Resource Committee — Department of Mines and Energy — 12 May 1998

1998-05-12

Newfoundland and Labrador — Committees

May 12, 1998

RESOURCE ESTIMATES COMMITTEE

The Committee met at 9:00 a.m. in the House of

Assembly.

CHAIR (Canning): Welcome to the Resource

Committee hearing for the Estimates for the Department of Mines and Energy.

Before we get into the business at hand today I

would ask for - I think everybody has a copy of the minutes from the last

meeting. I notice that Anna Thistle's name was left off the list of those who

attended. We have a motion to accept the minutes with the amendment to add Ms

Thistle's name.

On motion, minutes, as amended, adopted as

circulated.

CHAIR: Good morning, Minister. Perhaps you

might want to have a few comments before we get into the review of your

Estimates.

MR. FUREY: Perhaps, just for my staff's sake,

we could introduce all of the members for some of the staff over here and then I

will ask the staff to introduce themselves. Percy, why don't you just start,

introduce yourself and your district, and come along, for the benefit of the

people who are brought here this morning?

MR. BARRETT: Percy Barrett, MHA for Bellevue.

MR. FITZGERALD: Roger Fitzgerald, MHA for

Bonavista South.

MR. SHELLEY: Paul Shelley, MHA for Baie Verte.

MS THISTLE: Anna Thistle, MHA for Grand Falls -

Buchans.

MR. WOODFORD: Rick Woodford, MHA for Humber

Valley.

MR. T. OSBORNE: Tom Osborne, MHA for St. John's

South.

MR. FUREY: Good. If I could, Mr. Chairman, I

will ask each of the people seated here with me to introduce themselves and to

just briefly describe their position.

MR. MORRISSEY: My name is Ferd Morrissey; I am

the Director of Mineral Development.

MR. BLACKWOOD: Frank Blackwood, Director of

Geological Survey.

MR. HAWKINS: Dave Hawkins, Director of

Petroleum Resource Development.

MR. LESTER: Charlie Lester, Director of Policy,

Planning and Co-ordination.

MS LAING: Tara Laing, Director of

Communications.

MR. FUREY: Thank you.

I just have a brief statement. I do not usually do

statements but I wanted to highlight some of the things that are happening in

this department, if I could, briefly.

This department represents basically a $9 million

budget which, if you put it in the context of the global budget of the Province,

represents three-tenths of 1 per cent of the entire budget. The expectations

from this department are probably around 80 per cent, but the means to deliver

on those expectations are quite small. There is three-tenths of 1 per cent of

the $3.3 billion that we spend in this Province, which is about $9 million

dollars for the department.

As you know, we are responsible for the management

of the Province's mineral and energy resources. The mandate, we believe, is a

timely mandate: the development of projects that we see that are coming forward.

We are attempting to achieve the highest level of employment for the people of

the Province, and to develop the greatest range of opportunities for businessmen

and women from all parts of the Province.

The department's mission is to create an integrated

mining and energy industry to maximize revenues and to maximize benefits,

basically. The long-term goal for the Department of Mines and Energy is to

develop a comprehensive public policy framework which will govern mining,

petroleum, and electricity for the Province well into the millennium. This will

include a series of policies which respects the development and management of

all mineral resources, offshore and onshore petroleum resources, hydro

resources, and alternate energy resources. The policies that we will create will

be reflected in the relevant governing legislation, through the acts that we are

responsible for here in the House of Assembly.

What is the current situation? The current

situation with respect to the total value of the mining sector, the mineral

production, is that it will exceed $1 billion in exported value this year, a 1

per cent increase over last year. We have crossed the $1 billion mark, I think,

Frank, for the second year in a row. I think this is mainly due - we have to be

up front and honest about it - it is mainly driven off the iron ore exports out

of Labrador City, that the Chairman would be very familiar with.

Employment in the mining sector remains fairly

stable. The direct jobs account for about 3,400 direct jobs. Then there are

spin-offs, of course, and depending upon which economist you talk to it is

anywhere from two to three to four to one.

The energy sector, as represented by your barrels

there this morning, reached a major milestone in 1997 when Newfoundland and

Labrador join the petroleum states and countries and other provinces of the

world as an oil producer. It was quite a feat which happened on November 17,

1997, roughly a month ahead of schedule.

Hibernia oil production is expected this current

fiscal year to average about 60,000 barrels per day. By early next year it will

ramp up to 100,000 barrels a day, and that may even occur later this year. As

you know, over the life of it, the peak up output will be roughly 180,000

barrels a day and that field, the Hibernia field itself, the original economics

were driven off 650 million barrels. The companies themselves now have increased

that by 100 million. Our own department believes there is a billion recoverable

barrels of oil in the (inaudible) basin, in the area known as Hibernia.

The announcement this past February that Terra Nova

Consortium was proceeding with Terra Nova, a development, we think is another

critical step in the development of a sustainable petroleum industry in the

Province; because we have moved from just being a project, and being seen by the

outside world as project, to a series of projects which now can be created and

called with substance in industry. In fact, in our visit to Houston just last

week, and meeting after meeting with CEO after CEO, everybody talked about

Newfoundland very glowingly, but also as the new North Sea. That is quite a

compliment to be paid to us because, as you know, the North Sea was developed

some twenty-five or thirty years ago. It just started with one small well and

rippled out to a second one and a third one; then it became a burgeoning,

booming industry that just changed the entire economy and social fabric of

Norway, on the northern side of Norway in particular.

People talking about Newfoundland as the new North

Sea is quite encouraging. They are looking at this place as a good place to

invest, and there is a whole series of reasons for that: There is a positive

climate; there is a positive attitude; it is a friendly place to do business;

the generic royalty regime gives certainty to industry, so it reduces risk;

industry, business and capital (inaudible) and will move where there is

certainty.

You are starting to see some funny things, for

example, happen in South East Asia now. People who put lots of investment in

Indonesia, as an example, are starting to get that money out of there because of

the turmoil and uncertainty and the disruption that is happening there on a

daily basis. Well, they like Newfoundland and Labrador. It is certain; the rules

are fair; the royalty regimes are in place. They like certainty and clarity, and

that is what they have and that is what they enjoy, and that is why they are

coming here to invest. I will speak a little bit later about some of the parcels

of land that are out there for bids this year and the excitement that is

swirling around that right now.

I think we are moving in the right direction on the

mining side and on the oil and gas side, and I think these sectors represent a

important part of the GDP growth that we are seeing forecasted again today in

The Globe and Mail by the Bank of Montreal. They are saying Newfoundland and

Labrador and Ontario will lead the economies. I think they are projecting 4.4

per cent of GDP real growth happening this year, and another 4.2 per cent next

year in Newfoundland and Labrador, and 2.9 per cent in Ontario. All of these

projects as they roll out, as this capital has invested, will augur well, I

think, for an expansion in the economy, and for growth and for job

opportunities.

I am optimistic about the future in these

developments. There are a number of hurdles with respect to Voisey's Bay which

are still troubling for me. I think we are starting to see a positive path

opening up. I think the companies are starting to see and take quite seriously

the government's deep resolve to maximize benefits and to adhere closely to the

legislation; in particular the Mineral Act amendments of 1995,

section 4 I

think, which allows for maximum development of the resource and value-adding

through processing. They are taking that quite seriously.

The discussions have gone very well. The president

has now entered those discussions with our chief negotiator, and we are talking

quite seriously about how to get this done in a way that is fair, not only to

the shareholders of Inco, but fair, reasonable and decent to the shareholders of

Newfoundland and Labrador who own that resource, and who are giving Inco the

privilege to develop it.

As I reported to you last year, by 2000 then we

expect that both Hibernia and Terra Nova, and Voisey's Bay and a number of other

projects, will be ratcheting up and moving forward through the construction

phrases. Not Hibernia, but Terra Nova and Voisey's Bay will be moving through

the construction phases.

We are proposing also in this department some major

changes with respect to how we do things in the mining and offshore oil and gas

sectors. We will be implementing a new mining tax. Basically the work is pretty

well done on the mining tax. I have not made the mining tax public for one very

simple reason. We are still in negotiations with Inco, and I am not prepared to

put our cards on the table and show them our cards until I see all of their

cards. It is just as simple as that. It is no more difficult to understand than

that.

I could put it on the table, I could fix it in law,

and we could have no room to be flexible in the aftermath, but I want to see all

of Inco's cards, everything that they are putting on the table, and then I will

put our tax policy on the table. It is not much different, I can tell members of

the House, than the Bill 43 that was tabled. There are some slight variations

but there is no change basically in the amount of capital that would be

collected in revenue sources for the Province. There are some changes that are

favourable to the company, that recognize the peaks and valleys and the vagaries

of the London Metal Exchange which controls the price of these commodities. In

essence, at the end of the day, the collection is not altered very much.

That is as much as I will say about the tax right

now until we move further down the path on our set of strategic negotiations

with Inco, but I am quite prepared to table it at the appropriate time. All the

work has been done. We have reached out to some terrific economists, both in the

U.S. and in Canada, and some academic people in central Ontario who are very

familiar with taxation in the mining industry. We have put their brains around

our thinking. All of them have come to the consensus that what we are putting

forward is both fair and reasonable to the company and to the Province. I am not

too concerned about that, but I wanted to just give you a heads-up that that

taxation stuff is pretty well done and I am ready to bring it forward in

legislation through the Department of Finance fairly quickly, depending upon the

pace of the negotiations with Inco.

There is a new mining act which will govern all

phases of mineral development. Essentially that is bringing together all of the

pieces of how we conduct and deal with mining generally in the Province under

one comprehensive act now, rather than have loose ends everywhere. We are

pulling it together in a streamlined, very clear and narrow act.

We are going to amend the Quarry Materials Act.

That is to deal with offenders. The fines are so small now that as people abuse

quarries - and sometimes, I am told, people actually put the fine in their bids.

So that they actually win a bid, and then they go out and take the quarry

materials. They have the $1,000 built into the bid so that when they get caught

and the courts nail them, it is already factored into the economics of their

bid. We are going to toughen that up. It is going to be up to $10,000 for a

first-time - who helped me write this? Ten thousand dollars per fine now, is it,

Mr. Andrews?

MR. ANDREWS: (Inaudible).

MR. FUREY: We are going to go after the repeat

offenders too, as I understand it.

WITNESS: (Inaudible).

MR. FUREY: Right. There are amendments to the

Mineral Act to deal with the staking rush to stop the line-ups down at my

building every year, and to give fairness to people who live in rural and

isolated areas. That will be done on a lottery basis - I love that word, lottery

- rather than on a line-up basis.

I do not know if you see it every year, but you

probably see people lining up in the cold twenty-four hours a day down outside

my building. They are lining up to be first in line for when these pieces become

available to get in on it. What we are going to do is stop those line-ups.

People who want a particular piece of property and want a permit can apply for

it. If there is more than one there will be a lottery, a public draw for that

piece of property. We think that is fair. Because the people who live, say, in

Baie Verte or Northern Labrador or wherever can not come in here and spend all

that money and time and effort to get in. It is just not fair. The person who

lives across from my building has an advantage, is the point, so we are going to

change that.

There is a development of a geo-science policy

way on. Frank Blackwood here, by the way, has led the way with the Government of

Canada on a lot of this work. I saw it at the last mining show, which is the

largest, as you know, in the world, the prospectors and developers conference in

Toronto. Absolutely fascinating, first-rate. The work that he is doing, which I

will ask him to talk about a little later, is really leading edge stuff, and we

are leading the way in the country. Say yes, Mr. Blackwood.

MR. BLACKWOOD: Thank you.

MR. FUREY: We are going to come up with a

development of a comprehensive mineral policy for the Province as well.

With respect to the energy sector, negotiations for

the agreements on the Lower Churchill are proceeding. We want to maximize the

return and benefits to the Province. I will be announcing today in the House -

and I will give you a copy of this later, Mr. Shelley - the first of three

contracts for the Lower Churchill. We have to start the environmental scoping

work right away. These will be given to three companies that have headquarters

in Newfoundland. I will be calling for three engineering studies to be

completed. Calls have gone out. We will be awarding those probably in the next

couple of weeks as well. There will be about six contracts let for the Lower

Churchill in the next couple of weeks. I will announce three today.

Then in the fall we are going to have the

definition of what the project looks like in terms of final costs and stuff, and

then we move into high gear. I will talk a little bit about that later, if you

want, as well.

The generic royalty regime I touched on. We are

finalizing the fiscal agreements with the Terra Nova partners. You know that

Bull Arm will be reactivated. There is a $100 million contract going out there.

I just had some great meetings with J.L. Holloway, the man who I brought to the

Province two years ago, when I was Minister of Industry, Trade and Technology to

have a look at Marystown, and who subsequently bought it for a dollar. It was

the best dollar we ever spent. We saved ourselves $5 million every year. You

recall there was an annual loss at the yard of $5 million per year on average

for the last thirty years.

We stopped the bleeding, passed it to the private

sector. He has taken it from 300 employees up to 1,000. He is hiring another 200

in the next two weeks. He has got an order book that he is coming to the

Province to announce in August. He will be announcing 300,000 man hours in the

next two or three weeks, and in August another 400,000. Then he has the patent

on these specialized legs for semi-submersibles that he wants to bring into

Marystown and make it a specialist area for it. He is going to take the

workforce up to 1,200.

The unions as you know, have signed on to a profit

sharing agreement for five years. Burin Peninsula, they tell me, is just

hopping. Mr. Barrett, you have been down there recently. It is bopping and

hopping, people are happy, good attitude, morale is up. It is fabulous. One of

the best things we ever did as a government was privatize. Take that yard out of

the public sector and privatize it. I know my good friend for St. John's South,

my member, would agree with me that it is the best thing to do, to take business

out of government. Government has no business in business. We should be out of

it.

I understand the Dockyard is doing very well. I had

a meeting when I was in Houston with one of the people down there who tells me

that it is up to 300 people now. That is great.

WITNESS: (Inaudible).

MR. FUREY: Yes, and we have to do that. By the

way, I should talk to you about another person I met down there. We should talk

after, actually, because there is another great project, but they are getting

screwed around by Marine Atlantic down there on land. You remind me to talk to

you about it in private sometime later today. Maybe we can work on that

together.

The other area is the promotion of exploration and

development. I mentioned earlier that the C-NOPB - which is a creature that is

just went out for its largest call ever. Thirteen parcels of land. I think it

represents 800,000 hectares, which is the largest piece of land bids we have

ever gone out for, and we expect those bids will be closed by September. There

is already expressions of interest coming from all around the world, from

companies we did not expect to show up on our doorstep. They are showing up,

they are sniffing, they are having a look, and we expect those will go for

probably record sums again this year. You know last year the four parcels went

for $99 million. That is quite a chunk of change. We expect a lot of excitement

out there as well. It is all driven off the generic royalty regime and

certainty. That is what business likes.

I can talk a little bit about the disputed area on

the Newfoundland-Nova Scotia boundary later if you would like. That is a very

interesting and vexing problem for us. The problem really stems from Nova Scotia

arbitrarily drawing a line when they created the so-called C-NSOPB, Canada-Nova

Scotia Offshore Petroleum Board. They arbitrarily drew a line down through the

St. Pierre Bank right out to the 200-mile limit. The line makes no sense in law.

It is completely idiotic when you look at maritime law, but they have set it in

their legislation, which I guess is mirrored, isn't it, David? Their

legislation, C-NSOPB, would have to go through the parliament of Nova Scotia,

much like ours here.

They have a law over there that has created a line

which we believe is illegal. I will tell you a little bit about why it is so

important after. It is quite fascinating. I had some meetings when I was in

Houston with the senior executives of Gulf who came down from Denver to meet

with the Premier and I. If you just remind me after I will come back to it and

tell you why it is so important, especially if there is no press here.

We are going to move forward then with an

electricity energy policy as well. It is stated in the EPCA, of course, which is

in legislation, we are mandated to provide the cheapest form of electricity we

can to the consumer, both business and domestic. I will talk a little bit about

that as well, particularly as it relates to what is available left on the Island

for river or hydro power. Mr. Langdon and I have been looking at this issue for

some time and there are not many rivers left that really can be harnessed for

power. There are about four or five in the hopper now. We are going to look at a

policy that protects the rivers into the future. Those that are in now will

probably be grandfathered, and if they make it through the environmental

assessment and through the regulatory bodies, then they may get developed.

Somebody raised Northwest River the other day as an

example, the one skirting through the Park. That has major hoops to get through.

Does it skirt the Park or go through the Park? Through the Park. That is going

to be a tough one, to go through a national park and set up a hydro-electricity

project for the amount of power. I am not going to pre-judge it, nor should we,

because of the investment these people have put in, which is real money and it

is private sector, but if those that are in hopper - and there are about four or

five of them - make sense they will probably go through.

We are looking at a policy to protect the rest of

the rivers, simply because there is only about 150 megawatts of clean hydro

power left in the Province. When you take out Granite Canal, which is forty-five

megawatts, and you take out Upper Island Pond, which is about thirty megawatts,

which are both owned by Newfoundland Hydro, that is seventy-five megawatts - and

set it aside -, those are fair sized projects. There is really only seventy-five

megawatts of realistic, able to be harnessed hydro power left in the Province

anyway. Those are the four or five rivers, like Torrent River, which the member

from Deer Lake is familiar with, which is about thirty-five megawatts of power,

and some others on the South Coast, and Northwest Arm and some of these others.

When you put those in the hopper, if they make it

through, fine, but we are going to look at a policy to set the record clear that

there will be no more development of these rivers. That is a policy that we are

working on now, and I would rather not articulate it in a public fashion until

we hammer it out and get it straightened away in our own minds.

The last issue is this business of climate change -

and I can talk a little bit about that, too, if you want - that is the so-called

Kyoto Accord which commits Canada to reducing its greenhouse gases to 6 per cent

below the 1990 levels by the year 2010. Charlie has done most of the

negotiations at the officials level at the Kyoto table for Newfoundland in the

Canadian context, and in the global context. That is a very significant one. It

is not one that I think will grow too many teeth simply because of the US

position. The US position, if they sign on to this, means a rapid closure of

particularly coal-fired power plants. As you know, 62 per cent of the US is

driven off coal. That is their energy source, and it is probably one of the

dirtiest forms of energy, one of the highest pollutants, and one of the biggest

problems with respect to the greenhouse gas emission problem, as are cars and

vehicles.

California is cleaning up their act, I see, and

some other states, but these are state laws. If the US does not buy into the

Kyoto Accord, does not sign on and does not grow teeth to give effect to it,

then Canada is not going to be putting itself in a non-competitive position by

increasing our energy costs to have a clean environment so as to make ourselves

non-competitive so we can all sit in a nice park in Canada with nobody employed.

I am being a bit facetious but that is the long-term view.

Now there are other views, that if Al Gore comes in

as Vice-President, Mr. Environment, that he may grow teeth in this accord and

force it to happen. If that happens, of course, the value of the Lower Churchill

quadruples, particularly the emission credits. Anyway, that's another story.

Let me conclude, Mr. Chairman, by saying that we

have a small budget of $9 million, which is not very much, to promote some of

the biggest projects in North America, if not in the world. I predict there will

be $18 billion to $20 billion over the next six to seven years, (inaudible) to

seven years, spent in this Province on major projects. What are they? Terra

Nova, which is $4.5 billion. I think you will see White Rose coming on stream in

that time period, which is about $2.2 billion. You will see the Hebron field

coming on stream, which we thought was 195 million barrels of oil; but if you

look at Chevron's comments in the paper today, from the president, that 195

million is ratchet up to a potential 600 million barrels of oil.

Remember Hibernia; the economics that drove

Hibernia were driven off 650 million barrels of oil. That is 50 million short of

Hibernia. If that holds, and their seismic work and stuff shows that there are

some huge, interesting cavities and basins in that field now that they did not

know about before, if that holds, that is a huge project. That is not the

billion dollar project we thought it was; that is probably a $3 billion project

or a $4 billion project.

Then, of course, Voisey's Bay, which we think the

agreements will conclude in the next short while, that is a $3 billion project.

Finally, of course, the Lower Churchill, which on the low side is a $7.5 billion

project and on the high side is an $11 billion project.

So we have a lot of work ahead of us, a lot of

exciting things ahead of us, a lot to do with a small budget, and sometimes I -

you know, in the department we push hard. Sometimes we have to back off a little

bit because we don't have the budgets for the overtime that we would like to

have, and we don't have the budgets for the consultants that we do need. A lot

of management people sitting here - and I have said this to them privately

before - spend a lot of time, a lot of countless hours, that we do not have the

overtime for, but they really do believe in the Province. They believe in their

jobs and they love what they are doing. I feel so fortunate to be able to work

with such a competent and technically superior team that, when I go to

Ministerial Conferences, the Province shines because of these guys.

CHAIR: Thank you, Minister.

Before we go to questions and comments, I would

just like to say that when members of your staff (inaudible).

MR. SHELLEY: Thank you, Mr. Chairman.

First of all, Minister, I have no problem agreeing

with you on your staff because I do ask many questions, especially to Mr. Dean

who is not here today - and, of course, Ferd and so on - being from a mining

community; not only that, I guess, but as the mining critic and watching things

as they flow out.

I do agree with you on one other thing, too, along

with the three things you just mentioned which I put at the top: Voisey's Bay,

the oil industry, and the Lower Churchill. They are the three huge mega-projects

which, if done right and the process unfolds as it should, should be - I guess,

to get down to it - the answer to Newfoundland and Labrador. It is as simple as

that.

I have no problem in saying either that as far as

the mining industry goes, long before I ever entered politics, watching things

in the mining industry, I have always been interested in it. Growing up around

it, I have always believed it could be a very significant part of this economy,

bigger than it is now. Of course, then Voisey's Bay came on stream; but, besides

Voisey's Bay, I really believe that the Island portion of the Province has a

great potential also, which leads into the first question or comment on

exploration. Instead of just listing out a bunch of things - well, maybe I will

list out a few things and then I will come back and get a few answers from you

in general, and then we will go into some estimates maybe.

Exploration, that is where it all has to start. If

you don't start with exploration, you don't get your Voisey's Bays or anything

else. I know you didn't make a lot of comments on the exploration potential for

this summer. I would like to get a general comment for the Island portion, not

so much for Voisey's Bay. I have been following that as much as I can. I met

with Mr. Gendron just a few weeks ago and pretty well got an update on that, but

I would like to know for the Island portion on exploration. Specifically, I will

mention one right now - well, the whole Baie Verte Peninsula, of course, and

also the Green Bay area - Rio. I would like to get an update. I don't know the

whole name of the company, but I know their nickname, `Rio'. I think you know

what I am talking about. So, if we can get an update on -

MR. FUREY: What is the name of it again?

MR. SHELLEY: Rio. There is a longer name to it.

They are doing the Rendell Jackman property near Springdale.

MR. ANDREWS: Rio Algom Exploration.

MR. FUREY: Why don't you come over here so we

don't have to shout across and play ping-pong.

MR. SHELLEY: I would like to get an update on

that one. I have telephoned them to get an update, but I have not heard back

from them yet.

MR. FUREY: We will just wait until Ken

(inaudible) and give you an update.

MR. SHELLEY: Rio Algom is it?

MR. FUREY: Yes.

I should say to the member, generally the

exploration pre-Voisey's Bay, I think it ran in the order of $10 million to $15

million spent in the entire Province. Then, of course, when Voisey's Bay hit in

early 1994, the exploration rush took off and your dollar value went to about

$98 million, as I recall, and then it levelled off after Bre-X and some real bad

hits that the juniors took, including Cartaway. We had our hit too. For some of

those, the stocks just danced on the moon. Then, bingo, overnight the assays

came out and the true results landed. A lot of people got hurt playing these

stocks that were bouncing; but I think after Cartaway and Bre-X and stuff, your

exploration dropped. It has levelled off in the last number of years, I think,

Frank, at about $50 million?

MR. BLACKWOOD: Fifty million for next year.

MR. FUREY: Fifty million will be the

exploration dollars that are targeted, real dollars that will come into both the

Island and the Labrador portion. Now, let me go from memory. The $50 million - I

think about $15 million of that is Voisey's.

WITNESS: Fifteen is Newfoundland's.

MR. FUREY: Fifteen is Newfoundland, the balance

is Labrador. About $35 million will be spent in Labrador. About $15 million,

which is what we used to have for the entire Province, will be spent on the

Island.

Why don't I get Ken. You will probably be able to

speak more specifically about the explorations. Why don't you do that?

MR. ANDREWS: Sure.

MR. FUREY: You should introduce yourself, too.

MR. ANDREWS: I am Ken Andrews, Director of the

Mineral Lands Division with the Department of Mines and Energy.

Mineral exploration this year is forecast to be in

the range of $50 million. We feel that is a fairly conservative forecast for the

area. It could possibly go as high as $60 million depending on the early

results, the early successes in the exploration program in Labrador. The $50

million is going to break down, roughly, to $35 million to $40 million for

Labrador, and $10 million to $15 million for the Island portion of the Province.

That amount for the Island has been relatively static for about the past four or

five years, and it has been in the range of $10 to $15 million during that

period.

MR. SHELLEY: What about Rio at the Rendell

Jackman property, the Rio Algom? Is that $2 million right there in itself?

MR. ANDREWS: I beg your pardon?

MR. SHELLEY: Is that $2 million in exploration

on that property alone? Could I get an update on that, if you don't have it? I

have heard -

MR. ANDREWS: That particular program now - Rio

Algom entered into a joint venture agreement with a junior mining company that

has been exploring in that area for close to ten years now. Rio is a major

Canadian mining company, and their specialty is base metals. They have entered

into a joint venture agreement with a company called Major General Resources,

and they are exploring the base metal properties and looking at the base metal

potential of this particular area in the Springdale area. I don't believe they

have published any figures on what they anticipate their budget to be this year;

however, it will be one of the more significant exploration programs on the

Island part of the Province.

MR. SHELLEY: I think I did read - they had a

press release - that it was $2 million for that area.

MR. WOODFORD: Over four years.

MR. ANDREWS: That could very well be.

MR. WOODFORD: They will obtain 50 per cent if

they spend $2 million over the four years in exploration.

MR. ANDREWS: That would sound correct, yes.

MR. SHELLEY: Okay. I will request then,

Minister, an update on those exploration areas, because everybody asks the

question and they are wondering what kind of activity is going to go on there.

Is that okay?

MR. FUREY: What is that?

MR. SHELLEY: Oh, you didn't hear.

MR. FUREY: What did you say?

MR. SHELLEY: I would like to request an update

on the exploration in that area and so on.

MR. FUREY: Sure, I will get Ken to take note

and we will send it to you.

MR. SHELLEY: Because if people in the area see

somebody out snooping around, they want to know what is going on.

MR. FUREY: No problem.

MR. SHELLEY: On the exploration, I can't pass

by without making a comment on Voisey's Bay. Of course, everybody is concerned

about it. It seems like it has been off track for a little bit, mostly due to

rural markets, and we understand that - anybody can understand that - but also

the Aboriginal concerns that are up there. Those are the two most outstanding

ones, I would assume. That is all I will comment on that to date, and also add

this comment to it: I know they are talking about concerns about the nickel

smelter and so on in Argentia. Well, just for the record, I say that I still

have thoughts about a copper smelter. I am still not convinced it is not

possible. We will welcome Inco or anyone in this Province as a partnership, but

at the same time we don't brush off a possibility, even if it is a slim

possibility, and I have not been fully convinced. I know Hatch did some work and

so on, but I have not been totally convinced that a copper smelter is not

possible. I guess I will stick to my name, that a copper smelter may be still

possible, and I would like to see what will happen to that and what is ongoing

with potential for a copper smelter in this Province also.

Also, I would like to make another comment on IOC

and the pellet plant expansion. Of course, with the philosophy and policy of the

government that Voisey's Bay stay in the ground unless we get the full benefits,

I would like to see the same approach taken with pellet plant expansion. Very

simply, I understand there is a review going on, and somewhere near the end of

this month they are supposed to give the review of consideration at Seven

Islands and Labrador City.

Of course, I spoke in the House to the Chairman's

resolution just the other day and you found out how I feel about it. I think the

minister feels the same way about it, but I just wonder how hard-nosed we are

with that approach in saying to them that... As far as I am concerned - now I

don't know how technical we can get into this, but - I would say to them: Stop

your review; stop wasting your time and your money. If you want to expand

pelletizing in this Province, you do it at Labrador City or you don't do it at

all. That is the way I feel about it. That is a pretty blanket statement, but at

the same time I think that is the way we can approach it until we are told for

sure otherwise.

I know, and you know, from living in Labrador City

also, with the royalty regime that IOC enjoys in this Province, and with the

millions and billions of dollars they have made over the years in profits -

let's face it, they have been a good company in a lot of ways. I have had family

work there. I know they have been good, they have been good to the town of

Labrador City in a lot of ways, but at the same time the bottom line is that

they were here for profit and they made a lot of it over the years. I think at

this stage, when you see an expansion or you see markets open up for them -

which is good, and we commend them on that - at the same time, if there is

expansion that would affect Newfoundland and Labrador, that it would stay in

Labrador West. I think we should be firm and strong on that, as strong as we are

with the Voisey's Bay stand that it stays in the ground unless we get all the

benefits from it.

That is the exploration of IOC and Voisey's Bay. I

would just like to mention a couple of other things before I ask you a couple of

questions.

Nugget Pond in Baie Verte - I would be remiss if I

didn't mention something about that - their first quarterly report is out. You

were away then and I don't know if your have seen it yet, but it was made

public. Of course, they are doing very well down there. If you look at the price

of gold, and these guys - Steve McAlpine, who is the manager of that mine site -

if we had a few of those guys around this Province, I am going to tell you, the

mining industry would benefit greatly. I think the minister knows who I am

talking about. Every worker, every person around, can tell you, that is one of

the cleanest, well-developed mine sites around this Province. There can be a

page taken from his book, I can tell you, that could help us in here, so I

wanted to mention that.

Silica deposits, of course, in Labrador West - very

interesting. I would like to get an update on those. Also in La Scie, from what

I understand, there is going to be a silica bulk sample taken down in that area

this summer. I would like to get an update on that if the minister could.

I will not go into the oil industry part, but just

finish off with this one. This a more local one again but it is important for

the Province because, as the minister knows, it has a huge potential. That is

the Baie Verte mine site and the potential magnesium development there.

I will tell you, if anyone has been studying

magnesium in this last several months it is me, from the Internet to every book

possible. I will be quite frank about it, I did not know very much about it. I

know quite a bit and still have a lot to learn from it, but the potential for it

is incredible. Of course, with mining, timing is everything. The timing in the

markets for magnesium, and the potential for increase, I guess you have to be in

the right place at the right time. Well, maybe we are; because it is such a

funny thing, Minister. We looked at the Baie Verte mine site, and it is a

dilapidating environmental mess down there, a town that went from boon to bust.

We talk about Buchans and other places, but Baie Verte has had it as hard as

anybody. When you get 500 to 600 people making good wages and all of a sudden

drop off the face of the earth and that town is still surviving, it says a lot

for the community. Right now we have that mine site down there, which we just

looked at as a garbage disposal really, and while we were looking at the garbage

disposal it was full of magnesium, 40 million tons of it from what I understand,

a lifelong... It is important for that area. I just want to comment on it.

I know we are working very closely on it. I have

not said very much on it in public, and I do not intend to. The minister said a

little about it, just enough to let people know there was some potential there.

There is a lot of work to be done on it, but if we take it slowly and do it

right, I think there is a lot of potential there.

With that comment, I will say that the sawmill

industry - I know it is not in your jurisdiction, but you understand - they want

to go on that site and use one of the buildings, because there are a lot of

buildings there. The minister has been to the site and seen the infrastructure

that is there. I think it is prudent that they move forward with that

development as a sawmill industry. Hopefully it will be compatible down the road

with the magnesium, and hopefully they can all work together, but we will have

to wait and see what happens there.

Without going into the Estimates - I will not be

too cruel - I will leave you with those comments to see if I can get some

reaction from you on those.

MR. FUREY: Let me just take each of those

issues one at a time and, for the record, let me just read in about some

exploration that is happening this year.

Donner Minerals, as you know, is the company that

has aligned itself with Teck Corporation of Vancouver. Donner, I guess, is about

90 kilometres south of Voisey's Bay. They had some very high grade showings in

some of their drill cores. They are moving in this year for a very aggressive

exploration. Their original capital budget was about $5 million.

Frank and I met with the president in Toronto at

the PDA, and they had increased, at that time, their exploration dollars to

about $10 million. Now they have re-configured those dollars again. They are

going to put $14.8 million in exploration into that zone this summer, which is

quite a chunk of money. They are going to have a very aggressive drilling

program in there. There are some very hopeful signs there.

I think one of our senior geologists, Andy Kerr,

who is quite bright, just wrote an

article on his view of the Donner property,

and if any of you are interested in that property I would be happy to send you

that article. It is quite an insightful piece of work. That is one to watch.

They were very clever to rename the sight `South Voisey's Bay'. I think that is

clever marketing, actually, because it captures the attention of the stock

markets and everybody else, the investors around the world.

It does not seem like they are having very much

trouble raising money for this property, and it seems a very intriguing property

based on the very limited drill cores that have come up. One of those, for

example, had an 11.75 per cent showing of nickel. Voisey's is considered one of

the richest in the world, and it is 3 per cent?

WITNESS: (Inaudible).

MR. FUREY: Yes, some of the highest numbers - 3

per cent. So 11.75 per cent is quite an anomaly. We don't know if it is an

anomaly, or whether there is the motherlode there, but they are going in there

very aggressively this summer.

I mentioned Cartaway earlier. Cartaway has joined

forces with International CanAlaskan. They are doing $100,000 worth of survey

work in a similar area up there. Celtic Minerals, Copper Hill Corporation, the

Dart Creek property, First Labrador Resources, Virginia Gold Mines, these are

all companies; there is a bunch of them going in to do some work in Labrador.

As well, the member touched on the silica Shabogamo

Mining and Exploration Company over there in Labrador West. As I think, we gave

them authority to send out about 20,000 tons of bulk samples, Mr. Chairman, into

the marketplace. That is a test sample to see what comes back from it. The

reserves there are very high, and I think there are some very good opportunities

there. We are looking closely at that.

On the Island portion, you mentioned Buchans River.

That is a very interesting property. I met the people who were in Toronto who

are involved in that. The member from Deer Lake worked there, or he lived there

for a period of time, and attempted to play hockey there or something.

MR. WOODFORD: And worked there.

MR. FUREY: And worked there.

You might want to comment on this, too. The people

who have taken over that property think that ASARCO may have missed the

motherlode of zinc, that there is a huge find back there. Apparently ASARCO,

when they were in there - you would have more knowledge than I would - just

high-graded for quite a period of time and off they went with the profits and

sailed out of here.

These guys have taken over that property and they

are up there marketing it. I don't know how successful, Frank, they were. Did

they do okay in this past show?

WITNESS: I think they attracted quite a bit of

attention.

MR. FUREY: Quite a bit of attention, yes. What

is the name of the company?

WITNESS: (Inaudible).

MR. FUREY: Buchans River Minerals, yes. They

are having a little bit of difficulty raising money, but if they can raise a few

bucks and get in there and do the exploration and the kinds of things they want

to do, they think ASARCO missed the giant zinc reserve. There is evidence that

they may well have. That is speculative, what I am saying, but it is quite

interesting that this group is up there marketing aggressively and commanding a

lot of attention. You might want to talk on that after; the Member for Grand

Falls may want to say a few words about it.

Celtic Minerals, British Canadian Mines, Altius.

Altius are a group of young guys I met in Toronto as well. One guy, I think, is

about twenty-five years old, the other partner is about twenty-seven years old.

They kicked off this company. They have it registered now in the Alberta stock

exchange. They have taken up a bunch of properties in Central Newfoundland. They

are aggressive young marketing kids who are just fabulous. They are fabulous to

watch, too. What is their stock trading at now?

WITNESS: (Inaudible).

MR. FUREY: But they are doing well, aren't

they?

WITNESS: (Inaudible).

MR. FUREY: No, Altius Minerals. These are two

young kids. Kids - they are twenty-four and twenty-seven years old, around that

age, aren't they? They have an old geologist with them who really knows... Why

don't you speak on that for a second, Altius? Go ahead.

MR. ANDREWS: It is, as the minister says, a

very aggressive, energetic young company whose principals are extremely bright,

we feel, and are actively pursuing a number of important prospects on the

Island. Apart from the two principals the minister referred to, they also have

Dr. Geoffrey Thurlow, who is a veteran of the Buchans mining camp, and is

extremely knowledgeable and very well respected, with a national and even

international reputation. So they have a great synergy there of mature

geological experience and young, energetic bright ideas being brought together

to promote a number of properties around the Island.

MR. SHELLEY: Altius, is it?

MR. FUREY: Altius, A-l-t-i-u-s. I think it is

one of these things up in the constellations, where the Member for St. John's

South usually resides.

Noveder, a Cabot property in Baie Verte, outlined a

significant electromagnetic conductor on the Cabot property north of Baie Verte.

Are you familiar with that? A conductive zone of moderate to very high intensity

extends over a distance of 600 metres to either side of a copper cobalt showing,

which was discovered by PNL Ventures in '97. Surface sampling values were 1.13

per cent to 6.8 per cent copper. Drilling is planned and, in addition, Noveder

also optioned 185 claims from British-Canadian mines in the immediate area. You

know about that, do you?

MR. SHELLEY: Pardon?

MR. FUREY: You know about that, do you?

MR. SHELLEY: Yes.

MR. FUREY: Sulliden Exploration completed six

holes, a 1,600 metre drill program at Beck's Cove gold property, Baie Verte

Peninsula, in February and March of this year. You are familiar with that too?

Previous drilling by Sulliden returned values of seventeen gold over .6 metres.

The program is designed to test the possible extensions of the Nugget Pond

sedimentary host to Richmond Mines, Nugget Pond gold mine. Interesting about

Nugget Pond, they are projecting 48,000 ounces of gold this year. It is the most

cost-effective gold mine in Canada. A fabulous group, and I agree with your

comments about the personnel who run it. Ten more of them and we would have zero

unemployment.

MR. SHELLEY: Steve McAlpine.

MR. FUREY: Unbelievable. Vulcan Minerals in

Flat Bay, of course, is doing a drill program. There is a group of other ones

but I would be happy to send this to you if you all want an update on this.

With respect to the copper smelter you mentioned, I

have not given up on it either but I think it was the proper thing to do, to

seek an independent consultant who had no axe to grind and who is a world-class

operation, which Hatch Associates is, as you know, and I think they did a superb

job. That is not to say that we ought not to pursue new technologies and new

opportunities, and even with Hatch's study in my arm I chased, as you know,

Mitsubishi. They are still quite interested; I am waiting for their report to

come back to me.

I should also tell you that I met some interesting

people in Toronto, on my way back from Texas, who are willing to work with me

with the giant copper consortiums of Chile, to look at doing some kind of joint

venture using the copper out of Newfoundland, and to see if we can do something

beneficial there. It may require me meeting with them in Chile later on in the

fall, and I am quite prepared to do that, or bring them up here, or have a twin

visit. So I have not given up on that idea, and it is very much top of mind for

me because I hate to see one speck of ore exported without value added. It has

happened too often, far too often in our history.

With respect to the pellet plant, I concur with

your comments that IOC has been a pretty good employer in that area and we

cannot condemn the company for the massive amounts of investment, the job

creation, and the tax and revenues they provide to the Province. In fact, just

last year their investments peaked up to about $148 million in new capital. A

lot of people do not realize that. Again this year they are forecasting another

$75 million in equipment replacement et cetera, but I share your view: If the

ore is in our Province, and it is, and if the labour is in our Province, and it

is, and the power is available in our Province, and it is, those are the

fundamentals of any economic equation to say that it ought to stay here. You

have the labour and experience; you have the power and it is reasonably priced;

and you have the commodity, which is the iron ore. Those are the basic elements

that will drive any good business project.

Now I have been very firm with them. I have not

been very public because they have asked me to tone down the rhetoric and tone

down a whole bunch of stuff, but the Chair has also chaired a mining committee

for me in Labrador and has done great work behind the scenes ferreting out

information, providing me with background, setting up meetings, attending

meetings on my behalf. A lot of work, I have to tell you, has been done behind

the scenes. You can take this to the bank: They ain't taking that ore out of

Labrador.

WITNESS: (Inaudible).

MR. FUREY: And they particularly are not taking

it to Quebec. Having said that, I should report to you that the independent

study that was under way had not had Labrador City in it. It was the efforts of

the Chair, the member for Labrador City, the Premier and others, who summoned

the new board in and said: You had better put Labrador City in your study. And

it was included in the study. In fact, we helped shape some of the terms of the

study. I can tell you, the initial capital costs of this project of about $230

million have mushroomed, and whether this project goes ahead is very, very,

iffy.

There are three components to the study: the

capital costs, the operating costs, and the marketing costs. They have not come

to the second two because they need to definite and scope out what are the

capital costs for a brand new expanded pellet plant facility in Sept-Iles, which

is currently an old antiquated twenty-year-old plant which was built for

Schefferville, which was mined out under the Mulroney stewardship and handsome

cheques given to those Quebecers and half the cheques given to the Labradorians.

Anyway, they got a lousy deal. That is another story for another time. I do not

mean that as a political comment; I mean it as - President of IOC, (inaudible).

Anyway, the way he treated Newfoundlanders and Labradorians is unacceptable.

That is another story. We were too sedate and too laid back and too charmed and

too everything else.

The point I am making is that the antiquated

Sept-Iles plant was built for Schefferville, which was mined out and closed

down. The Sept-Iles plant would - the capital costs are just incredible to

reactivate it. It never ever worked well anyway. It worked for about two years.

There were all kinds of problems and snags. Two or three years?

WITNESS: It worked for approximately a total of

eight years, but on and off.

MR. FUREY: It really only worked for two or

three years, if you consider the shutdowns, the problems they had, and

everything else.

To put a greenfield site in place next to the plant

in Labrador City, their initial thinking was about $200 million or $240 million.

I do not know the final sum, but apparently the capital costs have mushroomed

way beyond what they ever believed the cost should be. My own gut and my

instincts tell me that I do not think they are going to expand, but that is my

own instinct.

We have given them good power rates; I have already

signed off on them. We have told them about the economics where we sit. We have

told them the resource is a Newfoundland and Labrador resource, and ought to be

beneficial to our Province. We have quoted the Mining Act under which they do

not come because they have a separate act which was instituted under a former

regime in 1938, but I have looked carefully at that act - very carefully at that

act - and I have some other arrows in my quiver, should they not listen to

reason.

With respect to the silica - I mentioned to you

that there were 20,000 tons of silica that we allowed to be exported in the raw

so that it could be market tested, and we are waiting for the results. That is

driven off a company called Shabogamo Mining and Resources out of Labrador City.

We are quite prepared to deal with them, and to

deal with the silica. I attempted to bring in a number of Norwegian companies,

as the member from Labrador City knows, and some other companies from around the

world, to look at it. It is a difficult prospect because silica is only one of

many components that are required to build others alloys and metals, so we are

waiting to see what the results on that are.

Baie Verte magnesium, you are quite right, is an

exciting project. You have done a lot of reading about it. I think I have kept

you up fairly well up to speed on what is going on, and kept you briefed as I

normally do. I think these are great people - the Verbiskis - who are the

co-discoverers of Voisey's Bay. They have considerable capital, time, energy,

smarts, and intelligent people surrounding them looking at this project.

As you know, the car manufacturing industry, and in

particular the parts industry, is moving more and more away from aluminium, as

we talked about, and more and more into magnesium. At Baie Verte, I think there

is about 100 years' supply and the new technology, which is proven out by SNC

Lavalin and Noranda, shows that you can not only extract 60 per cent, which was

the old technology, but the new technology allows you a recovery rate of 97 per

cent. So the beauty of this project is, it kills two birds with one stone, if I

can put it that way. It helps clean up a mess, the tailings that are there that

are hopelessly spoiling the environment. You take those and extract from them

something of value. You take that value and export it to the world marketplace,

in this particular case the auto industry, and you create, if they move it up to

full production - the member probably knows a little better than I because you

have met with Mr. Virbiski now; I have to call him after this session,

incidentally - if you take it at full production it is about a $750 million

plant, and it would create about -

WITNESS: (Inaudible).

MR. FUREY: About 450, is it?

WITNESS: Eight hundred in construction maybe.

MR. FUREY: Yes, so it is quite a significant

project if we can pull this off. He is earnest about it, we are earnest about

it, and you are earnest about it. We have agreed to work together and to circle

the wagons, toss our political hats to the wind, and make this happen if we can.

Now I should report to you also that my Assistant

Deputy Minister, Mr. Dean, tells me that the early indications they are getting

back are that this sawmill project as well could probably be compatible. We will

make a decision on that in the next week or so and I will let you know.

You also mentioned - no, I think that is about all

you said. Was there something I missed that you wanted me to talk about?

MR. SHELLEY: No, you covered pretty well most

of them. I will leave the oil industry thing (inaudible) colleagues here.

CHAIR: Thank you, Mr. Shelley. Ms Thistle.

MS THISTLE: Mr. Minister, I could not help but

pick up on some of the things you were mentioning about the Buchans area. I know

you are aware that there was a mining conference held last November in Buchans,

and there was quite a lot of excitement there, and particularly around the young

people you just mentioned, Altius Minerals. I think they were the hit of the

whole conference. There was so much enthusiasm shown from those two young

people.

It was interesting to learn also that I think there

was about $1 million spent in the Buchans area last year in exploration. I think

there were about five or six groups that participated at that mining conference.

Most people there came away encouraged that they will find what they are looking

for, that mother-lode everyone is talking about.

It was also interesting, too, to see recently that

another barite mineral company has started up now, Phoenix Minerals, in Trinity

Bay, their operation; United Bolero of course, are almost up and running in

Buchans. When you see the oil industry on the move, and on the heels of it you

are seeing other interests like barite that will serve the offshore industry,

that is good. There is a lot of interest there. What I would like to find out

from you this morning is this: How many companies have registered their interest

in the Buchans area for the upcoming season for exploration?

MR. ANDREWS: We expect there are going to be

three or four companies active in exploration in the Buchans area. They all have

not finalized their plans yet for this upcoming year. However, we expect that

Buchans River will be active in that area. There is a company called Celtic

Minerals which will be active in the Buchans area, in the Hungry Hill area.

Archean Resources have properties in that area and I expect they will have an

exploration program. As well, Phelps Dodge, which is one of the major

exploration companies in the United States, will have an exploration program in

that area again this year. They have been active in the Central Newfoundland

area for over five years now, so they will be active.

All considered, the Buchans-Central Newfoundland

area is one of the more active areas of the Province. There is a really

interesting mix of junior mining companies and major international mining

companies, and it all makes for a very healthy, competitive environment between

the different players. Success on the part of one of the players down there will

certainly aid the exploration efforts of other players down there. It will

facilitate the raising of exploration capital and that type of thing. You have

to be optimistic with what is happening in the Buchans area.

MS THISTLE: Thank you. You did not mention

Altius Minerals. Are they having difficulty raising funds to further their

exploration?

MR. ANDREWS: No, they are not experiencing any

problems other than the usual difficulties that all junior mining companies are

experiencing at the moment. Altius has been successful in listing, I believe,

with the Alberta stock exchange. They are raising exploration capital and they

will be active again this year. They may not have a huge program, but they will

be one of the players in that area.

MR. FUREY: They are going to investigate their

Shamrock, Lockport, Victoria River, and Wild Cove base metal properties, and

their Moose Head, Tom Joe, and Big Arm precious metal properties throughout

1998. They are raising money on the stock market. I do not think they are going

to have any problems raising it, to be honest with you. These guys are good,

they are promoters.

MS THISTLE: Of course, all this exploration

work generates a lot of economic activity, directly and indirectly. I am pleased

to hear that, and I am sure the people in the Buchans will be interested in

knowing that there is so much interest and that there will be a lot of activity

again this summer. Thank you very much.

CHAIR: Thank you, Ms Thistle. I think we will

move now to Mr. Fitzgerald.

MR. FITZGERALD: Thank you, Mr. Chairman.

Minister, I do not have a mine in my district. I have lots of government wires

and slipways. I did have a mine there, in Keels actually, the slate mine which

was mentioned in your budget last year, put forward as an opportunity to create

employment there. There is still a lot of potential there, and hopefully

somebody will join forces and become partners with the present owner there and

make that mine function.

I do not know if you can give me an update or if

there is anything new on that, or if you even want to talk about it. I would

like to ask the question because I think there is a great potential there. It is

something that would be able to employ probably twenty-five or thirty-five

people there for many months of the year.

Maybe the minister might be able to tell us how

much money we received from the first shipment of oil. The minister passed out a

sample of oil. Maybe he would like to inform us how much money the Province of

Newfoundland got from the first shipment of oil from Hibernia.

MR. FUREY: Did you want to ask a series of

questions, or do you want me to respond as we go?

MR. FITZGERALD: Probably respond as we go.

MR. FUREY: We signed a confidentiality

agreement with the companies in terms of releasing. The problem is that the

companies do not want their take in the marketplace out there, and there are

good reasons for that, competitive reasons. Anybody who wanted to calculate -

for example, let's assume a dollar came in and you know that the royalty rate is

20 per cent. They do not want anybody to factor back what there earnings are on

that field. We - "we" being the previous and current governments - through the

Atlantic Accord and through the arrangements that we finally signed off on,

agreed to keep that confidential.

It is difficult for me to tell you when we are

bound by legal agreements that say we can not do it. We treat it as we would

treat any income tax matter. It is purely for competitive reasons. It is not

because I would not tell you, and I do not mind telling you privately so long as

you respect the legal agreements that are in place that I am bound by. It has

not been significant yet. When I say significant, everything is relative. What

is significant? It is a significant amount of money, but not in terms of the

amount of money that the oil has actually generated for revenue for the

companies. I think that is a fair comment.

MR. FITZGERALD: Would you like to make a

comment on the slate mine? What is happening there, other than the financial

problems?

MR. FUREY: I think that there is magnificent

potential there, there is no doubt about it. It is difficult again for me to

talk about it because of the circumstances that surround what is going on there.

I think if we can find some capital to go in there, there are magnificent

opportunities, and that is something we are looking at quite seriously. It is a

difficult one for me, again, to talk about.

MR. FITZGERALD: Minister, there is a lot of

speculation out around the -

MR. FUREY: I think you know what I mean.

MR. FITZGERALD: Yes, I know what you mean.

There is a lot of speculation out around the community where I live, in the

Musgravetown area there, about an ore find in the Bunyan's Cove area. It has

been carried in the media, and there has been a fair amount of exploration there

by an individual. Is there any truth to the rumours that are floating around, or

has there been any significant find in that particular area?

MR. FUREY: No, there has been no significant

find. There had been some prospectors in there, there has been some shows of

gold, but it is very preliminary.

MR. FITZGERALD: Minister, you opened your

statement by talking about the small amount of money that was in your

department, $9,119,100, something like one-third of 1 per cent of the total

budget of over $3 billion. When you look at the cost of running the Minister's

Office, Minister, your office is more expensive than any other office within the

confines of this book of all the government departments. Maybe the minister can

tell us why his office is so expensive to run compared to other offices with

billions of dollars in their budget.

MR. FUREY: If you look at the increases in my

office, it is reflective of the changes that we made, where we brought the p.r.

people into the minister's office, (inaudible) of the benefits that accrue

there. There is a small amount in that office for overtime because the

secretaries are often kept there a long while. I think there is about $10,000 or

$15,000 in overtime. If I had to pay the real overtime costs my budget would be

about $400,000. I am quite serious about that. A lot of people stay on because

they just stay on. They stay there. They are always there when I am there, and

they hang in there. Also, you see that my travel costs have increased. I should

not say they have increased. They are what they ought to be, and that is what it

costs to have the Minister of Mines and Energy travel around the world and

promote.

In fact, I think the Member for Baie Verte would

agree that these missions are quite good and quite substantive, and if nothing

else, they promote the Province. As you and I will recall, you and I so

gallantly and valiantly promoted the Province in Italy. These are the costs of

doing business. It is not cheap to fly to Texas, it is not cheap to fly to

Toronto. I always try to stay in a moderate, sensible and fairly decent clean

hotel that is not outrageous. You say my expenses are fairly high. If you

compare them to my predecessor of another time, you will see my expenses were

basically 60 per cent of my predecessor's predecessor.

MR. FITZGERALD: Would you have the same number

of staff, Minister, as other ministers in other departments?

MR. FUREY: Yes.

MR. FITZGERALD: The staff remains the same, it

is just the difference in expenses.

MR. FUREY: Yes. It is mostly reflected in

faxes, phones, travel, communications, hotels, that kind of thing.

MR. FITZGERALD: Transportation and

Communications seems to be a heading where what is budgeted and the revisions,

there is a big difference. That seems to happen every year.

MR. FUREY: They always undervalue it, and I

always tell them during budget time: It is stupid to put $40,000 there. I can

tell you right now, with the things that are on my plate it is going to be

$100,000. If you want me to look like a jackass, put $40,000 there.

MR. FITZGERALD: I agree with you.

MR. FUREY: It is stupid. I think the Member for

Baie Verte last year said: Why don't you just put $150,000 in there, or

whatever, and make it reasonable? It is sensible. If you look at my column of

the Department of Mines and Energy and go across the country to where there are

mines and where there is energy - and by the way, most of the departments are

split - , most of those ministers of mines have $100,000 to get out and promote

the mines and exploration and whatever it is they do. Most of the ministers of

energy have $150,000. If you combine the two departments it is $250,000 and they

are still complaining, and they are always over budget.

Here I am with $40,000 to promote the hottest

properties both mineral-wise and oil- and gas-wise in the Province of

Newfoundland and Labrador to the world. It is just dumb, it is stupid. They want

to make me look like a jackass every year, and they stick in $40,000, and I

spend $100,000, so I look like a jackass.

MR. FITZGERALD: Purchased Services is just as

big a difference, every year in the budget as well. Not only your budget, but

every budget, and I am wondering how accurate the budgets are, the figures that

are put forward.

MR. FUREY: In the global context of the budget

you will see that we never overrun, but inside the subheads you will see we

always overrun because we are moving money around. We need to move money to

Frank's division, and we move it from Dave's division; if Dave needs it we move

it from Frank's division; or if we need more in my department for travel. In the

context of the global budget, I should say to the hon. member, there are no

overruns, but there are overruns in terms of each subhead within that global

budget.

MR. FITZGERALD: Information Technology is

another one this year that seems to be a catchy item. Just about every

department has fantastic amounts of money put forward into Information

Technology, but computers have been around a lot longer than 1998.

MR. FUREY: That is true, but there are

different systems, different programs. Frank may want to talk about this. Who

would be best to talk about IT (inaudible)?

WITNESS: Are you referring to the Information

Technology allocation in the Mineral Resource Management sector of the budget,

sir?

MR. FITZGERALD: I am referring to Information

Technology under all the headings in the budget.

WITNESS: One thing that has happened this year

is that government in the Information Technology area has allowed an extra

expenditure to deal with the year 2000 problem. This is the major issue that the

information technology industry is confronting in terms of making sure our

computers operate after the year 2000. There has been an allocation to deal with

that issue right across government, and that does represent a portion of the

increased expenditure (inaudible) IT for our department.

As the minister alluded to, we are constantly

trying to stay in Newfoundland on the leading edge of IT developments. We want

to make sure that the databases that we collect, maintain and promote to our

industry clients are leading edge and state-of-the-art, that can compete with

any jurisdiction in Canada. In order to do that we need to acquire, as the

technology improves, the most current processes and techniques for recording and

promoting our data. In fact, we as a province lead or are matching leaders in

the country in this area.

MR. FITZGERALD: In heading 2.1.02.05, Mineral

Lands, there was $7,000 budgeted in the 1997-1998 budget and there was $43,200

spent. Why would there be such a difference there, Minister?

MR. ANDREWS: There was a requirement there for

a professional services study, a consultant study to be undertaken, and it was

decided that the funds for that study would be sourced from Mineral Lands. This

was a consultant study undertaken to examine the regulatory efficiency of

regulations affecting mining and mineral exploration in the Province.

MR. FITZGERALD: Heading 2.1.03.05, Mineral

Development. There was no money budgeted in the 1997-1998 budget, but the budget

was revised to spend $84,000, a significant amount of money there. What was that

for?

MR. ANDREWS: I believe that was the funding

provided to hire consultants for the work for the smelter and refinery at

Argentia.

MR. FUREY: Yes, there are a number of studies

in there, one of which was the Hatch study, for example.

MR. FITZGERALD: 3.1.02.01, Salaries. There was

$205,000 budgeted and $166,000 spent. Does that mean there were people laid off

in that particular department?

MR. HAWKINS: This is my division. We had a few

staff go to the private sector and we had savings in the Salaries because of

that. It took us a bit longer than we had hoped to recruit and fill those

positions, which we have now done.

MR. FUREY: By the way, that is a real problem

for the department. The other side of the story Dave is not telling you is that

we lost one of the best petroleum engineers in this country who got taken away

by the private sector - Mobil or someone grabbed him - in Ontario. They just

doubled his salary overnight and he is gone, because we just don't pay the

salaries to keep competent technical people in a very technical department. Our

salaries are pretty meagre. The wage freezes and what we have been doing over

the last number of years, I know we have had to do those things, but the point

is it is very difficult, as industries coming in here - somebody mentioned

engineers yesterday. Do you know that the oil companies are going in now buying

up engineers at our University? They are actually paying for their last years so

they can buy them and get them out west. You have seen that, different specific

engineers.

One oil company was telling me they tried to get an

engineer recently. Of the applications they had, the people that they

interviewed, by the time they got around to making the job offer they had to

give it to the sixth person on their list. By the time they got around to making

the offer, which was in a two-week period, the first five had jobs. They were

gone to Alberta, Fort McMurray, the Gulf of Mexico. When I see what is coming

down the pipe in $20 billion worth of projects, we are going to have to import,

believe it or not, technical know-how and engineers. The trick is, when you

import it, to get the technology to stick and stay here. That's the trick.

MR. FITZGERALD: Maybe that's another reason why

we should be looking at labour market information when we offer courses in our

colleges, our universities and this sort of thing -

MR. FUREY: Absolutely.

MR. FITZGERALD: - instead of training people

for unrealistic jobs.

MR. FUREY: I agree.

MR. FITZGERALD: I can name as many as you can

as well, Minister.

My closing comment would be that I do not think

that anybody here will ever say that the minister shouldn't travel, or the

minister is spending too much money travelling and this sort of thing. If we are

going to get our people working, then that needs to be done and we need to

promote what we have in order to attract people to this Province.

We talked about the wonderful things that are

happening on the Burin Peninsula, and that is good stuff. It is needed right

across this Province. In my own district, probably one of the most destitute

areas of the whole Island, the Bonavista Peninsula, there have not been many

opportunities since the fishery closed. I say to the minister, if there is

anything that can be identified to help solve the problems that we have there,

then I hope you would keep that in mind and be able to put forward whatever you

can in order to attract something there to maintain the people so that they

might be able to continue to live in the Catalinas, the Port Unions and the

Bonavistas. Thank you.

MR. FUREY: I accept what the member is saying.

In fact he and I worked on a project a year or two ago when I was another

incarnation as Minister of Industry, Trade and Technology, but it turned out to

be a lot of chicken feed, as I recall. It is too bad, because we both believed

that this could lead somewhere, but it is interesting. I wonder if any of those

areas you just referred to are speaking to this clothing manufacturer, Mr. Lee.

Have they contacted him at all?

MR. FITZGERALD: Yes. (Inaudible) they did -

MR. FUREY: By the way, I took the time to visit

his five factories in Toronto. They are top-notch. As I recall, they have a base

salary and then it is piecemeal work as well. Most people were taking away $150

to $200 a day. Now they are making clothes for Tommy Hilfigar, Polo, top-class

brand names and quality products, but it is very much like an assembly line. It

reminded me of a fish plant with no rotten smell. (Inaudible) because everybody

(inaudible), and everybody has a particular job. Now I was a fish cutter at

National Sea. I remember being in the line. You got a base salary, but every so

many pans of fish that you got you got a bonus. I was a pretty good cutter, too.

I still have my fingers. The point is, has your area talked to him? He is in

(inaudible)? What (inaudible)?

MR. FITZGERALD: Yes. As soon as I heard the

comment that this gentleman was visiting the Province I called down to Cabot

Resources here, which is a provincially-federally funded group in the area that

is trying to promote the area and attract new industry. They have put together a

package and faxed it off to Industry Trade and Technology to be presented to

him. There have already been a number of people who have been trained in that

area. Apparel technology, I think, was the name of the course that has been

offered there on several occasions. Lots of space there, certainly the need for

employment. If that has been done, hopefully it will give a fair hearing for

those people up there.

MR. FUREY: Do you know the single biggest

reason why he is looking at Newfoundland? The loyalty of work force. By the way,

you only have to look traditionally at outport Newfoundland to see the loyalty.

People going back to the fish plant. At least where I grew up there was small

turnover. The other thing is, look at Point Leamington, the glove factory. They

had almost had zero. The Member for Bellevue, I think you have been out and saw

that. Zero turnover. That is a guy who -

MR. BARRETT: I used to be the principal of the

school so I (inaudible) most of (inaudible).

MR. FUREY: That is right. That is a guy who

brought the factory from Toronto and set it up in Point Leamington, and

everybody there works. Why do they work? Loyalty. The guy recognizes he can get

good work done, it is quality work, they are a loyal work force, low turnover.

Back haul rates back into Ontario. He has all the contracts now for all the

hydro corporations across Canada. Those little white gloves that everybody wears

three or four times and throws away. Everybody is working around the clock. It

is unbelievable. This is what Lee sees. This is what Arthur Lee sees. He sees

profit, he sees an opportunity, he sees a chance to create jobs, and he sees a

chance to do some good. Don't kid yourself, he is a businessman. Profit,

loyalty, low turnover, that is what he is after, particularly loyalty.

MR. FITZGERALD: It is pretty hard for some of

those areas, and I think of my area, to compete with places according to the

article that appeared in The Evening Telegram on the weekend, where you

have a group of businessmen who collectively decide they are going to spend

millions of dollars to put up a building, and millions of dollars to maintain it

over a ten year period. I don't know of any business people in my area who would

be able to afford to even think about doing this kind of thing, and all of a

sudden you are at a disadvantage from that point alone. So I think this is where

maybe government should step in. If we are going to allow that scenario to

continue to happen then we will have two or three or four major work centres and

the rest of the areas will be allowed to die and disappear by the mere fact of

the regional disparities, if you would, happening right here in our own

Province.

MR. FUREY: That is a good point. Even worse

than that is when governments provide pots of diversification funds and they

start bidding against each other. That is even worse.

MR. FITZGERALD: That's right.

MR. FUREY: But I hear you, and I am glad to

hear that your group put in a proposition. That's good stuff.

MR. FITZGERALD: Thank you.

CHAIR: Thank you, Mr. Fitzgerald. Mr. Woodford.

MR. WOODFORD: Thank you, Mr. Chairman.

I wonder, could the minister or some of his

officials give me an update on what is happening with regards to Tally Pond? I

understand Noranda now controls that. What is the latest on that?

MR. FUREY: Yes, Noranda still owns the

property. I am just not right up to speed myself on it. Ferd, do you want to

speak to that?

MR. MORRISSEY: At the present time, Noranda are

looking at all of the properties in that area and determining what they want to

do with them. In fact, most of them they would like to be able to either auction

off to another company, keep a retained interest, or sell the properties. They

are looking at all their properties in Central Newfoundland, Tally Pond being

one of them. I am not sure if they have truly decided whether they want to

dispose of that property totally or not. I think they want to keep a retained

interest and they would like to have some company go in there, preferably, and

do the development. I don't think that Noranda actually wants to do the

development on the property itself. The reserves are a bit too low for Noranda

to get involved with. So right now what they are looking for is basically a

partner, preferably a partner, to go in on that property, where they would -

just to keep a retained interest and perhaps be the operator of the property but

not put up the capital.

MR. WOODFORD: My understanding is that - that

is not a recent find. Tally Pond was found when ASARCO operated Buchans years

and years ago. Twenty-five or thirty years, I remember Tally Pond being - the

old (inaudible) used to do the drilling in there for ASARCO at the time. Am I

wrong in saying there is nothing new there, that what they found at that time is

what they found and that is it? And why they were sitting for so long with this

property.

MR. MORRISSEY: The reserves, Mr. Woodford, are

about 5 million tons there, and each year they do further exploration. They put

down a couple of more drill holes. The reserves have slowly increased over the

original reserves which had been identified, but the reserves are not at a level

that Noranda would like to get involved with. They have expressed an interest to

us whereby they said: We would like to get into large projects. We would like to

get into hundreds of millions of tons of projects. That is where we are going

corporately, and these smaller projects are not what we really want to be

involved with.

MR. WOODFORD: Is it a case of a 5-million ton

property like that not being viable? Or would it be something similar to... If a

smaller company owned that property, at today's prices, do you foresee that

being developed, other than Noranda? I understand Noranda is much bigger, they

are looking for much bigger things to play with and so on. If a smaller company

had it, do you think it would be developed based on some of the (inaudible) and

everything that has come out of it?

MR. MORRISSEY: Well, that is one of the things

Noranda has done. They have looked for a smaller company to operate it, and they

have also revised their mining plan whereby the extraction of that ore would be

at a higher rate than they had originally planned when they looked at the

property the first time. They are actively looking at doing something with the

property. Whether they will be able to do something this year or not, I am not

sure. I know it is still under consideration by them. They spoke with us about a

month-and-a-half ago on that.

MR. WOODFORD: What's new with regard to the

Deer Lake basin, the exploration and seismic work that (inaudible) was doing

there? I think they were doing it for (inaudible) if I am not mistaken. What is

the latest on that particular project? I understand they had problems there with

regard to the frost and they could not move around, but they were back there

again in the spring. What is the latest on that?

MR. MORRISSEY: Inglewood did complete their

seismic survey with the Deer Lake basin. They are looking at the results of that

data right now, and they have indicated in the media that they do intend to do

some drilling this summer. They are also out into the investment markets to

raise some funds for that drilling program. We are waiting to see whether or not

it is successful to proceed to drilling the one or two wells they previously

talked about in the media. That is the current status right now.

MR. WOODFORD: I will pass now, Mr. Chairman. I

had just a couple of brief questions.

CHAIR: Thank you, Mr. Woodford.

Mr. Osborne, would you like to wait for a second

until the minister returns?

MR. T. OSBORNE: Just a couple of quick

questions. I do not know; the minister may or may not pass them over to one of

his officials.

The port of St. John's obviously has a great

interest in the offshore industry, and now with the St. John's shipyard

operating, I know they have been looking at widening the opening of the harbour,

the narrows. In discussions with the City of St. John's, they have had some

difficulties in determining - because the harbour of St. John's is a federal

port but yet just outside the narrows it reverts to provincial waters, as far as

they understand - which jurisdiction they have to go to in order to widen those

narrows. I wonder, would that fall into your department or would that be

government lands?

MR. BLACKWOOD: I am not certain of the answer

to that question. I would suspect, in the absence of the minister, that it is

not our department's responsibility. Maybe you could restate it.

MR. T. OSBORNE: I will repeat just for the

minister. The Port of St. John's obviously has a great stake in the offshore

industry and the new operators of the St. John's Dockyard have been looking at

widening the opening of the St. John's Harbour, as you are probably aware.

MR. FUREY: The widening of the narrows?

MR. T. OSBORNE: Yes. You are obviously not

familiar with that.

MR. FUREY: No, I cannot imagine (inaudible).

MR. T. OSBORNE: I think they have had

discussions with the City of St. John's. In discussions myself with the Mayor of

St. John's, he was telling me that they have had some difficulty. The Port of

St. John's is under federal jurisdiction,

whereas just outside the narrows it

reverts to provincial jurisdiction. He has had some difficulty in defining

exactly what authority would have jurisdiction over whether the narrows would

have to be widened.

MR. FUREY: It strikes me that it would be joint

jurisdiction, but I would have to check that for you.

MR. T. OSBORNE: That probably falls under

government lands in any event, would it?

MR. FUREY: You are saying they want to open the

narrows, widen the narrows. I cannot imagine anybody allowing them to do that.

MR. WOODFORD: There was supposed to be some

type of agreement with regard to cruise ships coming in, to make it wide enough

for cruise ships. My understanding is that it is supposed to be done this

summer.

MR. T. OSBORNE: The City of St. John's are

looking at it for a couple of reasons. One, as Mr. Woodford has pointed out, is

for cruise ships, but also the St. John's Dockyard are looking at getting larger

vessels in to obtain more work, which would be of benefit to...

MR. FUREY: By the way, I really encourage you

to encourage the dockyard to move more and more towards vessels, because I think

Marystown is moving more and more away from that. So you should pick up all the

slack that Marystown... Marystown is chasing the heavy metal fabrication work

now for the offshore. They are not going to be chasing ships, and repairing

ships and building ships and stuff. There is a great opening there for the

dockyard.

I cannot answer your questions because it is all

brand new to me; but, off the top of my head, if you were to ask me who owns the

jurisdiction, because it is land that actually reaches out into the water, I

would think there is probably joint jurisdiction there.

MR. T. OSBORNE: Okay. I have just a couple of

other questions, and obviously it has been a concern to the Province. The

transfer payments, when it comes to royalty regimes, we are losing seventy to

eighty cents on the dollar.

MR. FUREY: Yes.

MR. T. OSBORNE: With Churchill Falls - the

Lower Churchill, just as an example - are there any discussions with the federal

government with that, as well as other mineral finds and so on, to ease up a

little on the cuts to transfer payments? Otherwise, we will continuously go

through the cycle of always being a have-not Province, because as quick as we

get our royalties we are losing the bulk of it to Ottawa.

MR. FUREY: You are quite right. You make a good

point and it is a problem that has bedevilled successive governments. I remember

Premier Peckford, when I sat in Opposition, saying the exact same thing. How do

you get ahead? Mr. Crosbie, himself, called it the turkey trot, two steps

forward and three steps back, however that dance goes.

You are right, it is very difficult. You are in the

welfare trap. You are in a syndrome and it difficult to get out of the spiral.

Yes, there are discussions ongoing but they are led by the Minister of Finance

because as royalties come in they are clawed back. I particularly and personally

like the Irish model, the European Union. What happens in the European Union is

that they transfer equalization on a yearly basis in five-year increments. In

other words, they agree that for five years they are going to give Ireland, for

example, $2 billion; give it to Ireland over a five-year period irrespective of

what happens in the economy. So what happens is, after five years they review

the GDP performance and the economic -

MR. T. OSBORNE: It gives them a chance to catch

up.

MR. FUREY: Then they review the economic

indicators and they adjust equalization after five-year increments.

MR. T. OSBORNE: Lock it in for another

five-year period.

MR. FUREY: In Canada, it is adjusted on a

quarterly basis. If we grow, lose population, bring in more royalties, collect

more taxes, they reduce it on a quarterly basis. At the end of every year they

do not examine how the economy has performed and adjust equalization forward;

they always adjust it downward, that I can see. Now there are cases, I suppose,

where it has gone up based on some anomalies, which is the engine of Ontario

driving the economy into such a heated performance that revenues fall back to

the Province by virtue of Ontario doing much better, but it is a stupid...

Here I am criticizing it, I am criticizing the hand

that is feeding us, but that is what makes it so stupid; it is the welfare trap.

It is the lady who called me from Port au Choix who got a job at K-Mart and was

delighted. When she went to K-Mart for $5.50 an hour, she had her dignity and

she was happy. She called me two weeks later and said, `I had to quit'. I said,

`Why?' She said: I am a single mother; I have two kids. They took away my drug

card, they took away the allowance - the book allowance, the school allowance -

they took away this, this, this and this. I cannot get out of the trap, so I am

back in the trap.

That is us; that is Newfoundland.

MR. T. OSBORNE: Precisely. Hopefully there will

be some resolve there with -

MR. FUREY: They have to change the formula.

They have to change the way they are looking at it. They cannot look at it as a

hand-out; they have to start looking at it as a hand-up. Until they change that

attitude, we are caught in that spiral. It is vexing and it is terrible and we

cannot get out of it. It will require every one of there projects going flat out

for ten years to get us even; but the truth is, if they really wanted to help,

they would change the formula and we would be contributing in six years. We

would be a have Province (inaudible).

MR. T. OSBORNE: We would be out of (inaudible).

MR. FUREY: Think about this: The equalization

we lose is equal to what we generate for Quebec on the Upper Churchill contract.

If we could take that $850 million into our coffers, we would not have to take

the $850 million from Canada, we would be a have Province. Think about that.

MR. T. OSBORNE: On an even keel in one year.

I have just one other question pertaining to the

Lower Churchill. The transmission route to the Island, that power, would that be

100 per cent belonging to the Province of Newfoundland and Labrador, or would it

have to run through CF(

L) Co and we would get our 67 per cent?

MR. FUREY: No, there is 1,000 megawatts

reserved from Gull Island for use in the Province. The way we have determined it

is to make 200 megawatts available. Although it could be 400 or 600, whatever is

required for Labrador, we nominally set 200 because the economics of the

interconnect are driven off 800. That block of power would be reserved

exclusively for Newfoundland and Labrador. We can take that block of power and

run it through the company into the New England marketplace and take the

revenue, or we can take the power; it is our choice.

MR. T. OSBORNE: Okay, so either way it is 100

per cent ours?

MR. FUREY: One hundred per cent.

MR. T. OSBORNE: Okay, that answers my question.

I wanted to know, if for some reason the power corridor did not come to the

Island, would we then lose, I guess, a double wham? I was thinking if it was not

ours -

MR. FUREY: I know what you are thinking.

MR. T. OSBORNE: - then we would lose 33 per

cent of it going through, plus we would lose our equalization cutback on it

again and it would virtually mean that it is...

MR. FUREY: I hear what you are saying.

In the agreements which we are heading for, for

September, October and November of this year hopefully, if we can meet those

time lines, and we are hoping to do that - I am going to announce some contracts

today for the Lower Churchill, as I have told you, to get the field work done on

the environmental matters.

That block of power is reserved for our use. If we

decide to take the 1,000 megawatts and build an aluminium smelter in Churchill

Falls with the group of Germans who are going up there tomorrow or the next day

- did I tell you about that? - that may be one use for it. It is a stupid use,

but it is one use it could be used for. I could think of a better way to use

1,000 megawatts of power. We may use 100 megawatts to run it up to Labrador City

to create a silica production facility up there.

We may use some power to run it over to Voisey's

Bay, because it is good, cheap, efficient power, to reduce the costs of the mine

and mill at Voisey's Bay. A block of power in reserve to interconnect to the

Island because, as I told you earlier, there is only 150 megawatts of clean

waterpower left on the entire Island. Once it is used up, and it will be used up

fairly quickly, 150 megawatts is not a lot of megawattage. We are forecasting a

growth (inaudible) of 50 megawatts in the next three years. If we use 50 of

that, there is 100 left.

If we use up that waterpower, we are shackled and

handcuff to the world price of oil for all future requirements on the Island

portion of the Province. Think about that, being tied to the price of a barrel

of oil to expand your economy; you cannot do it. It is nice while these prices

are down the toilet at $14 or $15 a barrel. In fact, our last tanker of crude at

Holyrood was $14.50, the cheapest we have had in fifteen years.

You know the price of oil is going back to the

moon, and I know it, because that is the way it is. That is the way the cartels

operate. That is the way OPEC has fixed it. That is the way it is going to be

done. That is not a bad thing, because we went off Hibernia and Terra Nova and

everything else, but if we do not do something within the next six or seven

years - and that is the magic of the interconnect and that is the sale pitch we

are trying to make to Ottawa - if we do not do something, we are tied, our

economy is tied, the future is tied, the domestic consumer is tied, into the

future, to a price of a barrel of oil, which is completely out of our hands, and

we lose control of our economy. That is why it is so important.

MR. T. OSBORNE: Are there any other potential -

I know there is a study being done to assess the viability of further projects

as well to tie into the Lower Churchill agreement, perhaps. Is there any other

possibility of a larger reserve for our Province? I mean, when you think about

it right now, 1,000 megawatts may seem like a lot but in ten years' time we may

have every bit of that used and we are then purchasing power from CF(L)Co as

opposed to having our own reserve. Are there any -

MR. FUREY: Well, of course, Muskrat Falls.

MR. T. OSBORNE: That is what I was referring

to, the viability study, I guess, on Muskrat Falls.

MR. FUREY: I am going to announce the request

for proposals to look at the final feasibility study of Muskrat Falls, which is

an extra 800 megawatts.

MR. T. OSBORNE: Would that be ours, then, or

would that have to go -

MR. FUREY: Yes, that is completely ours.

MR. T. OSBORNE: Okay.

MR. FUREY: Now, we may want to bring in a

partner to help us build it and construct it and everything else, but it is for

our use.

MR. T. OSBORNE: Obviously we have to set our

sights long term because if we bring the power corridor to the Island then the

power initially will not be cheap power, but in ten, twelve, or fifteen years'

time, as we have seen with the Upper Churchill, it becomes cheaper power and

then we can attract industry to the Province by way of offering them cheap

power, which we have seen in Quebec and so on.

MR. FUREY: You are quite right, and this is why

we are asking Ottawa to participate. Why should Ottawa participate? Because it

will help us displace thermal energy which is oil-fired, which is Kyoto - it is

a negative to the Kyoto Accord.

Ottawa should also help us because it is the right

thing to do. They turned their back on us thirty years ago. They turned their

backs on us consistently through the piece on the Upper Churchill. Every form of

power, every form of energy, has the right of access across this country of

ours. Everything - natural gas, oil, you name it - every form of energy that you

can think of has the right of unfettered access through every territory in

Canada except electricity, because they were not prepared to take the

separatists out.

Mr. Smallwood was told by a prime minister: There

are funny things in mail boxes in Quebec. Don't ask, Joe. Successive premiers

badgered and tried to get access through Quebec for our power but could not get

it. Canada turned its back on Newfoundland. We were only seven seats and we were

insignificant. That is the truth. Successive governments turned their backs. The

government of the United States gave us access through Quebec (inaudible), not

Canada. Canada would still be sitting on the fence. Canada owes Newfoundland. It

owes us in terms of we are going to contribute to greenhouse gas reduction. They

have turned their back on us in the past. They controlled and crippled our

fishery. There are a whole bunch of reasons why they should help us with the

interconnect, and we are making that case now. If they do help us with the

interconnect, the cheap power that you talk about into the future, even at full

cost, may be a whole lot cheaper, if they pick up part of the capital cost, and

we can use that.

MR. T. OSBORNE: That may make it cheap power

tomorrow as opposed to ten years' time.

MR. FUREY: Exactly, that is the point. If you

get that cheap block of power tomorrow you can drive huge industries and create

thousands of jobs. You really can. A magnesium plant is one example.

MR. T. OSBORNE: If the power corridor does not

happen, do you feel, as a minister sitting around the Cabinet table, that the

Lower Churchill deal will still get approval from our provincial government?

MR. FUREY: You are asking me a hypothetical

question. You prefaced it with "if." I always hesitate to march into

hypothetical land, as I like to call it. These are all ifs, and if we start

speculating we might as well go out and play the stock market, you and I,

because it is pure speculation. I feel confident that the total project will go.

I feel confident that -

MR. T. OSBORNE: The reason I ask, I guess, is

because I feel that the power corridor to the Island is an integral part of that

deal -

MR. FUREY: So do I.

MR. T. OSBORNE: - and without that it changes

the whole outlook of the deal itself.

MR. FUREY: Not necessarily. If you look at the

components of the deal, the deal as structured without the interconnect is a

pretty good deal for Newfoundland and Labrador. The deal with the interconnect

is a super deal for Newfoundland and Labrador, so do not throw out the baby with

the bath water. The baby still looks pretty good. I think we have got to keep

moving forward to get that interconnect because it just makes so much sense from

every perspective: environmentally, socially, economically. It is good for the

country and the country should participate. Let's not prejudge till the study is

done. The study is getting underway now. I think there is a meeting in Ottawa

today or tomorrow where they are laying out the terms of reference and stuff for

Ottawa and making their first presentation on the interconnect.

MR. T. OSBORNE: No, I am not prepared to

prejudge yet either. However, the key to our viability as a province is going to

have to be industry. Because once that deal is signed, yes we have revenue

coming in from the Churchill agreement, we have some revenue coming in from

other energy - oil and gas and minerals; however, if we do not get out of the

trap we spoke about a few minutes ago in regards to transfer payments, and we do

not have enough power here to support industry ourselves, it is going to

continue to just be a vicious cycle. We have to reserve enough power for

ourselves and have the ability to use that power to create industry in the

Province.

MR. FUREY: I agree. You make a good point

there. There is no doubt about that.

MR. T. OSBORNE: Thank you.

CHAIR: Thank you. Mr. Barrett, any questions?

MR. BARRETT: Time is running by. I just want to

make a couple of comments. I would not want to miss this opportunity to bring

some good news from the oil capital of Newfoundland, and talk about the

fantastic things that are happening in the district and the isthmus of the

Avalon. I guess it is the hub of the oil activity in Newfoundland. What is not

on the Grand Banks is happening in the District of Bellevue.

I would like to speak for a short while on the Come

By Chance oil refinery. We did have some problems there over the last little

while. To give you an indication of the effect it has on the local economy,

during the shutdown we had 160,000 person hours of work at an average of $31 per

hour. That would give you an indication. There was roughly $25 million spent.

That meant that fabrication yards in St. John's and all around were busy, and

trucks were coming and going to the refinery over the last month or so. It had a

great impact on the economy of Newfoundland and Labrador.

I guess I have to also look at it in terms of the

company. What they have done is taken local people and put them through a

vigorous training program. They have taken young people from the area, from as

far away as Bonavista and Conception Bay, taken them in as operators. They

trained the local expertise, the local workforce. It is fantastic, the record

they have in terms of taking the young people from the immediate area and

training them to work in the oil industry. The problem with the oil refinery is

the minute they get them trained they take off to Alberta and other places and

in the offshore. A lot of people from my district who have worked at the

refinery are on the Hibernia rig and they are involved in the offshore

exploration and those activities. The company has done a fantastic job.

I agree with the minister. If we are looking at the

safety inspections and audits of the refinery, we are finding the same problem.

The wages we pay to our public servants are not comparable to what is being paid

in industry. You realize that a person who was on spark watch during the

shutdown at the refinery is probably making more than the person who was doing

the inspections at the refinery. A young student was being paid $15 or $16 an

hour and working ten and a half hours a day, and with overtime was probably

making $28 or $29 an hour doing spark watch. We are sending experts into the

refinery who are doing the safety audits and all the other audits, and we are

paying them a very...

As we get more of these heavy industries - this was

always a case at the refinery, I guess -, these major developments in the

Province, I think we are going have to really address what is happening in terms

of the staff at the Department of Mines and Energy and the Department of

Environment and Labour. I do not know, we may have to set up a different

corporation. If we can not work it within the public service, we may have to set

up some other kind of mechanism so that we can pay those people that are

comparable wages to what they would make, at least reasonably, in respect to

what they are being paid in industry, if we are going to be able to retain them.

We need that expertise. If we are going to develop in this Province we are going

to need that expertise, and we need the kind of safety audits and that sort of

stuff at major facilities like the refinery.

I have been the Member for the District of Bellevue

for nine years. The other morning I came in the office and I heard word that

nine bright, well trained, young people from my district had recently acquired

the permanent jobs at the Whiffin Head transhipment terminal. These were young

people that have gone through our post-secondary institutions over the last

three or four years. Bright minds who were hired as the permanent staff at the

Whiffin Head transhipment terminal. I have had a good many highlights in the

district over the last nine years. It has been a very positive district to work

in. There have been fantastic things that have happened over the last nine

years. I think one of the most encouraging things I have had in the last nine

years was the news that these nine young people have been hired.

These young people are the future of our

communities. We hear so often of young people having to move away to get jobs,

and all of a sudden within my own district there were nine young people hired.

Young people who will settle in the area, young people who will have families,

which means that the pupil-teacher ratio and the student enrolment will probably

not be so drastically affected as is happening in some of the places in

Newfoundland and Labrador.

I guess another success story is the transhipment

terminal. We have to give the credit to the people at the Department of Mines

and Energy, and we have to give credit to the Premier. There is no doubt that

that transhipment terminal was on its way to `Point Tupperware,' Nova Scotia,

but this Premier said that only over his dead body would it move.

WITNESS: Point Tupper.

MR. BARRETT: Oh, Tupper, is it? It does not

really matter. I was so frustrated with the whole thing I would have called it

anything at the time. Tupperware was good enough for me, as long as it was going

to Nova Scotia. I did not know where it was. The Premier said that it was over

his dead body that it would move out of Newfoundland and Labrador. Sitting on

this side of the House, I have great confidence that we will stand up to the

test of time, and the smelter refinery will go in Newfoundland and Labrador and

the other major developments will go here. I think we need to hang in there.

There is a lot of pressure on the person that sits

in the seat that Paul Shelley is sitting in now. People are desperate for jobs.

I am glad that last week we supported the resolution that was so ably put by the

Member for Labrador West. We need to stand up as Newfoundlanders and

Labradorians to those major companies and make sure that we get the maximum

benefits for this Province. I think the Whiffin Head transhipment terminal was

one of those examples of where the government stood up to the major oil

companies and said: You have to bring it ashore here and we have to get the

benefits here. Of course, we have to go further and say that further refining

and everything else has to happen in Newfoundland and Labrador in terms of our

oil industry.

These are some of the positive things. I could talk

about National Sea, I could talk about the quarry in Goobies and the one in

Terrenceville. For a while there were a great number of communities in my

district where there was zero unemployment. When the shutdown was at the

refinery there was no person unemployed in various communities in my district,

and I think that was a very positive thing that was happening.

It is good news, and I want to compliment the

people at the Department of Mines and Energy. Particularly Mr. Lester, who has

worked very extensively over the years with people in my district and the

community groups, and has been always there to support people in my

constituency. He has attended numerous meetings, and probably knows more about

the district than I do. There are not many public servants in this Province who

know any more than I do about the district. Mr. Lester has been working with the

committees over the years and has done excellent work. I cannot pass this by

without paying a compliment to Mr. Lester at this particular time because I

think he did a great service to the people and to the communities in my

district. I want to compliment the people from the Department of Mines and

Energy who have worked over the years to help facilitate and help to make

improvements that were so necessary in the district.

With that I move that the estimates of the

department -

CHAIR: (Inaudible) question (inaudible).

MR. BARRETT: Okay, I guess we are not moving

the estimates. Mr. Shelley wants to have a few words to say.

CHAIR: Mr. Shelley.

MR. SHELLEY: No, they are not more questions,

it is one comment and one request actually, but they are very important. I left

them until last anyway. I think Mr. Fitzgerald asked enough estimates questions.

We can go on with those all day.

As far as travel goes, by the way, I have never

criticized it, especially when we see end results. I never have, before politics

or during or ever will, as long as there are results from those. I agree that a

$40,000 budget is certainly not going to take you anywhere to promote when you

have to talk about a big (inaudible), and a big country to travel across.

I just want to make a comment first on the Sam

Blagdon Memorial Trail in Baie Verte. As the minister knows, Sam Blagdon was

tragically killed a couple of years ago. He was a big part of mining in the Baie

Verte area. The people, his friends, including myself by the way, helped build a

boardwalk trail through a place where he always walked along the river out

there. The first phase is over with. It is enjoyed by a lot of people right now.

We are trying to finish it. The previous minister supported us in different

ways. There is a request in a letter with your office for some small help in

trying to finish that. It is very important, although it is a small amount of

money, and I hope that we can follow up on that for continued support from you

as minister in that department.

The last thing I want to mention - and I did tell

the Chairman I would mention it here today, because I think it is more important

this year than any year - is our annual Chamber of Commerce mining conference,

which is on June 19-21 in Baie Verte. It is very important I think this year,

Minister, more than any other year before, that you would be there. You are

saying you will be there? It is good to know that because there are a lot of

questions.

MR. FUREY: We are going to do some skiing,

aren't we?

MR. SHELLEY: You can help them with the snow

maker, yes.

I think it is important for this reason - I say

this in all seriousness to you - because there are a lot of questions about what

is happening there. I am getting calls for job applications for the magnesium

mine. When that happens it is good that you would come as the minister and

address the people and put them on the right keel of what is happening. I try to

do it, my little bit, as I talk to certain groups, but it is certainly good for

that time. Plus of course the positive things in the area at Nugget Pond and the

other exploration there. I certainly invite you to that, and I am glad to hear

you will be coming to that. That is it for my remarks. Thank you.

CHAIR: Thank you, Mr. Shelley.

MR. FUREY: Thank you. Just a quick comment. Of

course my department will be there with a display, and I will certainly be

there. I think they have invited me to speak at the luncheon. I think I have

already agreed to do that, and I would be happy to do it.

Let me give you an invite. Mr. Blackwood, my

director here, is insisting that I go into the wilds of Labrador and see how

they operate in the field program for at least one night, amongst the black

flies, and in the tent, with black spruce tea and all that kind of stuff. Why

don't you come up, as critic, with me?

SOME HON. MEMBERS: (Inaudible).

CHAIR: I do not know how it is that all the

black flies are attracted to you two gentleman, because I am not bothered at all

by the black fly. (Inaudible) at all.

Before we would accept a motion on the estimates I

would just like to make a couple of comments. First of all, I would like to

express my appreciation, in a public way, to the Minister for his work and

efforts on behalf of the people in my riding with respect to the Iron Ore

Company of Canada claims. Also, with respect to Shabogamo Mining. I think that

we have sixteen or seventeen local entrepreneurs who have put their thoughts

together in trying to promote a project which I think holds some promise for us.

The other thing I would like to say, just quickly,

is that the issue of the pellet plant has been an important one, and has taken a

great deal of time, but there have been other issues you have taken with respect

to the companies. In fact, the supplier issue has been a very powerful one for

us. Because for many years IOC, Wabush Mines and CF(L)Co too have been supplied

from Sept. Isle and other places. Since January there has been more interest in

the industrial park in Labrador West than there has been in its couple of

decades of existence. We will see this year, I believe, several new businesses

going into the industrial park. As a matter of fact, the tractors are rolling

today, there is new steel being hung today in the industrial park, because we

have pursued the companies and wanted them to purchase locally. Those are real

jobs from real spin offs from real companies, and I think that it is because we

have taken an aggressive position, and that is very much appreciated.

On motion, subheads 1.1.01 through 3.1.07, carried.

On motion, Department of Mines and Energy, total

heads, carried.

CHAIR: Incidentally, before we close off. The

meeting that was scheduled tonight for the Department of Development and Rural

Renewal has been postponed. The minister is on business outside the Province.

The next meeting to be called will be on Wednesday, May 13, at the Committee

room at 7 p.m. for the Department of Industry, Trade and Technology.

The Committee adjourned.

Document details

Collection	Newfoundland and Labrador — Committees
Citation	1998-05-12
Type	committee
Volume / chapter	committees_standingcommittees_resource_ga43session3_1998-05-12_rc-me_.htm
Language	en
Format	html
Source	PROVINCIAL
Identifier	8af8976e488bd03a8f0fa6699991146513f68a71

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