April 30, 1991 RESOURCE

ESTIMATES COMMITTEE - MINES & ENERGY (UNEDITED)

The Committee met at 7:00 p.m. in the Colonial

Building.

MR. WALSH: Order, please!

Good evening ladies and gentlemen.

We have a brief formality that we will have to deal

with before we get started and that will be the election of our Chairman and

Vice-Chairman for the Committee. With that in mind, although I am conducting

this very brief thirty seconds, I will turn the -

AN HON. MEMBER: (Inaudible).

MR. WALSH: No, the Chair is already held by

Elizabeth Murphy, and I will let you do whatever has to be done.

MISS ELIZABETH MURPHY: Are there any

nominations for Chairman?

SOME HON. MEMBERS: (Inaudible).

MISS MURPHY: All those in favour, aye. Contrary

minded, nay. Carried.

MR. CHAIRMAN (WALSH): I would like to thank the

gentlemen to my left for their confidence, except for Walter. That was last

night, Walter, not tonight. I would like to open the floor now to nominations

for Vice-Chairman.

AN HON. MEMBER: Mr. Woodford, Humber Valley.

MR. CHAIRMAN: Seconded by Mr. Langdon.

All in favour, aye. Carried.

I would like to welcome everybody here tonight. For

the sake of the microphones, Jim Walsh, MHA Mount Scio - Bell Island. On the

Government side of the Committee I would like to welcome Bill Ramsay, the Member

for LaPoile; Oliver Langdon, the Member for Fortune - Hermitage; and Mr. Walter

Noel, the Member for Pleasantville. I would also like to welcome the Member for

Green Bay, Mr. Hewlett and the staff who are here with us tonight to assist us,

but in particular the Minister of Mines and Energy and his support staff who are

here with us tonight.

We are going to follow a fairly informal format. If

we need to we will come back to being technical, of narrowing our questions down

to ten minutes an individual. If I find that a Member wishes to relinquish his

time so that someone else can carry on we can do that. I would also like to

advise the support staff who have come with the Minister, that in actual fact

the questions tonight are being asked to the Minister and at the Minister's

prerogative he may call upon the support staff to give answers that may support

the position that he is putting forward. I would remind Committee Members that

in turn for the informality of it some questions could go directly to the

witnesses. But I remind everyone that on occasion we may find it necessary to

reaffirm the fact that the questions are really through the Minister to those

individuals.

With that in mind again I would like to welcome you

all here tonight, and that is my preliminary opening statement. I would like to

turn to my Vice-Chair now for any comments he might like to make and if need be

to begin the questioning.

MR. WOODFORD: No. The format as laid out by

you, Mr. Chairman, seems to be in order. There is nothing else to say. The

Committee Members know what their job is and I am sure most of those people

appeared before different estimate committees before and Public Accounts also.

So they are well aware of what is about to take place. So I would yield with

regards to questioning to my colleague, the Member for Green Bay, seeing that he

is the Opposition critic for Energy. So I yield to you, Alvin.

AN HON. MEMBER: Do you want me to (Inaudible)?

MR. CHAIRMAN: We will go to the Minister for an

opening presentation. In discussions with the Vice-Chair today, as I would be

making some preliminary statements as to how the format would run, I wanted to

make sure that he had an opportunity to confer, and I guess I went too far by

beginning with opening statements. But correct, Mr. Minister, we will go to you

for your opening statement.

DR. GIBBONS: Thank you, Mr. Chairman. I would

like to introduce my staff who are with me first. On my right, my Deputy

Minister Gordon Gosse; to his right, Assistant Deputy Minister for the Mines

side, Paul Dean; next to Paul, Mr. Kevin Whalen, Director of Administration; and

my executive assistant, Susan Hollet. On my left, the Energy side. Cyril Abery,

Chairman of Newfoundland and Labrador Hydro; David Mercer, President of

Newfoundland and Labrador Hydro; and Martin Sheppard, Assistant Deputy Minister,

Energy.

I would like to make a brief statement touching on

the main activities of the Department, and I am going to say a few words about

the geological survey work first, and then a little bit about the Mineral

Resource Management Branch and Petroleum Resources and Energy Programmes Branch

followed by Petroleum and Energy Economics; a little bit about each sector of

the Department and then open it to questions if that is okay with you.

One of the main activities of the Department of

Mines and Energy is in geological survey, and some of us who walked in tonight

noticed on the wall downstairs a quote dating back to some gentleman named Moses

Harvey who said, 'every decent country has a geological survey', or something to

that effect, I think. Paul Dean may remember the words better than I do, but we

are in a Chamber tonight that has such a quote on the wall downstairs as we

entered. And our geological survey has been in existence for a century.

For the last two decades approximately we have been

doing a lot of geological survey work in conjunction with the Federal Government

through federal-provincial cost-shared programmes, and last year we were

fortunate enough in October to sign a new four year programme that is going to

see us increase our field surveys this year. This summer we expect about forty

projects about half of which will have field components of geological mapping,

geochemistry, and mineral deposit studies in various places throughout the

Province, throughout Labrador and throughout the island part of the Province. We

can have questions on the details of that later as you desire. I will not go

into the detailed locations of any of these surveys at this time or the detailed

breakdown on the amounts of money or the amounts of staff.

On the Mineral Resource Management side, this is

the side that regulates the mining industry, monitors what is happening in the

mines around the Province and the quarries around the Province. In this

particular branch there is a Mineral Lands Division which is primarily

responsible for the administration of the land tenure regulations relative to

both the Mineral Act and the Quarry Materials Act, and issues expiration

licenses, mining leases and permits and all of that. So if anyone wants to talk

about anything dealing with mines and quarries we can talk about it relative to

that section.

One other aspect of that

section is its

responsibility for what we call our Drill Core Storage Programme. There are six

regional core buildings throughout the Province, and there is one

section of

funding in the budget this year to do some further work or upgrading on the

building in Baie Verte. The Mines Division of that particular branch is

responsible for monitoring the actual activity at the mining sites, and this

would include both operations at the mining sites and close downs at the mining

sites, and this is the

section which is very involved with and was, for example,

with the close down last year of Daniel's Harbour and right now with the

situations at St. Lawrence and Baie Verte.

There is a Research and Analysis Division of that

branch which is primarily responsible for collecting the statistics and

analyzing the statistics. This would include both the statistics on mineral

production as well as statistics on mineral exploration.

On the petroleum side I would like to talk first

about the petroleum resources and energy programmes part of the department. This

is the part which is primarily the technical side of the petroleum part of the

department responsible for the implementation of the Atlantic Accord

Implementation Act for Newfoundland and the Petroleum and Natural Gas Act for

the Province for the onshore and any related subordinate legislation.

At this time the Assistant Deputy Minister, who is

present, is the Chairperson for an interdepartmental study that is being carried

out by us on the Terra Nova project as a possible second project offshore next

to Hibernia. We have not yet finished that study but we are making progress on

it.

Through this

section we are monitoring offshore

exploration activity, again in co-operation with the offshore board. To date

there has been one well confirmed by British Petroleum for the offshore this

year, and another one has been talked about in the media but it has not yet been

formalized, so we expect at least two.

In terms of the land sale for offshore, the

Offshore Board has put out a call. There are four parcels that are on sale with

September 6 as the deadline for the call for bids. Three of these parcels are

offshore Grand Banks and one is offshore west coast.

Relative to the onshore activity that I mentioned

earlier, on February 15 we proclaimed a new set of regulations for onshore oil

and gas activity, and sometime during this year we expect to put out a call for

nomination of lands for onshore petroleum exploration. If there is any interest

in that we would then have a subsequent call for bids for onshore lands.

Another thing relative to the offshore through this

section and the offshore development fund we approved a community information

monitoring programme for the Bull Arm area last November, $375,000 out of the

offshore fund and we have now set up a Bull Arm area co-ordinating committee to

observe the activities at Bull Arm with representatives from all the local

communities and to co-ordinate any input. The other part of this branch that I

mentioned, the renewable energy part, is also a significant activity and the

Department continues to actively encourage energy efficiency as a means of

combating rising energy cost.

The Department also continues to promote the

development of extensive renewable energy resources such as waste wood, peat,

wind, small scale hydro and we are looking for opportunities relative to that.

Recently, we put in place an advisory committee to develop a strategic plan for

conservation and renewable energy options for the future and that committee I

understand is meeting on Thursday.

The Committee has been given a mandate to report to

me by the end of June with its first preliminary report on the options in that

area.

Now the final part of my Department that I want to

talk about is on the petroleum and energy economics side, and here we have a

group that is primarily concerned with formulation of policy and legislation

with respect to the economic and financial and fiscal aspects of petroleum and

energy, including all oil and gas exploration, development, production,

transportation, processing et cetera, and recently, over the last few months

this group has been very involved in a study of petroleum product prices.

Last year, as we all know there was quite a

significant increase in prices throughout the fall after the Iraqi invasion of

Kuwait, and as a result we had officials from this part of the Department do an

analysis and after seeing that analysis, we felt that it would be important for

my Department and the Consumer Affairs people of the Department of Justice to do

a thorough analysis of the situation.

They have now reported to me and my colleague, Mr.

Dicks, and we will be reporting to Cabinet very shortly on our findings on that

particular issue. The other significant area of activity of this group is in

relation to Hibernia, where they are having significant involvement in

monitoring the development of Hibernia. Of course there has been much said about

Hibernia since the signing last September 14th, I will not go into details now,

but will be prepared to answer questions.

We are also monitoring the Come By Chance refinery

operation and last year it set lots of records. Come By Chance experienced 350

days of operation, a total throughput of 31.5 million barrels, for an average of

90,000 barrels per day which was 86 per cent of capacity; it had an excellent

year. During 1990 employment at the refinery peaked at 570 workers.

Re-evaluation of some maintenance projects in late

November resulted in about 200 layoffs, but since that time the refinery has

still been operating at that 86 or so per cent capacity level with the full

slate of production workers. The final aspect of my Department for which I am

responsible, not a direct part of the Department, represented tonight by the

Chairman and President of Hydro and if there are any questions on Hydro, we can

discuss that as well.

That covers my statement, Mr. Chairman.

MR. CHAIRMAN: Thank you, Mr. Minister. I would

now go to Mr. Hewlett, the M.H.A. for Green Bay. I might add just for a moment,

Mr. Hewlett, that when answering questions, for the sake of Hansard, it might be

wise for whoever may be answering a question or asking, that they identify

themselves at the start of their comments so that Hansard will be able to

separate who is speaking and make it a little easier for them.

MR. HEWLETT: Thank you, Mr. Chairman.

In my capacity as Opposition critic, I am actually

Energy critic, my friend from Menihek is Mines critic and I expect him shortly,

but I would like to get a general overview of the Mines situation in the

Province and I will ask the Minister just how many mines do we have operating

right now, apart from Labrador City, Wabush, is that about it?

DR. GIBBONS: No. I have not counted lately but

we certainly do not have very many these days, apart from Labrador City and

Wabush. The Gypsum mine in Flat Bay should be back in operation after our winter

shut down; I will have to check with Paul to see if it is back in operation, it

should be as it is usually shut down during the winter.

Hopebrook Gold is continuing to operate; as we go

around the coast, I am not sure if the Lower Cove Aggregate operation is back

working yet from the winter shut down; Baie Verte, in the Baie Verte case, the

wet process is going through a receivership sale at this time; there was a

little clip in the Globe and Mail today that the two companies that were just

recently in court in Ontario on this particular property have come to an

agreement out of court and the process will continue now for the sale of that

operation. After that sale is over, which should take about another five weeks,

we would expect it to get back in operation fairly quickly this summer. Come

further east and I think I have to come all the way to pyrophyllite at Manuels.

That operation should be going right now through the winter.

MR. WOODFORD: Apart from Hope Brook then, I guess,

that is about it in base metals at this stage of the game.

DR. GIBBONS: Hope Brook is the only metal mine on

the island right now.

MR. HEWLETT: I know over the past number of years

there has been considerable exploration in the Green Bay - Baie Verte area. Are

there any reasonable prospects of a new mine in the area of base metals in that

particular area? I know there was some talk for a while of mining the tailings

at Rambler and there have been finds of gold in the general northeast coast

area. But are there any reasonable prospects of a mine? I have not seen one in

my neck of the woods since I was a teenager.

DR. GIBBONS: There has been quite a lot of mineral

exploration over the last few years. We went through the very aggressive time of

exploration, 1987-1989. (Inaudible) were a factor in helping raise money. A lot

of gold properties were identified. There are about a half a dozen around the

Province that are in the range of a half a million tons to about a million tons.

None of them really are likely to become mines in the near future. There have

been some proposals made on some of them but there is no likelihood in my mind

that any of them are going to become mines immediately.

In central Newfoundland the Tally Pond-Duck Pond base

metal prospect has been drilled considerably over the last couple of years.

Noranda is still looking for a little extra tonnage and they have been going

through the environmental review process. They are fairly close to the end. Is

it sometime this summer that is should be over, Paul?

AN HON. MEMBER: (Inaudible).

DR. GIBBONS: By June. So that property is probably

the closest one to becoming a new mine, but there has not been any decision made

to proceed with it at this stage.

MR. HEWLETT: What is the mineral mix at the Tally

Pond area?

DR. GIBBONS: The Tally Pond-Duck Pond is a

Buchans-type deposit. You have base metals plus gold and silver. Copper, lead,

zinc, gold and silver.

MR. HEWLETT: Is it fair to say that the main

problem with the gold situation is the international market price?

DR. GIBBONS: Yes. Right now gold is - I think

today it is $352. It dropped about $2 again yesterday. It has been decreasing

gradually over the last several months when we wish it were going the other way.

The price is not helping at all. The other thing that is a negative factor on

gold and other mineral products is the Canadian dollar. At eighty-six cents plus

that is not helping the situation at all. I would love to see the Canadian

dollar go down to about eighty cents and help boost the industry.

MR. HEWLETT: What about countries like the Soviet

Union? I have heard that gold products have shown up on the world market now

bearing the symbol of the Tsar.

DR. GIBBONS: Russia has been selling some gold for

foreign currency, yes, they have been doing that. But the key point with any

gold property is whether or not it can be mined at a profit at today's price.

Small deposits just do not have the economics in them to do that.

MR. HEWLETT: With regard to the offshore, you

mentioned Terra Nova. What sort of time frames are we talking about with regard

to that particular field where we have already started the Hibernia project and

you are into five or six years of construction before anything is pumped? Do you

anticipate anything with regard to Terra Nova in the short to medium term in

terms of actual physical activity towards a development?

DR. GIBBONS: Not in terms of physical activity. As

I said at the beginning in my introductory remarks we have been doing an

assessment of the Terra Nova field ourselves with an inter-departmental

committee looking at all aspects of that particular field. We have not quite

finished our assessment. Within the next couple of months I hope that we do get

it completed - probably before the summer break - and can basically decide on

some policy positions for Government as to how we would like to see it proceed.

The company will not be making a decision on it until they hear back from us.

MR. HEWLETT: With regard to policy decision, are

you talking about production mode? Floating, fixed, that sort of thing, is that

what you mean?

DR. GIBBONS: We have been reviewing that. That is

one aspect of policy decision on the production mode, and financial matters and

other things. But particularly the production mode. We have been having an

assessment done of the different options for production, whether it is a

floating system or a fixed system. What type of floating system, if a floater.

MR. HEWLETT: With regard to the Hibernia project,

what is the current work force and sort of anticipated profile of the work force

over the next several months? Certainly through the main summer construction

season. What do you anticipate in terms of direct job activity on the site?

DR. GIBBONS: The latest number I have on Hibernia

is - is this 637 in -?

AN HON. MEMBER: (Inaudible).

DR. GIBBONS: And Bull Arm? Yes, 637. These are the

numbers as of the end of March. So we have not yet got the numbers as of today.

MR. HEWLETT: What would you, say, anticipate come

mid-July or whatever?

DR. GIBBONS: These numbers will continue to grow

and certainly by September we should be 800 or more than that, but I would say

MR. HEWLETT: Will it continue to grow as the

calendar year goes on or will it taper off as the winter season cuts in?

DR. GIBBONS: It will continue to grow and by next

fall the number should be more like 1,600 at Bull Arm, it will double in the

year, from September to September and by September of 1993, it should have

doubled again and gone to about 3,000 at Bull Arm by that time; that is our

present assessment of what the likely numbers will be.

MR. HEWLETT: You mentioned you have a monitoring

committee with regard to the local situation in the immediate vicinity of the

Hibernia development, I wonder could you make a brief comment on how things are

going because I can appreciate, coming from a rural district with a depressed

economy, to put it mildly, how galling it must be to local people to have to

watch workers even from other parts of the Province roll by in a bus to a work

site when you yourself are unemployed or are on welfare or whatever, how is the

involvement of local people-

DR. GIBBONS: It has been doing very well as I

understand it. I am not sure what the exact percentage is now, but at one time,

about a couple of months ago, they were saying about 37 per cent were coming

from within a half hour's drive of the Bull Arm site, so I would not think that

number should change a lot, it should continue to grow locally.

In the early stage when the development started there

was a lot of concern out there; people had the feeling that well, we are not

going to get any jobs, but a lot of people in the local area have gotten jobs on

the site.

MR. HEWLETT: When you mention 600 or 700 or

something at Bull Arm, does that include engineering work and what not in the

capital city or around and about the Province or are we talking about additional

persons?

DR. GIBBONS: I can give you the breakdown right

now. St. John's, there are 205 at headquarters functions whether HMDC or Nodeco

or NOC in St. John's right now and 432 in Bull Arm, that is the March 31st,

number.

MR. HEWLETT: 432 (inaudible).

DR. GIBBONS: That was March 31st at Bull Arm and

that continued to grow and will continue to grow throughout the summer.

MR. HEWLETT: I will switch a bit, Mr. Chairman.

With regard to hydro-electricity and the Lower Churchill Development, the

Minister will recall that I have probably been somewhat sceptical of progress to

date.

I recall serving under an administration that talked

to Quebec for ten years and heaven knows they are good talkers; could the

Minister indicate if he is reasonably optimistic that there is a possibility of

some sort of an agreement with Quebec in this particular year?

DR. GIBBONS: I have always tried to avoid using

the word optimistic because I do not want it to sound too positive. We have been

making gradual progress since we started these discussions about a year and a

half ago in October, 1989, and as I said in the last few days, up to now we have

had twenty meetings and there is another one scheduled in the very near future.

I am hopeful that during 1991, we will reach an

agreement in principle or a letter of intent stage, but you can never be sure;

you can never be sure. From where I sit, from what discussions I have had, both

sides are very serious, very serious; I have no reason to be sceptical about the

intentions.

MR. HEWLETT: Okay; there were many times, I might

indicate, that I felt the same, watching the progress of things, not being a

Government official as such, but being an aide to the Premier, but one thing

that has always been prevalent in any concept of Lower Churchill Development is

significant federal presence in such a development, probably in the way of long

guarantees and/or direct grant funding.

I gather your department has indicated in an

environmental presentation that such federal involvement would be necessary in

order to make that project go and bring some power to Newfoundland?

DR. GIBBONS: Well, we see right now that the Lower

Churchill Development Corporation is the appropriate vehicle to use; it may not

be the one that is used if we get a development, but it seems to be the

appropriate vehicle to use, and that is fifty-one per cent provincial and

forty-nine per cent federal, it is a Crown corporation, and that in a sense

assumes a federal role. Now I do not want to really get into the discussion of

what we might need in terms of loan guarantees or any other aspect of financing

until we really get an agreement. I really do not want to discuss that publicly

at this time. I prefer to leave that issue, but naturally we will have to borrow

considerable, or whoever is doing it will, if it is LCDC, borrow considerable

quantities of money for such a development.

MR. HEWLETT: You are talking $1 billion or $2

billion or so for a power line I presume?

DR. GIBBONS: A power line: $1.6 billion plus.

MR. HEWLETT: Given the current debt load of the

Province, surely one could assume that grants and/or guarantees from the Federal

Government would be required in order to carry off even such a transmission

project, I would assume.

DR. GIBBONS: Well maybe, but as I said, I do not

want to get into the details of discussing how the financing would be arranged.

But it is a lot of money, and obviously we would have to look at the financing

seriously once we get a letter of intent, if we get a letter of intent.

MR. HEWLETT: That is all for now, Mr. Chairman.

MR. CHAIRMAN: Mr. Ramsay.

MR. RAMSAY: Just to pick up on a couple of things

you said. First you mentioned onshore exploration. I wondered, based on the

geological information available to your department, in comparison to places

where the geological information would suggest you would be successful in oil

exploration onshore, I suppose, how likely are some of the areas, how do they

look in comparison to what normally is the case?

DR. GIBBONS: There are some interesting onshore

rocks on the west coast from the Bay St. George's area all the way up to the end

of the peninsula. The last couple of years there has been some seismic

exploration over there. If I remember the number correctly I believe there was a

total of sixty-two kilometres of line seismic shot in the last two years, some

of it up the coast and some of it south of Corner Brook. I cannot be sure that

there will be a lot of activity in the next year, but we have already had some

interest shown in the last few months by a company that has talked about further

seismic work over there onshore. I would not see any drilling onshore in the

very near future. You have to get a fair bit of seismic exploration first.

MR. RAMSAY: I do have one concerning Hopebrook

gold which you mentioned. I do not know if it is public, I assume it is and was

at the time, the Province's inter-tie in any way with Hopebrook gold; I wonder

what the Province's involvement is insofar as the provision of hydro to

Hopebrook and that sort of stuff. Is that -

DR. GIBBONS: I do not have the details on that,

but I know that the line was installed a few years ago with support from the

Province. Maybe, Mr. Chairman, you can -

MR. ABERY: Yes, we built a line -

MR. CHAIRMAN: Excuse me, Mr. Abery, just for the

sake of Hansard would you identify yourself please.

MR. ABERY: Cyril Abery, Hydro. Yes, we built a

line down basically from Stephenville, down to Burgeo and Hopebrook when they

were developing the mine. At that time the Province did put some money into the

financing of that line. But right now Hopebrook is just a normal commercial

customer of Hydro and pays normal commercial rates for it's power requirements.

MR. RAMSAY: One other thing, Mr. Minister, I

wanted to get into some of the details of the estimates document. In various

component parts of the estimates there is a federal figure as far as federal

revenue. Is that targeted specifically to certain expenditures or is it a global

amount that the Province decides on what it should be spent?

DR. GIBBONS: These dollars that are marked as

Federal are dollars that are coming in under the Mineral Development Agreement

and they are being targeted at various projects that are being done under the

Mineral Development Agreement, and throughout the estimates document, and

particularly under the geological survey branch most of it, regional mapping,

for example, shows $401,100 federal dollars revenue, that is money that we are

receiving from them for geological mapping projects done.

MR. RAMSAY: Okay, so that $401,100 comes into the

Provincial Treasury for specific regional mapping things, but the decision as to

what is expended from the total is the Province's decision or is it a joint

decision?

DR. GIBBONS: No, the agreement is run through a

joint Federal/Provincial Management Committee and every year that committee

meets regularly to look at possible projects to do, and usually by March of each

year, would approve projects to be done the following field season, and these

would be vetted through both surveys, the Geological Survey of Canada and our

own geological survey and finally approved by the committee.

MR. RAMSAY: Mr. Minister, through the budget

process: I just wondered how evaluations are done on say specific sub-head items

in order to determine if savings can be generated in a given area. I do note a

lot of areas where the expenditures have been well below the budgeted amounts in

the past, this is probably due to restraint, but I just wonder how these are

looked at then to determine if it might be necessary to require the same amount

as was budgeted last year, in comparison to those areas where the increases have

been put in I suppose, to cover what is anticipated as increased expenditure.

DR. GIBBONS: Most of what you see as increases

this year under the geological survey are increases related to the Mineral

Development Agreement, with the amounts really tied to the cost of carrying out

a field project, whether that is an amount in professional services or supplies,

purchase services or something like that, it is to carry out field projects, and

that is where you will see an increase.

MR. RAMSAY: Mr. Minister, also, regarding

something that the Opposition has brought up, concerning the purchase services

and professional services I guess, insofar as more purchase services by

departments, and I have gone through most of the purchase services here and I

note that on most of them you have held the line and/or decreased them; very

little seems to have been increased in purchase services, is there an

explanation for managing to do that or -

DR. GIBBONS: Well, we are trying to live within

the budget we were given, which was basically a frozen budget, and that is the

circumstance, except for this Mineral Development Agreement where there were

extra dollars because of the Mineral Development Agreement, otherwise, we are

living within the budget and there may be some juggling between sections within

a total amount, but keeping it within the total budget amount wherever we can.

MR. RAMSAY: Okay. On page 154 of the budget

estimates, I note under the Policy Planning and Co-ordination of Petroleum

Resources Management, 4.1.01, sub-head No.10, there was an allocation of

$200,000 budgeted for grants of which only $20,000 was expended, is there an

explanation of the reason for that?

DR. GIBBONS: That is this co-ordinating committee

part, is it not?

MR. RAMSAY: Information Centre Programme, yes.

DR. GIBBONS: Yes, the Information Centre Programme

that I mentioned earlier that is in the Bull Arm area; we did not get it in

place in time for last year's budget so it was not spent last year.

MR. RAMSAY: So that was in the Budget, in case -

DR. GIBBONS: Yes, well we did not get it approved

through the approval process last year under the offshore fund, but it had been

budgeted last year under the offshore fund and we did finally approve it and I

believe it was announced on November 27th, and put in place now for this budget

year.

MR. RAMSAY: Okay. I just have one final one, and

it concerns the transportation of petroleum products from the United States into

the Province. Matters come up in discussions at home, just local discussions

through the grape vine, that there are some retailers of petroleum products

bringing in product from the U.S.; is that kind of thing allowed or is it the

kind of thing that the Free Trade Agreement would allow to happen for products

to be brought in, in that manner?

DR. GIBBONS: That is the first time that issue has

been raised, but I do not see any problem with it coming in because, really, all

of our petroleum product in Eastern Canada comes from foreign sources; all of it

that is used in Newfoundland, New Brunswick, Nova Scotia, P. E. I., is all

imported into the Atlantic Region, refined somewhere in the Atlantic Region and

then distributed; now some of that refined product may be coming out of United

States refineries, but it is all foreign product that we (inaudible).

MR. RAMSAY: So if an entrepreneur did take the

initiative to go down to the Eastern Seaboard of the US and bring a tanker load

of petroleum back he would not have any problem?

DR. GIBBONS: I do not think there is any problem

with that. I mean, Hydro may be an example of a company that goes out in public

tender. Don't we get most of our Bunker C from a company in the United States?

AN HON. MEMBER: It comes from Venezuela, Mr.

Minister.

DR. GIBBONS: Most of it comes from Venezuela

through an American company, through public tendering.

MR. RAMSAY: Well, that is all I have, Mr.

Chairman. Thank you very much.

MR. CHAIRMAN: Thank you.

Mr. Snow or Mr. Hewlett?

MR. A. SNOW: Alec Snow, Menihek. (Inaudible)

concerning Hydro. Has there been any thought given recently or this year with

the expansion of Newfoundland Hydro and distribution of power in the Province?

DR. GIBBONS: In what sense do you mean

"expansion"?

MR. A. SNOW: Well, to increase the amount of

delivery of the supply of electrical energy to consumers.

DR. GIBBONS: We are providing all that we have a

demand for.

MR. A. SNOW: There has been a lot of talk in the

last couple of months around western Labrador that they have seen people from

Newfoundland Hydro in there and suggesting that they may be considering

expanding into Labrador City and supplying power to the residents in western

Labrador, in Lab City.

DR. GIBBONS: Supplying power? - right now Lab City

is supplied by the company, is what you are saying.

MR. A. SNOW: Yes. Carol Utility, I think.

DR. GIBBONS: By the company. I think there may

have been some discussion from the company to Hydro? We can ask the Chairman of

Hydro to speak to that.

MR. CYRIL ABERY: Yes, we have over the last number

of years had a number of discussions with the Iron Ore Company of Canada. There

has been no resolution of those discussions, and I guess we have been on and off

talking to them maybe for ten years now. We continue to do so. There have been

no decisions at present.

MR. A. SNOW: Do you anticipate a resolution to the

negotiations that you are having?

MR. ABERY: I really could not speculate on it. As

I say, we have been discussing with Iron Ore Company of Canada on and off for at

least ten years. Whether or not at this time we have actually reached some sort

of an agreement with them I do not know.

MR. A. SNOW: Are you negotiating now?

MR. ABERY: There are discussions with the Iron Ore

Company of Canada.

DR. GIBBONS: The company is also talking to us

about getting extra power I think for the mill up there, isn't it?

MR. ABERY: That is correct.

MR. A. SNOW: So you would be looking at purchasing

the assets of the distribution of power in the town site, we will call it?

MR. ABERY: Yes. That has been one of the subjects

that has been discussed over the last ten years, that and supplying the mill

with more capacity.

MR. A. SNOW: You would supply more energy to the

concentrator?

AN HON. MEMBER: (Inaudible).

DR. GIBBONS: Both Wabush Mines and the Iron Ore

Company of Canada have been asking for more power.

MR. CHAIRMAN: Just for a brief moment. As Chairman

I must say that we are starting to get into three-way conversations, and again

for the sake of the people who will be sitting in the Hansard room with a tape -

not seeing the faces but hearing the voices - as we go to the third person I

would ask you again if you would, identify yourself or we will end up in a

four-way conversation and we will have no idea who said what.

DR. GIBBONS: Excuse me, Mr. Chairman, that was my

fault because I was the third person jumping in there.

SOME HON. MEMBERS: (Inaudible).

MR. CHAIRMAN: I did not mean to interrupt, but Mr.

Abery or Mr. Snow please carry on. But again, try to identify yourself.

MR. A. SNOW: Did the Minister want to continue

jumping in or did you finish?

DR. GIBBONS: No, you carry on if you have further

questions for me on the topic.

MR. A. SNOW: You mentioned that there are ongoing

negotiations and, I would assume, that the whole block of power would be

negotiated. You are talking about the block of power to Iron Ore Company of

Canada and what is consumed - mill site, we will call it - and the block of

power consumed in the town site of Labrador City? Is that it?

DR. GIBBONS: I am not sure that negotiation is the

right word. There have certainly been discussions.

MR. A. SNOW: I thought the word "negotiations" was

mentioned by Mr. Abery, I believe.

MR. ABERY: Cyril Abery here. No, I believe I said

discussions, but it is a thin line, I admit.

DR. GIBBONS: On and on for ten years.

MR. A. SNOW: Well, if indeed these discussions -

brackets, negotiations - are ongoing now, could you tell me what the benefit

would be for the taxpayers of this Province, for Newfoundland Hydro to purchase

assets in distribution of power in Labrador City?

DR. GIBBONS: Cy, you want to -?

MR. ABERY: Cyril Abery. We would have to get

Public Utility Board approval for any expansion that we made, so obviously any

arrangement that we came to with the Iron Ore Company of Canada with regard to

distribution of electricity in Labrador City would obviously have to be shown to

be to the benefit of the consumers of the Province. Otherwise, I presume, the

Public Utilities Board would not approve it. So any change in the distribution

of electricity in Labrador City would require a public hearing when we would

have to presumably justify any arrangement that might be made.

MR. A. SNOW: Alec Snow, Menihek. Prior to any deal

being cooked up between the Government and the mining company, and having huge

electrical rate increases in western Labrador, there would be public hearings

held?

MR. ABERY: Yes. We are not allowed to change any

rates without Public Utility Board approval for retail customers.

MR. A. SNOW: Could you tell me if, in the

discussions or negotiations that are ongoing now, what the price range is you

are talking about? In purchase of assets?

DR. GIBBONS: I do not have the answer to that, I

would have to ask the Chairman of Hydro.

MR. ABERY: No, I could not answer that.

MR. A. SNOW: Is there a reason why or do you just

MR. ABERY: I don't know what the value of the

assets are.

MR. A. SNOW: Okay. Thank you.

MR. CHAIRMAN: Thank you, Mr. Snow.

Mr. Langdon.

MR. LANGDON: Oliver Langdon, Fortune - Hermitage.

A couple of questions. I understand that Noranda has scaled down its operations

in the Province considerably and have moved whatever headquarters they have to

the central area. I was wondering what prospects have they found out in the

Harbour Breton - Pool's Cove area as to the possibility of lead, zinc, whatever.

DR. GIBBONS: Yes, Mr. Chairman, Noranda has done

exploration in that region and they do have some prospects for these particular

metals down there. I do not believe they plan very much in the way of

exploration down there this year, but I would ask Paul Dean, my Assistant

Deputy, who might be more up to date on that.

MR. PAUL DEAN: Mr. Langdon, Noranda has been

active in that area I would say for at least the last five years. They have what

we would call a prospect, a lead, zinc, silver prospect in the area that is

known as Winter Hill. Somewhere near the head of Hermitage Bay. There has been

some drilling and other exploration activities, sort of on-again, off-again,

over the last five years.

The geology of the area is complexed and it is very

difficult to look at continuation of geology from drill hole to drill hole. But

nevertheless I think Noranda has been active in that area over the winter doing

further geophysical surveys to further define drill targets.

MR. LANGDON: Will they continue to be doing that

over the summer?

MR. DEAN: I am sorry, sir, I do not know.

MR. LANGDON: Okay. The other area of concern is

the Seal Cove granite. I understand the granite industry in the Province is in

its infancy and there are granite deposits in the Lumsden area, but one of the

big deposits as I understand it is in the Seal Cove area. There was some work

done on that last year. I was wondering if we could have an update on that area.

DR. GIBBONS: Yes, you are right. Seal Cove has

probably one of the most interesting granite deposits in the Province and there

are about a half dozen prospects for granite and other types of rock for

building stone, dimension stone around the Province that we have been working on

as a department now for several years, starting with our last Mineral

Development Agreement and we have identified some good sites.

As you said, this industry is in its infancy and

people are working on the rocks in a number of the areas in trying to create an

industry out of it; it is hard to say how big it can grow, but certainly the

Seal Cove area is one where it can possibly grow, if the person who is involved

in it can find some markets and gradually develop the markets; again, I would

ask Mr. Dean to probably talk about that in a little more detail.

MR. DEAN: Just to echo again what the Minister has

said, we think this is a part of the mineral sector which is in its infancy but

has some potential especially for small scale new developments in rural

Newfoundland.

We would say from our assessment of the resource to

date there are two deposits if you like that are perhaps a step or two ahead of

others and that would be, certainly the Seal Cove pink granite and the

anorthosite near Nain, and those two deposits are closer to being a proven

resource if you like than any of the others, although we are encouraged by the

preliminary results in a number of other localities also.

MR. LANGDON: If I may, the person who was doing

the exploration there last summer, did it on a very small scale, and I would

think that if the industry were to come to fruition, there is going to have to

be some larger investments, other than what Mr. Kealey had from St. Alban's. I

was wondering if there was any work on that or, what do you know of his probably

entering into a partnership or whatever, to get extra funds to do more

exploration this summer?

DR. GIBBONS: I am not aware of anything myself,

Mr. Chairman; Paul, are you aware of anything?

MR. DEAN: No, I am not aware of anything in

particular with respect to Mr. Kealey, although, I would note that there are

several Italian companies who have become interested in granite and marble in

the Province, and in addition, have had their initial interest through the Nain

project, the Nain deposit, and they have expressed an interest to invest, should

other deposits be proven in the Province.

DR. GIBBONS: The Nain project to which Paul was

referring is the Labradorite in the Nain area.

MR. LANGDON: Just one more question; late fall,

there was a tractor-trailer flat bed from Nelson Monuments in New Brunswick

which came and got two of the large chunks of granite and took them back, and I

was wondering if there has been any report made to your department on these two

particular samples that were carried away.

DR. GIBBONS: I have not seen any; is there, Paul?

MR. DEAN: No, I am not aware that there is a

report, although you are right, Nelson Monuments have been very co-operative

with the department and with the people who have potential development sites in

the Province, in that, they are the major supplier of monumental stone in the

Province at the present time.

They have a processing plant in New Brunswick and they

have offered to take samples of anyone who has an interest in deposit or

prospect and bring them back to their plant in New Brunswick, cut and polished,

but I have not seen any particular report on that particular granite deposit.

MR. CHAIRMAN: Sorry.

AN HON. MEMBER: I have a few things to say

whenever it is convenient.

MR. CHAIRMAN: I will go to the Vice-Chairman now,

then I will come back as we are trying to alternate as best we can from each

side.

Rick Woodford.

MR. WOODFORD: I have a question for the Minister

concerning the dimensional stone. Has anybody in the Province made application

for the processing of any dimensional stone in the Province?

DR. GIBBONS: I do not know if they really have to

make application for the processing -

MR. WOODFORD: Actual processing of the stone.

DR. GIBBONS: There are people who have tried to do

some processing and again, under our previous Mineral Development Agreement, we

helped fund some processing that was done that polished a number of samples that

were used that year at the Earth Science Building at Memorial. Apart from that,

Paul, is there anyone else who is doing any processing?

MR. DEAN: No, there is no one who is doing

processing at the present time. We are aware in our Department of Mines and

Energy of applications to ACOA for financial assistance and for processing

projects and for feasibility studies in this area of dimensional stone. But I am

not aware of any applications to the Province other than the ones that we are

aware of through our relationship with the Atlantic Canada Opportunities Agency.

MR. WOODFORD: Well then, would it be fair to say

that there have been officials from the Department of Mines who on different

occasions have spoken to individuals who did make applications to ACOA or

elsewhere for funding to do just that?

DR. GIBBONS: Oh yes. Normally there is

consultation with officials from the Department on that particular subject for

anyone who is interested. I think all the people who have had any interest in

the sites that have been mentioned to date have had an interaction with the

geo-scientists in our Department.

MR. WOODFORD: You mentioned Tally Pond, and some

other areas, Baie Verte area. There is Noranda, and BP - I think they have some

mining and exploration interest in the Province.

DR. GIBBONS: Yes.

MR. WOODFORD: Would it be fair to say that because

some of those same companies hold the same claims, or claims to different tracts

of land in the Province, that is why some of it is not developed?

DR. GIBBONS: No, I would not really say that. On

our mineral rights map right now there must be about a hundred different owners

of mineral rights. Now, some of the companies, the big companies, hold bigger

blocks than any others and you have just mentioned the names of some of the

companies which have been most active in terms of Noranda and British Petroleum,

and they have been very active in the Province over the last few years. I would

hope they stay active.

It was mentioned earlier that Noranda has recently

closed an office in the Province. They have consolidated back to central

Newfoundland, they have announced the closure of their St. John's office, and

that they are going to be operating out of Grand Falls. In the earlier days of

Noranda and Newfoundland they used to operate out of an office in Gander only

and then they opened a second one in St. John's. But I would like to see

companies like that stay operating here because they are the ones which tend to

be able to raise the money and do the exploration.

MR. WOODFORD: On the hydro part of it. Did

Newfoundland Hydro this year buy any power whatsoever from Deer Lake Power

Company or Kruger? Did any excess power go into the grid at all?

DR. GIBBONS: I do not know the answer to that but,

Mr. Chairman, I will ask the Chairman of Hydro.

MR. ABERY: I do not believe we have bought any

substantive amount. On occasion, if the mill is down for some reason or they

have surplus water, we have a contract with them where we would buy

interruptible power. To my knowledge we have not bought any substantive amounts

this year.

MR. WOODFORD: What about last year? Could you make

some comparisons?

DR. GIBBONS: Yes, go ahead.

MR. ABERY: No normally we do not purchase much

from the Deer Lake Power Company. We sell them power, basically. They basically

take the power from the Deer Lake plant and they also buy I believe it is

another twenty or thirty megawatts - I am not sure of the amount - from

Newfoundland Hydro. But if there is a slow down at the mill or a strike or

something of that nature at the mill and they were going to spill water, then

they generate the electricity and we would take it into the grid. But on a

normal year we would not really buy very much from them except under those

circumstances.

MR. CHAIRMAN: Thank you, Mr. Woodford, Mr. Abery.

Mr. Noel.

MR. NOEL: I get some complaints from people about

not getting a fair shot at work with the Hibernia project. I know this has been

an ongoing kind of concern that you have been dealing with. Is there anything

new on it?

DR. GIBBONS: I would say, Mr. Chairman, that in

the early stages again I have had a fair bit of contact from people who were

expressing concern that they could not get jobs, but again, more recently, I

have not been receiving any concerns. I think it is again reflecting the fact

that more and more people are being hired on the site. But I have not been

getting much concern raised at all recently.

MR. NOEL: I am sorry, I was thinking primarily of

companies that are trying to get (Inaudible).

DR. GIBBONS: Oh, companies, I thought you were

talking about individuals looking for work.

AN HON. MEMBER: People versus companies.

DR. GIBBONS: People versus companies. Yes, well,

with regard to companies there is a well-defined bid process and all bids that

are - I think it is graded on $100,000, Gordon? - will go through that process.

Companies would go through a pre-qualification. They would submit the details of

their company and get pre-qualified. If they qualify then they would be asked to

put in a proposal on a bid and eventually the winning bidder is determined.

Again, in the early stages of this development there have not been a lot of

small contracts. But as the development proceeds there are more and more

contracts that people bid on. There will be more opportunities.

But you are right, I have had concerns expressed to me

up to last week of companies saying they wished they could get more

opportunities on Hibernia. In most cases I would encourage them to be a bit

patient and keep trying, and make sure they keep themselves fully aware of all

the opportunities that are going to be there. Stay in touch with HMDC, Nodeco,

NOC, and any of the other companies that may be subcontracting work.

Particularly with regard to Newfoundland companies. They are often looking for

the smaller packages that are subcontracted down that they are capable of

bidding on.

MR. NOEL: Some of them seem to feel that certain

suppliers have particularly close relationships with the developers and feel

that they can't sort of get inside that relationship. Is there anything that the

Government can do to deal with that, or is it essentially a - how much influence

can the Government have with the developer?

DR. GIBBONS: Well, in a sealed bid process, when

the details of a particular project are laid out and you bid on it on the basis

of a sealed bid, I do not think the particular comment really is particularly

relevant, that, well, it's because someone knows somebody. I think right now

here most of the companies that are here are working hard to become well known

to the major companies that are putting out the bids and to know what is

required of them so they can bid intelligently and bid a good price. I encourage

Newfoundland companies to keep trying and there will obviously be some

disappointments, but to keep trying.

But what you are saying has also been said to me at

times, that people are concerned that some people know more about what is going

on than others and seem to have an inside track. I do not know if really that is

true. As I said there is a process and you go through that process and come out

through after having participated in a sealed bid, and if you win, you win.

MR. NOEL: I guess I am thinking primarily in terms

of consulting work and engineering work, that sort of thing, where you probably

do not have the tendering process.

DR. GIBBONS: Well, there is a tendering process

but a lot of the engineering is being done through the big companies. The big

contract was won by NOC for the top side engineering. They are a big engineering

consortium with several companies making up that consortium. As I understand it

they are going to try to do most of the work within that consortium rather than

subcontract it as it gives them more control.

Now there is still going to be some subcontracting of

packages. For example, the water and sewer at the site was subcontracted to a

company, I think won by a company from Clarenville. There are other small

packages that are going to be subcontracted out. Over time maybe there will be

others that are going to be subcontracted out. But there are major engineering

components to all of the consortia that are involved.

MR. NOEL: What about the concern that a lot of

work is being done outside the Province? People thought that engineers in

particular, and designers for this sort of thing, they thought we would have had

more done in the Province by local people. Does that seem to be a problem by you

people?

DR. GIBBONS: Well, in the agreement that was

negotiated there was a certain amount that was committed to be done in

Newfoundland. That will be done in Newfoundland. I would hope that other

companies in Newfoundland will win work besides what is committed to be done

here. For example, the gravity base itself. Fifty per cent of all the

engineering on the GBS is committed to be done in Newfoundland. The initial,

early phases of that particular engineering, these phases are being done

elsewhere right now, in Montreal and Paris, primarily.

But at a certain stage it will come to Newfoundland

for completion. There is a particular agreement, a technology transfer

agreement, where we as a government through the Department of Development are

committing, I think, $11 million to get some particular engineering work done.

The accommodation module which my energy critic has

often mentioned in the past, the engineering on that is committed to be done in

Newfoundland, will be done in Newfoundland. I will wait and see if there are

other aspects of engineering that Newfoundland companies can win. I hope they do

win other aspects.

MR. NOEL: But you are pretty comfortable with the

way it is operating now.

DR. GIBBONS: Well, I am satisfied that what we

have negotiated is being done in Newfoundland and will be done in Newfoundland

and we will certainly be watching it very closely to make sure it is done in

Newfoundland. I would hope that we also get more than what is committed to us on

paper. But it is the process I guess that people have been concerned about, that

there have not been a lot of subcontracts called. But again, we are at the very

early stage of this development, we are only six months into this development.

There will be, I believe, more opportunities for subcontracts although I do

believe the big engineering consortia will be doing most of the engineering work

themselves, as part of these consortia. I think that is about right, isn't it

Gordon?

MR. R. GORDON GOSSE: That is true, yes.

MR. NOEL: You are looking at the possibility of

regulating fuel prices, are you? Is that fair to say, that you are looking at

the possibility?

DR. GIBBONS: Well, yes. It is fair to say we have

been looking at the options relative to petroleum product pricing. The options

vary from leaving things as they are right now with the market driven system to

going to a regulated system of some kind, or stopping somewhere in the middle.

We had this committee in place that assessed all of this over the winter and the

committee has now reported to me and my colleague, Minister Dicks, and we will

be getting into the Cabinet process in the next few weeks, and we will take a

position after that Cabinet review.

MR. NOEL: A few people in the Province have been

looking into developing slate mines as a few people around the table I suppose

are aware of. Do you think there is much potential in that particular area?

DR. GIBBONS: Well, we do have some excellent slate

deposits, particularly in the Trinity North area. The Nut Coast Lake deposit is

an excellent one and there is more slate in that region. On Random Island near

Hickman's Harbour there is a good deposit. Over at Keels, Bonavista South

district, there is some good slate. There are some other slate deposits

scattered around the Province, but particularly those three are excellent

deposits. There has been a lot of work done on them over the last few years,

particularly Nut Cove. The market is excellent, there is an excellent

international market for slate products. There has not been a lot of success yet

in production of slate and marketing but again we hope that the companies that

are involved do have more success in the future.

MR. NOEL: What is the problem? If the markets are

there and we have good product, we do not have substantial enough companies

trying to do it, does that seem to be the case?

DR. GIBBONS: I think that is an aspect of it. You

need someone who is able to go in there and make the investment and start

producing the product. We have had a number of small-scale operations and I

think the scale is part of the problem.

MR. NOEL: What about the Bell Island mines? There

is ongoing talk about using them for other purposes. Is that anything your

Department has to do with?

DR. GIBBONS: Not particularly. We maintain a file

on the Bell Island mine because it is a closed down mine and we are basically

responsible for watching it right now as a property of Government, as a closed

down mine. We have all the detailed drawings of the internal workings of it. The

Department of Development is the one that promotes it as a possible oil storage

site. I do not know exactly what if anything is going on at this time. There is

no interest in it as a mine any more, although there are probably several

hundred million tons of iron ore still resting in the ground below Bell Island.

But they can not be economically removed, compared to the economics of taking

ore out of the ground in Labrador West, or elsewhere where you have big open pit

mines.

MR. NOEL: Thank you, Mr. Chairman.

MR. CHAIRMAN: Thank you, Mr. Noel, not only for

your questions but your special interest in my district as well. I will go back

to additional questions and just make note that things are moving along very

smoothly. I cannot anticipate, based on how things are going at this present

time, how long this session might go for, so I thought that we would flow along

for another little while and we will probably pick 8:25 or 8:30 as an

opportunity to take a seventh inning stretch and maybe get a coffee. In the

interim, anyone who would like a coffee, of course, go ahead. We have scheduled

three hours for this particular meeting and things are flowing well, so rather

than interrupt at this point in time we will look at that as a potential time. I

will confer with the Vice-Chairman and also with the Members who are here to see

if we can carry on and clue up. If not, we will take a break and go on. Mr.

Hewlett.

MR. HEWLETT: Thank you, Mr. Chairman. Under

electrical energy, the last page of the Departmental Estimates is the Electrical

Power Control Act 1977, grants and subsidies, $2.1 million. I wonder if the

Minister could indicate what this figure means?

DR. GIBBONS: (Inaudible) subsidies that are payed

to some companies under the Electrical Power Control Act and is paid out to

Hydro. The companies, Kruger, Albright and Wilson, Abitibi-Price, Grand Falls,

there is a certain amount paid to each one annually and they are tied to

long-term contracts, and I do not recall the details of the long-term contracts.

Would you Sy?

MR. HEWLETT: The Government pays Hydro -

DR. GIBBONS: A subsidy.

MR. HEWLETT: - to the shortfall or whatever -

DR. GIBBONS: Yes.

MR. HEWLETT: - to make up for the cheaper power

that they are giving the company.

DR. GIBBONS: Yes, relative to some contracts that

are in place with these particular companies.

MR. HEWLETT: The next subject down from that in

the Estimates, PDD. Last year there was $10 million in the budget and this year

we got a blank. I presume, Mr. Minister, this is the off loading of Government's

subsidy to Newfoundland Hydro for the more rural uneconomic areas of the

Province, which I would assume is being off loaded again by the Hydro

Corporation onto the rate payers of the Province.

DR. GIBBONS: I prefer to use the word phase-out of

the PDD subsidy, last year $10 million was left and this year there will be zero

in the subsidy to PDD. PDD has now been phased out completely and has been

merged with Hydro. It is now part of Hydro, there is no longer a PDD.

MR. HEWLETT: But this phase-out I presume is a

significant part of the fact that power rates have risen approximately

twenty-five per cent the first year of the decade of the nineties.

DR. GIBBONS: This reflects the four per cent

increase of a year ago when Hydro went to the Public Utilities Board and asked

for a review at that time to accommodate the phase out of the PDD subsidy. Hydro

went in looking for rates over a three year period and the Public Utilities

Board only gave them a rate increase for one year, and that was approximately

four per cent at the retail level, I think it was eight per cent on the

wholesale rate. But for the ordinary customer it reflected about a four per cent

increase in the rate. Any other increases that have come in the past had nothing

to do with the phase out of this subsidy.

MR. HEWLETT: So how would you characterize the

fact that during the last year, Mr. Minister, power rates have essentially risen

twenty-five per cent to the domestic consumer. I even got out my pocket

calculator and did my own sums on my own power bill. Certainly since this

administration has come into office power rates have risen twenty-five per cent.

There has not been that much inflation during that particular period so would it

be fair to characterize a majority of the rate increases as deriving themselves

from policies of the Wells administration which tended to off load onto the

consumer?

DR. GIBBONS: No, it would not be fair to assume

that at all. I am not sure of the exact amount, whether it is twenty-five per

cent or whatever.

We could go down through the amounts. Light and Power,

3 per cent last February?

MR. ABERY: I believe Newfoundland Light and Power,

Mr. Minister, had about 4 per cent.

DR. GIBBONS: Four per cent last February? There

was about a 4 per cent change for Hydro because of the phase-out of the subsidy.

There was about a 4 per cent change in the rate stabilization fund. About 12 per

cent. GST came in on January 1 at 7 per cent, and there is what you have seen

since the Wells' Government took over. Only 4 per cent of that is related to the

phase-out of the PDD subsidy. The rate stabilization fund is reflecting changing

costs for petroleum products to be burned at Holyrood or other plants that use

petroleum. It also reflects rainfall changes throughout the year and weather

conditions throughout the year, in a sense, reflecting that. And whatever is in

the rate change for Light and Power reflecting change in circumstances for that

company.

MR. HEWLETT: So you are saying that policies of

this Government are not the major factor in the actual increase to the consumer?

DR. GIBBONS: What I am saying is that the

phase-out of the PDD subsidy as a result of last year's hearing before the

Public Utilities Board resulted in a 4 per cent increase at the retail customer.

I think that is correct, isn't it?

AN HON. MEMBER: That is correct.

MR. HEWLETT: Will there be further increases as

Hydro absorbs this loss? Will they be back again to the Public Utilities Board?

DR. GIBBONS: Hydro last year when it went to the

Public Utilities Board asked for an adjustment over a three year period to

reflect the phase-out of this power subsidy. It was given a change for one year

only and asked to go and do some studies on the cost of the rural distribution

district and come back after these studies are completed before the PUB again.

These studies are not yet complete, so I do not know exactly when Hydro will be

going back to the PUB again. But sometime in the next year they will have to go

back to the PUB again when these studies are completed. Maybe the Chairman of

Hydro can speak to that.

MR. ABERY: Yes, we were asked by the Public

Utility Board to review all the rural rate structure. We are in the process of

doing that but we anticipate these studies will be complete by probably the end

of this summer or early fall. We would anticipate later on this year making an

application to the Public Utilities Board for a hearing probably early in 1992.

MR. HEWLETT: There is a threshold I think below

which rural consumers get what you might call a break, but above which they pay

a higher rate than usual. Would this be one of the aspects being studied? As to

whether or not that threshold could be raised? Because it is not uncommon even

in rural Newfoundland now to have electrified houses.

DR. GIBBONS: It is not one of the prime things

being studied. It was a Government policy decision a year or so ago to raise

that base from 600 kilowatt hours to 700 kilowatt hours. It is not quite as

simple as saying: let's take it off completely. The amount that is there now

covers what any ordinary residential home would need for light and other

electrical needs without electric heat.

MR. HEWLETT: So the threshold as laid down right

now does not cover the electrical (Inaudible).

DR. GIBBONS: It is not adequate to cover

electrical heat. It is adequate for everything else. I know I do not have

electric heat in my house and I rarely go over 500 kilowatt hours a month. Seven

hundred is plenty for anyone who does not have electric heat. But there is an

extra problem created in these diesel areas with electric heat. In many cases

Hydro would have to go in and give a significant upgrade to the size of the

diesel units available. It is much more efficient frankly to make heat from

burning oil directly in a furnace in your own home than to take it off

electricity in a diesel area. About three times more efficient.

MR. HEWLETT: Mr. Minister, I do not have electric

heat in my home either. I must confess that I probably am like your average

Canadian in that I have increased my consumption of electricity significantly.

The amount has gone up 50 per cent since the Wells' Administration took office,

but the percentage, I would reiterate again, in the base rate and the actual

rate per kilowatt hour has worked out to a 25 per cent increase on my domestic

power bill; I would just like to state that for the record.

One point, following on what Mr. Noel mentioned with

regard to contracts; insofar as Hibernia is a Federal-Provincial development, I

assume the local preference policy does not apply here. I know normally speaking

the Federal Government does not, in Federal-Provincial projects allow Provincial

preference policy to apply, so I presume it is the best bid per se, is the

winner.

DR. GIBBONS: Well the local preference policy as

defined by the Province gives a 15 per cent preference to anyone who is selling

to the Province or provincial agency, but you are right, it does not apply to

anything that is funded federally-provincially out of the offshore development

fund or does not apply to anything that is being paid for privately by any

private company, so it can't apply to Hibernia. However, in the Atlantic Accord,

and in the agreements that we have negotiated, there is supposed to be a 'Best

Efforts' undertaking, and what is the other phrase that is used? -'First

consideration', best efforts and first consideration for a provision from

Newfoundland.

MR. HEWLETT: But it is fair to say that companies

who may be complaining to my colleague from Pleasantville, are competing in a

slightly more competitive environment than they would if they were bidding on

Provincial Government work exclusively?

DR. GIBBONS: Yes. Well, I think a lot of these

concerns that our colleague expressed are - companies are competing with other

Newfoundland companies; they are not necessarily outside companies.

MR. HEWLETT: Oh, I see. It is just that the volume

of contracts are not there yet?

DR. GIBBONS: The volume is not there yet and

therefore some companies have not received any work.

MR. HEWLETT: That is it for me right now, Mr.

Chairman.

MR. CHAIRMAN: Mr. Ramsay.

MR. RAMSAY: With regards to the Hibernia project,

Mr. Minister, I was going to ask what your department and the co-ordinating

committee, I think it is called, you can correct me if I am wrong, are doing in

co-operation with the consortium, as far as the stimulation of private sector

development or the encouragement of same or the monitoring of the Newfoundland

aspects of the Hibernia development, how is that process set up?

DR. GIBBONS: We all have to understand that the

key agency to all monitoring for both the Provincial Government and the Federal

Government relative to Hibernia is called: The Canada-Newfoundland Offshore

Petroleum Board.

It is one of the items in the estimates which we are

looking at tonight; we pay 50 per cent of the cost of operating the offshore

petroleum board, that is where most of the work is being done to monitor Canada

and Newfoundland benefits.

In addition to that, we do have a committee called:

The Hibernia Monitoring Committee, provincially, that is overseeing what is done

on the provincial side only in our line departments. Where there are

responsibilities on the respective line departments, whether it is energy or

development or employment and labour or education or anyone asked to monitor how

these departments interact with the Hibernia project and we are all watching it

I guess, and doing our jobs, and I am satisfied at this stage that everybody is

doing his job appropriately.

MR. RAMSAY: I have heard an explanation and

description of what constitutes Newfoundland content. I wonder if you could have

it clarified for us - the description I have heard. Again, I just ask for

clarification, if a car was purchased from Hickman Motors, that complete

purchase price would not be considered a Newfoundland benefit, part of it would

be considered Canadian if the vehicle was manufactured in Canada, the profit

made on it by Hickman Motors would be considered a Newfoundland benefit, the

salesman's commission would be considered a Newfoundland benefit, if there was a

set of windshield wipers or something on it that was made around here, that

would be considered Newfoundland, but, is there some process that is followed in

that way that -

DR. GIBBONS: There is a well-defined process that

is followed and they try to break out the percentage of that car which is

attributable to Newfoundland. You said it, it is the markup and the dealer,

which includes the commission for the agent primarily, and then you are going

back to the manufacturing centre in central Canada or wherever it was

manufactured for the rest of it. So they do break out the components of the

products. For a lot of things you may only have the agent's commission in

Newfoundland, as the Newfoundland content, if it is manufactured outside this

Province.

MR. RAMSAY: But we are guaranteed a certain

percentage of Newfoundland benefits in most of these areas of this development.

DR. GIBBONS: Hibernia in general, yes. Up to now -

I cannot remember the exact number. Are we 55 per cent or 60 per cent

Newfoundland content to date?

AN HON. MEMBER: To date, yes.

DR. GIBBONS: Yes, to date. And when we total them

all up - because in some cases the contracts will be 100 per cent Newfoundland,

in other case, like the cars or trucks they are buying, maybe 10 per cent

Newfoundland. But add all these up, weight it appropriately, and we are around

55 per cent or so of Newfoundland content right now and about 80 per cent

Canadian content. Frankly, we are doing very well at this stage.

MR. RAMSAY: There is one thing I mention insofar

as the prospect of other areas garnering some work on Hibernia, and something I

mentioned last year with regards to the proposed - and the term that is used is

"fabrication facility" - that has been worked on for the last number of years in

Port aux Basques as far as the proposal goes. It is just at the proposal stage,

I understand. Maybe if you could give an analysis in your mind of what you think

might be possible for a private contractor in that kind of area, insofar as the

amount or type of work that could possibly be contracted out to other areas of

the Province.

DR. GIBBONS: There is no question that there will

be subcontracted work that will go to various sites around the Province. There

is only one site that has committed work and that is Bull Arm. There is a huge

amount committed to Bull Arm and some subcontracting of work that will

eventually come to Bull Arm will have been fabricated elsewhere. Under the

Offshore Development Fund we have committed about - I think it might be $36.5

million - for the Cow Head site in Marystown. To date we have not committed any

funds for any other site. Cow Head is being targeted for some specific work,

some mechanical fabrication work relative to the legs. But otherwise, other

sites could get some subcontract work.

MR. RAMSAY: So you feel that some of the best

efforts and some of the first considerations to Newfoundland could possibly -

and even best efforts to Canada - be done here with the right expertise?

DR. GIBBONS: Yes. With the right expertise I think

anything that is committed to Newfoundland or Canada could be done somewhere in

Newfoundland if the right facilities are in place.

MR. RAMSAY: And the companies with the expertise.

DR. GIBBONS: But the key thing is that the

companies have to have the expertise, they will have to get pre-qualified for

any bidding that is done, and then they are going to have to win the bids after

a thorough analysis of the bids. That considers not just price, it considers

lots of matters. But price is going to be obviously a big factor.

MR. RAMSAY: The pre-qualification process has come

up in some of my work. I wonder if you could advise what the dates as far as

pre-qualification goes. Is there any idea as to how that pre-qualification

process works? I understand that it is a period of time that has to be followed

for any of these things as far as pre-qualification goes.

DR. GIBBONS: Yes, well, any time a contract comes

out, every quarter there is a list of contracts. Then when contracts are

identified companies get their information in and they get assessed to see if

they are pre-qualified to bid on any particular contract. In going through that

process there are a number of days assigned when the Offshore Board would review

the pre-qualified list to determine whether or not they are satisfied that the

names on the list include all those that in Newfoundland might have wanted to

get on and whether or not they were given a chance. Just to make sure that

everyone had a chance at it and was satisfied. So that time period is spelled

out there.

MR. RAMSAY: Okay. So some of these have already

happened, and I guess pre-qualifications have been cut off on some and some are

going through the process right now.

DR. GIBBONS: Oh yes, and will be until this

project is completed.

MR. RAMSAY: But each phase does have a cutoff

point.

DR. GIBBONS: Yes, I think it is five days.

MR. GOSSE: Something like that.

DR. GIBBONS: You know, leading up to it they will

be getting company information in, and then I think they give it to the offshore

board for a five day period for the pre-qualification phase so that the board

has time to interact with us in the Government departments to review, and if

there is someone who is missing we can certainly make some comment on it at that

time.

MR. RAMSAY: Is that from the major contractors

perspective or is it right down through the line of certain aspects that the

major contractor would have to qualify a sub-contractor? How does that work?

DR. GIBBONS: We have already seen sub-contractors

having to pre-qualify. I will ask my deputy to speak on it.

MR. GOSSE: I think the sub-contractors would have

to pre-qualify with the contractor.

MR. RAMSAY: So the contractor is responsible for

the pre-qualification process of the sub-contractor.

MR. GOSSE: Yes.

MR. RAMSAY: I just have a couple more on Hydro -

DR. GIBBONS: The phrase that we use on it is that

there has to be full and fair access to Newfoundland companies so that they get

a shot at getting on the list.

MR. RAMSAY: But if they do not initiate the

process with NOCU or HMDC or some of the other sub-contractors, they do not have

a chance.

DR. GIBBONS: Well they have to get in there with

their information.

MR. CHAIRMAN: I am going to suggest, Mr. Ramsay,

that now you are about to move into yet another area.

MR. RAMSAY: It is 8:30.

MR. CHAIRMAN: You have had ten minutes, and we

said we would try to get a quick break at 8:30 which I think we will do now. If

you come back and there aren't any questions that are ready to be asked by

another Member the Chair will certainly recognize you again and let you pick up

on that new train of thought.

I suggest we take a ten minute break and for the

purposes of time we will begin again at 8:40.

RECESS

MR. CHAIRMAN: I would call our session back to

order. We will move to Mr. Snow.

MR. A. SNOW: Thank you, Mr. Chairman. There were a

couple of questions earlier concerning explorations. Can the Minister tell me of

any programmes they may have available now which could influence more

exploration in this Province? I live in western Labrador and north of me, there

seems to be quite a bit of exploration going on in the adjoining province of

Quebec, and people there for some reason have continued a lot of exploration in

that region, albeit is just across the border in the province of Quebec. Can you

tell me if the Government is considering any new programmes to influence more

exploration in this Province?

DR. GIBBONS: No, Mr. Chairman, not particularly

any new programmes. Most of the exploration that was occurring in the last five

years or so was being pushed by the flow-through share incentive that was there

as a Federal financing incentive, and that was cancelled. Since that time the

level of exploration activity in this Province, as all across the country, has

dropped considerably.

We were fortunate that we did not drop as fast as a

lot of other sectors, mainly because of the success for gold exploration

prospects around, for example, Baie Verte Peninsula, Notre Dame Bay and some

other parts of the Province. But now it has caught up with us as well and this

year we are projecting that in exploration in general, we will be down to what

would have been a normally expected level if there had never been a flow-through

regime. We expect about $13 million to $15 million to be spent and that is back

to what we consider to be the normal level without that regime.

Now, when you compared it with Quebec, Quebec had its

own provincial flow-through incentive on top of the Federal one; we never could

afford to have that in this Province and we are not considering it now. I do not

know if it still exists in Quebec but it did for a while. I will ask my

Assistant Deputy if he is aware of that.

MR. DEAN: Yes. The regime in Quebec does exist.

There is an extra incentive in the province of Quebec that is a tax incentive to

investors in flow-through shares that is not available in the rest of the

country. I just might add an extra comment: in spite of that effort by the

Quebec Government, exploration is still down in Quebec proportionately to the

rest of the country.

MR. A. SNOW: Do you know how much this cost the

Province of Quebec?

DR. GIBBONS: No, I do not know, but I know it was

an extra incentive in that province on top of the Federal incentive. During the

flow-through share regime and when the Federal Finance Minister was cancelling

it nationally a few years ago, the Quebec Minister was keeping it in Quebec to

maintain the level, but as my Assistant Deputy just said, it has still dropped

in Quebec comparative to how it has dropped in the rest of the country.

MR. A. SNOW: Previously, Mr. Abery of Newfoundland

Hydro suggested I believe, that the electrical energy subsidy of $2,171,000 was

paid to Kruger, Albright, Wilson and who else?

DR. GIBBONS: I said that actually.

MR. A. SNOW: Oh, you said it, did you?

DR. GIBBONS: Yes, I said it. It was paid to three

customers, Kruger, Albright and Wilson, and Abitibi-Price, Grand Falls and is

tied into contracts with these companies, which expire very shortly, do they not

Cy? I will ask the Chairman of Hydro.

MR. ABERY: Yes, they expire I think around 1996,

and those were contracts entered into before the Hydro Act was passed. When the

Hydro Act was passed we started charging commercial rates to all our customers,

but those were in existing contracts and the Government over the years, has made

up the difference between our commercial rate and their previous agreement, as I

understand it, and they are gradually phasing out and will disappear by I think,

MR. A. SNOW: Could you tell me how much each

company gets?

DR. GIBBONS: I could tell you; I have the

breakdown, that is no problem. The money comes to Hydro and is broken down in

these amounts: Kruger is estimated here at $812,000; Albright and Wilson

$432,000 and Abitibi-Price $926,000, totalling to $2.171.

MR. A. SNOW: Is that a fixed amount or could you

tell me the formula or if there is a formula?

DR. GIBBONS: That is relative to the industrial

rate. I would ask Dave Mercer, the President of Hydro, to talk about the

details.

MR. MERCER: All amounts here are variable amounts.

In the case of Albright and Wilson, they are now paying the same commercial rate

as every other industrial customer with respect to the demand charge and the

energy charge, but there were some special facilities installed in order to

deliver a supply to them, and a portion of that cost is being born by the

Government until their contract expires. In the case of the paper companies they

are paying an increasing percentage of the cost of providing them with service

so that each year as we establish the cost of providing our customers with

service, they are assuming a larger and larger percentage, so the subsidy is

decreasing each year. By the time it is scheduled to, their contracts expire

about 1996, 1997, they will be paying the same amount as all other industrial

customers.

MR. A. SNOW: It just seems strange to me that

Albright and Wilson - they are not producing anything here now are they?

MR. MERCER: No, but the special facilities that I

mentioned that were installed in order to deliver them power when they were

operational have to be paid for by somebody, and it would be unfair to have

these charges paid by, for example, the customers of Newfoundland Light and

Power Company. So these fixed charges remain with the Government. While they are

not producing anything here they are taking in the order of two megawatts of

power from us which they are using for clean up operations around the site, and

they have a contract that allows them to take five mega watts. They are not

actually taking that, but they do have certain plans to reprocess mud out at

Come By Chance and they need -

DR. GIBBONS: At Long Harbour.

MR. MERCER: - at Long Harbour and they do need

certain power for pumps and the like.

DR. GIBBONS: Since the close down the Albright and

Wilson contract has been renegotiated, I guess that is the right word, and

instead of 130 mega watts as previously it is now five mega watts. They are

going to be there for several years yet cleaning up the site at Long Harbour, so

that contract stays in place. What is the termination of that contract for

Albright and Wilson, Dave?

MR. MERCER: I am not sure that it has a specific

termination date. I do not recall it, but it would be at least five years or

maybe longer, and it is certainly renewable. But as I say, with respect to

specific quantities so much per megawatt and so much per kilowatt hour they are

paying the same as, for example, Abitibi-Price in Stephenville. They are not

getting any subsidy on that clean up power, if you will. It is just that there

are some residual facilities that were put in place that as part of our

agreement Government is carrying the fixed charges for it.

MR. A. SNOW: It just seems strange that a company

that was not creating any products or creating any employment in the Province

was continuing to be subsidized by $500,000 a year. It seems rather strange.

DR. GIBBONS: I guess Hydro is really what

(inaudible).

MR. ABERY: The money comes to Hydro. The

facilities were put there by Hydro. Government was subsidising the ERCO

operation. When ERCO closed down we signed a new contract with them for the

power and energy they now need, and they are paying full commercial rates for

that. But under their old contract that they had with the Government going back

to 1968 there were some facilities that still had not been amortized and

Government is paying that money to Newfoundland Hydro to allow us to amortize

those whole assets which have been there for twenty to twenty-five years, and

they will all be amortized in the next several years and that will be the end of

it, so none of that money goes to Albright and Wilson.

DR. GIBBONS: And this was a liability that was in

the old contract as a liability from Government to Hydro on this Albright and

Wilson liability.

MR. A. SNOW: Previously we talked about some power

in western Labrador. I wonder if you can tell me how much power IOC purchases?

DR. GIBBONS: I do not know the answer to that. I

will have to ask Hydro again.

MR. ABERY: IOC receives 160 megawatts of capacity

out of the Twin Falls block, and at Labrador City they purchase another 67.5

megawatts off Newfoundland Hydro, so in total they have 227.5 megawatts

purchased from the Twin block and from Newfoundland Hydro.

MR. A. SNOW: Do they pay the same price for each

block?

MR. ABERY: No, the Twin Falls block is based on

the Twin Falls contract which existed prior to Churchill Falls. The rest of the

power is in two, thirty-seven and a half megawatts blocks, and the price is not

the same on those. I cannot tell you what the price is off hand but it is not

the same for the first and second block, there are differences.

MR. A. SNOW: Would you be able to tell me what the

price is?

MR. ABERY: I could not off the top of my head tell

you. I am sorry I could not, but I could find out.

MR. CHAIRMAN: I appreciate where we are attempting

to supply each other with information but again I would remind everyone, for the

sake of Hansard, when we get into the third person please identify yourself for

the sake of the tapes.

Mr. Snow.

MR. A. SNOW: How much extra power do they want?

DR. GIBBONS: I do not know the answer to that

question either.

MR. A. SNOW: Would Mr. Abery, as he seems to be

actively involved in these discussions?

MR. ABERY: I am not actively involved in the

discussions.

MR. A. SNOW: Well, representing people who are

actively involved.

MR. ABERY: The capacity that you can bring into

Labrador City on the existing lines, I think, there is about another twenty or

twenty-five megawatts that you can bring in over the existing facilities. I

believe that the Iron Ore company of Canada is interested in acquiring that

amount of power.

MR. A. SNOW: Is there some reason they want this

power? Is it for an expansion of the mines or change in the method of

production?

DR. GIBBONS: Again, I do not know. But the last

time I was up there they did make a comment they wished they had more power. I

really did not get into a discussion of the details of why. I know they have

been going through some upgrading of facilities there and changing, maybe

requiring more power. Maybe my Assistant Deputy may know something about that,

do you Paul?

MR. DEAN: My understanding, Mr. Minister, is that

during the peak demand in wintertime when there is a very strong demand for

electrical power in the town that the company is unable to run its mills at

capacity and they would like to run their mills at capacity during that time

and, therefore, would like to have more power. That is my understanding of the

situation.

MR. CHAIRMAN: You may continue if you wish,

bearing in mind that we are moving into probably the last hour, and I want to

certainly recognize Members on the Government side but I am going to allow the

Opposition Members a little additional flexibility and freeway in case they want

to pursue some questions or some particular directions.

MR. WOODFORD: (Inaudible).

MR. CHAIRMAN: What I will do by leave is probably

go almost on a ratio of two to one if that is fine with my colleagues?

MR. WOODFORD: In the annual report of Newfoundland

Hydro, released just recently, it stated there were some ongoing studies

regarding the Cat Arm reservoir and the monitoring of fish and the ecology at

the reservoir, began in 1980 and which should be finalized in 1991. One thing

that strikes me there, and I did not realize it, it is in my district, I did not

see it before, I am sort of alarmed by it, but how serious is it? -- it says

there that the Department of Fisheries and Oceans issued an advisory that

elevated levels of mercury had been found in certain fish species in Hydro's

Reservoirs on the Island. What would that be in? I know there is no commercial

fishery there or no native fishery as stated here, but what reservoirs would

they be in? Would they be in the Cat Arm and Hinds Lake Reservoirs? Would they

be in the trout, because primarily there is trout fishing there?

DR. GIBBONS: It is my understanding that fish in

any hydro reservoirs normally have a slightly elevated mercury content. This is

historical. You can see it anywhere there is a hydro development and ours are no

different from that. There was an advisory put out last year and as stated in

this report, people should be aware that there is some mercury there and they

should, I guess, watch the quantities they are eating. There is no commercial

fishery as I have said, but people often go in trout fishing or whatever, and no

matter what type of fish, there seems to be a small elevation.

MR. WOODFORD: I realize that there are always

levels of mercury, but when they say: elevated levels of mercury, it seems to me

that there is something there now, that was not there in 1980, 1981, 1982, 1983

or, am I wrong?

DR. GIBBONS: Something that was not there before

there was a hydro development. There seems to be what is called metalizing;

metalizing of the mercury, which gets into the water and is absorbed into the

fish as a result of, I guess, the flooding of a lot of terrain and a lot of

vegetation and the mercury that may be contained in a lot of this vegetation and

terrain is absorbed into the water and metallized.

I have seen numbers that are up to three, four or five

times a normal level of mercury; that is not a problem if you are just going to

have a meal of fish, but it could be a problem in a commercial fishery. We are

well aware of in the past, places like Japan, where there was a problem of

mercury in commercial fisheries, so that is why the advisory was issued, that

really, people should be aware that in any hydro reservoir when they are

fishing, there is going to be a little bit of an elevated level.

MR. WOODFORD: In the Cat Arm reservoir alone, the

reason why it strikes me as a concern is that you sit on the road between

Jackson's Arm and Cat Arm at the intersection, you would swear, except for

seeing the boats come in, in this case you see the pick-ups come in with,

instead of boat loads of fish you are looking at pick-up loads of fish,

literally pick-up loads of trout coming out of Cat Arm and I mean the people

down there and the Development Association for years have been trying to stop

it.

They go in and they are just raping the reservoir and

when I see something like this, people carrying out that much, they cannot be

eating them; surely God, they must be selling them or something, but, when I see

something like this, if they are, and if there is an elevated level, whatever

the so called elevated level is, there should be some reason for concern. It is

the first time I have heard of it and I am living in the area.

DR. GIBBONS: Yes, and this is why the advisory was

issued last year by the Fisheries and Oceans and I think the Department of

Health was also monitoring it with Hydro as I recall. I saw some numbers a year

ago, I do not recall the numbers for the Cat Arm reservoir as such but, any fish

that live and grow in hydro reservoirs normally have elevated mercury content.

MR. WOODFORD: What level would be a safe level for

mercury?

DR. GIBBONS: I really do not know the answer to

that. I guess if you are just having a meal of fish, any level that is in it is

probably no problem, but if you are eating fish every day that has elevated

mercury, you may end up with problems.

MR. WOODFORD: It seems as if Mr. Dean is biting at

the bit, maybe he would like to say something.

DR. GIBBONS: Maybe, Paul has an answer.

MR. DEAN: I have no comment.

DR. GIBBONS: No. Hydro, any comments on it?

MR. MERCER: I do not recall the specific levels

set out by Fisheries and Oceans, but it varies by the type of fish. If you are

talking about trout, which type of trout or pike or what have you? But we have

been and will continue to monitor the mercury levels in our reservoirs.

You asked about Cat Arm, I think that is one of the

sensitive ones, but Bay d'Espoir, we have the same thing and in the Churchill

reservoir; the pattern seems to be, as the Minister indicated, that immediately

after the creation of a reservoir, there is a lot of flooding of land and that

allows water access to mineralized areas where the mercury can leach out and it

gets in the food chain and gets picked up by fish.

This is not unique to Newfoundland, it is not unique

to any hydro development, it is very common and the objective of the monitoring

is to trace the pattern and usually it rises for three or four years and then it

begins to fall off.

When the Department of Fisheries put out an advisory,

they were asking us to inform anglers or others, that mercury levels were in

certain ranges which are identified, and that therefore consumption of these

species should be confined to one or two meals of that fish per week. It is not

a requirement that you not eat it, but you do not eat it every day. We have

worked with the Department of Development and the Department of Health et

cetera, to make sure that anybody interested in a commercial fishery, for

example, in these areas is well informed that they should watch the mercury

levels and have their particular fish tested at regular intervals to make sure

they are not involved in promoting unsafe consumption.

MR. WOODFORD: Yes, well then what happens after

this year when there is no other testing? Who takes over the responsibility then

for something like that?

DR. GIBBONS: That is Hydro too.

MR. ABERY: Periodic testing goes on and is

monitored by ourselves and our Environmental Department, the Department of

Fisheries and the Department of Health. If there was any change, that would be

noted. We have posted signs around our reservoirs advising people of that. But

as Mr. Mercer said, the consumption of the fish is not a problem unless you ate

very large quantities of it over a significant period of time.

MR. CHAIRMAN: Thank you, Mr. Abery. Mr. Woodford.

MR. WOODFORD: Because of the fact that that area

and better, it is fast becoming a very high tourism spot. There is a lot of

interest being shown, a lot more than was shown before. You are well aware of

what the roads were like down there. Now that they are paved there is a lot more

interest in tourist development. People are going into the Cat Arm area to trout

because it is a haven for trout fishermen. And like I said, I have been going

back and forth there now for the last six or seven years and I have not seen a

sign up, I have not seen a press release, and I have not even heard the comments

about the mercury level down there. Would it be advisable, I wonder, to put up a

sign or would that be an alarmist type thing to put up a sign saying there is an

elevated mercury level in the fishing reservoir?

MR. CHAIRMAN: Mr. Minister, I appreciate the

question, but I am not sure the answer can come from yourself or your committee.

I would tend to think that if Fisheries and Oceans and the Department of Health

felt the content of mercury was there, maybe through yourself you can address

it, but I am not sure that it is a Mines and Energy question. I will defer it to

the Minister if he wishes to deal with it.

DR. GIBBONS: As you said it is really a Fisheries

and Oceans or a Health matter more than anything else. We are concerned because

we are Hydro and people are fishing in our Hydro reservoirs. But as you said

yourself, Mr. Woodford, we do not want to be alarmist about this. As Mr. Abery

said and Mr. Mercer said, the levels are such that the mercury is not a hazard

to people who have an occasional meal of fish from these reservoirs, but you

should certainly not have fish every day or two times a day or whatever. I

should not use occasions like that or frequencies like that, but certainly it is

something that people should be aware of, that there is mercury in fish and we

have to continue to monitor it regularly. Because of historical data that is

known from both Newfoundland and elsewhere we know the approximate maximum

levels that are likely to be attained and monitored regularly.

MR. WOODFORD: Still pertaining to Hydro. I wonder

could yourself, Mr. Minister, or Mr. Abery or someone in Hydro give me a

breakdown now of what is happening in the Roddickton area with regards to the

Hydro station down there and the wood chips. I am getting some different,

conflicting reports concerning the operation of the wood chip area.

DR. GIBBONS: Well, it opened about a year and a

half ago. As I remember there was a snow storm the day we tried to go up there

to open it officially about a year and a half ago in October. It had some

teething problems initially like any new facility, but I believe that over the

last few months it has been operating routinely and producing to capacity plus.

I ask the representatives from Hydro to make a more knowledgeable comment on it.

MR. ABERY: Like any new plant it takes a while to

get it operating. There are still elements that require fine tuning, but the

plant is operating. It is operating at around five megawatts depending on what

day it is and what have you and the load, and like any other plant it will

gradually get rid of all the bugs that are in it and presumably it will operate

as it was designed to.

DR. GIBBONS: I think five megawatts is the rate of

capacity.

MR. ABERY: That is correct, Mr. Minister.

MR. WOODFORD: Are there any problems with regards

to the wood suppliers namely the Northern Development Corporation.

DR. GIBBONS: I am not aware of any problems but

maybe Mr. Abery can speak to that as well.

MR. ABERY: I have no knowledge of anybody having a

problem. We called public tenders a couple of years ago and three or four

different companies were awarded tenders for different types of wood product,

sawdust, residue from sawmills and old tree chipping and what have you; to my

knowledge they are supplying the plant as required with wood and to my knowledge

we have had no particular difficulty.

MR. CHAIRMAN: Thank you, Mr. Woodford.

Mr. Noel.

MR. NOEL: (Inaudible) one way or another. Has

Government ever assessed it?

DR. GIBBONS: Two years ago when we talked about

the phase out of the PDD Subsidy we had some discussions with Light and Power

about the PDD part. At that time we did an assessment of what was the most

appropriate action to take, whether to have PDD merged into Hydro or whether we

would merge PDD with Newfoundland Power or sell it to Newfoundland Power. The

decision made at that time was that we would keep the PDD, rural distribution

district, and merge it with Hydro. We have not done any assessment of any other

aspect of the merger.

MR. CHAIRMAN: Thank you.

Mr. Langdon.

MR. LANGDON: The range of prices for fuel products

in the Province especially in the remote areas is of some concern. I was

interested in the Member for Menihek saying that in Labrador City, I think it

was, the regular fee was 65.8 cents and all the communities on the Connaigre

Peninsula that I represent are paying anywhere from 68 cents to 69 cents to 70

cents for unleaded gas per litre. I was wondering if the Department had any

plans or had done anything to look at probably a way of coordinating the

transportation so that the people in the rural areas of the Province might be

able to save some dollars on the shipment of gas?

DR. GIBBONS: Of course, we are talking about

private industry and one of the things in our assessment of the cost of

petroleum products around the Province is we note the differences that exist and

some of the differences are quite dramatic, depending upon how the supply is

provided. We do not know exactly what position we are going to take as a

government as we assess the options that are put before us. I do not really know

what we will do at this time but we understand why the prices vary to a degree.

When you go out to geographic areas that are remote like coastal Labrador, like

your district on the Hermitage Peninsula, the extra transportation cost is going

to add some amount to the cost at the pump. The size of the station is also

going to add some cost to the price per litre as well because if you have a very

small station selling a small amount there is probably a slightly higher margin

there per litre.

We want to see the fairest price possible but at this

time we expect it to continue to be a commercial private enterprise and not

Government transporting it.

MR. LANGDON: Yes, I know but my question would be,

is there any thought given to regulating the transportation of the petroleum

products?

DR. GIBBONS: Well, we really have not talked about

that aspect separate from the total picture of looking at petroleum product

pricing and regulation. As I have said we will see what comes out of the Cabinet

assessment of what is in the recommendations there from the Committee. In Nova

Scotia right now there is a full scale regulation of everything regarding

petroleum distribution. They licence the stations, they do not even allow

self-serve service stations in Nova Scotia for example, and every move a gas

station makes is regulated and also how the product gets distributed around. We

have had an assessment done of all the options from full scale regulation to no

regulation.

MR. LANGDON: One more question: earlier, we talked

about doing some exploration for gold in certain parts of the Province and I was

wondering what has been found in the Little River area in Bay d'Espoir, is that

promising, have they found the amounts that are available or whatever?

DR. GIBBONS: There has been a lot of exploration

in the Little River area in the last decade, but there has never been a

significant deposit outline down there; there are still some mineral claims held

by a number of companies, so the companies, I guess, must feel that the

properties are interesting enough to maintain these claims and to keep working

on these claims, but there has been no deposit identified as big enough to

consider developing.

MR. CHAIRMAN: Mr. Snow.

MR. A. SNOW: Thank you, Mr. Chairman. Last year,

we saw the imposition of a payroll tax on businesses operating in this Province

and we see that the only resource based industry that is taxed with this

particular tax is the mining industry. I wonder if you can tell me what the

rationale is of taxing the mining industry, separate from any other resource

based industry?

DR. GIBBONS: The rationale at the time, I think,

was that the renewable resource industries were exempted; the fishing industry,

the forestry industry and agriculture. The non-renewable were not exempted.

MR. A. SNOW: What is the rationale behind that?

DR. GIBBONS: I am not sure if it is an adequate

rationale, but it is the rationale. The mining industry was not zero based at

the time but the fishing industry, forestry and agriculture were zero based.

MR. A. SNOW: You still have not explained to me

what the rationale was of excluding them.

DR. GIBBONS: As I said, some that were zero based

and these are renewable industries, and the mining industry happens to be a

non-renewable one and was not zero based. I do not know if that is the exact

rationale or not, but it was not zero based.

MR. A. SNOW: Are you suggesting that the reason

why it was taxed is because it is a non-renewable resource?

DR. GIBBONS: No. There were exemptions made, or

some industries were identified and zero based. A lot of things besides mining

are paying the tax.

MR. A. SNOW: Yes, but it is the only resource base

industry of which I am aware (inaudible).

DR. GIBBONS: Yes, it is the only resource base;

well, hydro -

MR. ABERY: Hydro pays it.

DR. GIBBONS: Hydro pays the tax.

MR. A. SNOW: So it had nothing to do whatsoever

with being a non- renewable resource?

DR. GIBBONS: I have no answer for it.

MR. A. SNOW: You must have had input, surely to

goodness you carry as much weight as the Minister of Forestry?

DR. GIBBONS: Yes, well I guess the Cabinet

decision was made that certain industries would be zero based and the mining

industry was not one of them.

MR. CHAIRMAN: Mr. Hewlett.

MR. HEWLETT: Mr. Minister, I was just looking

through the salary details of your department, there is no listing for a press

secretary or public relations officer and so on. Do I presume that your

department does not have one or that you might share one with another department

and it might be listed in some other format?

DR. GIBBONS: We do not have a press secretary. We

share one of the Director's of Communication. I guess the salary estimates for

that particular person is probably in the Executive Council vote.

MR. HEWLETT: Information Services section?

DR. GIBBONS: Yes, one of those. We share one of

the individuals.

MR. HEWLETT: I was just wondering because at the

time of the Budget, which was obviously a very difficult time for Government in

terms of image, I will go back to what I mentioned some time ago, there was

considerable positive chatter emanating from your ministry with regard to

possibilities of agreement with Quebec. I was just wondering, seeing there was

no personnel related to public relations in your department. This caught my

attention because it was my position, as you realize as your critic at the time,

that the level of press activity and what not was a public relations effort more

so than an energy effort, obviously you disagree with me on that?

DR. GIBBONS: Of course I do. Because I think that

most of the chatter that comes out of my department relative to these subjects

comes out of interviews that I am commonly doing with the press or answers to

questions from yourself or others in Question Period or at times when I am out

as a guest speaker, talking on the issue of Hydro or Hibernia or mining or

whatever else, and not deliberately targeted press activity. We have very, very

little deliberately targeted press activity of any kind.

MR. HEWLETT: So you firmly believe that the talks

you are having with Quebec are, for want of a better word, legitimate. This is

not another race around the mulberry bush as such. I witnessed a ten year race.

Forgive me if I come back to the point, but you feel that these are real

substantive talks that have a reasonable possibility of reaching some sort of

agreement in principle possibly by this year's end?

DR. GIBBONS: That is my belief.

MR. HEWLETT: Thank you, Mr. Chairman.

MR. CHAIRMAN: Mr. Woodford.

MR. WOODFORD: Yes, sir.

MR. CHAIRMAN: I am trying to stay within the time

limits. Time is on your side.

MR. WOODFORD: I wonder if the Minister or one of

his officials in Hydro could explain why there was a decrease of some 22.7 per

cent in revenues totalling some $9.3 million, especially to the industrial

sector last year. Albright and Wilson was only 3.4 or 3.5. Where would such a

substantial amount of savings come from, especially when it comes to the

industrial sector?

DR. GIBBONS: I will ask someone from Hydro to take

that.

MR. ABERY: I would believe it was the close down

of the ERCO plant primarily. ERCO had been taking 130 megawatts in capacity from

Hydro and now they are only taking 5 megawatts, so there was a very substantial

decrease in industrial sales by Hydro because they were our largest customer.

MR. CHAIRMAN: I know by looking around the table

those who are seeking information. I think this is coming from the annual

report. Would you identify where it is coming from?

MR. WOODFORD: Page 12, Mr. Minister, under revenue

the second part on the bottom. But I thought it said that Albright and Wilson

used up ten per cent. That is why I asked the question, to be honest with you, I

do not see it there now. I thought they just -

DR. GIBBONS: Albright and Wilson closed halfway

through 1989, so that would make the big difference in 1990 where you basically

had no usage - 2 megawatts instead of 130 -

whereas in 1989 they used half of

their capacity.

MR. WOODFORD: You mentioned earlier about the

offshore and onshore in western Newfoundland, some seven parcels went under the

offshore lease.

DR. GIBBONS: In the call for bids last year, seven

of eight blocks were taken offshore western Newfoundland, and in the call for

bids this year one of the four packages that is available is in the offshore and

it is actually, I believe, the same area that was not taken last year but got

renominated. So it is about halfway up the coast slightly out offshore from the

other lots.

MR. WOODFORD: Do you expect to have much interest

when you get the regulations in place for the onshore sector? Is anybody showing

much interest?

DR. GIBBONS: We have had interest shown already. I

do not want to name companies but we have had interest shown. So sometime this

year, I do not know how soon, but fairly soon, probably within the next few

weeks, we will put out a call for nominations of land in western Newfoundland to

see what official response there will be from the industry. We have already

informed the industry that our regulations are now in place and have been since

February 15. So we are expecting some interest for the onshore lands in 1991.

MR. WOODFORD: Switching over to Hibernia,

mentioned was made earlier by the Member for Pleasantville, I believe, or the

Member for LaPoile concerning quality control. I am hearing a lot about that

too, the quality control part of it. I am familiar with what happened in Norway

and some of those places and other parts of Europe, and I have been told by

people in the industry, or I should say Newfoundland companies, not necessarily

people in the industry, people trying to get into the industry, that they do not

stand much of a chance, to be perfectly honest about it, unless they do form a

joint venture, and it would have to be with someone very, very reputable from

not only outside the Province, but outside Canada. The quality control measures

for Hibernia are very, very strict to say the least.

DR. GIBBONS: That is correct. Quality control and

quality assurance are vital for this particular development. Companies that have

experience with that naturally would be great partners for local companies that

have no experience with it, and a lot of the local people have been showing a

lot of interest in developing their own expertise in it. A joint venture partner

is a natural way to get that technology transferred and get in on, I guess, the

more interesting or some of the bigger contracts.

MR. WOODFORD: Yes, because even the book on

quality control alone, the sort of pre-tendering document that you look at, is

just mind boggling. I mean I read through one not long ago where a small company

- and when I say small company I am talking, for instance, from the Lundrigan's

group down. It is unreal to even go through what they have to put in place just

to get to the point of submitting a tender.

DR. GIBBONS: That is when you are really talking

about components for the GBS itself, and that is when quality control is vital.

Right now in the construction phase at the Bull Arm site it is not quite the

same because a lot of it is regular routine construction activity, and a lot of

Newfoundland companies have a lot of experience in that type of work. But I

could ask my deputy to speak to that particular question a little more. Gordon.

MR. GOSSE: I am not sure what else I can add to

that. The Minister is quite right. The standards are slightly different for work

being done on the site which is a lot of routine civil work and routine type of

construction work, and the quality control standard just is not that high for

that type or work, but it certainly is for any offshore facility or component of

the production system.

MR. WOODFORD: Correct me if I am wrong, but I

think fifty-one per cent of the work is supposed to be done in Newfoundland.

DR. GIBBONS: Not fifty-one per cent.

MR. GOSSE: I am not sure what that number relates

to. Certain work was agreed to in the binding agreements that would be done here

in the Province, but the number does not add up to fifty-one per cent. There is

one number in the documents for Canada as a whole, the content will be from

fifty-five to sixty per cent, and a portion of that will be a large portion in

the Province.

DR. GIBBONS: Quite a large portion actually will

be done in the Province because the GBS is being built in the Province and all

the related labour - 10,000 person years of the direct employment of Hibernia

out of about 17,000 - done right here.

MR. WOODFORD: Done in the Province and done by

Newfoundlanders, where would -

DR. GIBBONS: Again, in terms of the employment

most of that employment should be Newfoundlanders, but at this particular phase

there are a fair number of people who are not Newfoundlanders who are working on

the project in the Province. Because when you get into some of the technical

areas - people have had to come in right now in the early stages to work with

the Hibernia Management Company and the Nodeco group and the NOC group. Some of

these are not Newfoundlanders, but when you get into the construction trades,

and the work at Bull Arm primarily there you are going to be talking about

Newfoundlanders. There is a requirement in the Atlantic Accord, of course, that

Newfoundland residents have to be given first preference and resident is defined

as in the election act, six months continuous living in Newfoundland. That is

first preference on the jobs.

MR. WOODFORD: I do not know if you can answer this

or not, but I will ask you anyway. Is there any truth to the rumour, which I

think was brought up in the House earlier by someone, that if a worker in the

building trades got a job there on the site - let's say, for instance that they

are with Lundrigan's and they were on the job there for three months. Once they

are finished that particular contract they just move out and go to the bottom of

the list. I have been told by union people that this is true. Whether it is just

rumour or truth or not I do not know.

DR. GIBBONS: I do not know why that would be true.

That would have to be something that is being done internally in the unions

because my understanding is that they work on the basis of seniority on the

union list. If you are senior and you are on a job now I would think you would

remain senior as you change from one project to another project on the site. But

there might be something internally in a union where they cycle people through

to give people employment. It is certainly nothing that I am familiar with and

nothing that Government is involved with doing.

MR. WOODFORD: That is my understanding, that it is

done within the unions, but it is happening.

DR. GIBBONS: They may be doing something in their

particular union to cycle the work through their membership but I am not aware

of it.

MR. WOODFORD: I was told by a union member that

that is exactly what is happening. For instance if Lundrigan's has a contract

for a year and the worker is there for a year, well he is safe enough, or for

two years or whatever. But if it happens to be for three or six months and he

happens to get laid off at the end of that contract he cannot stay there and

work on.

DR. GIBBONS: That must be unique to some

particular union because my understanding was that it would be seniority within

the union, till they run out of union members, then they start taking other

people who have applied who are non-union members. Basically on a priority

basis.

MR. WOODFORD: Getting back to the statement made

by Mr. Noel concerning the integration or the merging - or I suppose it is not a

merging, it would be a sale of Newfoundland Hydro, so that they can either

compete with Newfoundland Light or else.... I do not see it as one company but I

see a lot of duplication. I always did. It is there now and always will be. What

would it take, or is it realistic to even think, that there would be - say,

Newfoundland Hydro could go on its own?

In saying that I would like to go back to the fact

that the Newfoundland Government now does not pay a subsidy to Newfoundland

Hydro. Right? They are more or less off on their own. Now, would the time be

right - or am I wrong in saying that or suggesting it -for Newfoundland Hydro

now to act as a retailer rather than a wholesaler?

DR. GIBBONS: Well, Newfoundland Hydro does act as

a retailer in many circumstances.

MR.