Leonard FILM ON, Gary, Hon. FINDLAY, Glen Hon.

GAUDRY, Neil GILLESHAMMER, Harold GRAY, Avis HAMMOND, Gerrie HARAPIAK, Harry HARPER, Elijah HELWER, Edward R. HEMPHILL, Maureen KOZAK, Richard, J. LAM OUREUX, Kevin, M. MALOWAY, Jim MANDRAKE, Ed MANNESS, Clayton, Hon. McCRAE, James Hon. MINENKO, Mark MITCHELSON, Bonnie, Hon. NEUFELD, Harold, Hon. OLESON, Charlotte Hon. ORCHARD, Donald Hon. PANKRATZ, Helmut PATTERSON, Allan PENNER, Jack, Hon. PLOHMAN, John PRAZNIK, Darren ROCAN, Denis, Hon. ROC H, Gilles ROSE, Bob STORIE, Jerry TAYLOR, Harold URUSKI, Bill WASYLYCIA-LEIS, Judy YEQ, lva CO NSTITUE NCY Os borne St.

Norbert Thompson Swan River Fort Rouge River Heights Selkirk Kildonan Burrows Portage la Prairie Churchill Ste. Rose du Lac Roblin-Russell Concordia Arthur Emerson Niakwa Riel St. James Lakeside Charleswood Fort Garry Brandon East Tuxedo Virden St. Boniface Min nedosa Ellice Kirkfield Park The Pas Rupertsland Gimli Logan Transcona lnkster Elmwood Assiniboia Morris Brandon West Seven Oaks River East Rossmere Gladstone Pembina La Verendrye Radisson Rhineland Dauphin Lac du Bonnet Turtle Mountain Spri ngfield St. Vital Flin Flon Wolseley lnterlake St.

Johns Sturgeon Creek PARTY LIBERAL LIBERAL NDP PC LIBERAL LIBERAL LIBER AL LIBERAL LIBERAL PC NDP PC PC NDP PC PC LIBER AL PC LIBER AL PC PC LIBER AL NDP PC PC LIBER AL PC LIBER AL PC NDP NDP PC NDP LIBER AL LIBER AL NDP LIBERAL PC PC LIBER AL PC PC PC PC PC LIBER AL PC NDP PC PC LIB ERAL LIBERAL NDP LI BERAL NDP NDP LIBER AL

LEGISLATIVE ASSEMBLY OF MANITOBA THE STANDING COMMI TTEE ON ECONOMIC DEVELOPMENT Tuesday, March 28, 1989 TIME- 9 a.m. LOCATION - Winnipeg, Manitoba CHAIRMAN- Mr. Helmut Pankratz (la Verendrye) ATTENDANCE - 11 - QUORUM - 6 Members of the Committee present: Hon. Messrs. Manness, McCrae Messrs. Angus, Cowan, Enns, Gilleshamm er, Harper , Helwer , Lamou reux, Minenko, Pankratz, Plohman, Rose, Taylor APPEARING: Mr. Norm Brandson, Environment and Workplace Safety and Health Mr. Mike Bessey, Executive Council Mr.

Harry Harapiak, MLA for The Pas MATTERS UNDER DISCUSSION: Annual Report for Manfor Ltd., fiscal year ending December 31, 1987. Mr. Chairman: I call the committee to order at this time. I have a couple of resignations to deal with first. "I wish to resign from Eco nomic Development Committee effective March 23. Parker Burrell." Do we have a replacement? *

(0905) Mr. Edward Helwer (Gimli): Mr. Chairman, I would like to nominate Clayton Manness, the Member for Morris, to replace Parker Burrell. Mr. Chairman: Clayton Manness has been nominated. Agreed? (Agreed) Hon. Clayton Manness (Minister of Finance): Thank you. I appreciate your support. Mr. Chai rman: "I wish to resign from Economic Development March 23, 1989. Jim Ernst, Charleswood." Mr. Helwer: I just appoint Jim McCrae, the Member for Brandon East, to fill that position. Mr. Chairman: Mr. McCrae has been nominated. Committee agree? Mr. Helwer: Brandon West, sorry. Mr.

Chairman: Committee agree? (Agreed) "I wish to resign from Economic Deve lopment Committee. Elijah Harper." Do we have a nomination? 141 Mr. Jay Cowan (Churchill): I would nominate John Plohman. Mr. Chairman: Mr. Cowan nominates Mr. Plohman. Committee agree? (Agreed) Okay , if there are no more resignations or nominations, I would like to ask the Minister to make a few comments. Mr. Manness: Mr. Chairman, I really only want to correct one matter on the-this is a draft?-draft of the proceedings from Thursday last. lt is ori page 27 when an Honourable Member asked Mr.

Bruce why do you want to be on the board of directors, and Mr. Bruce responded we were not invited and it is written a different way. lt is written as "bite it." His response is we were not invited, on page 23. An Honourable Member: What page? Mr. Manness: Twenty-three. Mr. John Angus (St. Norbert): I just want to clarify the Minister's intent. Is it a typo on a word or were in fact you invited? Mr. Manness: Well, I do not know what "bite it" would have to do with the request that we be invited to sit on the board of directors.

I obviously believe that the individual who was listening to the transcription obviously picked up the wrong word completely. Mr. Chairman: With that, Mr. Minister, are we prepared to let the committee Members fire away with questions? Mr. Manness: Yes, by all means, Mr. Chairman. Mr. Chairman: Okay, committee Members, have you got any questions or are we prepared to pass? Mr. Angus: Mr.

Chairperson, I might suggest that as we are still looking at the financial implications then there are a number of other sections vis-a-vis the environment, vis-a-vis the training and the upgrading of the personnel that is currently employed, that we move on to different sections reserving the right to come back to some of the financial questions a little later . If the committee is of a mind, unless my honourable colleagues from the third Party have specific questions on the financial matters they want to ask at this time, I am prepared to relinquish the floor to them. Mr. Chairman: Mr.

Minister, do yo u have any problems with the request of Mr. Angus? Mr. Manness: Not at all, Mr. Chairman. Mr. Chairman: Okay. Then we may proceed.

Tuesday, March 28, 1989 *

(0910) Mr. Angus: Mr. Chair person, I would like to move into the area of the environmental cont roL The Min ister in dicated that the special status that Manfor, in relation to environ mental concerns, is going to be changed and I believe he ind icated that they were now going to be pa rt of The Environment Act of the Province of Man itoba. I was wondering if he could just elaborate on that direction : why that has happened, and what it in fact means in sort of real terms. Mr. Manness: Mr. Chairman, I will ask Mr.

Norm Brand son to join us at the table from the Department of the Envir onmen t, if we are moving into some environmental questions. The general response to the question I will provide firstly though and that is tha t it is my understanding that by way of Order-in-Council exemption was provided to the pulp and paper indus try within the Province of Man itoba from the regula tions, many of the environmental regulations, particularly in the area of water discharge. Mr. Bessey, in going through the presentation last Thursday, ind icated that the Government was going to remove that exemption . Mr.

Norm Brandson (Enviro nment and Workplace Safet y an d Health): Tha t is correct. There is a regulation under the previous Clean Environment Act and now rolled over to the existing Environment Act that exempts the pulp and paper industry for discharges to water. That regulation was first passed back in 1975. Quite frank ly, I am not sure that there was a necessity ever to have such a regulation because liquid effluents from the pulp and paper ind ustry are regulated under the federal Fisheries Act.

In other words, that is a legitima te jurisdiction that exists regardless of whether or not there is any provincial regulation in place that governs liquid effluent from pulp and paper mills so that the only jurisd iction the province could exercise with respect to liquid effluents is to either impose additional or more stringent conditi ons than those that exist in the federal regulation. Mr. Harold Taylor (Wolseley): Yes, I am interested to see what the official is noting on that given that the federal Government has fully delegated its authority in the fisheries area to the Province of Man itoba.

Does that, therefore, say that it is really a case of there is no pol icing of this ma tter and tha t the federal Government is not active in fisheries in Manitoba and it is solely a provincial responsibi lity and has been so for years. So who is looking after this discharge then? Mr. Brandson: That is actually incorrect. The federal Govern ment has deleg ated some aspects of enforcement of the regulations under the Fisheries Act to the pr ovi nce. Other aspec ts, it has retained jurisd iction.

The example of liquid effluents from pulp and paper mills is an example of a juris diction that the federal Government has mai ntained and monit ors and cont inues to enforce as they see fit. lt has never been delegated to the Province of Man itoba. 142 Mr. Taylor: Well, I would like to point out to Mr.

Brands on then that there seems to be a difference of opin ion between his dep artment and tha t of the Department of Natural Resou rces because, at hearings that I conducted on behalf of the City of Winni peg in the summer of 1985, officials of that department made that statement, and it is in the public record of the city. There are other matters that we have to get into today, but I would like an undertaking then, if we seem to have an impasse this morn ing, to find out who is actually carrying out this responsibi lity because I have als o heard the concu rring comment from federal Fisheries.

I would like to know if the regulations , the federal regulations, are being enforced and, if so, by whom . If Mr. Brandson would give us an undertaking to bring that back either to the next meeting of this group or subs equent to that, I wou ld very much appr eciate it. Mr. Manness: Before Mr. Brandson answers I am sure, hopefully, that the department will bring back some greater understan ding associated with the question. However, I point out to the comm ittee, Mr. Chairman, that what Mr. Taylor is asking in some respects, in my view, is a moot point because we are moving on.

We are going to remove the exemptions so that the province has jurisd iction within those areas from now forward. Now what is happening up to this point in time, yes, hopefully Mr. Brands on will be able to provide that. I will ask him whether or not he will be able to. •

(0915) Mr. Brandson: I certainly can come back to the committee with additional information . For clarification, however, my assu mption would be that the Department of Natural Resources was ref erring to those portions of the Fisheries Act that are admin istered by the federal Department of Fisheries.

The Fisheries Act is somewhat com pl icated in th at the federal Fisheries people themselves have delegated part of that act to the federal Department of Environ ment, and in turn there is an inter-relationsh ip between the federal and provincial Departments of Environment with respect to delegation or non-delegation of those parts of the Fisheries Act which have been delegated to the federal Department of Environment.

So I think that may be where some confusion may arise with the Natural Resources people, ind icating I think quite properly that the federal Department of Fisheries' aspects of the federal Fis heries regulations have, in deed, been delegated to the Provi nce of Man itoba. Not all of the parts of the Fisheries Act that have been delegated to the federal Department of Environ ment, however, have been so delegated to the Province of Man itoba. Mr. Ta ylor: I appr eciate tha t cl arifi cation , Mr. Chai rperson. I have questions for Mr.

Brandson about the pote ntial future und ertak ings of the newly const ituted Manfor. The situation is that today we have an ind ustrial process which takes advantage of the inherent nature of the type of fibre found in the slow

Tuesday, March 28, 1989 growth trees that are prevalent in our part of the world. I am referring to the high strength brown kraft paper that is produced out of that plant. Because it is kraft paper, it has less poll ution coming from the ind ustrial process than from the process that we were going to be looking at, which is a bleached paper process.

Now, in that we are going to see, I gather, a conversion of this mill from a one product kraft to a one product fine paper, we are going to see a very major change in the make-up of the plant, and we are going to see a very major change in the indus trial pollutants that will be produced by that plant. My questio ning is going to be on the pollutants themselves. For example, when one goes into a white paper, the bleaching process that is employed is called bleaching, but in effect what it is, it is separation of white and brown fibres.

The leftover brown fibres which give our brown kraft paper its natural colour are going to be produced at the bottom of a vat in the form of a sludge. The disposal of this sludge is the chroni c bug bear of fine paper mills. The solutions unfortuna tely are not very satisfactory in the world and, in particu lar, the North American record is very sad.

What I want to know is with this conversion away from the more natural product to something that is more highly refined, what are the intentions of the corporation with regard to dealing with this very hard to handle indust rial pollutant, i.e., the brown sludge produced? Mr. Manness: Mr. Chairman, I will ask Mr. Brandson to give a fuller response, but again I remind Members of the comm ittee, or at least I point out to Members of the committee that the Government before us had to look at the product that was being produced in the existing mill.

Today that product commands on the marketpla ce the return of $670 a long tonne. Mr. MacDonald is right. lt is long growing; it is a very strong fibred product. * (0920 ) Mr. Taylor: A point of order, who is Mr. MacDonald? Mr. Manness: I am sorry, I am sorry, my apology, Mr. Taylor. Mr. Taylor: The record should be corrected. Mr. Manness: Certain ly it should. My apology, $670 a long tonne- An Honourable Member: Ronald McDona ld. An Honourable Mem ber: Well, there is a resemblance, right? Mr. Manness: Is ther e? I do not think so. Now you have taken my train of thought completely, Mr. Taylor.

Anyways , I point out $670 a long tonne with markets that were- I would not want to be so unkind as to say diminish ing but certainly not increasing, a product though recog ni zed as being a good pr oduct, unquestio nably. 143 What Governments have to decide, ourselves and the preceding Government, is whether or not to, through the processes that exist in the indus try at this time plus one's new technologies that I think are coming which we will speak to-w hich I will ask Mr. Brandson and Mr.

Bessey to speak to in due course-w hich minimi ze the pollutants, the net result being a product that will draw from the marketpla ce a value of $970 a long tonne, so an increase roughly of almost 50 percent in value added. Now, that in itself is imp ortant but it certainly does not have to be the final consideration. But when one looks on the negative side and says , well, what is the sensitivity around unbleached kraft if there is again another downturn, and where does it find its market niche?

As I have shown in the slide the other day, a matter of fact in the package of handout, I think it was the third page, sensitivity to SPK price, one can see very quickly that if the price of this unb leached kraft drops $15 0 a tonne, for instance, which could easily happen, all of a sudden you have a $25 million loss associated with the existing plant. The argument can be made, well, why do we not build in all the new productivity into the plant and still work in this product?

I guess someone can make that argument, but again when one looks at the marketplace and all the best advice that we have is that you sti ll put at risk that investment, because it is a market at this point and forecasted beyond this point which is not growing at all in any respect. Now that does not mean 10 years from now it may not be returning into some type of interest. At that time, of course, you still have a facility that can switch back to it, if necessary.

So that was the basis on which I guess the Government decided that the potential and the best guarantee of the activity in The Pas was to see somebody come in and provide for development that would cause the conversion over to a bleached mill. If there is a greater response wanted, I will ask Mr. Brandson to provide for that. Mr. Taylor : Mr. Chairperson, the Minister has answered the question from an economic viewpoint and nothing wrong with that.

In fact, I think it puts some interesting considerations on the table, but I find it interesting to note that while the market for kraft overall is growing, neither are there, from what I understand, new kraft pla nts of any su bstantial size or incr ease, kraft production worldwide of any incr eased size out of existing plants on the drawing tables. But the situation for fine kraft paper is something quite different.

I do not know if the Mini ster was aware of the plans for inc reased production of kraft paper on a worldwide basis which says that in stead of accepting the steady but not fast growth context of producing a product like SPK at The Pas we are ins tead going to be moving into a very high competition market, a market that has had its ups and downs, will likely have its ups and downs because the cyclical factor of fine papers on a multigrade basis is something that has been around for a long, long time. We had real downturns in the early'80s and we are seeing now a more optimi stic market.

As a result of that more optimi stic market and a need for plant

Tuesda y, March 28, 19 89 modernizat ion at older plants around the world, we are seeing significant hundreds of mil lions of dollars going into plant impr ovement and plant expansion for this area of production. I am wondering what factoring that had in the thinking of the decision to go ahead with this very major conversion, because once a conversion is made, certainly technically it is possible to convert the plant back, but it is not like flipping a switch. The conversion back costs, in relative terms in future years, will be as great as the conversion to the fine paper context. *

(0925) Mr. Manness: Mr. Chairman, on that poi nt, first I would point out to Mr. Taylor it is my understanding that the cost of switc hing back and, indeed, if it is economic to do so, is very min imal. lt is not a major cost to run unbleached kraft ag ain. There is actually very little in the way of capital costs. Let me point out for the record, there was not a prior condition put on by the Government in Manitoba. We did not say to potential bidders we are only interested in dealing with you if you consider a conversion. That was not the case at all.

As a matter of fact, we would have just loved to have had a proposal that would have been centred around expansion of an unb leached kraft faci lity, even though my argument sti ll stan ds. You still get even better white paper from that slow growing long fibre. You still get better white paper and the best, the premium white papers, will come from our northern softwoods. There is no argument. Nevertheless, I think the Government of the Day would love to have had somebody come forward with a proposal sayi ng here is what we pla n to do and not converting. We never had that.

So we did not make it as a prior condition that a potential purchaser wanted to come and show an interest and leading to some type of proposal. There was absolutely no prior con di tion tha t precluded them from building tha t proposal around an unbleached kraft mill.

I think the final point we would like to make is that still the sensitivity around the lower quality product, i.e., the un bleached kraft, there is much greater sensitivity around there because, of course, if the product drops in value or if it increases in value, all of a sudden you have substitutable s, in the area of plastics particula rly, that come in very quickly. For the life of me, Mr. Chairman, we surveyed the whole industry and nobody is investing capital in this type of facility. In ternational Paper no w, who was one of our competitors by the way, came up and looked at the facility.

We thought maybe they might be interested in putting in a proposal that would give them greater capacity in the area of unb leached kraft. Albeit they came in on it late, showed no desire whatsoever, and they are the big players in that brown paper bag indus try. So, from our viewpoi nt, we did not see where anybody was prepared to direct additional capital into that particular niche in the market. Secondly, the competitors that were there are not expanding in their own facility, let alone wishing, at least from our viewpoint were not wish ing to expand in Man itoba. 144 So, Mr.

Chair man, from our point of view, at this point in time, we had little alternative. Yet we are mindful and we ask the question, particularly of Repap and other potential buyers, if indeed it looks like, through environmental concerns, that society wants to go back to unb leached brown paper, will this facility, will it cost you much to convert over? They said no, it will not. As a matter of fact, it is a small change in the process. So it was on that basis that we felt it was the best move under the circums tanc es at this time. *

(0930) Mr. Taylor: Mr. Chai rperson, my line of questioning has two motivations: one, the environmental concerns, of which I am critic for our Party; the other being the sta bility of jobs. The Min ister has repeatedly made comment about growth. One of the problems with gr owth in the paper ind ustry are the periodic downturns that it takes and the downturns can exist for a numb er of years, and the downtu rns can say not only will there be no growth but the probabi lity is there might be layoffs.

With that sort of a context, I would suggest to the Min ister that the production of a product like SPK, which is 25 percent stronger than any other brown paper, industrial paper, available on the world market; and, two, given the environmental con text of the desirabil ity of paper products as opposed to plastic products and hence the use of pla stic bagg ing for various indu strial packaging is no longer as acceptable as it once was. Even in the last year we see changes and the fact is that firms, in fact large scale firms, are saying, "We are using environmentally safe products.

We produce them environmentally safe and we package them in an environ mentally safe fashion." Should it not have been a consideration in evaluating this? lt is one thing to say there might be some new jobs, it is another thing to say are those same jobs going to be there in five years because of the circumstan ces I just outlined. Mr. Manness: Mr. Chairman, there is no doubt one can build various scenarios going forward.

One could say this might happen, that might happen, the next thing may happen, and at this point in time one attaches probabil ities to those various alternatives and forecasts and one has to make a decision on th ose bases. I do know that right today there is a greater concern coming forward with respect to plastics. I also know that our landfills today are for the most part filling up more so because of paper being buried four feet or five feet under the ground. lt is not deteriorating or-w hat is a better word?-d ecomposing quickly at all and so that is a problem that we have also.

I do not pretend to have the answer to this, but I am saying that I was convinc ed and Government was convinced that given the state of circumstan ces, the circums tan ces that we had, anybody that was going to put an investment there to guarantee the jobs that are now in place, to guarantee those jobs, because the only way of guaranteeing the jobs that presently exist was for Government to continue to be prepared in certain years to direct tens of millions of dollars in

Tuesday, March 28, 1989 support of the existing plant and the existing product. The only way that Government could safeguard itself from that potential draw was to see come forward an investment for sign ificant amounts of money.

Now, all that we asked was that any company that was going to consider investing that money, at this point towards conversion in the bleached area, that they did not have their capital locked in so that it could not be converted back at a minim al cost to once again not calling upon blea ching agents if indeed the market and society-and this is the key-and society said that it wanted and was prepared to pay the premium associated with brown paper agai n. So I think we asked those questions, Mr. Taylor, in all honesty.

We asked those questions because they were important to us also, and other than sayi ng, no, we are not going to deal with you unless you are prepared to stay with the product, unless you are not prepared to bring in bleaching agents, I do not know what other alternative we had. Mr. Taylor: Mr. Chairp erson, the Min ister has referred a couple of times to the after-the-fact convertibili ty back to unb leached kraft production.

I am pleased to hear that he has asked that type of question and has gained that sort of assurance, because the Li berals will be watching this when the pla ns are annou nced to ensure that that convertibili ty back will be inherent in the construc tion plans, so that we do have that ease of production change because it is something that is not in those plans-w hen the changes are made, pieces of equipment are brought out and production line lineups. In other words, the align ment of the various pieces of equipment is physic ally changed.

If this can be done in this major plant change then I think that is all to the good. lt is to Manitoba's advantage and we will be looking for it to come forward as a fact. I might just point out before I pose my question to the Min ister that the problem in the dump s around the countr y is not paper because paper will biodegrade unless it has been actually treated with plastic or something like that. lt biodegrades and tha t is the beauty of paper and cardboard products. The prob lem is overpackaging and, in particul ar, plastics. That is just a note to the Minis ter.

The question that I have on the jobs aspect-tha t will be the part A and there will be a part B on the environment-i s the assurance of the job retention in the existing context, because I would like to take, pardon the expression, a more conservative appr oach, and say what can be retained with some sort of assurance in the five- to ten-year time frame of existing jobs in The Pas and in the cutting areas out some distance therefrom.

The other is, as I raised the point in my earlier question and have not yet had an answer, how will the brown sludge that will be produced in the bleached paper context be dealt with? I am looking for some sort of answers today, and I hope that will lead into a line of questions on this matter. Mr. Manness: Mr. Chairman, as far as the brown sludge, I will ask Mr. Bessey or Mr. Brandson to deal with that more specifically. 145 As far as the guarantee of jobs, what was patently obvious, Mr.

Chairman and Mem bers of the commi ttee, the only guarantee of the jobs was that firstly somebody in some company had to come forward and see some economies associated with producing a product that allowed them to profit. Those were the only guarantees of the job. There were none other. I think Government and Governments over a series of years proved that they could not guarantee those jobs without a massive direction of capital and, again, under the phi losophy that publi c ownership still can work.

So the only guarantees of the job were to enter into an agreement, an agreement of divestitur e with the infusion of millions and millions of dollars. That is the guarantee of jobs in the global sense, 850 existing today, to build to as our num bers show 1,250 within five years, permanent jobs. Of greater concern to us was how the transformation would take place, as many of those jobs toda y are part of the sawmill operation. We wanted to ensure to the extent that we could that those ind ividuals were given first oppor tun ity for retraining, upgrading, whatever, to find their way into the pulp and paper side.

We feel we have done everything humanly possible in the terms of a cont ract, in terms of the Charter of Rights as it exists in the nation today, to protect all of the jobs.

We cannot visualize a situation where we could have gone further to pro tect what is in place, a $20 million retraining program put up by Repap, over four or five years, tremendous recognition from their point of view that they have a role, but secondly, in wanting to keep peace in that area, labour peace within The Pas and district, that they have to do what they can to see the orderly transformation of jobs from the sawmill into the pulp and paper industry. So, Mr.

Taylor, I honestly believe that with respect to the guarantee, when we look at the process that we went through as the Government in divesting ourselves of Man for, that we have done almost everything that we could with regard to that. As far as the brown sludge, I turn it over to either Mr. Bessey or Mr. Brandson to give greater explanation. •

(0940) Mr. Mark Minenko (Seven Oaks): A point of order, Mr. Chairman. I would like to quickly ask the Min ister Mr. Chairman: Mr. Min enko, on a point of order? Mr. Minenko: Yes. Is he suggesting then that, if Repap wou ld not have purcha sed Manfor , would this Government have been prepared to wrap Manfor up? From his comments just mentioned, he would seem to suggest that. Mr. Manness: I will answer the question. Mr. Chairman: First of all, I would like to interrupt. I do not believe that is a poin t of order. A dispute over the facts is not a point of order.

Tuesda y, March 28, 19 89 Mr. Mike Bessey (Executive Council): I do not know the Honourable Members who were here for all of the presentation yesterday but, with respect to agents, the clearing, bleaching process may produce as by-product, in the last five years and especially in the last two to three years, the engineering techno logies in the pulp ind ustry for dealing with those, primarily organi cs, has increased somewhat dramatically. Where the bleaching pulp ind ustry traditionally used chlorine in its bl eaching process, they are now moving to substitution with chlorine dioxide.

The most up-to-date and modern substitution mill as of yet in Canada will probabl y be the Daisho wa mill, the Greenfiel d project in Al berta that was just annou nced, that Crestbrook was successful in bidding this year. The Alberta Government has annou nced that they are improving their guidelines and enforcing some of the things that we will be enforcing here.

The Daisho wa's engi neering capacit y, about the mos t modern in the world tod ay, is about 50 percent su bstit ution of chlorine dioxide for chlorine, in addition to extended delignification and oxygen delignificat ion, so that in the several stages of the bleaching process, in the several cooks, you remove the lignin as much as possible without producing any organ ics. Repap currently is engineering their technology for a 70 percent substitution factor chlorine dioxide for chlorine and will utili ze extended delignif ica tion and oxygen delignification.

That will make, in essence, up to the present time the most environmentally sensitiv e mill at The Pas in the world until someone finds a way to do a 100 percent substitution, which may be a couple of years away. On that poi nt, the technolo gy that will be brought into the province will be nothing short of the best technology that is available, period, and in fact will far exceed any existing pulp mill in Canada. The federal Government by and large does not even regulate some of the organics that are a by-prod uct and are now embarking upon that endeavour.

The prelimin ary kinds of tolerances that the federal Government will be talking about as acceptable will be as much as two ti mes higher than tha t which this new mill will be producing. So every effort possible has gone into making sure those consid erations were upfront and part of the negotiation strategy, and quite fran kly part of the development strategy of Repap, because they understand the long term benefits themselves of proceeding in that fashion. I will ask Mr. Brandson to pursue the question of brown sludge more specifically. Mr.

Brandson: Fi rst of all, I would like to preface my answer by sayi ng that we are getting into questions of some technic al complexity. There certainly will be a full licensing process applied to any alterations to the Manfor facility. That will be a detailed, publ ic, and I think quite thorough licensing process. So any answers I give this morning will be of a reasonably general nature without going into a lot of the techn ical details, given that there still is to apply this full licensing process under The Environment Act.

With respect to the question of sludge control, the present Manfor mill now produces sludge. This will not be a new situation in the switch over to a new process 146 at the mill. The principle that we are applying to the existing facility and will apply to any alterations to that facility is retention of that sludge. In other words, the sludge is not to be emitted into the environment. lt is to be retained, controlled and su bsequently disposed of in an acceptable manner.

So, although there may be an increase in the quanti ty of sludge, although that is not altogether certain that there will be an increase in quantit y, there still will be sludge and the principle to be appl ied will still be retention of that sludge, not emission. Mr. Chairman: Before we continue with our question s, I have another resignation to deal with. "I wish to resign from Economic Development imm ediately. Sharon Carstairs." Mr. Taylor: Mr. Chai rperson, I would like to nomi nate Mr. Lamoureux, the Member for lnkster. Mr. Chairman: Mr. Lam oureux has been nomi nated, comm ittee agree? (agreed) Mr.

Taylor: Yes, the point is that with this proposed type of paper production there will be a massive inc rease in sludge production unless the pro cess has been altered rather radical ly. Given the sign ificance of that and the problems that there have been for fine paper mills all over the conti nent, whether it is the retention containment areas being un dersiz ed periodically overflowing from production, periodically overflowing from excess rainfall leaching through into the local aquifers, contamination of local bodies of water, impacts on wildl ife, etc., I think it is a fairly sign ificant change.

I think that we should hear more on this, notwithsta nding the re will be a hearing. I would like to know to some extent what the technical changes are that are contemplated, and I would request that we actually get a briefing on this so that we can understand the changes that are coming. Mr. Bessey makes some very interesting points about the new plant that was proposed just very recently for Alberta. If we are having a quantum leap forward in technology imp rovements, there are benefits to be had. I think those reassuran ces should be on the table.

That does not mean we have to get down into the nitty-gritty scientific detail but at least a level of detail that laypeople can understand and be assured of what will be going on there. lt sounds like something of that nature could be put together and I, Mr. Chair man, would respectfully request that such a presentation be made before the next hearing of this commit tee. I believe there will be another one after today and I think that would be really good for the process. I think it would clear the air, and I think it would show that the answers are there.

There seem to be quite a few assuranc es that I am getting from the Government. I think it is incumb ent upon them to put them in a little more detail and a little more concrete form. The sort of presentation that we had with the overhead slides the other mo rning, I found beneficial. I think it puts it in a capsu lated form. I think something like this on the environmental side is required and I hope there would be sup port from the committee for that sort of a request.

Tuesday, March 28, 1989 Mr. Bessey: For the Honourable Member's information, all of that information and documentation is part of the records that are filed as part of the licensing process and will be part of the public registry and will form a signif icant part of the public hearing process. lt is not, on an earlier point, a for granted consid eration that there will be an increase in sludge proportional to the increase in production because of engineering redesign and retrofitting of the recovery boiler in a recovery process itself.

So it is not a defacto assumption that we can make, and the effect of that and the engineering specifica tions for that, which will be provided by the company and which we really need them to provide and our environmental people to go through, is what the li censing pr ocess is all about. 1t is tha t documenta tion, specific ally, which will be brought forward at that time. *

(0950) Mr. Taylo r: Yes, Mr. Chai rperson, recognizing what Mr. Bessey just said, and that is why I phrase my request in the fashion that I did. I do not expect to see in a presentation here the level of engineering and scientific detail that would be necessary for a Clean Environment hearing on the plant conversion. I am not ask ing for that. I am asking for a quality of presentation that a concerned layperson can understand what the major changes are. That is all I am asking for. I am not expecting people to go through fiery hoops with a whip crack ing at their back.

I want to ju st see an understand ing in general terms what we are talking, because it sounds like we are talking something that is somewhat different than maybe the past experience has been with these types of mill s. If that is the case, I would be pleased to hear that technology has finally caught up in this area. lt sounds like the information is available. The sort of thing I am looking for is a 15 -20 minute presentation which would explain the changes expected, given the conversion of the plant. Mr. Manness: Mr. Chairman, Mr.

Taylor's request is fair and we will endeavour quickly to put together some very basic presentation dealing with the system in place, with the whole system of recovery and bleaching and how effluents will be dealt with. I cannot make a promise today as to what date that will be because obviously we are going to ha ve to get back to Repap to develop with them a better understandi ng of how we keep it down to, as the Member requests, a basic layman 's understand ing app roach to developing that type of presentation.

We will endeavour to do that and whether this commit tee sits again or when it sits again we will still endeavour to do that sometime in the next, certainly within the month of April. Mr. Harry Harapiak (The Pas): Mr. Chairman, I wonder if I could ask a question on the environment prior to Mr. Plohman going into his questions. Mr. Chai rman: Ok ay. Mr. Hara piak: I am wondering if we can have a little more information on the process that Mr.

Bessey alluded to with the chlorine reduction to 70 perc ent, if there sti ll are going to be dioxins and how much dioxin emissions there will be, if we could have that included. And also I wou ld like some in formati on on the reforestation project and programs that would be going in because now they seem to be going sort of in a monoculture process for replanting. But now with the aspens being a useful tree, I am wondering if they will be- how they will be changing the reforestation.

Also there was some experimentation going on with Roundup, which will be defeating the whole reforestation program now that the aspen is being used. I am wondering if Mr. Brandson would ha ve any information on that or maybe you can bring it forward at that same meeting. Mr. Manness: Mr. Chairman, as far as reforestation, we come here today prepared to answer reforestation questions. We look forward to doing that and to the extent that we cannot then we will bring back responses. But we are prepared to move into fair discussi on on reforestation today.

As far as specific questions, again dealing with the environmental cycle at the plant, we will include those in the presentation that we are prepared to make in this month of April. Mr. Angus: With the commit tee's permission, not just again on the environmental aspect, I too have questions on the reforestation and I appr eciate that we can move into that today and discuss that. I think that will be beneficial. But being a lay person, I am concerned about how much bleach you are going to be using. Is it tanker cars full, or is it trucks full during the course of a year? How is it transpor ted in?

How do you get it to the mill? Is it by rail or by truck? And then, of course, how do you disp ose of it when the sludge comes out? Again, I think that if the Minister is prepared to put an informatio nal presentation for the layman on it, that would be beneficial . Also include the information on the public hearings, the public hearing process. I notice that Pine Falls has put in a five-year game plan and sugge st there might be public heari ngs on the environment of that nature, how that actually works, where they are held and what controls you have over it. The qu estion that I have, through you, Mr.

Chai rperson, to the Minis ter, is that in order to buy this particular plant Repap has had to have some assuran ces of an abilit y to continue to function within reasonable parameters, within normal parameters. Have you given any assurances and/or guarantees that there will not be massive changes and/or massive regulations to prevent them from carryi ng on their business? Mr. Manness: Can the Member be more specific? Is he talking with regard to the environment or is he talking generally across all of Government 's areas of regulations? ___Mr. Ang us: Right now we are just talking about the environment.

I would naturally be interested in any assuran ces of continuing in business that you have 147

Tuesday, March 28, 19 89 given. recognize that you have held back some drawstrings in terms of cutting rights as a bit of a clout, but I am talking about the environment specific ally, because we oftti mes find that, as was alluded by one of the Min ist er's staff Mem bers, tha t the federal regulations are not as powerful as they could be. They are updating them, upgrading them. They are trying to strengthen those laws and we have in a lot of cases the difficulty of dealing with what the law says and what in fact is right in terms of ecological advancement of the planet.

I would like to be assured that you have not given any commitment to Repap that they will be able to deal under existing environ mental rules that allow them to continue. Mr. Marm ess: Mr. Chairman, as ind icated the other day in our ini tial presentation, right now, today, in Manfor, the regulations that are in place are not being met. They have ind icated Repap, in deed the Government ind icated to Repap tha t tha t cannot cont inue, that Phase I after it is completed has to be brought up to the most stringent stan dards that exist anywhere, anypla ce on the face of the Earth, No. i.

Repap is not only want ing to do that but is looking forward to what is coming and as far as even greater regulations and stan dards within that respect and are want ing to build that into their new plant, Phase 11. They want to be world leaders. So to the extent that the covenant calls for Repap to meet standards that we have put in place as legislators- indeed as people responsible to society-t hey fully expect and indeed want to meet. So, Mr.

Chairman, again I say to Mem bers of comm ittee we do not have a buyer who is balking at anything dealing with stan dards, as a matter of fact, again I indicate, have the world technology under patent whereby bleaching, as we know it, may no longer be necessary and they are tryi ng to rush tha t into production, hope to have that in production in the space of five or six years. So I think we are dealing with a- 1 know we are dealing with a company who understands their role as a large corpo ration, as a corpora te citi zen, recognizes their role in ensuring that the environment is not negatively impacted. Mr.

Angus: I app reciate the Minis ter's anxiou sness to solve the environmental concerns and we all share those types of concerns and want to be assured that we are moving in that direction. Jus t so that I have it clear, the Repap organ ization will be subject to the Man itoba Environmental Legislative Regulations. Is that accurate? Mr. Manness: Mr. Chairman, that is absolutely accurate. Mr. Angus: Secondly, Mr. Chai rperson, there will be pu blic hearings in relation to the changing of the plant from the current status to the processing of bleached paper status.

If I have left out any of the technical phraseology, forgive me. •

(1000) Mr. Manness: As I understand that question, and it seems to be most understandable, the answer is yes. 148 Mr. Angus: Fin e. Mr. Chai rperson, during Phase I the Repap plan! is going to be upgrading the environmental poll utant control devices in ihe plant. Mr. Manness: To that I will say not only yes, I will say sign ificant ly. Mr. Angus: I understood the Min ister of Finance (Mr. Man ness) to say that it was going to take five to six years. Mr. Manness: Mr. Chairman, that is not correct. What I was referring to was the new Als el (phone ti

c) technology patented and owned by Repap. I was referring to a new te chnology which does not use chlorine in any sense and they are the world owners of that te chnol ogy. They believe that it will be the next generation of technology that will reduce pollutants to a minimum once that technology is in place. Mr. Angus: Just one final question on the environment and th en we are going to have a layman 's br ief presentation of what is now, as we know it, and what Repap is intending to do, answering some of these questions in a common- sense language technology. Mr. Man ness: Mr.

Chairman, yes, but agai n, the Government will be for making the presentation and the Government will answer questions. lt is not Repap's role to come and ans wer th ose quest ions. 1 will undertake this to the extent possi ble, to provide for that in the month of April. Mr. John Plohman (Dauphi n): Mr. Chairman, before I ask a numb er of questions about cutt ing area and so on, I just want to, for the record, enter into the record a small

section of the min utes of March 1, 1988, board of directors' meeting of Manfor, in which the pr esident reported on environmental is sues, the President of Manfor at that time, Allan Bourgeois. The president advised the directors that, I quote, "New legislation will be in force effective April 1," that is, the new environment legislation.

"As a result, full publi c inquir ies will be requir ed each time sign ificant operational changes are contemplated. 1t is also likely that cutting plans will have to be app roved." This was the understanding of the Manfor Board of Di rectors at that time and clearly, that has not changed. Mr. Chairman, I believe one of the more contr oversial aspects of this deal is the impact that the- Mr. Minenko: A point of order, Mr. Chairman. Is Mr. Plohman prepared to table the document that he has just referred to? Mr. Piohman: I do not see any difficulty with that.

These are the min utes of the March 1 meeting and I read from part of that. lt is public informat ion and 1 am glad to see that the lawyer is on the ball. Mr. Angus: On a point of order. Are the min utes of the meetings of board of dir ector s of Crown corpora tions public information? I do not know. I would like a copy of the min utes he is referring to specifically

Tuesday, March 28, 1989 because he has introduc ed them; that is reasonable. But the broader question is are they normally public informa tion? An Honourable Mem ber: Maybe all of them should be tabled then for Manfor for the last . . .. Mr. Plohman: it is up to the Government, Mr. Chairman, to decide what they want to table. I have some minu tes here that I am prepared to give copies of and table but, as I ind icated, it is not a decision that we can make in the Opposition as to whether other min utes would be tabled. Mr. Mi nenko: If you have them. Mr. Plohman: I do not see why I should give you them.

I will give you this when I have referred to it. Mr. Chairman: Fi rst of all, this is not a point of order, but I would like to ask Mr. Plohman if he is prepared to table those min utes. I believe that would be up to him to do at this point in time. Mr. Minis ter, do you have any comments to make? Mr. Manness: Mr. Chai rman, I guess I would just like to point out that that is the difference in Government. Our Government does no t have access to th ose minu tes. We believe our Crowns should be run in a non-pol itical way. I have never seen Manfor mi nutes to be quite honest with you. Mr.

Plohman: I would think that would be rather negligent to the Minis ters, unless this is not the Mini ster responsible-w ould not have access to the Min utes of the Crown corpora tions because certainly many of the decisions that are made obviously affect and imp lement Government policy. I would say it borders on negligence if the Min ister does not read the min utes of the Crown corporation that he is responsible for, more than borders on it As a matter of fact, I thin k it is negligent. Mr. Chairman: Mr. Plohma n, have you any questions? Mr. Plohman: Yes, I do, Mr. Chairman. Mr.

Manness: On a point of order, Mr. Chai rman, nothing to do with the question. I am wondering if we have exhausted the environ mental questions for a period of time, whether Mr. Brands on can return to his office, yet to remain on call an hour or two hours from now, if that is the will of the comm ittee. Mr. Chairman: Does anybody in the commit tee have more questions on the environ ment? Mr. Taylor. Mr. Taylor : Mr. Chairperson, the questions that I gather a num ber of Members are going to want to get into have to do with the forestry aspect and the cuttin g rights and practices, etc. , etc.

Now, I do not know if Mr. Brandson, in addition to his environmental expertise, has expertise there or not. If not, then he probably should be excused and allowed to return to his office. Hopefu lly, it is no t some long di stance from the Legislatur e but that potentiall y an official from Natural 149 Resources might be required at the table. I point that out to the Minis ter. Mr. Chairman: Ok ay, if that is the will of the committee. Then if there are no more questions in regard to the environment, is it the will of the commit tee then that Mr. Brandson may leave at this point? Ok ay. Mr. Angus: Mr.

Chairperson, let us not forget the aspect that we are in the process of selling the second largest renewable resource in Man itoba. If that is not an environmental concern, I do not know what is. We are selling all of the trees off in terms of cutting rights. How they cut those trees, how they do not cut those trees, may in fact have environmental concerns. If the Min ister has assured us or can assure us that we do not any longer need somebody from the environment to answer those types of questions, then I have no difficulty with them. Mr. Plohman: Mr.

Chairman, I think there will be from time to time this morning some overlap, and particularly the need for a forestry director here or an expert would be beneficial for the commit tee, and a person from the environment as well from time to time. There may be questions that impact on the environment. There may be questions that impa ct on the cutting area, forestry practices, and so on, forestry management. So I would request, Mr. Chai rman, that the Min ister seek to have one of his representatives from the forestry section, who is on the negotiating team for the provinc e, to be present. Mr. Manness: Mr.

Chairma n, to expedite matters, let us move into those questions, and certainly we will have Mr. Brands on available. He will not be leaving the building but if we move into those areas that he should be able to answer, certain ly. Mr. Angus: On a point of order then, before Mr. Plohman asks his specific questions on the cutting and the impl ications of cutting, would it be permissible to ask the Minister to give us a brief overview of the cutting conditions and circumstances, to fill us up in the picture as it were as to what they have traded off and what they have not?

Then the specific questions can be asked, based on legitima te footing. Mr. Chairman: If that is the will of the comm ittee. If not-Mr . Ploh man, you had a comment? Mr. Plohman: Mr. Chairman, I had a line of questions and it will deal with all of those things. I think that the Min ister will have an opp ortunity to- Mr. Chai rman: Mr. Plohman will proceed. Mr. Plohman: Thank you. Mr. Taylor : Mr. Chai rperson- Mr. Plohman: I let you ask questions- Mr. Taylor: No, no, I do not want to interrupt you, want a question. lt could have a positive-

Tuesday, Mar ch 28, 19 89 Mr. Ch airman: Mr. Taylor. Mr. Taylor: Mr. Chai rperson, I had no problem with dism issi ng Mr. Brandson becaus e of the sort of questioning we are going into. I did put the suggestion on the table, and i would like it responded to, that - (I nterjection) - before we proceed with those questions, I would like to see an expert here so that we are not going to be in a position of having to ask questions a second time so that an official can hear. I think we should have an of ficial here now. I am talking about a senior official in the forestry

section of the Natural Resources Department. it is incum bent upon these sorts of comm ittee meetings to have the necessary expertise avai lable for both the Go vernment and for the Opposition. * (10 10 ) Mr. Manness: Mr. Chairman, this breaks down into a number of different situations. Firstly, dealing specifically with the cutting areas, Stothert Management was our. I guess, experts in helping us through this with some support from the Department of Natural Resources. We feel well versed in that area.

We feel that we can answer some, a goodly num ber, of questions, not all possib ly, but we can move into that area. Secondly, with respect to the larger cut area and the environmental impact, Mr. Brandson is the person whom we should call back. When one looks at the larger cut area and the impact on the environment, Mr. Brandson would be the Government's foremost expert within that area. So let us proceed and I think that we will very quickly determine whether or not we want to have Mr. Brandson return. Mr. Chair man: Is that the will of the comm ittee? (Agreed) Mr.

Ploh ma n: As I started to say earlier, I think one of the cont roversial areas of this deal was the fact that it seems to have impacted on the proposed oriented strandboard factory plant for the Swan River area. That is a very serious issue for the people of the Parklands. That project was in the making for a numb er of years, I think back to the early'80s, perhaps late '70s. There was a major Weldw ood study tha t was done to determine the extent of the forestry resource there, for suita bility for such undertakings.

Then Fin mac Ltd . undertook a major pre-feasibili ty study in the' 80s and finall y the study rights were turned over to the Penn-Co Group of Steinbach, of which Ernie Penner, I believe, is one of the princi pals and they were given exclusive study rights to extend to December 15, 19 88, to undertake feasibility studies to determine the viabil ity of such a plant and to ensure that there were markets for the product and so on. The agreement extension was sig ned by myself as Minis ter of Natura! Resources about a year ago. lt extended it to, as I said, December 15 , 19 88.

Penn Co, I understand, had spent over $200,000 on these studies and on this project over the years. The federal Government had certainly contri buted financial support 15 0 thr ough the Department of Regional Ind ustrial Expansion and the province had worked very closely with this project over the years. So it was a major undertaking that was undertaken over a num ber of years. As well, federal funding had been promised by .Jake Epp in December, 19 87, from the Western Diversification Fund. He talked about some $40 million, prematurely I have to admit, and the Min ister smi les.

I think he agrees with me on that. Brian White, the Member of Parliament, talked on several occasions about the federal funding that would be available for this plant. As a matter of fact , I think he said it was about 99 1/ 2 percent certain during the last election in the fal l. We are talking of up to $10 0 million major investment, 350 to 450 jobs near Swan River in the Parklands, and it seems that it is snuffed out.

I would like to ask the Min ister my first question: whether he can substantia te what has been stated in the newspapers attribut ed to him that indeed the sale of Manfor to Repap under the conditions that his Government has agreed to effectively quashes the chances for an oriented stran dboard factory in the Swan River area. Mr. l\ll anness: Mr. Chai rman, the Member uses the word "cont roversial." I do not, I guess, believe that we have a cont roversy.

I think the Government of the Day looked at all potential uses of the whole wood resource, including the hardwood resource in the mountain region, and made a decision. it made a decision given the evidence at the time that the oriented strand board plant, or the concept of a plant, really was some distance away. lt made that on the basis that there was not financing in place that we could determine. To the best of our our knowledge, there was not federal financing in place. Secondly, the provincial Government had not received a specific request.

We are well aware of the project, but a specific request for our role had been referred to. We had some understanding of what might be asked, but again a formal request had not been received by us. But beyond that, we look at the market for this particular type of product and , I say in all sincerity to Mem bers arou nd this table, we had a hard time quantifying where there might be a market and a return.

Now we became aware-b ecause a study came to us from Indu str y, Trade and Techno logy tha t was comm issioned indeed by Penn-Co. lt indicated that if whoever had control of that resource, if they had an alternative, it was probably better that alternative go into a higher value-added product. That was by their own report, comm issioned by Penn-Co, that the long run guarantee of the jobs-if you can ever guarantee jobs-w as probably better seen and recognized if indeed you are able to take it to a higher value product.

We are also aware, because every company that came along we dis cu ssed wha t was happ ening in that particular industry. For instance, Weyerhaeuser, two of the most modern plants in existence in Al berta, I know were losing- because they told me- fistfuls of money. We also know that the federal Government backed out of suppor ting stran dboard plants, per se, across

Tuesday, March 28, 1989 Canada. There was a policy change, but it was not only strand board plants, I think it was major components an yway , the forest produc ts indus tr y including stra ndbo ard plants. They withd rew, specif ically , a project in Ontario. We are aware of a case just last week where a strandboard plant or a waferboard plant in Thunder Bay was sold off from one corporate entity to another and where the purchaser, using the jargon in the industry, got it for a saw. So, Mr.

Chairman, the decision that we had to make, recognizing where we were in the point of time, recognizing that there was greater certainty attached to The Pas and district and indeed to the long-run viabil ity of the ind ustry in Manitoba and therefore the guarantee of long-run viabil ity of the jobs in The Pas and district was to allow access to the hardwood cut, given now that technology is in place to deal with the species of trees that just a few years ago I guess was considered, again in the jargon of the ind ustry, a weed. (-I nterjection-) Consid ered a weed, right. So, Mr.

Chairman, that was the basis in which we decided to alter the wood cut area. I also indica te that the Penn-Co Group had upwards of 18 mont hs-a t least 18 months-to put into a place a project that I can understan d would, stand ing on its own economic foo ting , not requ iring 50 percent financing from Government, I am sure would have been a treasured ind ustry in the valley area. But, Mr.

Chairman, from the point of view of the Government, recognizing tha t the cycle, the forest products industry cycle, the paper cycle, was beginning, had already been running for five years and was coming to a point where all cycles begin to drop, that a decision had to be made, and in my view it was made in the best interest of the people of Manitoba. I would say beyond that the resource- because as the Member knows fully well there is a resource in the mountain region which is maturing.

In some respects it is overripe and it needs to be used pretty quickly because it is becoming extremely more vulnerable to decay and indeed to fire. I know we have made the right decision. * (10 20) Mr. Plo hman: Mr. Chairman, the Min ister makes a lot of statements as if they were facts in terms of the viabil ity of such a plan and so on, but studies have been done that show this was a viable project, that the markets were there, that they were determined clearly in the studies. I want to ask the Min ister, when did he change his mind about this project and the importance of this project for the Swan River area?

When did he abandon his policy that the Manfor sale would no t impa ct on the cutting area, the hardwoods in the mountain

section of the forest section, because he has clearly put on the record, Mr. Chairman, his position contrary to what he is saying this morning. Mr. Manness: Well, I do not know. Mr. Chairman, I have no idea what the Member is talking about as far as changing the posit ion. I am saying that an agreement, 151 a Memorandum of Agreement or exclusivity agreement, entered into with Penn-Co by the Government ran its course as of the end of December 19 31. Certainly, I say to the Member that had this been such a feasible project, the financiers of the world, i.e., the banks, would have jumped upon it very quick ly.

If it had had no risk attached to it, Governments would not needed to have been app roached and, Mr. Chairma n , this Government had been mandated by the people of this province to divest itself of the only interest it had within the forest products industry and it is attempting to do so. So, Mr. Chairman, when the Member asks me the question when I changed my mind, I would only say that when it became obvious from our viewpoint that the OSB board plan was not proceeding in a fashion unless Government was going to be able to shore it up in a sign ificant fashion. Mr. Plohman: Mr.

Chairman, the Min ister makes statements like, who says it had no risk. No one has ever said this project did not have any risk. Any major project has risk. lt is a totally absurd statement to make that this project would not have had risks. Of course it would have risks. But he went up to Swan River with his colle agues, the Min ister of Trade, Mr. Ernst, and I believe Mr. Penner on June 29, 19 88, and he assured the people of Swan River that the Manfor sale would have no impact on this project and tha t the project in Swan River was a priori ty.

As a matter of fact, he also phoned the secretary-treasurer of Swan River on August 16 and assured that person, and he took notes, that in fact the Swan River project was a priority and the Manfor sale would have no impact on the cutting area. They would see to that and that was in fact the policy that our Government had very clearly.

The ML A for Swan River, Leonard Harapiak, at that time the Min ister of Agricultur e, myself as Min ister of Natural Resources and the Minis ter Responsible for Crown Corporations, Gary Doer, had taken that position very strongly and that carried on in the negotiations, it seems, unless the Minister wants to dispute what I am sa ying ins ofar as what he assured the people of the Swan River area, the town of Swan River in June and then again in August, that that had indeed been a prio rity ini tially and that was abandoned. So indeed the Min ister has flip-flopped on this issue.

He ha s taken a different position. I ask the Mini ster if that is in fact correct that he had assured the Town of Swan River that the prior ity wou ld be the waferboard or the oriented strandboard development in Swan River and that, in fact, it would not be im pacted on by the sale of Manfor. Mr. Manness: Mr. Chairman, why would the Member come forward now and make it sound like something that was said in June, and he quotes in August, make it appear as if all the circums tan ces surroundin g that statement were unchangeable, almo st 10 months later. Mr.

Chairman, I remember those days well and what the Member says is correct. At that point in time, we were assured as Government that this project was

Tuesday, March 28, 1989 coming. We were given all the assuranc es, and I must tell you we were not the lead Government in this project whatsoever. So, Mr. Chairman, we accepted that we recognize the fact that the former Government, when Weyerhaeuser first appr oached them and appealed to them to take the cut sout h, they had to make a decision at that tim e. I take it that they said they preferred not to, given those set of circu mstances.

But from June and August, halfway through the year to the end of the year, there was some hope and some expectation that Penn-Co would be able to, firstly, find the market because all the advice that we had was that the market was not there; secondly, find the financi ng; and thir dly, be able to put the project together. All of a sudden December came along and from our viewpoint, again not being inti mate with the project, as the Government, it became obvious to us that there was some difficulty in putting that project together. The Government felt badly about that.

But what does one do when you realize you have buyers who are prepared to make certain offers for a certain wood resource? Mr. Chairman, to even go further, we asked whether there could be compa tibil ity as between a smaller OSB plant and inde ed some of the other half of the hardwoods going and being used in the pulp facility in The Pas. We asked that question many times. We were told that it could not occur.

So we did in our view, in my view at least, everything humanly possible at that point in time to ensure, firstly, up until the end of the year to exercise the good faith that we had entered into by way of agreement that the OSB plant come into be a reality, but after that point we had to make a busi ness decision whether or not it could occur. We felt that given the circumstances that the best procedure was to enter into an agreement with Repap for an alternate woodcutting area. As Mr.

Plohman knows fully well, that area, the mountain area, was a condition of negotiations with Weyerhaeuser, and the NDP former Government proceeded with them. He knows that was a condition of one of the major compan ies that were into negotiations with the former Government. Mr. Plohma n: Mr. Chairman, I am very happy the Min ister rai sed that because, in fact, that was one of the reasons Weyerhaeuser would never have been the purchaser with that condition. lt was clearly stated, directed from Cabi net to our negotiating lead Min ister, the Member for Flin Flon (Mr.

Storie) at that time, the Min ister responsible for Manf or, that the cutting area would not be impacted on. As a matter of fact, Repap was not insis ting on it at that time. So somehow this Government managed to negotiate themselves from a position where Repap was not interested in pursuing as a prima ry objective that area, to giving that area away so that the other project could not proceed. That is the sum negotiations by this Government.

I want to say that the Min ister has identified a very serious problem between the two levels of Government. lt surfaced in the Alumax aluminum smelter deal and it has surfaced again. That is a communication problem. He says we were not the lead Government. Is he saying that Brian White is lying to the press when he says the final stage was to be a federal Cabi net subm ission as early as this month, in the same paper where the 15 2 annou ncement of the sale or giveaway of Manfor, or whatever terms that someone wants to use? Is he saying that at that same time this interview by Brian White is not correct?

Was he aware that the federal Cabi net was going to consider a submission? Was he aware that the Western Diversification Fund had just completed a study that was very favourable just 10 days before with regard to that project? Or is he saying that is all hyped by federal people, by Penn Co, or Ernie Penner? I talked with him. He ind icated that the discussions were ongoing, that the work was ongoing on this project, that it was proceeding in a favourable way. Is he saying that is not true either, or was he not aware of it? Is th ere a commun ication problem? That is what seems to be the problem.

Does he not talk to his federal counterparts? I find this incredible, Mr. Chairman. * (10 30) Mr. Manness: This Member always finds everything incr edib le. Tha t is why he was never gi ven any responsibil ity in the former Government to be involved in dealings like this. An Honourable Memb er: Quite a low shot. Mr. Manness: Well, Mr. Chairman , let us say something for the record. First of all, we have got it in the minu tes, not the min utes but indeed some of the discussion that went back and forth that Repap also requested the southern cut area. Why does not the Mem ber be so honest as to indic ate that?

At no time was it indicated to Weyerhaeuser in our coming into Government that the southern wood area would not be included in any negotiations. The former Government made it kno wn to us subsequently that they, indeed again today, would not have countenanced an agreement whereby the southern wood area was used. But that is not anywhere recorded in fact. Ind eed, the first meeting I had when I took over the respo nsi bili ty for the di vest itur e was with Weyerhaeuser and they made it known at that point in time that t he condition to them was that they have access to the southern cut area.

In no way and at no time did they indicate that the former Government had said once and for all, as a decree from Cabi net, that they would not have access to that wood, so let us be brutally honest here. Mr. Chairman, further with respect to the Penn-Co proposal, I do not cast aspersions one way or the other. The Memb er asked me to relate the set of circumstanc es in place. I have attempted to do that. I also indic ated that Government, being in Government, forces one to make decisions at certain points in time.

I guess under a perfect world it would have been great to ha ve had another year to see how the Penn-Co proposal was developing, but in all honesty there was not a year there. Government had to make a hard decision given the set of circu mstan ces that were in place in that point in time, and it did so.

Tuesday, March 28, 1989 Mr. Plohman: Being brutally honest, the Min ister knows that that southern cutting area, the mountain forest section, was not up for negotiation. He knows that because that would be right through the Civil Service that were involved in the discussions. He knows that because it was a position that Repap would have clearly enuncia ted to him. lt was clear from all discussions that we were not in any way-a nd we stated that going to impact on the waferboard plant with the sale of Manfor. For the Min ister to try to change that record now is just not going to work.

If he is brutally honest he knows that was our polic y. I ask him when was the decision made to, in negotiations, include discussions with the southern cutting area and a Swan River component to the sale of Manfor? When was that decision made? Mr. Manness: Mr. Chairman, I repeat exactly wha t I have said.

When it became evident that there was not a market for the product; secondly, when it became evident that there was not financing in place; and thirdly, when it became evident that the proposal was going to requir e a considerable amoun t of Government sup port plus some period of time yet to bring into place at that time the Government consid ered the feasibil ity of including the southern wood cutting area into the major development plan associated with the expansion of Manf or. Mr. Plohman: Mr. Chairman, when did all these things become evident in the Min ister's mind? Mr.

Manness: lt became evident after the completion of the exclusivity provided to Penn-Co. Mr. Ploh man: Mr. Chairman, the Penn-Co Group asked in a letter in September for an extension to that exclusivity study agreement that had been extended to December of '88 because they realized that the discussions were taking somewhat longer with federal officials for federal funding. Why did the Min ister not respond to that request that was made by the Penn Co Group to have an extension to that agreement? Mr. Manness: Mr. Chairman, Penn-Co already had 18 months, some might say two years, to develop the propos al.

I do not know how long Government is expected to go. That is consid ered within the business a pretty long period of time to have exclusive control of a resou rce to tr y to develop a pr oject. The Government of Manitoba, in my view, had been pretty fair in that respect. Mr. Plohman: The Minis ter knows that all of these things take time and when he talks about a substa ntial amount of Government funding, he should look at what the taxpa yers sinc e the days of Duff Roblin have put into Manfor and he should look at what has gone in, in terms of taxpayers' assistanc e in this sale.

How can he say that funding by the federal Government from the Western Diversification Fund was somehow making this project, this waferboard project, unfavourable in his eyes, that it was no longer a prio rity? Mr. Manness: Again, I know the Member does not understand some of these basic building blocks. There 153 is more to the component than just the jobs that the OSB plant, hopefully, would have provided to the valley area and, indeed, important jobs to that region, ones that we want to see in place also.

But the Memb er must real ize th at the fact or associated with the production of paper, the value added with the production of pulp, I should say, is upwards of three times, four ti mes, the value associated with producing stran dboard. And by the companies very own commissioned consultant's report, looking into the feasibility of strand board production contained wi thin that report, there is a strong ind ication for dollars and capital that is to be invested.

Now that technology is in place to deal with those hardwoods, that the greater safeguard associ ated with, firstly, the investment and , secondly, the jobs would have been very much better suited towards pulp producti on. I did not come to that conclusion. The consultants commis sioned by Penn-Co came to that conclusion. Mr. Chairman, once it became evident that there was no market for the product, secondly that there was no financing in place, thirdly there was not a propos al, a hard proposal tha t was coming forward to us, Government had little alternative but to move in the path it did. Mr.

Ploh man: The Min ister, I think, will regret making statements like "no market," blanket statements like that, because it certainly is not true. I would ask the Minis ter if he would table that report he is referring to, sinc e he is selectively referencing one

section that he says says something about a higher value-added product would be beneficial. Where is the rest of the report with all of the positiv e aspects to this project? Where is the documentation that Penn-Co says they have that made this project very feasible and that Western Di versifica tion Fund ag rees was a viable project? Would he table that? Mr. Manness: Mr. Chairman, the Member ind icates that he has access to all of this information from Penn Co.

I am sure he can obtain a copy of that as well as I can , but again I ask him to bear in mind that 50 percent, so-called 50 percent, of the proposed capital was to be provided by Government and again I point out, surely, if it is a project that is going to provi de return and be viable in itself over a period of years, certain ly, lenders would wish to put up a much larger and indeed, investors, a larger proportion of the total capital commitment. * (1 040) Mr. Ploh man: Mr.

Chairman, the Min ister is skating on thin ice when he references forest projects that require 50 percent of federal funding or Government funding as if this is somewhat unique. I might remind him of the CFI funding, that Duff Roblin and Waiter Weir got themselves into years ago. What about some of the references in his document that talks about Government participation in projects in other provinces? He knows full well these kinds of projects all take major economic development funds from senior levels of

Tuesday, March 28, 19 89 Government to make them work. That is why he has subsid ized past what is even reasonable in this case, this Manfor sale, which will be brought out through discussions once we see all the figur es, the facts and figures on this sale. But what he has done in addition to that is thrown away an opportun ity, an ec onomic development opportunity for diversifica tion of the econ omy of the Park lands Region. There is a contr oversy. People are very upset about this because they saw a very viable project go down the drain in the negotiations and it was done prematurely.

I ask the Min ister was he not in commun ication with the federal Min isters during these discussions or is he simply ind icating, as I believe is the case, that he simply got them off the hook on their prom ise for funds? Is that more accurate? Is the Min ister saying today that what he did through this project is got Jake Epp and Brian White off the hook on their prom ise for funds for the waferboard plant, for the oriented stran dboard plant, or did he not even commun icate with these levels of Government? Which was it? Mr. Manness: Mr. Chairman, let not the Member put words in my mouth.

I guess if anybody got the federal Government off the hook it was probably Penn-Co, because they were unable to find the market for the product. Second ly, they were unable to find the financing, so I was led to believe. Mr. Chairman, with respect to the project, comparing one versus the other, surely the Member is astute enough to know that upwards of 200 of the jobs that are going to be put into the Swan River area by Repap are the same 200 jobs that would have gone into the Swan River under an OSB board plant, because it is harvesting and transpor ting.

Whether the wood goes into stran dboard or whether it goes into pulp, sti ll the vast majority of the jobs in both proposals is the harvesting and the transpor ting of wood. Why cannot the Member be so honest as to admit that? Mr. Plohman: Mr. Chairman, the Mini ster talks about value added, about a product that is more refined. The fact is that the particle board plant in Swan River would have resulted in more refining, mor e processing in the Swan River area than will take place under this proposal. Certainly that is the case.

So he should not use that as an argument that there will be less processing taking place in Swan River under a waferboard oriented strand board project than there would be under the terms of this sale. In terms of benefits for the Parklands, there will be less. In fact, the Parklands will be the hewers of wood and the drawers of water for further processing that will take place in other places, like perhaps some in The Pas and some in Wiscons in. Is not that a fact? That is where some of this product will go. So I ask the Minis ter, could he table the evidence that there was no market for this product?

Could he table the proof that he refers to that there was no market for this product? Could he ind icate who has provided that opinion? Could he table any documents to sup port that statement? Mr. M anness: Mr. Chairman, if the Member would just want to survey the market, if he would just want to 15 4 make a few calls, just go to the effort of calling a few people in the indus try, just a little bit of effort, rather than putt ing all his trust and faith in a couple of parag raphs. I used that as one example. I did not put my final faith in any consultant's report.

I know that seems to be the way and the man ner of the former Go vernment. In deed, it was not our vi ew. We commis sioned the ind ustry in the sense of speaking to individuals totally unremoved from this project to try to get a better understanding of the future of a board plant. We came up to the subjective conclusion, su bject ive- and I use tha t becaus e obviously the Member will want to take argument with -tha t there is today and for the foreseeable future. There was no market for the lower value-added product.

Now, at no time did I say that the higher value product using the hardwood was going to accrue specifically to the mountain region, I did not say that. When the Government makes a decision, it does so for the benefit of the province, it has to. lt looks at it from the perspective of the overall economic benefit to the province.

Given the set of circu mstan ces at the tim e, and I repeat this, there was little alternative but to move on the best proposal that we had, yet as having as a major subset of that, some recognition, a major recognition I might add, of Swan River's importance and the role tha t it should pla y in the larger development. Mr. Ploh man: Mr. Chairman, the forest resources belongs to the public. Over the years it has been tied up by major companie s.

In fact, a lot of small operators have spoken to me about the fact they felt they do not have fair and equal access to the timb er resource in various areas, and I think the Mini ster is aware of that. I ask the Min ister then how long has he tied up this forest resource, this hardwood resource, which was not previously tied up? He had the softwoods tied up with major agreements, forestry agreements. How long ha s he tied up this hardwood resource now in the mount ain region , through the Manfor deal, that will prevent such a project as an oriented strand board facility being constr ucted in the Swan River area?

Mr. Man ness: Mr. Chairman, it is a normal forest agreement. To the best I recall, it is 20 years. Mr. Angus: Twenty years for that, you said? Mr. Man ness: Subject to finding the specific, I believe it is 20 years. Mr. Ploh man: Mr. Chairman, I would like to have specific facts on them. If this is the case where the forestry experts should be brought to the commit tee and perhaps that should be the case, if the Minis ter is unable to answer details about the fo restry agreement. Mr. Man ness: Mr. Chairman , it is 20 years, which is the standard, indeed, which the former Government was prepared to enter into.

Aga in, I point out for the record that the Manfor cut in area has changed precious little. The configuration has changed some, but the cut

Tuesday, March 28, 1989 area, as a num ber, has changed precious little as to what the former Government was consi dering in their ultimate agreement, and indeed what Manfor has today. Mr. Plohman: The fact is total hectares are not the relevant issue here, although it is sig nificant. What is very relevant is where those are located. You can have depleted areas taken out of a cutting area and you can have new areas with very abunda nt timb er added, so that can be very misleading in terms of the total numb er of hectares. What is imp ortant is where they are located.

Can the Min ister ind icate the extent of the cutting area that has been negotiated with Repap and given to them under this agreement, allocated to them? Mr. Man ness: Mr. Chairman, if the Member wishes we will bring in the map and show specifically the cutting area. I see he has a map. Maybe he wants us to use it, but we will bring a map in and show specifically the area in question. Mr. Pl ohman: I would be very pleased to ask the Min ister to use this one and to show the people exactly how much he has extended the cutting area.

We see an area there that is the one that Waiter Weir and Duff Roblin gave to Manfor, CFI, another private company from 20 years ago. Now, how has he added that? I have a red felt pen here. Is the Minis ter aware of precisely where he has extended that and what he has taken off so that we can just see how the people of the Parklands are impa cted by this decision that he has made, by the forest resources being removed for future development in the Parklands. * (10 50) Mr. Mann ess: Mr. Chairman, if the Member would provide the map, we will trans fer on to it the new configu ration of the cut area.

An Honour able Member: This will not be that accurate because what we need is a forest manual. Mr. Plohman: Well, I will not hold ... . Mr. Chairman, I want to get a general idea of the configuration so we have an idea of why this project is now pre-empting a major development in the Parklands. How much has Repap received of the mountain forest

section through this deal, and to what extent will it pre-empt any future developm ents? I understand there are close to 600, 000 cubic metres of hardwoods for annual allowable cut in !he mountain region. Only about 6 percent to 7 percent of that was allocated prior to this. How much has this Min ister allocated of the annual allowable cut to Repap of the hardwoods? My second question is what annual allowable cut has he allocated for softwoods in that area, if any? Mr. Mlilnness: We will provide all of that detail.

Certainly the vast majority of it has been provided by way of agreement to Repap, virtually ail of it, I might add. But specific to the other question, again it is not a question, it is a comment. The Member says it was a major developmental project around the corner. He paints the image, I suppo se, that there was a major new ind ustry 155 that was just about to happen. Mr. Chairman, if that had been the case, it would have happened. lt would have happened because there was a group in the provinc e who had the first right to see it come into being.

Scarcely eight months, nine months ago, the provincial Government believed it was coming. Given the circumstances at the time, into 19 89 it became evident that it was not there, that there would be no long-run use of those hardwoods unless somebody, now with the new technology in the pulp ind ustries, could use it. And they needed to be used, I agree. So the Member is wrong in a numb er of respects. He says there is no project in the mountain area. There is nothing further from the truth.

Repap is guaranteeing upwards of 250, indeed even more jobs within the Swan River area to be put toward the usage of the hardwoods. So the Member is wrong and he is right. He is wrong in saying there is no project there because there will be a project there. He is wrong in saying that those hardwoods are not going to be used, because they are. (The Acting Chairman, Mr. Edward Helwer, in the Chair.) Mr. Plohman: Clearly, Mr.

Acting Chairman, if any of the people of the Parklands have been misled it is because of statements made by federal politicians that indeed this project was imm inent, and there were studies to substantia te this was a very good project.

The Min ister today is throwing a completely different light on that project. lt will be determined as to whether he is accurately reflecting the status of that particular project or if, in fact, the politicians were misleading the people of the Parklands Region with regard to it right up to the day of the sale, as quotations from Brian White ind icate that this project was moving along very well. I ask the Min ister if, in fact, he is aware of how this will impact on existing operations with mills, small operators in the Parklands Region, where the hardwood resource has been allocated to Repap?

Is he aware of whether this is going to mean a reduction in the operations in any way? Mr. Marmess: Mr. Acting Chairman, there will be no impact. The small operators will still have access to wood supply. Furthermore, we requested of Mr. Petty, in deed some of the ad di tional amount s even be provided to operators that may want to come forward over the next num ber of weeks and few months, and so we have a situa tion where ev erybody that is producing today in a smaller fashion is safeguarded and indeed anybody else over the next short period of time also will be provided some access. Mr. Plohman: Mr.

Acting Chairman, as this Minis ter indic ated earlier tha t he had fully all ocated the hardwood resource in that area to Repap, does that mean that there will be no residual hardwood quota left for anyone else that wants to get into business in the future, the small commun ities in the area who might want to undertake cutting operations? Will they simply have to work for Repap or will they be able to deal with the province on this resource? Mr. Bessey: Just a point of clarification, what was given to Repap in this area was the unallocated hardwood resource.

Tuesday , March 28, 19 89 Mr. Msnness: Mr. Acting Chairman, again the words I said "the ma jority of the area, " and I did no t categorically by that mean every every area and that has been clarified by Mr. Bessey. Mr. Ploh ma n: Mr. Acting Chairman, what we see here is a major change to the cutting area here that now extends well down into the Swan River-Parklands area and means that no further projects just north of, up to Winnip egosis area, has all been tied up by Repap and no further developments can take place because there is no resource left.

The Minis ter has indic ated that resource has been fully allocated to one company . All of the quota that had not been allocated previously is now allocated to one company and further developments will not be able to take place. I want to know what consulta tion was done. Mr. Manness: Mr. Acting Chairman- Mr. Plohman: Is this a point of order or is this just Mr. Acting Chairman, I am not finished . The Acting Chairman (Mr . Helwer): Ok ay. Mr. Plohman: Mr.

Acting Chairman, what consultation was done with the people of the Parklands Region before such a major giveaway of their resource was undertaken by this Min ister? Mr. Man ness: What is obvious is that we have struck a pretty fair deal and the Member has no course of questioning whatsoever. Mr. Acting Chairman, again I repeat, if that area had been given and had there been a viable project to us e it and had it been directed towards that project, then obviously that area would have been gone just like it is now, but it is now part of a larger project.

But yet it sti ll draws its own jobs; it draws its own development project based in Swan River. Mr. Acting Chairman, so let not the Member again say that the wood resource has been lost, somehow magically lost, and that there is not a project to go along with that wood resource. That was one of the major aspects of the announc ement that Swan River was going to share in it.

So rather than it being a stan d alone OSB project that would employ upwards of 300 jobs, upwards of I believe it was a $60 million investment that was being talked about at that time, which would have required all of that cut area, that new red area at the bottom of the Member's map, instead of that what you have is the same wood resource now being commit ted to a different development project, one that is part of the Repap development, but one that involves 250-plus jobs in Swan River, the vast majority which are the same jobs, cutting, harvesting and transpor ting. So, Mr.

Acting Chairman, let not the Member say that because of this large annou ncement that Swan River has no activity, because that is the furthest thing from the truth, Swan River has a development project. lt is not stand alone, it is part of something that in the Government's view has a greater opportun ity and a stronger viabil ity associ ated with it in years to come. 15 6 Mr. Plohman: He did not answer my question, Mr. Acting Chairman. I just asked about consulta tion with local communi ties and ! bel ieve il is unfair to- • (1 10 0) llllr. Angus: I appr eciate that.

My hand is raised for a point of clarifica tion. I am confused by this map. I wonder if I can get a clarific ation on this map. The shaded area, perhaps you would like to just give me a clarifica tion and then it might clear up my concerns. llllr. Manness: Mr. Acting Chairman, I will ask Mr. Bessey to review the alteration and configur ation of the cut area. But before I do, when the Member asked the question about consultation, we are dealing with a billion dollar project, the largest industrial project that this province has seen. We have entered into an agreement based on about 25 or 28 different major issues.

We were manda ted to do so by the province, by the people of this province who asked us to div est of Manfor. That is the course we followed. The Acting Chairman ( llllr. Heiwer): Ok ay, just a minute, Mr. Bessey is going to describe the cutting area. Mr. Bessey: The old Manfor area is the one in black. Mr. Manness: Let us bring it up here and we will speak to it. Mr. Bessey: The old Manfor area is the area contai ned in black comprising 10 5,0 00 squa re kilometres and an annua l allowable cut of 3.2 million cubic metres a year, softwood/hardwood.

I am going by memory, but I believe of that, 2.4 million is softwood. The red area, actually should have gone right along here as well, from here down into the lake. This is the Repap area comprising essentially the same land area, 10 8,000 square kilometres as opposed to live and exactly the same annua l allowable cut, 3.2 million cubic metres a year. This is lopped off. The most northeastern extent is now available for other uses. The area the Member is speaking specifically of is just the southernmost area.

The reason we are talking essentially exactly the same land areas and annual allowable cuts is simply that the land area is exactly the same, it is just a reconfigur ation as to where we are going to get it. The reason is that it is the highest value util izat ion of that resource which was available. The Pas is right in here. These areas are excluded, by the way, sorry, these parks- Mr. Ploh man: Parks? Mr. Bessey: -a nd forest reserve. The Pas is right at the southernmost tip of the Clearwater Lake. Mr. Angus: Could you point out what areas have been cut out? Mr. Bessey: This whole area- Mr.

Angus: The area that you did not sell to Repap has already been cut out, and it takes 60 years to grow the trees back there, is that-

Tuesday, March 28 , 1989 Mr. Bessey: Oh, sorry, you mean wha t area has been harvested? Mr. Angus: Harvested, yes. Mr. Bessey: When you forest an area, you harvest it in its entirety. Mr. Angus: Ok ay. Mr. Bessey: You do not go into a whole region and clear cut it and then move in this way. An Honour able Memb er: Sometimes they do. Mr.

Bessey: In good forest mana gement and practice you do not because your per unit cubic metre cost that way is a lot higher because what you want to do is take some of the most expensive wood, some of the cheapest wood, some of the medium expensive wood every year and in that way in perpetuity you can manage your wood harvest costs. Mr. Manne ss: Manfor was not doing that. Mr. Bessey: Manfor was not doing that well. Partly because of the sawmill operation, they kind of cleaned out in the early years. So they have extremely high wood costs of $40 per cubic metre when they should be $30, part of the big problem.

What Repap will do is mana ge the area for a new fore st ma nagement plan wh ich is filed with the department every five years and mon itored by the Department of Natural Resources and Forestry which adopts all modern forest management pr act ices including managing the entire area as opp osed to just cheap areas or expensive areas. Mr. Angus: When you say that a licence has been given for 20 years, does that include public hearings? Does that include a subm ission of a plan every five years? What is the process? Mr.

Bessey: The 20 years is a stan dard forest management agreement which had never been subject to public hearings as these ones will be. Man for had ini tially just started a process because they had just come under The Environment Act , but of cou rse because they had been filing forest mana gement operational plans every five years and not making them subject to The Envi ronment Act or any assessment of any kind they were given a grace period to do that. By the end of this year they would present a plan for the next five years, kind of thing.

Both the reforestation, the operational management plan and the conversion process itself, both component s of the public hearing process for the first time. Mr. Angus: Does that allow you to alter that licence and put assuranc es of the licence of cutting? Mr. Bessey: The Department of Natural Resources has ongoing responsibi lity for the app roval of those five year management plans and the conditions they attach 15 7 to the company's use.

Part of that would be the reforestation, to make sure that the funds flowing out of the reforestation fund, actually when reforestation and sc arifi cat ion are do ne accor ding to forestr y standa rds, that stream crossings, for example, where they have to build an access road or meet environment guidelines, proper culvert signs, those kinds of things. The Acting Chairman (Mr . Helwer): Are there any more questions pertaining to the map? No, just a minu te, I asked you if there are any more questions pertaining to the map. Is this pertaining to the map, Mr. Angus? Mr. Angus: Mr.

Acting Chair person, there may in fact be questions that are related to the map, but we can certainly ask the Minis ter to hold it up again. He does not have to stand there and hold it if that is your the specifics. Mr. Man ness: If there are a series of questions, I will hold it. Mr. Angus: There are a number of questions that relate to people such as the Channel Lake Loggers and those types of thi ngs. Mr. Plohman: The Acting Chairman has let this get out of hand here. Mr. Angus: I will turn it back to Mr. Plohman then, if he is upset about that.

I do not have any specific questions about the map at this particular time. Mr. Plohman: I asked earlier, but the Minis ter did not answer, whether he has allocated any annual allowable cuts through this deal of softwoods in that area. An Honour able Member: In the southern where? Mr. Plohman: In the mountain forest areas, the extension area of the cutting area. The lnterlake, there is some, I guess, as well. Mr. Bessey: Right, in the total southern area there is non-allo cated softwood resou rce of about 10 0,000 cubic metres a year. Mr. Plohman: That unallocated, Mr.

Acting Chairman , as a result of a change in ownership, some of the existing mills, are some of them going out of business because- Mr. Bessey: lt had never been allocated. Mr. Plohman: I will just leave that. lt was clear a year ago that all of the softwood allocation annu al allowable cut ha d been allo cated tha t was acces sible and marketable, in that area. Mr.

Acting Chairman, I just want to ask the Minister further, regarding this whole area of major expansion into an area that was expecting to receive a very different project in very short time, what steps has he taken under this agreement to maxim ize and ensure

Tuesday, March 28, 19 89 benefits to local operators and residents of the area, the local mill operators now, the woodcutters in the area? What benefits, special benefits, will they get under this agreement now that this major resource has been allocated to a major company? Mr. Manness: I can tell the Member, indeed, if he wants to verify this on his conversation with princi pals from Repap. They prefer not to harvest their own wood, they pr efer not to sink in in vest ment in to the capital necessary to harvest.

As a matter of fact, all of the compan ies that we dealt with sensed that their greater profitabili ty would come, no doubt, from ind ividuals who are prepared to provide wood as entrepreneurs to their comp any. Repap is no different than any other, to the extent that there are operations out there, operators who are prepared to harvest and even transport wood to the door of Repap. There is great opportun ity, incredible oppor tun ity, through that whole area. That is the extent that can occur . Again, Mr.

Acting Chairman , I say to you, with respect to the development within the mountain region, it was an either/or option. We had chose the highest value use because, in our view, the OSB facility was one in concept, but was one which had some considerable distance to go before it came into being real. The Acting Chairman (Mr. Helwer): Mr. Minenko had his hand up first, Mr. Plohman. Mr. Plohman: Well, I wanted to ask a question, Mr. Acting Chairman, on this issue. * (11 10) Mr. Minenko: I am sure Mr.

Plohman, in the spirit of cooperation, would certainly be prepared to yield the floor for a few minu tes seeing we started about ten o'clock. I am sur e Mr. Plohman, in the spirit of cooperation, would certainly be prepared to yield the floor for a few min utes, seeing we started about ten o'clock.

With respect to the harvesting policy that the Min ister just alluded to, one of the concerns that was raised to myself as well as other Members of our caucus who spent some time up in northern Mani toba in Janu ary, was th at in some loca tions the Government had allocated a quota as to what would be allowed by a particular individual or group to be cut. Yet these people advised us they were prepared, willing and able and ready to carry on that cut, except that Manfor never really came around to actually purcha se that wood and make the final arrangements.

I am just wondering if the Minis ter could advise us as to how this particular problem would be addressed and perhaps seeing that the Min ister responsi ble for Manfor (Mr. Ernst) is not here today, if the Min ister could possi bly advise us: (1) about that Government policy; and (2) whether these same circums tances can be expected by ind ividuals who have in the past and perhaps in the future will be allocated certain quotas, and yet are not able to harvest and earn additiona l funds for themselves because the end user, the user of that product chooses not to go into that area. 15 8 Mr. Manness: Mr .

Acting Chairman , I can give you the general answer to tho se questions. Ob viously, all of the wood that had been allocated in a quota sense to suppl iers was not brought forward because there were negative margins on the product. The more wood that was run through that plant, the more money that was lost over the last numb er of years.

So consequently, managem ent, and probably sup ported by the Government, has said, we will take the amount of wood necessary to maintain the faci li ty, maintain the employment, but there is no way we are going to take delivery of all the product that we could, the input, because of course it would just, given the negative margins in place, represent a greater loss on the balance sheet. Now that is where we were. Where we are going is the requirement for three times the amount of wood supplied.

I have been told by Repap, not only will they need the fu ll amount that has been allocated to these operators who supply wood, but in cases where they or other operators are prepared to provide to the company larger amounts by whatever process is in place for them to gain that allocation, they need that wood. They are preferring a supply situation to them, a tenure whereby the individuals who supply the wood are their own entrepreneurs. The Acting Chairman (Mr. Helwer): Does Mr. Plohman have a couple of questions to finish his questioning? Mr. Plohma n: Mr.

Acting Chairman, I just want to draw the Minist er's attention tha t he contin ues to talk about up to, now he is saying there could be more, but his announc ement said up to 250 jobs in Swan River. I want to ask the Minis ter whether he can say categorically that these are all new jobs or whether th ese are some exis ting operators tha t would be supplying some timb er to the chipping facility at Swan River? Mr. Manness: lt depends how one defines jobs.

I would sup pose if Repap owned all of the activity from the harvesting onward , but in the sense that they are individual proprietors who come forward and are cutting a small area, now have an opportunity to cut and supply wood from a larger area, then that number would be included. There is still the economic activity associated with 250 new jobs and growing beyond that. Mr. Plohman: So, Mr. Acting Chairman, just to clarify, these may or may not be new jobs that we are talking about. Some of them may exist, to a certain extent, already in the local indus try that is there. Mr.

Manness: An ind ividual is cutting an area of wood today and that expands tenfold, then obviously that ind ividual is going to need to hire indi viduals to do that work. So obviously that is what we are talking about. Those are new jobs. Now, whether they are new jobs under the payroll of Repap or they are new jobs under the payroll of an existing operator who is going to expand his operation manyfold, just to me is academic. Mr. Plohman: Ok ay, just to follow up on that and to remind the Min ister as well that he is comparing 350

Tuesday, March 28, 1989 to 450, the figure that was the estima te when we were involved in the discussions for an OSB plant in Swan River versus 250 jobs, so when he is talking about a project he should keep that in mind. The other thing that is evident from the Min ister's sta tements is that he has sacrific ed jobs in the Parklands Region for what he says is greater processing or value added in other areas of the province.

I want him to clarify that as to what degree there is a greater processing from -a nd jobs therefore, and value added for the province as a result of the pulp and paper industry versus the oriented strand board and how much of that will be done in Manitoba and how much, if any, will be done in the Wisconsin plant of Repap. Mr. Manness: Mr. Acting Chairman, I will ask Mr. Bessey to answer that, but let me say firstly that all of the product from Swan, hardwoods, all of it is going to have to move north for processing into pulp.

No part of it can go to Mid-Tech in Wisconsin until after it has gone through the pulp process, so every part of it is going to go- An Honour able Memb er: Partially processed. Mr. Man ness: Well, most of the product, as we have indic ated in the annou ncement, until you have a paper machine there, virtually all of that product is going to go out in pulp form to somewhere, until there is a paper machine there, and as Mr.

Petty ind icated in his anno uncement in The Pas and the Swan, that is the uncommit ted Phase Ill of this whole process, having access to reasonable power, given the changes within the dynamic s of his own compa ny, that he can foresee by the end of the decade or sooner, provision for a numb er of paper machines. But let me not go off on that point. I guess the point we make is the value added and strandboard , I understand, is selling for-w e do not have these num bers on the top of our head, but I thought strand board was selling roughly in the area of $15 0 to $200 a tonne,

whereas pulp is selling a factor three or four times that. Mr. Plohman: The Min ister has talked about no market and, of course, he knows that the oriented strand board has been taking the pla ce of pl ywood in hous e construc tion and various construction requirements. Over the last num ber of years there has been a rather phenomenal growth in its use so I would like the Mini ster to provide information that would demonstrate that there is no market for this product.

As he sai d, his words, "no market" and I would like to ask him as well whether he can state categorically that the federal officials had ind icated to him that there was no federal funding available for this project, as he has indic ated that there was no fJ.mding available and, in fact, whether they had ind icated as well that there was no market and no way they could provide assistance to this project. Mr. Manness: Mr. Acting Chairman, at no time did I say there was no federal funding in place. I said that there was no total project financing. I did not see where it was in place.

As far as the federal Government, I will let them make their own pronounc ements specific to this project. lt is not for me to speak on behalf of 159 the federal Government. My references to financing were the whole project. The views of the federal Government on the OSB, the potential and all that, they will have to speak for themselves. All I know is that the Government of Manitoba had to make a judgment call at a point in time and did so. Mr. Acting Chairman, agai n, when I say there was no market, there is always a market at a price.

When I say there is no market, I am saying at a viable return to all the people who invested, and the Member says no. All I can tell him is tha t there was not a buyer, that there was not a person that I have not spoken to in this indus try, not all of them buyers, the people that we encountered along the way, that I did not ask that question to them, what is the future of the OSB indus try in this count ry. All of them said that if you are prepared to wait a long time, if you are prepared to sink in a lot of money, shore it up, continue shoring it up for a period of time, that ultimately there may be a place.

But what was happening today was that those major compan ies, Weyerhaeuser, MacMil lan Bloedel, and so on and so for th, that all had these plants, they could not spin them off quickly enough. They were giving them away. * (112 0) Mr. Plohman: Modern technology. Mr. Manne ss: Modern technology. The Member talks about modern technology. Weyerhaueser has the two most modern plants going virtually in Alberta. They do not use 450 people, I say to Mr. Plohman, many hundreds less. And yet, talking to Mr. McGinn is, what has happ ened, they are- Mr. Plohman: Forestry jobs. Mr.

Manne ss: Well, the Member now is saying to heck with economics. Now you are talking about forestry jobs. Mr. Plohman: I said the forestry jobs as well. Mr. Man ness: Mr. Acting Chairman, I am tal king about total , total harvesting right through the process. The fact of the matter is that today there is no viabili ty associated with them. Now maybe the Member can make a point that 10 years from now there may be. If he can see that well into the future, then I will listen to his argument.

But, at this point in time, given the circums tanc es, the Government had no alternative but to change the configuration of the cut and did not proceed, and to provide a guarantee, finally a guarantee to the 850 existing jobs in The Pas and the district area, plus the up to 300 new jobs in the Swan River area, that this represented a major initia tive and one the Government on behalf of the people of the province should enter into. Mr. Minenk o: Mr.

Acting Chairman, just to follow up my earlier question to the Min ister, can I then take from his comments that it is really an open field day in northern Man itoba with respect to people providing

Tuesday, March 28, 19 89 lumb er to Repap in the futur e? Can an entrepreneur of whatever sort then expect to receive a quota from the Government as to how much they can cut, or is that quota determined by Repap? Mr. Manness: Mr. Acting Chairman, I will let Mr. Bessey answer this question. Mr. Bessey: Primarily the people who have quotas there presently are in areas where there are yet allocated quota holders. What happens in a share purchase agreement is that you have essentially grandf athered rights so that the purchaser inherits the supply contracts that Manfor existed with.

So all those indi viduals who have been in this industry will have a tremendous opportun ity not only to continu e, but to expand the volumes with which they have suppl ied Man for. There are some, you might say special arrangements, that Manfor had with areas like the Moose Lake Band. Those survived the agreement, in essence, and they become transactions of the purchasers. Those contracts exist in the same fashion as they did pri or. In the new area, people who have quotas now conti nue to have those quotas. If the y choose to produce lumber or if they choose to supply Repap, they can do that.

In the area which was unallocated, in essence, that was sitting idle and that Repap has harvesting rights to new, either people with quotas who want to expand into that area, can have those rights or new entrepreneurs can develop businesses in those areas. Mr. Minenko: So then a group of people or an individual who had been in the past allocated quota rights, but who for whatever reasons Manfor did not purcha se from them, what are their circums tanc es? How do they fit in? Can they then bid to supply wood to Repap or are they restricted by these people who are allowed the grandf athering? Mr.

Bessey: The survivor rights apply to all enterprises that were quota holders, so nob ody loses out. The extent to which there was no body operating in the unallo cated areas, which are now allocated, anyone with the means, experience and equi pment can development new enterprises in those areas. Mr. Minenko: I have a series of other questions, having waited for my honourable friends across the table. I had earlier asked the Min ister on a point of order.

Seemingly from his comments about an hour and a half, an hour and 45 minu tes ago, he seemed to have suggested that perhaps due to a numb er of factors that he had cited that it would seem to suggest that the Government was prepared to allow Manfor to slowly disappear into the woodwork should Repap have not come onto stream. I am just wondering if the Min ister could comment on that particular suggestion that one could reach from a numb er of the Mini ster's comments. Mr. Manness: Mr. Acting Chairman, let the record show that those are the words of the Member, Mr. Minenko.

Fi rst of all, we went to the people of the province sayi ng that we wanted to divest of Manfor. We believe that we had the manda te to do so. We had six offers hard, firm, serious offers-and so whatever hypothesis 160 that the Member wants to put into place or supposition really is not terribly in order because it never was considered for a moment. We did not need to consider that because we had hard proposals before us. Mr. Minenko: Mr. Acting Chairma n , I would like to just swing over a little bit with respect to the development in Swan Riv er.

Will the employees that the Min ister seems to suggest will be employed in that area require any special skills that are not presently available? Mr. Manness: Mr. Acting Chairman, I think that there are some special skills required to harvest wood. I think there are special skills required to transpor t these big rigs, special skills involved in the chipping and also in the forest management aspect that is going to be centered there- all special skills. Mr.

Minenko: Has the Government then done an assessment in the area to ensure that the people who presently live in that area can in fact take advantage of the new job opportu nit ies, or will the employer end up having to bring people in from other provinces or other count ries to carry out the new jobs? * (1 130) Mr. Manne ss: Well, Mr . Acting Chairman, it is obvious that the natural advantage always appl ies to those who live near or close by. That is the first natural advantage. Secondly, as the Member knows, and under the Charter of Rights in this country, you can no longer specify as to who is given jobs.

I mean this is a nation and mobility is in place. Certain ly, we have made it known to Repap that we will expect through the natural advantage that our citizens have because of their location, plus an infusion of $20 million of training money and retrai ning mon ey, tha t our citizens will have obviously the first opportun ity and the best opportunit y to supply those jobs. But other than locking into agreement something which I would probabl y-! am sure the Courts would find ultra vires, and tha t is that nobody else, other than a Manitoban, and a Northern Man itoban be hired.

I believe that we have built in all the safeguards that we could. Mr. Minenko: Well, Mr. Acting Chairman, I think in order to engage in any form of retraining one certainly has to know what your working at and what you are working towards. And, again, I would like to ask the Min ister has the Go vernment done an evalua tion of the available skills in the area? Mr. Manness: Mr.

Acting Chairman, when you talk about the skills in the area, all I can say is that Repap did their own research into the Swan River area, and I think you prefaced your question cantering around Swan , and I can tell you that they were very very much impr essed with the sta bility of the work force and were just delighted to be able to put a major subset of this development within that area. So, Mr. Acting Chairman , I can tell you that Swan River has an awful lot going for it. Repap recognized that and was more than eager to, again, direct a

Tuesday, March 28, 1989 sign ificant part of the investment not only to the region but, more impor tant ly, as their belief that in the long run the contribution tha t they receive from the workplace will be strong and add to their profits. (Mr. Chairman in the Chair.) Mr. Mi nenko: The $20 mi lli on tha t the Min ister mentioned , is that Government money for retraining for the whole region, or has it been divided into how much will go into any particular area of this development through the sale? Mr. Man ness: Mr.

Chairman, that is all Repap's money jointly adminis tered by the company and the Province of Manitoba. Mr. Mi nenko: So is there any Gov ernment money in that $20 million? Mr. Manness: I will make myself clear-all Repap money. Mr.

Minenko: I would certainly think that a Government that certainly prided itself before last year's election and certainly I believe still pri des itself on management skills and things of that nature, being able to better direct the economy than the previous Government, I would say I am a little concerned in that it certainly appears from the Min ister's comments that, one, there has not been any -(Int erjection)- The Min ister says there is a natural advantage to being there and that is all well and good, but I am sure any literature that the Min ister or any Member or anyone would read on jobs and ensuring that people are employed to the best of their capabil ities inclu des a very major component of actually

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Collection	Manitoba — Debates (Hansard)
Citation	34-1-ed9
Type	hansard
Volume / chapter	34th 1st hansardpdf ed9.pdf
Language	en
Format	pdf
Source	PROVINCIAL
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