Resource Committee — natural resources — 14 May 2015

2015-05-14

Newfoundland and Labrador — Committees

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May 14,

RESOURCE

COMMITTEE

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

for Christopher Mitchelmore, MHA for The Straits White Bay North.

The

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

CHAIR (Cross):

I see the light is on. Good morning

everyone.

Welcome.

There

are a couple of quick chores first, I suppose.

Mr. Ball is replacing Mr. Mitchelmore in this session.

We have

minutes from the Department of Environment and Conservation and the Office of

Climate Change that need a mover.

Mr.

McGrath moves; Mr. Hunter seconds.

All

those in favour, 'aye'.

SOME HON. MEMBERS:

Aye.

CHAIR:

Carried.

motion, minutes adopted as circulated.

CHAIR:

Before we get to the introductions, just a couple of quick comments so everyone

is aware.

Estimates are governed by Standing Orders 65-77, and the proceedings that we

will do, we will introduce the Committee and then we will introduce the

department. We will give the

minister the opportunity to have fifteen minutes to open.

The first speaker thereafter, representing the Official Opposition, gets

fifteen minutes, and every intervening speaker after that gets ten minutes.

We will

use the clock just to try to keep us in order and keep everybody timely.

We will also endeavour to break for between five and ten minutes at 10:30

o'clock.

We will

start now with introductions of the Committee.

We will start with Mr. Ball.

MR. BALL:

Good morning.

Dwight

Ball, MHA, Humber Valley.

MR. MILES:

Peter Miles, Opposition Office.

MR. SLADE:

Sam Slade, MHA for Carbonear Harbour Grace.

MS MICHAEL:

Lorraine Michael, MHA, Signal Hill

Quidi Vidi.

MR. MORGAN:

Ivan Morgan, Researcher.

MS PERRY:

Tracey Perry

CHAIR:

Mr. Hunter's light is on.

MR. HUNTER:

Thank you, sir.

Ray

Hunter, MHA, Grand Falls-Windsor Green Bay South.

MR. MCGRATH:

Nick McGrath, MHA for Labrador West.

MS PERRY:

Tracey Perry, MHA, Fortune Bay Cape La Hune.

CHAIR:

Minister Dalley.

MR. DALLEY:

Derrick Dalley, Minister of Natural Resources and MHA for The Isles of Notre

Dame.

MR. BOWN:

Charles Bown, Deputy Minister, Department of Natural Resources.

MR. LIVERMAN:

Dave Liverman, ADM, Mines, Natural Resources.

MR. IVIMEY:

Philip Ivimey, Departmental Controller, Department of Natural Resources.

MS QUINTON:

Diana Quinton, Director of Communications.

MR. FROUDE:

Ian Froude, Minister Dalley's Executive Assistant.

MR. SMITH:

Alex Smith, Director, Mineral Development, Mines Branch, Natural Resources.

CHAIR:

Okay. One quick reminder for

members who are asking the questions, you ask the minister, and if the minister

deflects, in a supplemental way you can continue the conversation with the

person he deflects to. The minister

always has the right to come back to the question.

Minister Dalley.

MR. DALLEY:

I think I will just pass, in terms of some overview.

Most people are familiar with the department and you will see some

changes there.

Quickly, I guess you will see probably some things stand out a little more, some

variances, particularly around the Employee Benefits.

It is an issue of rightsizing some budgets that we are certainly

committing to do next year.

Outside

of that, some slight variances in salaries are due to increases.

Other than that, I think we will just go through the line items and I am

sure I will get to answer the questions that need to be answered.

CHAIR:

Okay, so we will call the line item.

CLERK (Ms Hammond):

Subhead 1.1.01.

CHAIR:

Mr. Ball.

MR. BALL:

What did you call, 1.1.01?

CHAIR:

Yes, we just started.

MR. BALL:

Okay, thank you.

I will

start, as the minister said, with some line items, which is the usual practice

now by this group in this room. I

do not know what books you guys are using by the looks of it there are some

Excel sheets or something but it is 1.1.01 and the Transportation and

Communications. Last year, there

was

CHAIR:

Just as a correction, Mr. Ball, we are not just sticking to 1.1.01.

MR. BALL:

Yes, we will move through. Thank

you.

CHAIR:

We will move through inclusive as you go.

MR. BALL:

Thank you, Mr. Chair.

It was

$78,000 last year. We see $78,000

in the budget this year, but it was actually revised and spent $93,500.

MR. DALLEY:

Yes.

MR. BALL:

So just an update on that.

MR. DALLEY:

The increases there are basically two missions: one was to China, which

was added there; as well as the trip to Washington, DC.

In China, it was regarding mining activity and meetings with respect to

potential investors for the Province.

In the Washington trip, it was with respect to energy and meeting with

New England governors and the Department of Energy for the US.

MR. BALL:

Okay.

Moving

along, in 1.2.01, under Supplies we saw about an extra $10,000 from the budget.

It was $6,300 last year and it was $16,900 spent this year.

MR. DALLEY:

Sorry, which?

MR. BALL:

If you go to 1.2.01 under Supplies.

MR. DALLEY:

Okay. There are a couple of

adjustments on the revised. The

actual number is $11,619. One

thousand dollars of that is in error. That

belongs in mining it belongs in one of the mining sections.

Outside of that, the increase is basically increases in magazine

periodical subscriptions and so on.

MR. BALL:

So you say it is $11,000, not

MR. DALLEY:

It is $11,619.

MR. BALL:

Not the $10,600.

MR. DALLEY:

The $1,190 is an error and the others are through subscription increases.

MR. BALL:

Okay, so under Purchased Services, it was $8,800 and it went to $25,500.

MR. DALLEY:

The difference there is when we changed the departments and Forestry and

Agrifoods went to the Department of Fisheries, we rightsized the budget, but

this is an item that got missed. So

there is $16,700 that actually should have been taken out of that line item and

go to Forestry and Agrifoods. That

is the difference in the number.

MR. BALL:

Okay. When we move off the line

items that is one of the questions I want to ask, about how that transition

happened, what was the impact with staff, and the extra costs with that too.

If we

continue on with 1.2.02, if you look at the Salaries line here, it went from

$927,000 in your budget and it actually went back to $847,000, so I guess some

$80,000 or so, and back to $950,000 this year.

I am just wondering if all those hirings have been made.

There was obviously less money spent last year.

Is that because of vacant positions, or is there a particular date of

hire that affected that?

MR. DALLEY:

Primarily, there are two things.

One was a vacancy during the year.

It was an Accounting Clerk II. We

have plans to fill that position.

It has not been filled at this point.

The other is lower than anticipated overtime expenditures.

So that is why we see the reduction.

As for

the increase, that is primarily due to collective agreement, salary steps, and

so on.

MR. BALL:

Okay.

Maybe

just for because it keeps coming up through all of this.

There does not seem to be any consistency when you look in the difference

in Salaries, it is not always reflected in a very similar fashion to Employee

Benefits. How does that tie in?

Is there a percentage because, in some cases, we see here where you get

bigger increases in Salaries, yet a less increase in Employee Benefits; and, in

some other cases, we have seen Employee Benefits that would go up and not as big

a change in Salaries. Is there

MR. DALLEY:

No direct correlation.

The Employee Benefits is primarily around seminars, conferences,

training, and so on. It depends on

what is happening from year to year.

It depends on how many people we send.

I think what you will see here, primarily in Employee Benefits, that

there has been an increase. That is

not because we are sending more people; in fact, in a lot of cases, we have sent

less because of discretionary travel and so on.

still attended what we needed to do, but we are seeing an increase in the costs

for some of these. The discussion

that I have had is that we need to have a closer look at some of our budgets

around what we are seeing in increases that we can rightsize budgets.

That is primarily the issue around Employee Benefits.

MR. BALL:

Okay.

In that

same category, 1.2.01, Purchased Services is $66,000 and there was an increase

in the budget at $84,000.

MR. DALLEY:

What happens here it is

actually in Phil's shop. The

allocation here was filled through finance controllers' responsible for Fishery,

Natural Resources, and Forestry.

Any training budget and work that he does, the funding for that is parked here

in this budget. What you see here,

that is primarily what that budget is, and the increase is the fact that there

was significant training done this year around the Organizational Development

Initiative. Basically that work

that Phil does with all three departments is paid for out of this item right

here.

MR. BALL:

So for the three departments

it is done out of this one initiative?

MR. DALLEY:

The budget to do the

Organizational Development Initiative, the training, is parked here in this line

item.

MR. BALL:

Okay.

Is there any reason that would stay in Natural Resources when it is

really work that is done in another department?

MR. DALLEY:

I can ask Phil if he would

provide the answer.

MR. IVIMEY:

The Administrative Support

budget here houses the divisions for Information Management and my division,

which is Finance and General Operations.

A communal theme you will see across government is some of the Financial

and General Operations Divisions are a shared service for multiple departments.

myself, the Finance and General Operations Division, we are shared service for

the Department of Natural Resources, Fisheries and Aquaculture, and Forestry and

Agrifoods, so you will see me that the Estimates meetings for Fisheries and

Aquaculture, and Forestry and Agrifoods as well.

The

administrative budget that relates to finance, general operations, landlines,

the administration of phones, telephones, day-to-day kind of operations type

support that is housed within my division, within the Department of Natural

Resources.

component of that is a training initiative which is managed through the Human

Resources Secretariat which provides training support for employees in each

three of those divisions, so that training budget is also housed under this one

communal area. All three of those

departments drawn down on this budget that is in this division.

MR. BALL:

Okay.

Moving

down to 1.2.03, and that is the $90,000 there in Property, Furnishing and

Equipment, I was just wondering what that purchase was.

MR. DALLEY:

That purchase was a transfer

from the Geological Survey for the purpose of replacing vehicles, and there was

three vehicles replaced in the Mines Branch.

MR. BALL:

That was not budgeted for

last year at all?

MR. DALLEY:

It was not budgeted, and I

guess savings in the Geological Survey were transferred over and three vehicles

were replaced in the Mines Branch.

MR. BALL:

Okay.

If you

go back to I picked up on this yesterday last year's Estimates there was

like $625,000 that showed up in the 2014-2015 budget, but I do not really see

where it shows up here. I do not

know if that is something that has been transferred out because of Forestry and

Agrifoods or if someone has an answer for that.

MR. DALLEY:

I will ask Phil if he could

answer that.

MR. IVIMEY:

Yes, that relates to a restatement for Forestry and Agrifoods.

MR. BALL:

Okay, that is what I thought

when I saw it, but I was not sure.

In the

department now I think if you total up the number of employees, it would be

somewhere around 179 employees. How

many of them are temporary versus permanent, and how many vacant positions would

we have in the department now?

MR. DALLEY:

I do not have the number

right here in front of us, but I will certainly get it to you.

MR. BALL:

Okay.

Do you

want to move on to Mineral Resource?

I do not have any more questions with Executive and Support Services.

I do not know if you want to give Lorraine an opportunity before we move

onto the Mineral Resource Management.

CHAIR:

Okay.

Michael.

MS MICHAEL:

Thank you, Mr. Chair.

Yes, I

think that is a good way to do it.

I just have one question under 1.2.02, Administrative Support.

I am just curious about 02, Revenue Provincial.

What is that line referring to?

MR. DALLEY:

Is that the $10,000?

MS MICHAEL:

Yes.

MR. DALLEY:

That is basically

miscellaneous in and out in terms of sometimes we may pay a bill and there is

credit or there may be a travel advance for someone and they do not travel,

there is a cancellation, the money comes back.

So that is basically just an accounting measure to deal with the small

ins and outs.

MS MICHAEL:

Okay, thank you very much.

I think

I know the answer to this one, but I will just put it on the record anyway.

Going right back to 1.2.01, Executive Support, under Salaries, it is

going up by $75,700. I am assuming

that is not a new position; it would be more benefits and increases.

MR. DALLEY:

Sorry

MS MICHAEL:

Subhead 1.2.01.

MR. DALLEY:

Under Salaries?

MS MICHAEL:

Under Salaries, yes.

MR. DALLEY:

The basic change there from

last year to this year was the reclassification of executive level positions and

it is a kind of back payment that was owed.

Then the subsequent increases are basically to the collective agreement,

salary steps, and so on.

MS MICHAEL:

Right.

That is what I figured, but I thought we would get it on the record.

Thank

you very much. That is all that I

have under that section.

CHAIR:

Subhead 1.1.01 to 1.2.03

inclusive.

All

those in favour, 'aye.'

SOME HON. MEMBERS:

Aye.

CHAIR:

Contrary?

Carried.

motion, subheads 1.1.01 through 1.2.03 carried.

CHAIR:

We will come back to

(inaudible).

MR. BALL:

Yes.

I will just start up on 2.1.01; this is in the Mineral Resource

Management area. Again we see

Salaries down a couple hundred thousand dollars, some $4 million down to $3.82

million.

MR. DALLEY:

Which subhead?

MR. BALL:

That will be in the Mineral

Resource Management under 2.1.01, Geological Survey.

MR. DALLEY:

I am showing 4.1.01.

Is that an error on ours?

OFFICIAL:

Yes, that is an error.

MR. DALLEY:

Okay, I am sorry.

MR. BALL:

I think what you will see is

some of the numbers based on the Forestry and Agrifoods being part of last

year's Estimates, the numbers have changed slightly.

MR. DALLEY:

Okay.

Sorry,

your question again?

MR. BALL:

The question would be on the

Salaries, the $4 million down to $3.8 million.

MR. DALLEY:

Basically vacancies during

the year.

MR. BALL:

Okay.

Yet Employee Benefits are up so I am assuming that is professional

development or something like that?

MR. DALLEY:

Again it is a line item here

that needs to be corrected. There

is an error there. The actual

revised number was $27,500.

MR. BALL:

Okay.

MR. DALLEY:

That has to do with

expenditures associated with seminars, conferences, membership fees, and so on.

As I said, we are seeing an increase in some of these conferences and the

costs. We have had a discussion

about rightsizing the budget and, as you can see, there is an adjustment made

for next year.

MR. BALL:

Transportation and

Communications is down considerably.

Was there something that was planned that was not done, or was it through

another department?

MR. DALLEY:

Well a number of factors;

one was discretionary travel that was implemented.

Probably more significant here was that there was less helicopter usage.

As you can appreciate it is very costly for helicopter time, but we used

less time this year.

MR. BALL:

The helicopter usage, how

much would that have been in that is a considerable reduction.

Is that the

MR. DALLEY:

We would have had twenty to

thirty hours less with respect to actual helicopter time as well as less travel.

MR. BALL:

With twenty or thirty hours

less helicopter time that would not be I mean you are looking at a difference

here of a couple of hundred thousand dollars.

MR. DALLEY:

That is not all helicopter

time. I would agree to that.

Primarily it was less travel.

We cut back on the field time this year.

It went from eleven field trips last year to nine this year.

The cost associated with that is primarily the reason for the reduction.

MR. BALL:

Okay.

The Professional Services go from $19,000 up to $49,000, and you actually

maintain that budget this year. Is

this a new directive within the department?

Will it continue year over year?

This is under Professional Services.

MR. DALLEY:

Again so I can fix a number

here and apologize, the actual number should read $27,000, and an increase,

realignment here around Professional Services.

There are a number of things that come out of here.

For example, in China we had geologist interpretive services which were a

cost that is showing here on this line item, and then the next year as well,

with respect to field work and hoping to do more field work and studying what

happens.

Either

we get more field work done and sometimes when we are not in the field there

is an opportunity to get more of the work done so that the geologists are

actually getting their work done from what they have extracted in the field.

That is basically what comes out of here.

MR. BALL:

When was the trip to China?

MR. DALLEY:

When was it?

MR. BALL:

Yes.

MR. DALLEY:

Last fall.

MR. BALL:

That trip was obviously

something not budgeted for at the time.

It was not budgeted for last year, I am guessing, from the conversation

that we had this morning. The

decision to go to China was made, obviously, after the Budget last year.

MR. DALLEY:

The department budgeted for

the trip to China because of the relevance, obviously, with what we are doing

and the interest in Chinese investment.

What we see in the increase is primarily around my travel and my

involvement with the trip.

MR. BALL:

In Grants and Subsidies

there, line item 10 under 2.1.01, we see an increase.

It is only $2,500, but it has been $5,000 for a long time.

Where do they go? What is

this for?

MR. DALLEY:

It is grants provided to the

Canadian Institute of Mining, Metallurgy and Petroleum to cover a portion of

their annual review of activities; to support the Geological Association of

Canada, Newfoundland and Labrador section, in support of its annual meeting and

field trip; and the Canadian I am going to say Quaternary Association in

support of its national biennial meeting in St. John's.

MR. BALL:

Okay.

Move on

to 2.1.02, which is Mineral Resource Management and we get into the Mineral

Lands piece. In 2.1.02,

Transportation and Communications, we see an increase over the budget last year

of $127,900 to $160,000. That is

now brought back to $127,900. So

the increase last year of around $23,000 or so, it is $33,000 I guess almost.

MR. DALLEY:

Yes, the increase there is

primarily due to higher than anticipated helicopter costs for field projects.

We had hired another inspector this year to be able to do more

inspections on the exploration side and ended up with more core sample work as

well. As a result of the additional

inspector we have had increased helicopter time.

MR. BALL:

Okay.

Moving

down to Purchased Services we see a big decrease in this year's budget.

Last year $657,000 was spent and this year it is down to $77,000.

Just a question on that; why the difference and what is it you purchased

last year that you do not need to purchase?

MR. DALLEY:

The difference here if you

recall last year in the budget as well, we highlighted there was $610,000.

If you look down further in Revenue you can see that.

MR. BALL:

Yes.

MR. DALLEY:

The $610,000 was an

agreement with the federal government with respect to the Mealy Mountain

National Park. Within Mealy

Mountain National Park there was a company that held mineral rights, licences

and an agreement. In order to do

the park there was an agreement with the federal government that they would pay

this company an amount of money with respect to their investment around the

mineral exploration.

MR. BALL:

So it is just basically

buying out the investment or replacing the investment that they had.

MR. DALLEY:

It is in and out.

It was no cost to us. It was

an agreement with the federal government.

We would pay and the federal government will reimburse us.

If you look down in Revenue you can see where we budgeted that amount of

money to go out. As well, in the

coming year then, we have that as revenue coming in.

That is basically the exchange of $610,000.

MR. BALL:

Is that company public

information now?

MR. LIVERMAN:

The fact is that the company, which holds mineral rights in the Mealy Mountains,

is public, but there has been no public announcement of any compensation at this

point.

MR. BALL:

Okay.

Just moving along to 2.1.03, I guess the big difference here, except for

we have seen some changes in Professional Services from $730,000 down to

$507,000 which was actually spent, and then down to $240,000.

These are the Professional Services.

There seems to be a substantial decrease for this year, so just an answer

on that one, I guess.

MR. DALLEY:

Yes, this line item here is

with respect to the inspections around dams and work that we have highlighted

that we want to get done on the dams around stability.

Three dams in particular were highlighted for repair and inspection.

Gullbridge was the highest priority, and the first phase of work has been

completed. This particular dam

meets the recommendations to ensure stability, but it is certainly on our list

that we would want to do some long-term work, particularly around the integrity

of the dam. It is work that we can

defer, without compromising any safety.

Then there are the other two dam sites around Whalesback and Rambler.

There is still work ongoing there, but it is lower priority.

Basically with these dams, some of the work has been deferred.

We feel with the inspections and looking at the conditions of those dams,

it is a lower priority and less risk of failure.

We will continue to keep an eye on these as well.

Through our inspections if there are any changes, obviously we will bring

forward the work that needs to be done.

For now, the inspections are done and we are satisfied with the

integrity; but certainly, on our list in long term, that we will need to keep it

in view.

CHAIR:

Okay.

In the

event of time, we will move to Ms Michael.

MS MICHAEL:

Thank you.

Let's

continue then in that section.

Looking at Purchased Services there was a budget of $1.2 million approximately.

Then only $36,000 was spent and this year $146,500 is estimated.

Could we have an explanation of that line, Minister, please?

MR. DALLEY:

Yes.

What we have here again, that is related to the dams.

There are two aspects of that.

One is the Professional Services around the inspection, the engineering

plans, and work that we would use both internally and externally; and then the

Purchased Services would be the line item where we would actually go out and

hire to get work done.

The

work did not get done this year, but again, particularly around Gullbridge, we

are satisfied with the integrity where it is right now. So that is basically

that line item. Although we

budgeted, the work never got done.

Due to some delays and then weather and so on, it never got done.

Our position is that we will continue to inspect and monitor; but, for

now, based on the work that has been done on Gullbridge already, we are

satisfied with the risk assessment.

MS MICHAEL:

Okay.

Coming

down then to the Grants and Subsidies, which is subsection 10, what makes up

that line?

MR. DALLEY:

That is basically the

Mineral Incentives Program. There

is funding within this program for prospectors and funding for junior

exploration companies. That is

primarily what that fund is for.

Again, the rightsize of the budget here is $1.75 million.

MS MICHAEL:

It is $1.75 million.

MR. DALLEY:

The revised is $1.75 million

versus $1.90 million.

MS MICHAEL:

Oh, so the revised was down

MR. DALLEY:

The revised was down just a

little.

MS MICHAEL:

Yes, $1.75 million

MR. DALLEY:

Yes.

MS MICHAEL:

Okay, got it.

Minister, I am going to ask this question and I hope it will not be an

embarrassing one. I am not asking

it to embarrass you, but there seems to be a number of places in the budgetary

documents where there have been numbers that you are correcting almost

continually here. Can we get an

explanation of that?

MR. DALLEY:

I will give you one, but

maybe I can ask Phil since he is the guy who puts the numbers and puts it

together. I can give you an answer;

he will probably give you the right one.

MS MICHAEL:

Okay.

MR. DALLEY:

Go ahead, Phil, please.

MR. IVIMEY:

What you see in the

Estimates document in terms of the revised numbers, those numbers are usually

prepared around January, February

MS MICHAEL:

Okay.

MR. IVIMEY:

That is time when we do our final projected expenditures for the year.

I mean, there is still another two, three months of actual processing

after that. That is our best guess

at that time of what our final expenditures will come in at, but by the time we

actually come to print and now the fiscal year is over, we are past March 31, so

we know what our final actual expenditures are.

In some

cases, there are small differences.

In some cases, some things may or may not have happened depending on

circumstances. It is better to

report on what the actual expenditures are as opposed to try to explain a number

that is really inaccurate.

MS MICHAEL:

Right.

Well, thank you for that.

Actually, knowing that explanation, I appreciate the fact that you are giving us

the information right up to date; that is helpful to know that is what we are

getting. Thank you.

Since

you talk about the Grants and Subsidies, where are things right now, if I may

ask this question, in the Province with regard to exploration?

Do you still see the same activity

MR. DALLEY:

Same challenges.

By way of comment, I attend national meetings and it is right across the

country. Due to the commodity

prices and the challenges in the mining industry, we are certainly seeing that

played out in exploration as well.

It is down from other years.

Obviously it is a concern in the industry, but I am always amazed at the players

in the industry; they are so optimistic.

Having gone through I guess these ups and downs many, many times, they

are clearly a very dedicated, committed group of people that have their eye on

what is happening and keenly interested in continuing to do some work.

What we are finding, particularly the larger companies have tightened up

and there is less money available.

In our

case as well, you will see a slight reduction here.

What we have done is maintained, particularly the funding for

prospectors. We have a strong

prospector group in the Province and they have done some great work.

That is the grassroots. If

we are going to continue to find discoveries, it starts with the prospectors.

MS MICHAEL:

Thank you.

Related

to that this question goes back a few years, but we are curious about it in

2009 there was a company, Tenajon Resources, that announced they had found a

deposit and I hope I am pronouncing this mineral correctly molybdenum that

was located about 2,000 kilometres north of Grey River on the South Coast.

What ever became of that?

They made an announcement, but they have never done anything with it?

MR. DALLEY:

I could ask David Liverman.

MR. LIVERMAN:

I believe they still hold

the mineral rights to the property, but commodity prices have not helped.

We see a lot of companies announcing discoveries, but there is a big

difference between a discovery and a potential mine.

I think since 2009 they did some further drilling, but the results, as

far as I know, have not resulted in anything which looks like a future

development.

MS MICHAEL:

Okay, thank you.

MR. DALLEY:

If I might add, part of the

process as well in terms of the work that they are doing and to be able to get

to some sort of an announcement is obviously to create some interest and to

attract a more significant investor.

When you go to these shows and if you have something to be able to put

out there, you have something that is more attractive, that will attract more

interest and in hopes of attracting a larger investor so you can move to the

next stage. It is part of the

process in the business as well.

MS MICHAEL:

Right, thank you.

If we

could just go back to 2.1.01. It is

still under Mineral Resource Management, 2.1.01.

Looking at 01, Purchased Services, the budget was $398,000 and the

revision was $450,000.

MR. DALLEY:

The primary increase there,

as I referenced a little bit earlier, is that we have seen an increase because

we did two less field studies, what happened is our geologists were able to get

back into their offices and do some work, and it required more lab work.

We do

some internal lab work, but depending on the type of work that needs to be done,

depending on the mineral and so on, we have to use outside labs.

So the increase here is basically to be able to get more work done

sending our core samples out to other labs.

MS MICHAEL:

Okay.

Thank you very much.

I am

finished that

section if you want to get a vote on it before we move ahead.

CHAIR:

Mr. Ball, do you have

anything further?

MR. BALL:

Yes, I

have some general questions now around mining (inaudible) or do you want to I

guess we have to ask them now because we are going to accept this.

One of the questions I have is that when you look at the budget of Mining

Tax and Royalties, last year you will see around $95 million or so.

This year that is up considerably to just under $145 million.

The

question would be: How much of that is through Voisey's, so just a breakdown on

the Mining Tax and Royalties that we have seen in this year's budget.

It has gone up considerably.

I know a significant piece of that would be for Voisey's for sure, but just a

breakdown on where that would come from.

MR. DALLEY:

We do not have that

information because all of that is collected through Finance.

MR. BALL:

Through Finance, okay.

MR. DALLEY:

That would not come to us.

We make it, but they get to collect it.

MR. BALL:

Yes, they get the fun part,

right?

For

more general questions, I guess a concern in Lab West would be around MFC.

I am just wondering if we can get an update on where things are with MFC,

and if there have been any discussions at all with Wabush Mines, or anything

that the department has been able to do to facilitate those two groups getting

together.

MR. DALLEY:

We have been very open with

the people of Wabush, the union, the municipal leadership there, and publicly

that we are prepared to do whatever we can to help facilitate the situation in

Wabush. I think all of us in this

House would agree to that. It is a

very tough situation for the people of Wabush.

They are faced with a tough situation.

The

market prices are at near rock bottom.

It is tough. With respect to

the commodity price itself the issues at the mine are well documented as well.

What we have here is that MFC has indicated an interest.

We have had some discussion directly with MFC.

None of late, but they know that we are there to help and support.

Some of

the issues with respect to what Cliffs are doing with their commitment, the

concerns that we have expressed and continue to work with the Town of Wabush

with respect to issues around the cleanup of the site and the responsibility of

the site, that is a priority as well, and ensuring that the funding is in place

and to be able to do that. Any

company that comes in clearly would have to bring that commitment as well.

We have

had discussions with both companies.

There are some differences as to how this will work.

MFC we are hoping that Cliffs would turn this over.

Cliffs have not indicated any intention of doing that to us in our

discussions. We have encouraged

them to work together and see if there is an opportunity, but to date we do not

see that. We do not see that

happening. Other than offering

whatever support we can and encourage them to work together, that is where it

is.

MR. BALL:

So given the responsibility

of Cliffs to actually clean the site up I think there was, what, $50 million

or something that was set aside for that cleanup period.

I mean there must be a period where if you actually if you remove

yourself from an active mine, there has to be a time frame in place when you go

in and you take care of your responsibilities in this case.

I know

they have put numbers out there that said they would not be requiring $50

million and so on, but just an update on where Cliffs would be with the

remediation of this site and their responsibility to that area.

MR. DALLEY:

The requirement under the

rehab and closure plans would be within five years.

They would submit a plan that would go through a rigorous assessment

internally that we would accept, and then obviously the dollar value attached to

that. The plan would be done in

stages. The one issue, I guess the

biggest concern, the immediate concern is around dust in the region.

We have

had some discussions with Cliffs and have certainly conveyed what their

responsibility is. They still have

a responsibility for the dust. So

we are monitoring that very closely as an immediate concern from the region.

Outside of that, the plan around rehab and closure we have accepted

their plan and it will go through various stages.

That

has come up as well with MFC in terms of why you are allowing to do different

things, but it is a private mine, a private owner, and they have a right to do

these things. MFC or any company

that would come forward, as you know, will be required to clearly show us a

commitment as well with respect to rehab and closure.

Those

are some of the challenges, I think, that we are seeing from early discussions.

Basically, it is a five-year plan and different phases.

The immediate concern would be the dust, and we have been working and

indicated to Cliffs of what their responsibility is around that.

MR. BALL:

Are they actually still

paying for their mining licence too on top of this?

Didn't they agree to pay for two years?

MR. DALLEY:

They would have to pay, yes.

MR. BALL:

Not for the remediation or

the cleanup, but don't you also pay to maintain an active mine status as well?

They have paid that, haven't they, for a period of two years or

something?

MR. DALLEY:

Dave, I do not know if you

could probably explain what the requirement is.

MR. LIVERMAN:

Yes, there is a lease

associated with any active mine and there is a rental that is payable on an

annual basis. Cliffs remains in

good standing with the government in terms of paying the (inaudible).

MR. BALL:

That is a couple of million

dollars a year or something?

MR. LIVERMAN:

Actually for the past year

it is based on area. It is $80 a

hectare. It is a fairly small

amount actually.

MR. BALL:

So they have made a two-year

commitment to that?

MR. LIVERMAN:

It is just due annually.

If they were deficient in their payments, then the lease potentially

could be cancelled.

MR. BALL:

I guess in that area there

is also lots of concern around what the Iron Ore Company of Canada will do and

what Rio Tinto will do. Have there

been any ongoing discussions right now or anything new to report on what to

expect from IOC over and above the recent layoffs that we have heard?

MR. DALLEY:

I know we are straying from

some line items here, but particularly around that, it is a very important issue

with respect to what is happening in Labrador and the challenges with respect to

Wabush shutting down, Bloom Lake shutting down, and the significant impact in

the Labrador region. So I

appreciate the question. I recently

met with IOC and we have had discussions back and forth.

Obviously they are feeling the impacts of the low commodity price as well, the

iron ore prices. I think it has

been public that they are intent on trying to find efficiencies within their

company. They have changed out some

management. They are working with

the unions on various proposals, I guess, to try and mitigate the impact of the

price of iron ore. They are also

looking at some layoffs.

In my

recent meeting with them, there is no direct indication of more layoffs;

however, it was clear that they are concerned about prices and where they are as

a company, and looking to continue their efforts to be able to ride this out

with respect to their commodity prices.

MR. BALL:

Okay.

there anything new that would be budget related to the Julienne Lake development

that would impact the current budget or future budgets that we know of today?

MR. DALLEY:

Well, we are hoping to have

an impact on future budgets, if things all go well, but we are not at that stage

yet. As you know, the Julienne Lake

Alliance group, we have been working with them with respect to potential

development in the future. That

negotiation is ongoing and is certainly not concluded.

MR. BALL:

Okay.

The

third line going into Lab West, is that something now that is put on hold

indefinitely or is there (inaudible)

MR. DALLEY:

Basically, the Alderon line?

MR. BALL:

Well

MR. DALLEY:

Primarily, for lack of a

better word?

MR. BALL:

Certainly I have never referred to it as the Alderon line, but

MR. DALLEY:

Everybody else has.

MR. BALL:

Everyone does, I know.

It has taken on a brand of its own, a life of its own, but we know what

we are talking about

MR. DALLEY:

Sure.

MR. BALL:

when we talk about the

third line going into Labrador for reliability and

MR. DALLEY:

It is on hold.

The line and the prospectivity the opportunities for development in

Labrador West region, if we get there, if we see a change in prices, I think we

are going to see a lot of activity in the region and obviously a commitment to

supply the power to the region.

Given where we are and given the challenges for Alderon in particular, right now

that is on hold. Obviously it is

still committed, but we are at a time when that is not going to proceed right

now.

CHAIR:

Could we go to Ms Michael

now if she has

MS MICHAEL:

Yes, I do have another

question related to Labrador West, if I may.

This may be one that is the Department of Finance.

If so, tell me and I will ask them on Monday.

It has to do with the royalty dispute between IOC and the government and

the arbitration panel was set up.

Is that arbitration going has the panel started the arbitration process?

MR. DALLEY:

It is a Finance issue and we

are not directly involved.

MS MICHAEL:

Okay.

I think

I have one more Mr. Ball has asked a couple of the questions that relate to

some questions I was going to ask.

Last year we learned that there is a $700,000 outside contractor conducting an

audit on possible transfer pricing conducted by Vale.

Was that audit done?

MR. DALLEY:

I would suspect that is

Finance as well related to the mining tax.

MS MICHAEL:

Okay.

I think

that would be fine, Mr. Chair, in terms of general questions around

CHAIR:

Mr. Ball.

MR. BALL:

(Inaudible) trying to create

a partnership with Coastal Gold. I

know that this would have an impact of course on the mining royalties, and

obviously it would generate some interest in that area.

Is there anything new on Sulliden I think Sulliden was the name of the

mining company. I am just wondering

what would happen there with your department, what is the involvement with the

department and the impact that it could have I guess (inaudible)

MR. DALLEY:

Maybe if I could ask Dave

for an update on Hope Brook.

MR. LIVERMAN:

Coastal Gold have been

working the property for some time, but had been challenged, like many

exploration companies, in raising the funds to take the project to the next

level. So there was an announcement

around about the time of PDAC in March that Sulliden were taking over Coastal

Gold and would inject a significant amount of capital into the project.

I think what that will mean is we will see further drilling, exploration,

and work towards determining whether there is an economic mine in the area.

We are looking forward to seeing the results of that partnership.

MR. BALL:

I guess somewhat, not

related to Hope Brook, but obviously this is going to be a big year, a defining

year at least for Duck Pond with the closure.

What do we see happening with that site once Duck Pond how will the

remediation occur? I know there was

some discussion about removing the plant altogether at Duck Pond.

Is that still what we anticipate happening there at that site?

MR. DALLEY:

We have had lots of

discussion with Teck Resources. I

met with them at PDAC as well. I

will say they have been an outstanding company for the region, as you know, and

they take great pride in their reputation.

They have been very clear to us about their commitment to do whatever

they need to do.

We have

their closure plans, but they are also working through, particularly around the

mill, as to what may happen with that.

They are open to and, I understand, having some discussions with other

companies that have an interest in the region.

As you know, there is quite a bit of activity in the Buchans region and

great reason for optimism. The mill

itself, there is obviously some interest in the mill and the company is working

through with other companies around that.

One

thing that the company has been very clear to us with respect to their

responsibilities is that whoever is engaged, whoever they partner with, Teck

will require great certainty that this company is able to fulfill any obligation

with respect to rehab and closure, environment, and so on so that their

footprint and their reputation is maintained.

MR. BALL:

I agree, Minister.

There is no doubt that Teck Resources have certainly set a high standard

not only for their own company, but it just raises the bar for the mining

industry. It has been good to see.

The

reactivation of the fluorspar mine in St. Lawrence has been in the news lately,

so just an update on that and what the commitment would be from the department.

I know some of this would be finance related, but what is the movement on

St. Lawrence?

MR. DALLEY:

As you know, there was an

announcement and interest a company had made an announcement that government

has partnered with respect to some infrastructure with the mine and it is

basically funding through BTCRD. A

small amount of that money has been drawn down, but for the most

part it is not.

The money is still in place from a government commitment, but the company

itself partnered with Golden Gate out of the US.

It is from a company with a strong balance sheet.

Since that time, there has been tremendous work in St. Lawrence around

further exploration and discovery.

They

are excited about where they are and we anticipate, hopefully, something by late

summer, early fall, a further announcement as to where they are.

Obviously there is a lot of work and stages and so on that they have to

go through, but I know from a company perspective they like what they are seeing

and they like what their discoveries have been.

I understand that the markets are good as well.

So they are very optimistic as a company, and obviously we will support

them in any way we can.

MR. BALL:

I do not know if this has

spurred any questions for Lorraine or not, but that is kind of it for me for the

general questions and the finance questions.

CHAIR:

Okay.

Shall

2.1.01 to 2.1.03 carry?

All

those in favour, 'aye.'

SOME HON. MEMBERS:

Aye.

CHAIR:

Contrary?

Carried.

motion, subheads 2.1.01 through 2.1.03 carried.

CHAIR:

Subhead 3.1.01.

MR. BALL:

I guess I will go right back

to Salaries in 3.1.01. There are a

couple hundred thousand dollars less in Salaries this year.

Is this really due to vacant positions?

MR. DALLEY:

Vacancies.

MR. BALL:

Okay.

Transportation and Communications was down by $42,000 and the budget last year

was $72,000. What didn't you do

last year that you planned on doing, I guess?

MR. DALLEY:

It was basically

discretionary travel. We reduced

travel. With these kinds of

budgets, we went through an exercise a couple of years ago through a core

mandate where we looked at our budgets in the past two or three years and saw

some reductions, so that is why we basically maintained the same budget.

MR. BALL:

Okay.

Professional Services, however, was budgeted to be at $925,000 last year and you

spent $425,000. It is essentially

back to $425,000 this year. What

kind of services last year did you budget for that you did not use?

What are the types of services that you see included, even in the

$400,000?

MR. DALLEY:

The primary item that we

budgeted for last year was the electricity review.

We budgeted $700,000 for that electricity review.

The actual contract that was awarded to Power Advisory was $284,826.

It came way under budget.

That is the reason for the significant difference in terms of budgeted and

revised.

As well

in this item, we have been working on the net metering, as we have committed to

do. Through the process of, not

only internal work and working with Newfoundland Power and Newfoundland and

Labrador Hydro, we hired a company, Navigant.

The contract was approximately $50,000 to do some external work for us

around net metering, particularly around jurisdictional scans and looking at the

shift that we will look at from an isolated system to an interconnected system.

Navigant has been doing work on that.

MR. BALL:

Yes.

MR. DALLEY:

Sorry

MR. BALL:

No, that is fine.

MR. DALLEY:

They would have the work

done, actually, on the net metering.

The report is in and made public.

Just by

way of I am sure you will ask the question.

We have done some internal work on that.

What we have done with that report, though, and where we are moving

forward is to reach out to some of the key stakeholders.

We have done that. The only

one we are awaiting feedback on now is from the PUB.

As soon as we get feedback there we will go through the process and make

this public.

MR. BALL:

Okay.

Moving

down there to line item 10, under 3.1.01, Grants and Subsidies, we see the $3

million there this year again. I

understand, based on the comments last year, that was kind of with the

good-faith court case with CF(L)Co and Hydro Quebec, I believe.

Is that still the case?

MR. DALLEY:

Yes.

What shows up here in this amount of money is we budgeted last year

$600,000 for the good-faith case.

The actual cost last year was a little bit less, around $400,000.

So that is the reason for the slight reduction.

Also

here in this item is the $400,000 diesel subsidy grant for Coastal Labrador, as

well as the amount of funding for the Northern Strategic Plan which is roughly

$2.1 million. That again is for the

rate subsidies.

MR. BALL:

Okay.

Going

back to the good-faith case again, just an update on that.

Last year I think one of the comments made was that we would expect a

decision or an anticipated decision to be made this year, but that has not been

done. What is the

schedule now?

MR. DALLEY:

The decision was out and we

lost the decision.

MR. BALL:

So you appealed?

MR. DALLEY:

.Appealed, yes.

MR. BALL:

Yes, that is what I thought.

What is

the

schedule like to your best knowledge on the appeal process now?

MR. DALLEY:

I will ask Charles if he

would answer it.

MR. BOWN:

It is expected that the

appeal will be heard this year within 2015.

MR. BALL:

Okay.

If we

move to 3.1.02 this is in the Petroleum Development side.

Supplies we have seen go from $112,000, and we spent $136,000, back to

$12,000 this year. This would be

3.1.02, Petroleum Development.

If you

want to you can just add those two lines together because you will see the same

thing with Professional Services.

So for the sake of time, maybe we can just

MR. DALLEY:

Yes, I can answer that whole

item, that whole section. Basically

what you are seeing here is a base budget of somewhere around $500,000 and we

had added a million dollars for geoscience.

What we added and what we spent and if you can see the new budget, we

had taken the million dollars out of the budget item for this year.

The million dollars you will see that all of that between it all should

add up to around a million dollars.

The

difference in what we budgeted as where we spent our money moved it around in

different places, but the 2015-2016 estimate you will see the reduction of that

amount as well.

MR. BALL:

Okay.

The

Grants and Subsidies have gone down.

The $500,000 has been the consistent number for some time.

The decrease this year I mean obviously you spent $500,000 last year in

those Grants and Subsidies. What is

the impact we see there?

MR. DALLEY:

The amount of money that is

there is to pay for the Hydraulic Fracturing Review Panel. So we are clear, we

are not paying the panel members, it is for the cost of the panel to do their

work.

MR. BALL:

Is that still on

schedule

for October?

MR. DALLEY:

Yes.

MR. BALL:

The next line would be

3.1.03, which is the C-NLOPB. I

just wonder how the formula works because our provincial portion here would be

there is a subsidy here, by the looks of things, of $6.6 million.

How do we work that formula of what the feds pay to what we pay into the

whole ?

MR. DALLEY:

It is 50/50 and 50 per cent

of our share. Industry pays 75 per

cent. So we actually pay 25 per

cent of our 50 per cent, which is 12.5 per cent overall.

MR. BALL:

Yes.

Do we have any vacant positions on the C-NLOPB now?

MR. DALLEY:

In terms of the board?

MR. BALL:

Yes.

MR. DALLEY:

There may be one.

I know there were two. I

think one has been back and I am not sure if the other one has been filled.

MR. BALL:

That is fine.

Subhead

3.1.04, I guess the question around the royalty auditors I am sure

everyone is expecting this question in the room this morning.

So just an update on where we are with the complement of auditors and the

progress that has been made.

MR. DALLEY: As

you know, historically we had contracted out some of the auditing work.

The Auditor General highlighted some concerns with that and felt we

probably should do it internally.

We obviously accepted the Auditor General's recommendation.

Internally, we have twelve audit positions.

I will say it is a real challenge.

They are hard to recruit.

When you get them, it is hard to keep them.

So a fair bit of turnover, but we have a complement right now of ten, and

actively recruiting two others.

MR. BALL: That

status?

MR. DALLEY:

With respect to actually where we are with our audits, we are on

schedule with

our audits. We have not fallen

behind on any of our audits. In

fact, this past year, we were able to get more done than we had anticipated.

We are very pleased with that, as a result of being able to get to our

full complement as well.

The turnover is a concern.

We'll continue to work through that.

The other issue that we are very pleased about is that we are bringing in

a new royalty management system,

an electronic system.

We have one of our own auditors who is being trained.

They have been training for some time.

We are about ready to put that in place.

By all accounts that is going to be very positive in the process because

it is going to speed up the process.

We are

encouraged by that. That is a very

positive initiative to be able to move forward with the audits.

We did get more work done this year than we anticipated.

Again to highlight the importance that we are in-house and we continue to

recruit, but there are some challenges.

CHAIR:

Okay, so time now.

Michael.

MS MICHAEL:

Yes, if I could just follow

up on that. Minister, I remember

maybe two or three years ago the department actually did give us a written

report of where things stood, sort of a calendar of the royalties, what is due

when, et cetera. We have not had

that kind of a thing in a couple of years.

Would it be possible to get that kind of a written report of where things

stand?

MR. DALLEY:

That should not be a

problem. We can certainly share

with you as to what we anticipate our

schedule to be and so on.

MS MICHAEL:

That would be helpful.

Thank you very much.

I think

then that covers everything under 3.1.04, except if we could look right at the

bottom under Revenue Provincial.

I know you gave an answer to this in another heading, but

MR. DALLEY:

Is that the $81,000?

MS MICHAEL:

The $81,000 and then the

revised was $128,000.

MR. DALLEY:

That is revenue from the

registration fees for the OTC conference in Houston.

MS MICHAEL:

Okay.

Great, thank you.

MR. DALLEY:

If you notice, OTC takes

place every year.

MS MICHAEL:

Yes.

MR. DALLEY:

We have a booth and a

process that is followed here. In

2015-2016, we are not showing any revenue there.

It is actually going to show up in Petroleum Development.

So it moved from Royalties and Benefits to Petroleum Development.

We still anticipate that kind of revenue for next year.

MS MICHAEL:

Okay.

If we come right back up under 01 Salaries oh no I am sorry, I was

looking at Employee Benefits. I

thought I was looking at Employee Benefits.

It was Transportation and Communications, but you have explained that

already. I think that is all I have

on that page.

Coming

over to 3.1.05 which is appropriations provided for the investment in Nalcor

Energy, and/or its subsidiaries etcetera, I understand the $176 million.

I know we have asked this before and I do not know if you have a clearer

answer on it this year or not. The

$760 million is passed over as spent, obviously.

I know it does not go in a lump sum.

Do you have a breakdown of how much of that goes to Muskrat Falls and how

much of it goes to other expenses of Nalcor?

MR. DALLEY:

This amount does not go to

any operating expenses for Nalcor.

It is direct equity investments into oil and gas as well as Muskrat Falls.

Of the $760 million, $189 million is earmarked for oil and gas, and $571

million for the Lower Churchill Project.

MS MICHAEL:

Thank you very much.

I want

to ask a related question. I guess

as I read this you will think, well, I am asking a question that Nalcor should

answer. My question is going to be

a question to you with regard to accountability to the government from Nalcor.

Nalcor's annual report,

section 1.3, which is called Variable Interest Entities,

you have a very interesting little paragraph: Nalcor consolidates the results

of variable interest entities (VIEs) in which it holds a financial interest and

is the primary beneficiary. Nalcor

has determined that it is the primary beneficiary of the LIL Construction

Project Trust (Project Trust) and as a result has included the financial

statements of the Project Trust in these consolidated financial statements.

Nalcor has determined that it is not the primary beneficiary of the

Muskrat Falls/Labrador Transmission Assets (MF/LTA) Funding Trust or the

Labrador-Island Link (LIL) Funding Trust and therefore the operations of these

trusts are not reflected in these annual audited, consolidated financial

statements.

Could

we have a plain language explanation of what that means, please?

If you want my copy to read, but maybe

MR. DALLEY:

You can.

I am not going to give it to you today.

That is

a financial audited statement.

Those comments I think, rather than risk having a shot at that, we will get

you some clear language as to what that means.

Again, it is an accounting financial audited statement that highlights

the ways in which the money is in and out and accountability and so on.

I will get you an answer.

MS MICHAEL:

I guess then just to further

the question, if the reporting around those trusts is not in the Nalcor report,

because they do not see themselves as the primary beneficiary of those two

trusts, then where does one go for the accountability around these trusts to get

that information?

MR. DALLEY:

We will get you that

information.

MS MICHAEL:

Okay.

Thank you very much.

All of

my next questions are broader, general questions.

I do not know, Dwight, if you have some more particular ones first before

I ask those.

MR. BALL:

Yes, I have a couple of

questions.

When I

finished we were talking about the royalty auditors.

We understand ten of the twelve auditors are now in place.

Most of the

schedule the status has been updated and a new system will

be coming in place to help support this again.

So I am

just wondering, based on the auditing that we have seen have we been able to

recover extra royalties or some extra revenue as a result of the work they have

been doing?

MR. DALLEY:

Yes, we have.

I think it is important because I know sometimes the statements made are

that we are losing money. In fact,

we are not losing money. Through

the auditing process so far we have gained a little less than $50 million.

OFFICIAL:

Sixty million dollars.

MR. DALLEY:

Somewhere around $60

million.

MR. BALL:

That is good.

Back to

one of the line items that was around Professional Services.

Last year we had $2.9 million.

It was in the Royalties and Benefits

section there, 3.1.04.

Last year, there was a provision made in the budget for $2.9 million and

we spent $252,000. Obviously, if

you add those two together you would come up with nearly close to where the $2.5

million is for this year for Professional Services.

MR. DALLEY:

Yes, that is basically where

we allocate for potential arbitrations with the oil companies over royalty

payments. We allocated funding

there last year and expenditures were much less than anticipated.

well, any of the commercial negotiations that would have involved whether it is

internally or sometimes using external supports in negotiations, was obviously

less than expected as well.

Primarily, it is the arbitrations.

MR. BALL:

Arbitration.

Okay, good. It is always

good when you do not have to arbitrate.

Back to

the Nalcor transfers for this year, $760 million.

Of course we know $531 million last year went to Muskrat in 2013-2014;

this year, $571 million I guess.

That leaves $189 million to oil and gas.

I am just wondering if we can get a breakdown on what will be transferred

to the Hebron Project this year we know what is going to Muskrat, but to

Hebron Project and I guess to some degree too what we will anticipate to the

Hibernia extension.

MR. DALLEY:

I guess we have not, for

some commercial reasons, identified specific amounts; but, for the purpose of

your question, roughly over $200 million will go to oil and gas equity this year

and roughly half will go into Hebron.

It is about half.

MR. BALL:

Last year when we were

having this discussion, we were talking about Hebron being somewhere around $360

million

MR. DALLEY:

Yes.

MR. BALL:

and we had already had one

hundred and whatever it was, $180 million or something, that had been paid.

I think the line of questioning and the response was going around that

Nalcor would be self-sufficient in making the equity payments, so I am just

wondering is still on track, still on schedule.

MR. DALLEY:

Yes.

MR. BALL:

Okay.

MR. DALLEY:

It is still on track.

As you know, as I said somewhere around $205 million this year will go

into equity in oil and gas; $189 million will be from the Province; and Nalcor

will provide the rest of the equity

MR. BALL:

Okay.

MR. DALLEY:

half into Hebron, but we

are still on target and on track for 2017 to be self- sufficient with respect to

the rest of the equity payments.

MR. BALL:

And $14 billion in the

project

MR. DALLEY:

Yes.

MR. BALL:

which includes operating

and Capex, right?

MR. DALLEY:

Yes.

MR. BALL:

This is just a question now

in the general sense. Premier

Marshall mentioned an updated energy plan.

I am just wondering where that is, with the update of the Energy Plan of

MR. DALLEY:

I guess we will roll that

out when you roll out your economic plan.

MR. BALL:

That is more of a political

question right now, Minister. Our

economic plan will

MR. DALLEY:

And a political answer.

MR. BALL:

The Energy Plan is obviously

government spend; it is not party spend.

So right now I guess there is government money that will be coming I

would not expect that a political party would be rolling out an energy plan that

is paid for by government, I hope.

MR. DALLEY:

Of course not.

Not to

be too cute here, but the Energy Plan is what it is.

We just released an update on it.

The Energy Plan is built for a long-term plan to take us right out to

2041. There are 107 recommendations

there. We have outlined this week

as to where we are with those recommendations.

We have come a long ways.

There

is obviously a requirement as you go through from 2007, the work that has been

accomplished; but obviously, going forward, in a change in what we have seen and

the work that has been accomplished, you can be rest assured there will be a new

energy plan. I am sure you will

have an energy plan as well. That

will be forthcoming for sure.

MR. BALL:

That is good.

The

equity that we get from our oil your oil equity right now who is doing the

marketing for our oil? I know it is

done by a company. Who would be the

company that we are using now to market the oil that we get for part of our

equity share?

MR. DALLEY:

I will ask Charles to

answer.

MR. BOWN:

That depends on which of the fields that we are in because in some of the

arrangements actually they have offtake agreements already in place.

So that marketing really is set ahead of time.

Nalcor would market some of its own, but in the majority of the cases

they would particulate with the other owners in terms of how they market their

product as well.

MR. BALL:

Okay.

So Nalcor would market some of its own oil?

MR. BOWN:

Yes.

MR. BALL:

Okay.

Where would they have that refined?

MR. BOWN:

You just sell it to a broker.

MR. BALL:

Okay.

On May

11, in a Ministerial Statement, the minister made comments about Round Pond,

Island Pond, and Portland Creek as being partnerships for new hydro projects or

potential hydro projects. I am just

wondering if there was any work done on this recently because most of the

engineering on those three projects right now are old and done quite a while

ago.

consideration of this, is there any work being done or have been done lately

that would be more current?

MR. DALLEY:

To my knowledge, there is no

immediate work being done around that.

I think it is all a part of a long-term plan and vision that as we

develop from an isolated to an interconnected system, as we build a structure,

the outlook for an opportunity for us to develop further energy resources looks

good. That is where, as I

referenced in my statement, the opportunity and the prospects for the future

look good, and these are certainly some areas that have been identified through

previous work that could certainly hold some economic potential for the

Province.

MR. BALL:

I guess just a couple final

questions around the court cases involving Nalcor, just an update on those.

I know some of those will be more active this year than previous years, I

would imagine, so just an update on those court cases.

MR. DALLEY:

As was referenced in terms

of the good-faith case, we expect that to go this year.

The other case that has been in the news a little bit lately and

certainly to clarify it, because there has been some reference that it is about

water rights, the court case that is in the news is not about water rights; it

is an action between Hydro-Quebec and CF(L)Co with respect to the 1969 power

contract and the renewal that is due in 2016.

That is

an action that has been taken, it is in the courts, but it is with respect to

the

interpretation and implementation of the contract and basically how power

will flow on a monthly basis into Quebec.

MR. BALL:

In the Budget 2015 there was

a chart that showed Nalcor's investments and the payback to the Province.

I am just wondering in that chart was there any inclusion of the sale of

surplus power. Because it was

really not clear. We just said that

by 2025, the money that was paid to Nalcor, without interest, would be paid

back. That is probably a Finance

question, to make it easier for you

MR. DALLEY:

It is a Finance question and

I will say I think it was, but I certainly would like to reserve the right to be

corrected on it.

MR. BALL:

Yes.

Getting

to the end of this now, the Muskrat Falls Oversight Committee, where was the

money allocated in this budget or is that through Finance again?

MR. DALLEY:

Through Finance.

MR. BALL:

Okay, that is pretty much it

for me. I think I got it all.

CHAIR:

Ms Michael, I guess your ten

minutes will take us to break, unless we are getting close to the end and we do

not need a break.

MS MICHAEL:

Could we just take a real

short break now, maybe five minutes, and then I will ask the questions that I

have? Is that possible?

MR. DALLEY:

Not to be difficult, Mr.

Chair, but we are all busy and if we are gone through the line items I am

basically being courteous here to deal with some of their issues that are

outside of the line items and I do not mind doing that to a certain point no

disrespect, but

MS MICHAEL:

Okay, I will continue.

MR. DALLEY:

No disrespect, but it is a

busy day for everybody so if you had a few questions, I do not mind taking a few

and trying to help out with some of the answers.

If it does not come here, it will come in the House, I understand that;

but, in the interest of time, if it is okay.

MS MICHAEL:

I will continue, Mr. Chair.

CHAIR:

Ms Michael.

MS MICHAEL:

It may sound like a general

question, but it is a line item question.

At the

Nalcor AGM, the CEO Ed Martin said in talking about the potential of cost

overruns with regard to the Muskrat Falls plant site that the proof is in the

pudding and this summer will tell the tale.

Minister, my question is I think it is for your department, if it is

Finance you can tell me if there are looming costs overruns on the project,

who is planning for that, and where does it show up in budget?

If it

turns out this summer because this is going to be a telling summer coming up

with regard to Muskrat Falls. If it

turns out there are major cost overruns who plans for that and where does it

show up?

MR. DALLEY:

It would be Finance that is

responsible purely from that, but obviously it would show up in subsequent years

for us as well. The item here is

showing up as from our department, but it is a Finance measure in terms of

budgeting, how they plan their budget, and where that money will come from

basically.

MS MICHAEL:

Would that be the same with

regard to the interest that will accrue on the $6.8 billion money that has been

borrowed?

MR. DALLEY:

Yes.

MS MICHAEL:

That would also be Finance

that would be covering that and showing that whenever it has to show up.

MR. DALLEY:

Yes.

MS MICHAEL:

Okay.

Thank you.

I guess

related to that though, you would know, I assume, the estimate of the amount of

interest that will be paid on the $6.8 billion, or do you?

MR. DALLEY:

We would know it.

I do not have the number here in front of me, but we would be aware of

what that is I think.

I can

get Charles to tell you.

MS MICHAEL:

Okay.

MR. BOWN:

This number was released as well in the RFIs to the PUB.

It is approximately a billion dollars in AFUDC, allowance for funds used

during construction, and IDC as well.

MS MICHAEL:

Okay.

I was hearing somewhere around $1.2 billion.

MR. BOWN:

Yes. I would round it off, probably

$1.1 billion.

MS MICHAEL:

Right.

Okay, thank you very much.

Just to

come back to the question that was asked of you on the Energy Plan.

If there are any plans inside of Nalcor for new wind development, are you

aware?

MR. DALLEY:

Plans inside of Nalcor for

new wind development?

MS MICHAEL:

Nalcor, for new wind

development.

MR. DALLEY:

Immediate plans, no.

Contrary to statements that it is not worth the paper it is written on,

this document is very thorough and detailed.

We have followed it; we have had tremendous success with it.

Built

within Nalcor obviously is our vision and a plan as to where we could

actually take our energy resources once we build the system and a structure.

Beyond the Muskrat Falls development and the Maritime Link which connects

us with North America, that will provide us with unlimited opportunities; one, a

belief that we can do it, and we can build more if we need to.

More importantly as well, it will give us that link where we can develop

our resources for export.

There are opportunities, both within Nalcor and the

Province, but I believe there is going to be tremendous opportunity as well for

private sector to develop energy resources for export.

In fact, it has been very public about Beothuk Energy and offshore wind

development. We have been working

with them for over a year around their potential development, what that could

mean and how that would look, but understanding that it is not just develop and

go.

There is a lot of work that has to be done around

financials, around analysis, around how it connects to the grid, and potential

impact on ratepayers. There are all

kinds of issues that have to be addressed with any potential.

I think suffice to say the groundwork is being done, and once we become

connected there are going to be tremendous opportunities in our future for

energy development.

I think if I recall I know the preliminary work that has

been done highlights that we could have potential for 5,000 megawatts of wind in

a long-term development. Obviously

costs, technology all kinds of aspects to consider.

Once we have put that infrastructure in place, once we are connected, I

think we have even a brighter future with respect to developing our energy

resources.

MS MICHAEL:

Thank you, Minister. I appreciate

your answer.

Related and this will be my last question can you give

us an update on the Ramea wind project?

MR. DALLEY: I

can. I will take a stab at this.

We can get you more details.

We are moved into Phase two.

Basically, there has been success.

It is a fairly successful project around the wind, the hydrogen, and

diesel. The whole goal of this is

to looking at and it is a challenge across the country.

I know when I went to the energy ministers' meeting it was a good topic

of discussion.

We all have these isolated communities.

It is very costly to provide power.

We have coastal Labrador. I

think we have twenty-one sites around the Province and trying to find ways of

how we could do this better and

more affordable.

We have

done studies on coastal Labrador and the pilot project in Ramea.

We are having success. I am

not sure if it is cheaper, but we are having success that it can work.

We have moved to Phase 2 now of how we can find a way, with some storage

cells, to be able to store some of that power when it is not needed.

It is all a part of the backup system and how we can do that.

That is the phase that we are at now with respect to the pilot.

So far

things are on track. I know they

have saved thousands of dollars and thousands of litres of fuel that they have

not had to use because of the positive impact that we are seeing.

How that can be extrapolated into other communities or on a larger scale

is all a part of the pilot and a part of the studies that are ongoing.

MS MICHAEL:

Okay.

Thank you very much.

Thank

you, Mr. Chair.

CHAIR:

Mr. Ball has concluded.

Shall

items 3.1.01 to 3.1.05 carry?

All

those in favour, 'aye.'

SOME HON. MEMBERS:

Aye.

CHAIR:

Carried.

motion, subheads 3.1.01 through 3.1.05 carried.

CLERK:

The total.

CHAIR:

Shall the total carry?

All

those in favour, 'aye.'

SOME HON. MEMBERS:

Aye.

CHAIR:

Contrary.

Carried.

motion, Department of Natural Resources, total heads, carried.

CHAIR:

Shall I report the Estimates

of the Department of Natural Resources carried without amendment?

All

those in favour, 'aye.'

SOME HON. MEMBERS:

Aye.

CHAIR:

Contrary.

Carried.

motion, Estimates of the Department of Natural Resources carried without

amendment.

CHAIR:

I would like to thank

everyone for their questions, their answers, and taking the time to comply with

this activity this morning.

The

next meeting of this Committee is Wednesday, May 20, at 5:30 in the evening.

I need

a motion for adjournment.

MR. HUNTER:

Motion.

CHAIR:

Mr. Hunter; seconded by Ms

Perry.

The

Committee adjourns.

motion, the Committee adjourned.

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Citation	2015-05-14
Type	committee
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Language	en
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Source	PROVINCIAL
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