Resource Committee — Department of Mines and Energy — 31 May 1993

1993-05-31

Newfoundland and Labrador — Committees

May 31, 1993

RESOURCE ESTIMATES COMMITTEE

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

Assembly Chamber.

MR. CHAIRMAN (PENNEY): It being 7:00 p.m. we

will begin. I would like to welcome everybody to our second meeting of the

Resource Estimates Committee. Tonight we will be reviewing the budget estimates

of the Department of Mines and Energy. The minutes of our last meeting have been

distributed, everybody has seen them, will somebody move that the minutes be

adopted?

On motion of Mr. Tulk, seconded by Mr. Whelan, the

minutes of the May 25th Committee meeting were adopted.

MR. CHAIRMAN: I would like to begin by

introducing our Committee, my name is Melvin Penney, I am the Liberal Member for

the District of Lewisporte and I will be chairing the meeting tonight. On my

left is the vice-chairman, Mr. Rick Woodford, the Progressive Conservative

Member for the District of Humber Valley. The Committee member's are; the Member

for Fogo, Mr. Beaton Tulk; the Member for St. George's, Dr. Bud Hulan; and the

Member for Harbour Main, Don Whelan. There are two other members of the

Committee who are not with us yet but we anticipate that they will be joining us

shortly and they are; the Member for Baie Verte - White Bay, Mr. Paul Shelley

and the Member for Kilbride, Mr. Ed Byrne.

For the benefit of Committee members and the

minister's officials, I would like to explain the role of the Chair. It is

basically the same as the role of the Speaker of the House, his role is simply

to maintain order and decorum but the format is much more informal here at

committee hearings. The dress code is much more relaxed, we can refer to

individual members by their names as opposed to by the districts they represent

and feel free to bring your cup of coffee or tea into the Legislative Chamber.

The procedure that we will be following is, we will

allow the minister fifteen minutes to make his opening remarks and then we will

allow our vice-chairman or his designate fifteen minutes to reply. Once he has

done that it will go to the Committee members who will be given ten minutes each

but what we would ask them to do is rather than make a ten minute speech and

then expect the minister to reply to five, six, eight or ten different

questions, we would ask that they follow the same kind of procedure that we use

in the House of Assembly during Question Period, to ask a single question and

await a single answer. If, when the ten minutes are up, there are other

questions that the member wished to have asked, I assure them that we will get

back to them again, nobody will miss the chance to ask the questions that he

wishes. So, I would request cooperation in that regard.

For the sake of Hansard, which is recording

everything that we will be saying here tonight, I would ask that you speak

directly into the microphones. These microphones were designed to pick up the

conversation from a standing position, so I will ask everybody to lean into the

microphone when you speak and for the ministers officials to assist Hansard in

transcribing, I will ask that they identify themselves before they answer any

questions. I would remind them as well that they can answer questions only if

the minister directs them to do so. Committee members cannot direct any question

to anybody other than the minister and if the officials reply to a question, the

answer must deal with fact and not policy.

I believe that is everything we need to cover. I

will now ask the minister if he would introduce his officials for us and he

could proceed from there into his opening remarks.

Mr. Minister.

DR. GIBBONS: Thank you, Mr. Chairman.

With me this evening, I have on my right, my deputy

minister, Clyde Granter; next to Mr. Granter, is the assistant deputy minister

for Mines, Paul Dean and next to Mr. Dean, the assistant deputy minister for

Energy, Martin Sheppard. On my left I have Mr. Ray Clarke, who is the financial

wizard in the department.

Mr. Chairman, and members of your Committee, I am

pleased today to present to you the budget estimates of the Department of Mines

and Energy for the fiscal year, 1993-1994. Net expenditures in 93-94 are

projected at $13.2 million, a decrease of $2.1 million or 13.7 per cent from the

budget approved last year for 92-93. The main decreases are the result of the

assumption of industrial, electrical subsidies by Newfoundland and Labrador

Hydro, $1.6 million, so that government no longer provides electrical subsidies

and the reduced funding provided to the Canada-Newfoundland Offshore Petroleum

Board, $328,000.

The department is responsible for managing the

Province's mineral and energy resources in a manner that will ensure that their

contribution to the economic well-being of the people of the Province is

maximized. The department is responsible for increasing and improving the body

of knowledge on the Province's mineral and energy resources, encouraging the

orderly exploration and development of those resources and assessing their

economic potential and contribution to the Province.

The department is also responsible for formulating

mineral and energy policy and for providing advice to government on all

associated matters, including those involving onshore and offshore oil and gas,

energy efficiency, conservation and the development of alternative energy

resources. To ensure achievement of its goals in this regard, the department

operates under four main program areas: the geological survey, mineral resource

management area, petroleum and energy resources and petroleum and energy

economics. The Newfoundland and Labrador Hydro group of companies, as well as

the Canada-Newfoundland Offshore Petroleum Board, report to me as the minister,

and I will start with some comments on the geological survey.

Mr. Chairman, one of the main activities of the

department again this year, 1993 for the field season, will be geoscientific

survey work with the objective of providing basic, geological data for the

mineral exploration industry. Geological mapping has been completed for about

half of the Province; other elements of the data base are at roughly similar

stages of completion. Such information is a major factor in attracting

explorationists to Newfoundland and Labrador and in the discovery of new mineral

deposits.

The program this year will consist of forty-four

projects; twenty-one of these projects will have a field survey component. The

total net cost of the program is $4.1 million and part of this program will be

funded under the Canada-Newfoundland Co-operation Agreement on Mineral

Development which was signed a number of years ago, in October of 1990, and

which extends to and expires on March 31, of '94, next year, the end of this

fiscal year. The total provincial expenditure on geoscience under this agreement

in '93 will be $1.4 million, $600,000 in federal revenue is associated with this

expenditure, so $1.4 million of the geological survey's budget of $4.1 million,

is associated with the Canada-Newfoundland Mineral Development Agreement.

Now to the mineral resource management area. This

branch is responsible for administering the Province's mineral land tenure

system and for regulating mining developments and operations in the best

interest of the Province. This includes the administration of the Mineral Land

Tenure Act, particularly the mineral act and the quarry materials act. Jointly

with the Department of Finance, the branch also administers the Mineral Holdings

Impost Act. The branch is responsible for implementation of the regulatory

framework required to control the development, operation and termination of all

mining operations. This includes systematic monitoring of operations as well as

mineral development activities and the pursuit of related development

opportunities. The Mineral Resource Management branch is allocated $2,347,200 in

this budget, of which $912,000 is associated with programs under the

Canada-Newfoundland mineral development agreement.

I'd like to say a few words about the mineral

industry, sort of a status of the industry. The total value of mineral shipments

in 1992 was $693 million. The preliminary estimate for 1993 is $706 million, an

increase of 3 per cent. There are indications that maybe this will be even a

little better than 3 per cent. The Province's mineral industry produces over a

dozen mineral commodities, including iron ore, gold, asbestos, gypsum,

pyrophyllite, slate, limestone, dolomite, stones, sand and gravel, cement and

peat.

Shipments of non-metals such as asbestos and

gypsum, and structural materials such as cement and stone, accounted for

approximately $35 million of last year's total. Metals, including iron ore

products and gold, account for the remainder. The value of iron ore shipments

decreased almost 11 per cent between 1991 and 1992, and this was due primarily

to lower prices and lower production, reflecting the world recession. However,

we still produce approximately 60 per cent of Canada's iron ore products with

shipments of 17 million tons scheduled and forecast for this year. The Hope

Brook gold mine, which was very successfully re-activated by Royal Oak mines

last year, in 1992, starting at about this time, expects to produce 120,000

ounces of gold in 1993, making it one of the largest gold mines in Eastern

Canada. Frankly, one of the largest in Canada.

The mining industry is a major contributor to the

Newfoundland economy. It accounts for over $500 million of exports annually from

Canada and contributes about $100 million to the provincial treasury through

various taxes. It is also an important market for many millions of dollars in

goods and services both for export and domestic use. The mining industry is a

major employer in the Province and has a total payroll of about $150 million per

year. The outlook for 1993: a marginal increase of 3 per cent in the total

value, maybe a little more than that, chiefly because of increase in production

of asbestos and gold. Mineral exploration will continue at the same level this

year as last at about $10 million.

There are a number of important events in the

mining sector to watch for as we move through the year. The recent sale of the

former British Petroleum lands in Central Newfoundland to Noranda and the

surrender of some lands to the Crown by BP will result in increased exploration

activities in that region of Central Newfoundland. This year we're also hoping

for a production decision on a new gold mine for the Baie Verte Peninsula by

NovaGold Resources. We had hoped that we would have had that decision by now,

we're still waiting, but still quite hopeful.

The summer shutdown scheduled at Iron Ore Company

of Canada has been reduced from eight to five weeks as a result of recently

projected increased sales. There seems to be some indication of slight

improvements in world steel markets and therefore a slight increase in iron ore

production.

In the second half of the year there will also be

further developments in the emergent dimension stone industry an increased

production for those operations that were started last year. There is also

likely to be increased activity on a number of projects that could become future

mineral producers including a marble project near Roddickton, at Coles Pond and

silica deposits near Labrador City. If the price of gold continues to increase,

as we have seen in the last two to three months, there could likely be an

increase in exploration activities and expenditures before this year is over.

Now, I would like to switch to the petroleum side

of the department, starting first with the resource side, the petroleum and

energy resources branch. This branch has allocated $3.7 million for this fiscal

year in this year's Budget. The branch is responsible for formulating policy and

providing advice to government on all matters arising out of the

Canada/Newfoundland Atlantic Accord Implementation Newfoundland Act, The

Petroleum and Natural Gas Act and the development of subordinate legislation

under both acts. The branch liaises with the federal government, the

Canada/Newfoundland Offshore Petroleum Board and the oil and gas industry. It

monitors and interprets industry activity and provides assessments of decisions

taken by the board. The branch also provides a wide range of technical expertise

for the focus upon petroleum, energy efficiency, alternative energy, social

impact and community relations. The branch also is responsible for policies and

programs promoting the efficient use of energy in all sectors of the provincial

economy and encourage increased use of local alternative energy resources,

emphasising mainly small hydro, wood waste and peat. Energy, policy, planning,

information, advertising, promotion and community relation requirements are

coordinated within the branch as well.

Now the petroleum and energy economics side, this

branch has allocated $779,400 in this year's Budget, primarily for salaries.

This branch is responsible for planning, developing and evaluating petroleum and

energy policies with respect to economic, financial and fiscal matters. These

issues include oil and gas exploration, development, production, transportation

and processing both on land and in the offshore sector. In addition, the branch

is responsible for the analysis of energy supply and demand and the assessment

of events and issues as they relate to provincial energy policy and the

Province's energy sector. As such, it analyses and monitors local, national and

international developments in the energy area in order to advise on policy

matters.

I would like to say a few words about the energy

industry in general. The industry produced more than 7 per cent of total gross

domestic product and 25 per cent of the gross domestic product in the goods and

producing sector in 1991 and probably about the same last year, in 1992 but we

do not have those more recent figures. It provides direct employment for more

than 4,000 people, more than 2.5 billion litres of petroleum products and 10

billion kilowatt hours of electricity, valued at more than $1 billion, are

consumed in this Province annually.

Now, I move to Hibernia; after nearly a year of

uncertainty the combined efforts of both federal and provincial governments and

the industry to find a replacement for Gulf Canada's 25 per cent share of the

Hibernia Project were rewarded. A few months ago, on January 15th, the

announcement was made that Murphy Oil Corporation would acquire a 6.5 per cent

share. Mobile and Chevron, two of the original partner's, each agreed to take an

additional 5 per cent. On March 24th and 25th, 1993, the legal documents

relating to this accusation were executed and it probably took two days because

it was a pile that high. Someone said 1600 sheets of paper but I am not sure of

the exact number. A huge number of sheets of paper that had to be signed. I was

fortunate, I happened to be away and Ed Roberts had to do my signing for me.

The efforts of all parties are now focused on

successful completion of the project. Up to April 30, 1993 expenditures on the

Hibernia project totalled about $1.2 billion with Canadian and Newfoundland

content estimated at 76 per cent and 35 per cent respectively.

Also as of April 30, 3,039 people were directly

employed on the project: 1,508 at Bull Arm, 507 in St. John's, 651 in other

parts of Canada, and 373 outside of Canada. On May 28, when we had the

ceremonial pour at Bull Arm, there were then about 1,700 people working at the

Bull Arm site, and this number is expected to reach about 2,500 in two to three

months. By 1994, a year from now, that number will reach approximately 3,000. As

I have said many times, I believe that Hibernia is the first of what we hope

will be a series of developments. Other fields - for example Terra Nova, White

Rose and Hebron - contain significant volumes of oil and gas and there is

excellent geological potential for other discoveries.

Move to the onshore area. Onshore petroleum

activity continued in Western Newfoundland during 1992. A request for bids on

exploration permits announced in December of 1991 resulted in three successful

bids with associated exploration commitments totalling about $1.7 million on the

Great Northern Peninsula. Labrador Mining and Exploration Company Limited was

issued one exploration permit in the Parsons Pond area while Vinland Petroleum

was issued two permits, one in the immediate vicinity of Main Brook, and the

other in the Castors River area. During the fall and winter of 1992-1993

Labrador Mining conducted a seismic program in the Parsons Pond area collecting

approximately 100 kilometres of seismic data, completing that in the late

winter.

In August 1992 my department announced another call

for postings for the offshore, inviting interested parties to indicate which

lands they would like to see made available for the next round of bids.

Sufficient lands were nominated to proceed with a request for bids for ten

parcels totalling 329,000 hectares, with the closing date on May 28, which was

last Friday. We were very pleased with the response and I expect to be issuing

exploration permits on a number of parcels in the very near future. I had hoped

that I would have that ready for today but it's not ready for today or tonight.

My department will continue to promote the

petroleum potential of Western Newfoundland to ensure continued activity in this

area. In addition, we will continue our efforts to stimulate activity in the

offshore sector. We're pleased to see the Offshore Petroleum Board put out a

call for bids on three blocks in the Grand Banks area with a closing date of

September 1993. Last year they did not have any interest and did not have any

call. This year they have interest again.

Other aspects of the petroleum side over the last

year. My department has embarked on a number of initiatives to facilitate the

future development of our offshore and onshore petroleum resources. In December

1992 an amendment to the Accord act received royal assent in the House of

Assembly. This provision, which will come into force on the day that the federal

legislation comes into force - since this is mirror legislation it must be

approved in both Assemblies -, removes Canadian ownership requirements for

production licences in the offshore area. These changes, together with changes

in federal foreign investment policy announced last year, are designed to

attract additional foreign investment in the frontier areas.

My department is also nearing completion of royalty

regimes for petroleum production, both onshore and off. The establishment of

royalty regimes for the offshore and onshore sectors will greatly assist the

industry in assessing economic viability of any potential developments. This,

and a number of other regulatory initiatives, are designed to facilitate

investment by minimizing obstacles to petroleum exploration and to provide

certainty and encouragement for industry activity.

A few words about the offshore development fund.

One of the principal initiatives of the two governments in preparing for

offshore development has been the $300 million Canada-Newfoundland offshore

development fund. To date, twenty-five projects have been approved for a total

commitment of $281 million. So we're down to less than $20 million left in the

fund.

A few words about the Come By Chance refinery,

because this is one of the bright spots in the Newfoundland economy in the

energy sector. The continued operation of the refinery in October last year,

Vitol Limited, a major international conglomerate involved in crude oil trading,

entered into a stock purchase agreement with the owners of Come By Chance

refinery. Vitol is a reputable company which I believe will secure the future of

Come By Chance refinery and the much needed employment associated with the

operation. I look forward to the sale being finalized; they have been working on

it since last October and I hope they can finalize it in the next few months.

Last year the refinery had 290 days of operation, a

major turn around lasting six weeks coupled with minor maintenance and upgrading

work throughout the year, accounted for the down time and an interesting

statistic is that, during the year of 1992, 19.2 million barrels of crude oil

were refined at Come By Chance.

A few words on the electricity sector. Current

electric supply/demand projections indicate that no additional generating

capacity will be required until 1997. Last year, Newfoundland and Labrador Hydro

issued a tender call for the supply of 50 megawatts of small hydro power for

delivery in 1997. There was a strong reply from industry as seventeen companies

proposed thirty-three projects with a total generating capacity of 243

megawatts. In order to support the private sector development of these projects,

my department sponsored amendments to the Public Utilities Act, exempting from

PUB jurisdiction, hydroelectric projects of 15 megawatts or less who sell to a

regulated utility. In addition, the department assisted the organization of a

workshop for potential small hydro developers. The assessment of these projects

is now ongoing and hydro expects to make its decision in the second half of this

year as to which of the proposals will be selected to provide the 50 megawatts

out of the 243 megawatts proposed.

A few words on energy efficiency and alternate

energy. The department has prepared a ten-year strategic plan for energy

efficiency and alternative energy, and the objectives of the plan are to achieve

a 20 per cent improvement in the efficiency of energy use in the Province and to

increase the use of indigenous alternative energy resources such as small hydro

by 50 per cent. These objectives can be met to investment in economically viable

energy efficiency improvements, and cost competitive alternative energy for

projects.

Of particular interest is the reduction of energy

cost in government funded institutions. For example, energy efficiency projects

at the Janeway and Waterford hospitals were completed in 92 with assistance from

my department. A private company financed the $1.3 million cost of the retrofit

work and will recover its investment over six years from the resulting energy

cost savings. Presently, government spent about $40 million a year on energy. We

believe that $10 million of that can be saved through appropriate measures like

those being taken at the Janeway and the Waterford hospitals.

Jointly with the federal government and Superior

Propane, a pilot project was started a few months ago to encourage the use of

propane as a transportation fuel. Co-operation with the provincial Department of

Finance, the road tax on propane was reduced to 6.7 cents per litre to help make

propane fuel more economically viable and I think this is also working.

That is all I have in my opening statement, Mr.

Chairman, and so, back to you.

MR. CHAIRMAN: Thank you, Mr. Minister.

The minister took twenty-two minutes in his opening

statement; as a result we will accord Mr. Woodford the same length of time for

his comments and reply.

Mr. Woodford.

MR. WOODFORD: Thank you, Mr. Chairman.

My first question to the minister is one that is

certainly not new to him coming from me anyway, and that is again referring to

one of these statements in his statement on the mini hydro sites. This is

something that I have been questioning now for some time and often wondered why,

especially in the past year, why Newfoundland Hydro did not take more seriously

some of the proposals that came in from those private entrepreneurs. I do not

know why they did not go earlier especially when there was private money

involved and some of the companies went along with Newfoundland Hydro as

pertaining to the time that it would take to power, `96 - `97, where they would

buy the power but yet they were willing to go ahead with the construction of

some of the sites. Is this sort of a fait accompli now? Will they really give

out some of this 50 megawatt of power now in July or August of this year or will

they not?

DR. GIBBONS: The

schedule now, it is on

schedule in terms of the milestones. The next half proposed to Hydro now from

the companies that have come in the first time, have started to go through the

various aspects of environmental assessment and so on, they have to submit their

detailed financial proposals by the 28th of July, 1993, which is two months from

now, that is the next step. There are, I believe, thirteen of these projects

that were proposed, registered with environmental assessment and at various

stages through the environmental assessment process. So now they have a feel for

what that is costing them and they can get their final proposals submitted with

their final costs. So, that is the deadline, the 28th of July.

Newfoundland and Labrador Hydro will select the

proposals that make up the 50 megawatts in November. That is the schedule,

beyond that you go into approval of final designs and signing of the power

contracts in February, final approval of the detailed design by May and then get

into construction. There is a two year construction period so that construction

should be completed by the middle of 1996. Then, with some testing, it will be

on stream for power in 1997 and the power is not needed until that time. If

Hydro were to say to them now; proceed today and we will buy your power, Hydro

would be paying seven cents or 70 mils for that power, approximately.

Whereas

today, Hydro can produce the same power at Holyrood for less than 30 mils, less

than three cents. So, on behalf of the rate payer in the Province, Hydro has to

do it the cheapest way to keep the rates down.

MR. WOODFORD: Do you think there is going to be

any deviations from that? If that is the case, then why would they be going with

mini-hydro sites and not with an extra generator?

DR. GIBBONS: Well, that is a different matter.

Now if they were going with an extra generator then you are back to the high

costs. I am talking about -

MR. WOODFORD: Is that not what the costs were

based on in those mini-Hydro sites?

DR. GIBBONS: The small hydro is supposed to be

able to - be a better price than Holyrood four, that is when you would need the

new capital. So, you are taking 50 megawatts of small hydro which would be good

until - if it starts coming in `97, that 50 megawatts should be good until about

the year 2000 at our present growth rate and demand growth rate.

Whereas, if

they were going with a major investment for Holyrood four, you are looking at

the cost of building 150-175 megawatts in a single block. This is by far, the

more economical way to go.

MR. WOODFORD: That is right. Even when they

pick those 50 megawatts by - by November they are going to make their selection?

DR. GIBBONS: They are going to make their

decision by November.

MR. WOODFORD: Even if there are one or two of

those particular sites that already has the environmental assessment waived on

the projects, do you think there is a possibility of either company at all

getting a go ahead before the others?

DR. GIBBONS: Well, I would think they will all

be approved at the same time and then they will have to do their final detailed

engineering design and get that approved over the Winter of `94. The final

design approval will be in May of `94, in the Spring of `94, and then they are

told: okay, now we approve your design, now you can proceed with the

construction. So, they will all be on the same basis but if somebody has been

waived through the environmental process without having a requirement to spend a

lot of money on an environmental assessment than that means that they should be

able to give a better price and more certainly that they should be able to get

selected.

MR. WOODFORD: Yes, that is what I am talking

about because there is one particular company now waived in the past eighteen

months or so on a 4 megawatt job in Rattling Brook, but they have to wait for

the rest of them just the same, but whether they are going to be selected out of

the 200 and some odd megawatts, that is another thing as well, although it might

be waived, they still might not be selected.

DR. GIBBONS: All issues are going to be

involved in that decision, environmental, and you have been waived, closeness to

the grid, that is related to your cost and getting that easily connected to the

grid for example.

MR. WOODFORD: Mr. Minister, how stable now,

really, is the Come By Chance oil refinery, which had some problems there last

year; is it stabilized now?

DR. GIBBONS: Yes, they have had their problems

in the past, but they seem to be operating very well since the last turn around

last Fall, and for the last several months since last October, Vitol Limited has

been negotiating a purchase. They have not concluded that purchase yet but I am

hoping they will conclude it because I believe if Vitol concludes that purchase

and takes over the refinery, it would guaranteed a very, very, long life for

Come By Chance. Vitol is one of the biggest traders of petroleum products in the

world and they are operating in every time zone in the world, so it will be, I

think, a great benefit for Come By Chance to have Vitol.

MR. WOODFORD: Are they negotiating with them

now?

DR. GIBBONS: They have been negotiating for

several months, going through the (inaudible) and trying to get everything

concluded, so I think it would be a real good deal if this can be concluded and

I am expecting that it will and hoping that it will.

MR. WOODFORD: On the go last year, I do not

know if it was Varna?

DR. GIBBONS: Varna?

MR. WOODFORD: Varna Gold announced that they

had some interesting results on Glover Island in Grand Lake, is there anything

new on that? What is the status of that particular site now.

DR. GIBBONS: I am going to have to ask Paul

Dean for that. Paul can probably give us the most up-to-date thing on the Glover

Island site.

MR. DEAN: The company to which Mr. Woodford is

referring, Varna Gold, has changed its name to New Island Minerals at the

present time. It is Alberta based and trades on the Alberta stock exchange but

has significant ownership in Newfoundland. The company at the present time is

attempting to raise some money to carry on with the continuation of the drilling

program that they had in 1991 and 1992, and while there is no firm plan to

proceed with drilling, it appears that given the recent increase in price that

the minister pointed out in his comments, that it should be easier to raise

money for gold projects in 1993 than it was in 1992.

MR. WOODFORD: The dimensional stone in Goose

Arm, Mr. Minister, what is the status of that particular project now? The last

time I was talking to you, last Fall, they were thinking of doing some more

feasibility studies or something on it to see if it is viable, what is new?

DR. GIBBONS: Goose Arm is one of several sites

around the Island plus in Labrador, where sampling has been done of appropriate

rocks for dimension stone development, and some samples have been taken out and

polished and have been shown at trade shows, the most recent trade show, where,

about a dozen Newfoundland stones were shown was in Florida a few months ago. I

am not sure of the exact plans for 1993 but again, Mr. Dean may know a little

bit more about the details of the company's plans for 1993, so I can ask him to

speak to that.

MR. DEAN: Yes, some blocks of marble were

removed from several sites in a very large deposit near Goose Arm around the

north shore of Deer Lake. The operation is now owned by a company called Tiara

Marble, which is in fact a sister company to New Island Minerals, the company

that has the gold project on Glover Island, and the company has said that it

intends to proceed with the project again in 1993, take out larger blocks, and

proceed to further trial quarrying, trial marketing, but no firm plans to go

into full scale production at this time.

MR. WOODFORD: The minister mentioned in his

statement, offshore and onshore in Western Newfoundland. Do you think, Mr.

Minister, that there will be some activity there this year, either offshore or

onshore, pertaining to further exploration, further drilling?

DR. GIBBONS: I wouldn't predict any drilling

this year, but this past Fall and this Winter 100 kilometres of seismic work got

done in the Parsons Pond area. There is continued geological assessment in

various parts of the West Coast onshore. Last year through the Fall - I'm not

sure when the aeromagnetic survey was completed - but there was an aeromagnetic

survey completed, overlapping part of the onshore and the offshore in the Port

au Port area and Bay St. George. In response to this latest call for bids that

we've just had, where several bids were made on a number of the lots that we

identified over there, it's obvious that there's going to be some continued work

related to oil and gas on the West Coast onshore this year. I don't know exactly

what they will do and I don't know how much they could do this year, but there's

considerable interest shown.

MR. WOODFORD: Pertaining to Noranda in the

Province. There's been some rumours in the last couple of weeks in the district

anyway that Noranda is going to pick up... there's going to be a sizeable

increase in exploration in the White Bay area. Has the minister or his officials

heard anything different or have they heard that Noranda will pick up because of

where they acquired some of the holdings in Central Newfoundland? I think they

acquired a lot down around the Jackson's Arm, Sop's Arm area as well. Would they

have an increase in exploration down there this year or have they given the

department any indication that they will?

DR. GIBBONS: They've certainly redirected some

of their exploration activities from last year. They spent more in other parts

of the Province last year, including Labrador. This year they're going to be

putting a lot of interest into Central Newfoundland because of the British

Petroleum lands that they took over in the Buchans belt. I'm not familiar with

anything they may be planning to do in White Bay. Paul nods negative, so he's

not aware of anything either.

MR. WOODFORD: Not aware of anything.

DR. GIBBONS: I don't think so.

MR. WOODFORD: Thank you, Mr. Chairman.

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

Hulan.

DR. HULAN: Mr. Minister, I notice throughout

the estimates that are here in front of us there is wide variance between the

budget 1992-1993 and the revised for 1992-1993, and then in some cases even

larger differences with the estimates for 1993-1994. Pretty well throughout the

document it pertains to Professional Services and purchases. Why is there such a

big difference between the budget and the revised for 1992-1993 in that

particular area, in pretty well every heading area?

DR. GIBBONS: Your looking at last year's

budget.

DR. HULAN: I'm looking at last year's, yes. I'm

interested in why the big difference between the budget and the revised for

1992-1993, for pretty well every area.

DR. GIBBONS: I don't think it's just about

every area, but if you can be specific about some, perhaps I can give a

particular answer.

DR. HULAN: Sure, I'll give you a case in point.

Professional Services, 3.1.01.05. I've marked a lot of them. The budget was

$565,000, the revised was $250,000.

DR. GIBBONS: 3.1.01.05

DR. HULAN: 3.1.01.05.

DR. GIBBONS: Yes, page 178, that's in the

Mineral Resource -

DR. HULAN: On the same page, down below, for

Purchased Services, for 3.1.02.06, $166,000 was budgeted, the revised was

$305,000.

DR. GIBBONS: Yes, okay, I think I have an

answer for you on those particular ones and the two of them go together. The

$565,000 up top is related to mineral development agreement programs that did

not get completed in the year. Projects that were started but the expenditures

weren't made in the year, projects didn't get completed. So you have it down by

half.

Down below, in the Engineering section, this is the

section that was responsible and is responsible for something like the

maintenance at St. Lawrence Fluorspar. The responsibility for that maintenance

agreement that we have with the banks. We had budgeted $166,000 to cover that

type of maintenance activity but we spent $305,000 because in going into this

maintenance agreement with the Barclay's Bank on St. Lawrence it cost us more

than we had expected when the budget was put in place. So that's why the

increase down there. Frankly, because we had totals in the budget we could cover

one with - the decrease in one helped us cover the increase in the other one.

DR. HULAN: There are many others I picked up

but the other one that really was noticeable, Mr. Minister, is 4.1.02.05.

Budgeted $55,000, and revised $300.

DR. GIBBONS: 4.1.02.05.

DR. HULAN: 4.1.02.05. Professional Services.

Budgeted $55,400, revised $300.

DR. GIBBONS: Well, I don't have the answer for

that one, so I'm going to ask Martin Sheppard who's responsible for that

section

if he has the answer for that one. Obviously it's money that we did not spend

last year. That's good if you don't spend the money. But I don't know why he

didn't spend it.

MR. SHEPPARD: Mr. Minister, the reason that the

money was not expended there is because of restrictions in the amount of time

that we were able to afford to the particular studies that we identified as a

result of the demands on the small staff that we have within the division.

We essentially have a staff of three full-time

workers and one part-time temporary petroleum technologist, so our time during

the year was taken in day to day matters that didn't allow us any extra time to

conduct the studies that we identified. We have carried forward to the extent

that we've been able to in the new 1993-1994 estimates many of the same

requirements that we identified last year, and we're hopeful that we can

actually carry out that work this year.

DR. HULAN: Okay. Thank you.

DR. GIBBONS: Apparently as well (inaudible)

told that there was also a freeze put on the spending of Professional Services

money late in the year last year. That accounts for some of it. They didn't get

it spent and then they couldn't spend it.

MR. CHAIRMAN: I'd like to officially recognize

two other members of the House of Assembly who have joined us: Mr. Fabian

Manning, the Member for St.Mary's - The Capes, and Mr. Glenn Tobin, the Member

for Burin - Placentia West. The Chair will permit those individuals to ask the

minister questions. I think that is their right. But the Chair will recognize

officially designated members of the Committee first, unless one of the

Committee member wishes to yield his time.

Having said that I now recognize Mr. Byrne. If Mr.

Byrne is willing to yield his time to Mr. Tobin, who wishes to ask some

questions, that's quite acceptable.

MR. J. BYRNE: Mr. Chairman, I'll give my time

to Mr. Tobin.

MR. CHAIRMAN: Mr. Tobin.

MR. TOBIN: Mr. Chairman, I first thank my

colleague for giving me the opportunity to ask a few questions. As the official

spokesman for our caucus on mines and energy I thought that I would have the

opportunity, rather than have to ask questions by leave, I always thought I

would be afforded the opportunity to do so, rather than being recognized. But I

guess every Chairman has his own set of rules apparently.

MR. CHAIRMAN: The Chair would like to address

that. I think it was stated, probably before you arrived Mr. Tobin, that the

vice-chairman or his designate, would be given equal time to respond to the

ministers comments and since the vice-chairman did not designate you to do it

and he did it himself, that was quite acceptable to the Chair as well.

MR. TOBIN: Mr. Chairman, my questions would be

more on a provincial scale, on a district scale or a regional scale, I say to

the minister. I was delighted to hear him make reference to the two bright spots

in the Newfoundland economy being Hibernia and Come by Chance. He failed to

state that they were both projects of the previous administration but I am sure

that was just a slip on his part. In any case the minister made reference to the

Hibernia Development Project, I had the opportunity to be in Bull Arm with the

minister and others for that very special occasion on Thursday past. I have a

couple of questions on that which I would like to ask the minister. Number one,

could you tell us the numbers that are working at Bull Arm and how many of them

are Newfoundlanders?

DR. GIBBONS: I will repeat those numbers. I did

give them earlier, I guess, before you arrived.

MR. TOBIN: No, but in terms of Newfoundlanders,

did you?

DR. GIBBONS: I did not give the percentage that

are Newfoundlanders -

MR. TOBIN: Yes, but that is what I am

interested in.

DR. GIBBONS: - at Bull Arm. I do not have the

exact number but they are just about all Newfoundlanders because of the hiring

through the union contract and naturally some of the professional engineers,

management and supervisory people are not Newfoundlanders but that is a small

percentage. On May 28th, the day that you and I were there, I am told by my

notes that there were 1700 people working at Bull Arm.

MR. TOBIN: I wonder if the minister would

probably be able to check for me in the House or through some other means as to

the number of people that are working at Bull Arm and the nationalities, where

did they come from, what makes them up, particularly in the management sector?

DR. GIBBONS: I can certainly give you a

breakdown, I will ask my deputy to note that and we will see how accurate a

figure we can give you.

MR. TOBIN: I appreciate that.

DR. GIBBONS: We do get the reports regularly

from the companies through the offshore petroleum board which gives us a

breakdown by Newfoundland resident, Canadian resident and foreign. So we can get

that for you.

MR. TOBIN: Okay thank you very much.

The other thing, you made reference to the other

fields to be developed, I wonder if you can give me any indication if there has

been a decision made as to the type of platform that will be used?

DR. GIBBONS: No, we have not taken any decision

as a government and I do not think the federal government has taken any decision

on that particular question because at this stage there is no development plan

before us. We will wait until there is a development plan before us that we can

assess before we -

MR. TOBIN: So at this stage in the game in

terms of Terra Nova, White Rose, Ben Nevis and the others, there are no

decisions made as to whether it will be concrete or floating?

DR. GIBBONS: No, no decision has been made.

Obviously, you have to look at the economics of the situation and what comes out

of the development plan. From our perspective we would like to see a system used

that is going to maximize the amount of local employment and local work in

Newfoundland and Labrador, that would be our preference but when all of that is

put into the mix with the size of the field and the economics then there may

have to be some other decisions.

MR. TOBIN: So, the decision on that will await

the submission of the development plan?

DR. GIBBONS: Yes, we have to wait until we see

the development plan. Until we know the details about the size of the field and

exactly what this field can justify in terms of the type of -

MR. TOBIN: When do you anticipate such a

development plan?

DR. GIBBONS: When? At this time the companies

have not indicated to us when they will be ready to submit a plan on any other -

MR. TOBIN: Which oil field do you anticipate

will be developed next to Hibernia?

DR. GIBBONS: Hibernia is the largest that we

presently know in the offshore, Terra Nova is the second largest. Hibernia, the

recent numbers, put it at about 625 million barrels recoverable and Terra Nova

is assessed at about 400 million barrels recoverable. The White Rose and Hebron

fields are in the 200 million barrel range. So, Terra Nova is clearly the next

largest and I would expect that Terra Nova should be next in line.

MR. TOBIN: While we are on the Hibernia

development, I would like to ask the minister if he has anything he can report

or anything he can say as it relates to the development of Hibernia. The biggest

portion of the development, in work for Newfoundlanders, will be at the Hibernia

site with the GBS and with the topsides and making the topsides. I wonder if the

minister can give me any indication as to what is taking place in terms of the

second most important aspect of that development to Newfoundlanders, which will

be the mechanical outfitting and the proposal, or the bid by Newfoundland

companies?

DR. GIBBONS: That certainly is the next

contract that we would like to see go to a Newfoundland firm. We would like to

see it go to Cow Head. We are getting very close to decision time. I cannot

remember right now. I know it, I have heard it, but maybe my deputy can tell me

the decision period?

AN HON. MEMBER: (Inaudible).

DR. GIBBONS: I am told the early part of July

is decision time as to who will get that contract. There are four contractors

being considered.

MR. TOBIN: So there is nothing that has

transpired over the past while that you can comment on or anything like that at

this stage?

MR. GILBERT: There are lots of discussions as

to where it sits in the process. We know there are still four companies who have

bid and who are in the running and one of them is ours. One of them is Cow Head

and we certainly hope that Cow Head wins.

MR. TOBIN: I know it is very sensitive in terms

of what is said and what is not said and I certainly do not want to say anything

tonight or ask anything that would jeopardize that, but I share the minister's

views because not only will it be of great benefit to the Burin Peninsula, it

will also be of great benefit to the people of Newfoundland and Labrador, a

contract of that magnitude.

I was surprised, Mr. Chairman, that the minister in

his presentation did not set the record straight as it relates to the sale of

hydro properties in this Province. There is a lot of concern, particularly among

hydro workers in this Province, as to what plans government has for Hydro. Would

the minister be prepared at this time to confirm that the Newfoundland

government has plans to sell Hydro, the assets of Newfoundland Hydro?

DR. GIBBONS: Mr. Chairman, I am not prepared to

confirm or deny anything. The comments on Hydro have been made in this House by

myself and by the Premier. I would say, though, that I did not get any supper

tonight because the Premier, the Minister of Employment and Labour Relations,

and I, left the House at 5:00 to attend a meeting with a number of

representatives of the Hydro unions who were expressing their same concern on

this subject. We had a long discussion with them and I think that is all that

needs to be said at this time.

MR. TOBIN: Will you deny that the assets of

Newfoundland Hydro are being considered for sale? Will you state categorically

that is not the case?

DR. GIBBONS: On that subject, Mr. Chairman, I

am going to say exactly what the Premier said this afternoon. Go back to Hansard

and read what the Premier said on that subject this afternoon because I have

nothing further to add to it.

MR. TOBIN: Well, would you be able to tell me

in government's consideration of the sale of the assets of Newfoundland Hydro as

to whether or not the Lower and Upper Churchill are part of that?

DR. GIBBONS: I have no comment on any questions

related to privatization other than the Premier's answer this afternoon.

MR. TOBIN: Would you tell us whether or not

government will in no way consider the sale of the assets of the Upper or Lower

Churchill?

DR. GIBBONS: The same answer, no comment on it.

MR. TOBIN: So you are not prepared to confirm

or deny either one of them?

DR. GIBBONS: No.

MR. TOBIN: Mr. Chairman, getting off that

issues again, if I may, and I will be very brief on this, I know now that the

community of Petit Forte - I do not know if the minister has the intimate

details on every community in this Province, but the generator system is moving

out of Petit Forte and they are going to be hooked up to the provincial grid, so

I am just wondering if that will have any bearing in terms of the cost of

electricity fees to the people? Will it be more expensive or less expensive?

DR. GIBBONS: Petit Forte has just been put on,

I believe. They have been connected to the grid.

MR. TOBIN: They are going to be cutting the

trail for the poles within the next week or so, so it will be a period of a few

weeks.

DR. GIBBONS: My understanding of that is, once

you are connected to the grid then you will be charged grid rates and not rural

diesel rates.

MR. TOBIN: I am just wondering how that

compares to what they are presently charged? Is there any difference?

DR. GIBBONS: The first 700 kilowatt hours per

month is at the same rate as everybody else. When you are on diesel it is above

700 kilowatt hours per month that you pay more if you are in a remote diesel, so

there will be, naturally if you are hooked to the grid, some lower costs to the

people in Petit Forte in the future.

MR. TOBIN: Mr. Chairman, I have one more

question and I will be very brief on that. I wonder if the minister can tell me

if there has been any mineral finds of any significance on the Burin Peninsula?

DR. GIBBONS: No, Mr. Chairman, there has not

been any significant finds but there are still considerable deposits of

fluorspar in the St. Lawrence area enough to go for twenty years and more. There

are some gold prospects as well on the Burin Peninsula but at this date, none of

them has been proven to be of commercial size. Interesting anomalies,

interesting prospects but none significant.

MR. TOBIN: Where about on the Burin Peninsula

would there be gold?

DR. GIBBONS: In your district, and I will ask

Paul Dean to talk about the specific places in your district.

MR. TOBIN: You mean where I live, is it close

to my house?

DR. GIBBONS: What is the name of it, Eckies

Pond, Nicky's Pond or something? There are some interesting prospects there and

I will let Paul Dean make a comment for you on that.

MR. DEAN: Yes, there are some interesting

prospects for gold on the Burin Peninsula. The geology of the Burin Peninsula is

very similar to the geology of the Hope Brook region in southwestern

Newfoundland; the same kinds of rocks occur there so it is a good place to

prospect for gold. A number of prospects have been found off the Monkstown Road,

the road going down to Monkstown and then in the Point Rosie area, inland from

Point Rosie, around what we call the knee of the -

MR. TOBIN: What area?

MR. DEAN: Point Rosie.

MR. TOBIN: Point Rosie? Oh yes, but there is

nothing of any significance, is there, at this stage?

MR. DEAN: Not to date, and some of these finds

were found in '88, '89 and the price has been declining since then, so there has

not been a lot of interest in going back to these, and since that time, if the

price of gold continues to climb we think there will be some increased activity

down there.

DR. GIBBONS: Anyway, as Mr. Dean said, the

prospects are there for gold and if the price is right, we believe there will be

more exploration and you could see a discovery but we need more exploration on

the prospects that are known.

MR. TOBIN: So, Mr. Minister, is this going to

be an ongoing thing or are the people who have that land or the rights to that

land, right now are not doing anything?

DR. GIBBONS: Well, if you have a mineral claim

stake, you are required to do a certain amount of work each year on the mineral

claim or else it will go back to government and then someone else can stake it.

Now I am not sure how many of the claims in that area are in good standing; some

of them are, but as they come open someone else can stake them and do more work.

MR. TOBIN: (Inaudible).

MR. CHAIRMAN: Mr. Whelan.

MR. WHELAN: I am going to stay on the subject

of gold and I was wondering about the Hope Brook project, how healthy is the

profit margin down there, is the company making good profit, is it viable and as

well, I was wondering about the leaching process they had down there? I believe

they were using cyanide or something, it was a new process that they had

developed and there was some problem with the ecology, the environment, has that

been cleared up, I wonder?

DR. GIBBONS: Since the beginning, about a year

ago, Royal Oak took over that property and got it into operation and in their

first quarter they were in the black, that is my understanding anyway, in their

first quarter they were in the black and they have been in the black so they

have continued to make a profit, and with what has happened to the price of gold

in the last two or three months where it has gone up by forty dollars I believe,

it is a good healthy prospect right now, it still has about six or seven years

of reserves, seven years of reserves and the geological potential is good to

extend these reserves, so with good gold prices I think Hope Brook is possibly

good for a decade and they are going to do a vigourous exploration program.

The second part of your question related to

leaching and cyanide. Cyanide is normally used in leaching gold out of rocks

like this and there was a problem with the process that was installed originally

and they had to put in a different process, but right now all that is under

control and the environmental problems that were created with the original

process are actually being improved by the continued mining right now and the

reprocessing that is going on, so the environmental problems are being fixed.

MR. WHELAN: Thank you.

MR. CHAIRMAN: Mr. Shelly.

MR. SHELLEY: Thank you, Mr. Chairman. First of

all Minister I'd like to tell you that I'm one of the people who's very

interested in this particular part, the mines. Because you probably know I grew

up in Baie Verte and also lived in Labrador City for five years, so as far as

mining towns go I'm pretty familiar with it. I also get pretty excited about it,

knowing a few friends in geology and having a little bit to do with it when I

was in university. When you see the price of gold move then you get excited by

it, and that's what I guess mining and exploration is all about.

I have one specific one and then I'll then go into

a little bit on exploration. Terra Nova mines in Baie Verte, as you know with

the wet mill process they're having some little, I guess what you call growing

pains, because it's a new industry basically. They're having some problems with

the screening. They requested some funding in the amount - I think, now, I'm not

sure of all these estimates - $900,000 a short while ago. They've had some

response from your department I think. I just want to get updated on basically

where that's to right now.

DR. GIBBONS: Terra Nova has installed some

extra screens in the last few weeks. Their production seems to be improved as a

result of that. They did go to some agencies to help with some cash flow

problems they were having and I believe that's been taken care of. My

understanding anyway is that they're okay right now and the production is better

with the increased number of screens that they've installed.

MR. SHELLEY: Yes, .5 grade or something they

wanted to get to or something, was it? Or 5 grade.

DR. GIBBONS: Yes. They'd like to produce some 5

grade material because that's the good price stuff. I don't know, Paul, have

they started producing any now with the extra screens and the extra classifier?

AN HON. MEMBER: (Inaudible).

MR. SHELLEY: Yes, so have they secured the

amount of funding that they were looking for? Are they still in search of more

funding? That's what I don't know about now.

DR. GIBBONS: I believe they've got what they

needed to continue doing what they want to do in putting in the extra screens

and putting in an extra classifier to be able to produce the grade 5 materials.

Is there anything I don't know on that? As far as I know that's the situation.

MR. SHELLEY: No, well, I'm going to be meeting

with them this week actually when I go out, so I was just wondering where it

stood with it now so I could ask questions.

DR. GIBBONS: I think it's okay right now. The

process seems to be working with the extra classifier and the extra screens and

they're getting the grade 5. That was the big question mark, whether they would

get the grade 5 material, because that's where the price is best.

MR. SHELLEY: Next I'll lead into the

exploration. I know your department is aware of for sure, but the Baie Verte

Peninsula specifically has a great potential for different mines. Gold, mostly.

On the peninsula I know there's four, even five, sites now that are being looked

at as maybe being viable in the future. The Pine Cove in particular. I've been

in touch with some people in that group lately and it looks very good. I think

they're trying to secure some of the last dollars so I won't ask a question on

that one in particular because you've already mentioned that earlier.

I'm going to use the analogy of Hibernia. On the

Baie Verte Peninsula there's four or five or six - Mr. Dean could probably tell

me - possible gold sites. I firmly believe that if one takes off, like with the

Hibernia - if Hibernia goes then these other oil wells will come into existence.

I really believe that that's what's going to happen on the peninsula. Because

they are smaller scale mines. Like Pine Cove won't be a big mine. It'll be

somewhere in the - probably 100 people or something, at least that's what

they're saying now. There are four or five others around like that. It's very

important to this district that something get started. It's almost like the

igniter of it all. What does your department plan on doing as far as

encouragement, promotion, of these other sites, if Pine Cove comes on stream?

DR. GIBBONS: I hope like you that the Pine Cove

does come on stream. I hope we get that decision in the very near future,

because it can be a stimulus to get on with some of these other small prospects.

Unfortunately these small prospects that you talked about are small. We don't

have a nice big one the scale of Hope Brook that would justify the big

infrastructure.

There was a lot of talk a few years ago about

getting a single mill that would sort of serve all of these small prospects.

That's still a possibility in the future, I would think. If Pine Cove proceeds

and you've got your mill maybe these other small deposits can be developed and

use the Pine Cove mill, and extend the life over several years instead of having

three or four or five going at the same time in the last three or four years.

You could have something that would go a decade or more, using a central milling

complex. Pine Cove could be the site.

On the other hand, the geological potential on the

Baie Verte Peninsula is probably as good as anywhere on the Island of

Newfoundland. Easily at times one-quarter of the mineral claims held for the

total Province are on the Baie Verte Peninsula, because of that gold and base

metal potential. We're going to continue to promote the Baie Verte area as an

area that companies should go to and explore in, but the Baie Verte Peninsula

sells itself. The geologists are good, all we have to do is make sure that the

companies know and we promote the area.

MR. SHELLEY: I'll just make a comment on that,

because you led right into the next question I was going to ask you. That's

basically that I believe too from geological structures and everything else on

that peninsula that it is good. Just some other types of incentives for the

small exploration. Like prospectors. The individual and private, smaller

companies to go in there. Because it seems to me that the bigger companies -

like Noranda has done some things down there. I've found that these bigger

companies find these smaller mines and they sit on them, and then do another

little bit of exploration. I think it's three years before you do something. If

you don't you lose it. Something like that?

DR. GIBBONS: You have to spend a certain amount

of money each year over a certain number of years. After five, if you haven't

done it (inaudible).

MR. SHELLEY: That's the regulation now, is it?

Because talking to some smaller companies I've found that these bigger ones jump

on these small finds and they don't really want to develop them. They're looking

for the mother lode or the bigger ones, so they sit back with these smaller ones

and let them sort of just fade away into the time zone because they don't bring

them up because they're not bigger ones. But the regulations there I think could

be looked at again. The amount of work done on them - they just put in enough

work it seems like to me just to hold them off for a little while.

DR. GIBBONS: I wouldn't agree with you there.

MR. SHELLEY: No?

DR. GIBBONS: No. On the other hand, I do agree

that we need to encourage the individuals and the small companies. Because very

often the discoveries are made by the individual prospectors and the small

junior companies rather than the biggies. Then the big company will come in and

give that individual prospector or small company a nice -

MR. SHELLEY: Buy him off pretty quickly.

DR. GIBBONS: - joint venture payment and pay

for all their troubles. They've got their 6/49. So we are promoting prospecting.

We've had prospecting training courses for a number of years now under our

mineral development agreement. We've got one that's under way right now in

Stephenville. The graduating class I think graduates on the 10th. I have to go

to Stephenville for that graduation. It works very well with twenty individuals

per year. This year we gave out twenty-five prospectors grants. We've been

giving out twenty of those per year for the last several years.

We're building up a nice, good, healthy prospecting

fraternity. These are the people who are out in the woods, whether they're

hunting or fishing or anything else, they're out in the woods, they're seeing

the rocks. You never know when you're going to stumble across a bit of gold or

copper or something else. We are going to continue to promote that and encourage

the junior sector. We have looked at incentive programs and we've put it in the

Strategic Economic Plan as an action item. We're hoping to get a few dollars

this year to help.

MR. SHELLEY: I'll just finish off with a

comment, then. That's that I encourage you to keep going on that route because I

think that's where it lies. Like you say, with the marble on the West Coast, I

think somebody stumbled across that in fishing one time. I mean, that's what

happens, doesn't it, in prospecting a lot of times? Or the hillbillies stumbling

over the oil.

Basically it does happen like that in a lot of

cases. The more we encourage this individual prospecting and the courses and

everything, I think you're on the right track of it. Places like the Baie Verte

Peninsula and other places, you've the great potential. Hopefully, I think

there's going to be some exciting times ahead for that type of thing. Thank you.

MR. CHAIRMAN: Mr. Byrne.

MR. E. BYRNE: A question for the minister

related to Lower Churchill. Over the past decade or so there have been ongoing

negotiations with I guess Hydro Quebec and the Government of Quebec dealing with

the development of Lower Churchill. As it relates to our Province in ensuring

that we reap the benefits of that resource as a province and as a people, can

the minister elaborate on what the status is, are there any negotiation ongoing

at the moment? If not, are there any planned negotiations or continued

negotiations on the development of the Lower Churchill project?

DR. GIBBONS: One thing I want to repeat what

you said. We want to ensure that whatever is done with the Lower Churchill we

reap the benefits, the people of Newfoundland and Labrador. That's the way we

have negotiated since we started negotiating on this issue about four years ago.

Over about a three year period we averaged almost a

meeting a month. I'm not sure of the exact number now, I don't remember the

number, but something over thirty meetings were held negotiating the sale of the

surplus power from Lower Churchill development. We thought that beyond the year

2000 we would try to have access to about 800 megawatts of that for our own use

in the Province with a line tying the Lower Churchill basically to Holyrood so

that we would henceforth be tied to the Churchill grid forever. That would be

our number one priority because that would give us long-term stable power rates

and supply, both, and we would not have to worry about any small rivers or

anything else for sources of supply in the long-term future, but we could only

use about 800 megawatts over a twenty year period. The Lower Churchill is about

3200 megawatts so you have to have a sale for what is surplus to your own needs.

We looked at all the options for that. We negotiated with Newfoundland and

Labrador Hydro and negotiated with Hydro Quebec to see if they could get the

best deal possible. When the negotiations started Ontario Hydro was sitting

there as well saying, we want all we can get from you, but by the time three

years had expired Ontario Hydro was saying, we have a surplus of 3500 megawatts

ourselves right now and the Northeastern United States and Canada were all

saying, we do not need energy right now, slow down on it, so there has been a

slowdown on negotiations.

We did not conclude the negotiations, we did not

stop the negotiations, and basically the agreement was, lay this aside for now

but we know that in the long-term we are going to have to develop the Lower

Churchill because there is no more economic major source left in Eastern North

America than the Lower Churchill. In any study that has ever been done the Lower

Churchill has rated right up there at the top, especially the Gull Island part

of the Lower Churchill, so it will be done some day and I hope sooner rather

than later, but it will have to be driven commercially. It is a $10 billion

project and it cannot be done until it is driven commercially. A couple of years

ago we were all hoping that we would have it available by around the year 2001,

right now the demand is not there to get it negotiated and developed in that

time frame so it is going to be somewhat later than 2000 or 2001.

MR. E. BYRNE: My understanding is that up to

two years ago -

DR. GIBBONS: Up to one year ago, last March.

MR. E. BYRNE: - you were fairly close on a

tentative deal?

DR. GIBBONS: There were continuous

negotiations, basically on a monthly basis, approximately a meeting a month,

until about a year ago when everybody was saying we need to get this done

because we are all going to need it, but with the recession we have had in

Northeastern North American, and the reality of that came home to us all in the

last couple of years, and it was obvious that the need was not there for this

energy in the time frame that we thought we needed it.

MR. E. BYRNE: So the marketplace is not

demanding it?

DR. GIBBONS: The marketplace is not demanding

it in the same time frame. Instead of Ontario, for example, crying to us now

saying, we need more power, they are now in New York trying to sell 3500

megawatts of power, or somewhere else, because they have a surplus

whereas two

years ago they were saying, we are in desperate need, but the economy really cut

down on their demand and their projected demand for the future. Quebec,

likewise, has had a softening in its own demand but its export markets have

softened considerably.

MR. E. BYRNE: Again, I understand you cannot

really solve the substance of negotiations that have gone on. You have indicated

earlier as well that if that project is going to be developed it will be driven

commercially. Can you elaborate on any plans as to how it might be done in the

foreseeable future? You said some day, in your own opinion, I suppose, and not

the government's opinion, but yours as somebody who has tremendous expertise in

the area?

DR. GIBBONS: In my view what has happened right

now is that because of the economy instead of saying we need it in 2001 I would

not want to guess and say it is going to be 2004, 2006, or some other year, but

I think we are adding a number of years to when it is going to be needed right

now. The negotiations reached such a point that we can pick up where we left off

because we have done all the detail stuff. We can say, okay, now that the need

is here we can pick up this, finish it off, and get on with the project. I think

it will be done but do not know exactly when.

MR. E. BYRNE: Okay, thank you.

MR. CHAIRMAN: Mr. Manning.

MR. MANNING: Mr. Minister, as you are well

aware there is a major development happening at the Cape St. Mary's Seabird

Sanctuary in regards to road upgrading, paving and the

interpretation centre to

be developed there in the next year or so. Does your department - this is more

of an information question - does your department have any jurisdiction in

regards to the development at this sanctuary, ecological zone?

DR. GIBBONS: No.

MR. MANNING: In regards to the road?

DR. GIBBONS: No. Our only jurisdiction is

regarding giving quarry permits to anyone that would want access to quarry

materials to build a road or any other development. So, we do not have any

jurisdiction over the road itself.

MR. MANNING: No, that is the answer I should

say, I am aiming towards.

Did the present contractor on that site receive a

permit from the Department of Mines and Energy for the quarry site, back a

number of months ago?

DR. GIBBONS: Yes.

MR. MANNING: I am trying to find an answer to a

question that has been asked several times, what rules, regulations or whatever

the word would be for it, that you would give a permit to a contractor? What

guidelines would he have to fit in under?

DR. GIBBONS: Let me explain the referral

process to you and the process of getting a quarry permit to you. If any company

comes in and is looking for a quarry permit on any site, my department's quarry

administration will refer that request to all other affected departments and

agencies, including municipalities, to have their comment on this request

whether it is something that should be approved, that could be approved whether

there is any objection or not. In this particular case I guess they looked at

what looked like relevant agencies, sent the referral to a number of relevant

agencies, did not receive any objection, so proceeded and issued the quarry

permit but unfortunately, it did not go to the Department of Tourism and

Culture. They were the ones who would have noticed that the site being requested

was within the boundaries of the sanctuary. It was not shown on any of the maps

that we had in our possession, so my people did not know.

MR. MANNING: That is basically the question

that I was leading up to, did the person concerned in the Department of Mines

and Energy know that this was in the ecological zone?

DR. GIBBONS: No, they did not know. They

referred it around and other agencies that looked at the request came back and

said: no objection. I guess the one agency that would have known instantly that

there was a problem, did not receive the referral and because there was no

objection the permit was issued. I did not know anything about it myself until

sometime recently when it was drawn to my attention because normally, quarry

permits do not come above the officials that handle them - give them out after

due process and referral.

MR. MANNING: Do not feel bad, there was not too

many who knew where the boundaries of the ecological zone were to, until after

the quarry was put in place.

DR. GIBBONS: Exactly, it was after this issue

came up that it came to our attention where the boundary should be, we did not

have it on our maps.

MR. MANNING: Yes. Could you tell me, Mr.

Minister, has there been any mineral finds in that area over the past number of

years?

DR. GIBBONS: No, very limited in that

particular region. When we go down the Southern Avalon there are some gold

prospects but there is nothing significant and right down in your own district

itself, I am not aware of anything. I think the most interesting thing down

around that way - where are the fossils, Mistaken Point? Mistaken Point fossils

- the oldest fossils in Newfoundland and Labrador are at Mistaken Point on the

Southern Avalon.

MR. MANNING: Yes, I was told that there was

some possibility of some zinc deposits, is there any basis for that?

DR. GIBBONS: Over around Placentia there is a

bit of that. Now Paul may be able to answer that much better than I can. So I

will ask Paul Dean to speak on it.

MR. DEAN: One of the things that the geological

survey branch of the department has done over the last ten years is a thing

called lake sediment geochemical surveys, whereby we go around and sample the

sediments of the mud in the bottom of all the ponds and lakes in the Province.

We have completed the entire Province right now, including all of Labrador and

the area in the Chance Cove Brook watershed near Cappahayden, and between

Cappahayden and Portugal Cove South, those lakes in that area are high in zinc.

We have done an evaluation there, we do not have a good explanation for that at

the present time, and over the years several companies have staked claims to try

and come up with an answer to this geochemical anomaly and there really has not

been any good explanation of that anomaly, so every now and then we do see

someone going down staking claims in that area to do some work, but with no

significant prospects found to date.

MR. MANNING: Do you foresee anything in the

future, Paul?

MR. DEAN: No. I think in general the Southern

Avalon Peninsula is considered to be an area of low mineral potential. We as

geologists say this with trepidation because we are often proven wrong over

time, but based on our knowledge today, we think that there is not a lot of

potential down in that area. There are some other interesting other resources

such as peat which you know of in the Southern Avalon and we think that resource

has some potential.

MR. MANNING: Thank you, sir.

MR. CHAIRMAN: Dr. Hulan.

DR. HULAN: Thank you, Mr. Chairman.

Mr. Minister, I have a couple of questions. I am

listening to these other people raise the specific questions for their district

so I think it is only fair that I raise the question concerning the most

important district on this Island, the district of St. George's.

With regard to the gypsum -

AN HON. MEMBER: (Inaudible).

DR. HULAN: Yes, indeed. - the gypsum quarry at

Flat Bay, rumours are that its life is not going to be that much longer, that it

could close by the 1st of July this year and so on; I do not know if you can

share any information you have on that with us here this evening, but I will

just pose the question to you because it is something that is being talked about

a lot up there.

DR. GIBBONS: Certainly, a number of times over

the years, there seem to have been threats to the life of that particular

quarry, it always continues. My understanding right now is that there should not

be any threat to this quarry this year, '93 should be okay, so I hope that is

correct and that it will continue on into the future because it certainly has a

lot of resources there, lots of gypsum in the area. I am not sure what the

production is supposed to be this year but probably about a quarter of a million

tons. Paul, is there anything extra that you could add to that?

MR.DEAN: No, I think it is okay for this year.

DR. HULAN: Okay, the other question I have, Mr.

Minister, concerns agriculture, and agri-food industry as you know is very

important to the district of St. George's, and in all likelihood it will become

even more important as we go down the road together in the next short while. The

soils in Newfoundland in general, are very acidic, especially our mineral soils,

requiring tremendous amounts of limestone. There are limestone deposits in the

district of St. George's, in fact I know of one myself just about in the centre

of the district, just around South Branch. What is the size of some of these

deposits?

DR. GIBBONS: Well they are huge deposits. From

the Port au Port Peninsula northward. I am not aware of any large deposits south

of that. I am not sure exactly what is in the South Branch area. I am not aware

of any large limestone deposits, probably some thin ones down there Paul, are

you familiar with the ones that are there, but certainly not the big ones like

you get from Port au Port north to St. Anthony. They are small and would not be

a site that we would go to first if we were going to develop a limestone quarry;

then we would go to something like Lower Cove or some of the other places where

limestone has been developed, (inaudible).

DR. HULAN: You see for the dairy industry,

where they require large amounts of limestone, when you're putting limestone on

450, 500 acres of hay land and pasture land, at anywhere between six to ten tons

to the acre, you require a lot. What the farmers are talking about in that area

is that there are deposits around. If they could go to these areas and pick

their limestone up in bulk and then bring it home and they would crush it

themselves, they'd save a tremendous amount of money. When you're talking 300

acres at ten tons to the acre, that's a lot of limestone.

DR. GIBBONS: Yes. Are you familiar with the

limestone deposit up in Cormack area that has been developed for agricultural

purposes?

DR. HULAN: Oh yes. Aguathuna as well in the

Port au Port area, yes.

DR. GIBBONS: Yes.

DR. HULAN: I have one other question I might

share with the Committee, Mr. Minister, and that is on what the significance of

the onshore-offshore development on the West Coast, and in particular - that

associated for me - with the district of St. George's.

DR. GIBBONS: So the onshore-offshore oil and

gas?

DR. HULAN: Yes.

DR. GIBBONS: Certainly it has potential, very

interesting potential. In terms of geology and geography we're looking at the

west side of the Appalachian mountain belt. If you follow the western side of

the Appalachian mountain belt south from Newfoundland down through the Atlantic

provinces, down the Eastern side of the United States, you go right in to

Oklahoma and West Texas, with the same geological trends. There are some

significant oil fields and gas fields along the west side of that mountain belt,

all the way down there. The rocks in West Texas are just like some of the rocks

in Western Newfoundland.

For a hundred years we've known about the oil on

the West Coast, from Port au Port north. We've known about the gas in the Bay

St. George basin and in the Deer Lake basin from drilling for gypsum and other

mineral deposits. So we know there are little bits there. What I'd like to see

is some good seismic work followed by some good geology, followed by some

drilling, to find something a little deeper that'll be commercial. That's why

these companies are looking out there now. They really believe that there can be

a commercial-sized deposit in that geology, and I believe it too.

DR. HULAN: So I should hold on to that 300

acres I have just down below the mountains there.

SOME HON. MEMBERS: (Inaudible).

DR. GIBBONS: We'll see where they (inaudible).

SOME HON. MEMBERS: (Inaudible).

DR. GIBBONS: I know, I really honestly believe

that there is potential for west Appalachian-type oil and gas. I'm hoping that

the companies that are looking out there will find some of this and will find

something that's commercial size, commercial scale, in the next few years. It's

certainly a lot cheaper to develop something onshore or very near shore than it

is to develop it on the Grand Banks.

DR. HULAN: It was alluded to the other day in

the House or somewhere, I know of the areas where at one time there was oil

bubbling basically through the ground in the early 1900s. There weren't large

volumes every day, but so many barrels of oil would be taken from some of these

sites on a daily basis.

DR. GIBBONS: Around Parsons Pond, St. Pauls

Inlet, and these places, there were wells that were producing one, two, three

four barrels a day -

DR. HULAN: That's right.

DR. GIBBONS: - back at the turn of the century,

and there actually used to be a little kerosene refinery over there. One of the

first refineries in North America was in that region.

DR. HULAN: We had a lot of firsts out there,

there's no question of that.

SOME HON. MEMBERS: (Inaudible).

MR. CHAIRMAN: It being 8:28 p.m. we will now

take a short recess for about five minutes or so. As soon as we return I'll

recognize Mr. Shelley first. We will now recess for five minutes.

Recess

MR. CHAIRMAN: Order, please!

For the record it is now 8:42 p.m.

The Chair recognizes Mr. Shelly.

MR. SHELLEY: The group, C-Core here at Memorial

University. There was some talk recently that they are delving into new ideas of

mining, of course, and one of those being - I can't remember the name of it now,

but it's to do with scooping chunks or sucking chunks from the -

AN HON. MEMBER: (Inaudible).

MR. SHELLEY: Placer mining, that's the word I had

mentioned to me before. Basically it's taking chunks from the sea bottom. There

was some mention in the Baie Verte area about doing that in a particular area,

and apparently this is also in the cod fishing grounds. Now I want to know

basically, what your feelings - I do not know, that is why I am asking, you

know, environmentally, that is what I am trying to connect all this with, what

are the dangers there and what does this process actually do, does it mess up

the bottom so that there are problems later for the fish?

DR. GIBBONS: Well certainly there would be some

temporary disturbance. What C-core did was, in a sense, just testing, testing

the sands in that region along that coast to see if there might be some minerals

of interest, particularly gold, and they did find some gold in a small area; and

depending on whether they were going to go and mine it totally, or just do a

little bit of sampling - a little bit of sampling would not be a problem but if

you were probably mining it you would have that area disturbed during the life

of that mining -

MR. SHELLEY: So the actual mining process within a

place as opposed to sampling, you could do some -

DR. GIBBONS: - then you have a lot of dredging

going on so there would obviously be lots of silts and finds in the water -

MR. SHELLEY: That would have to mess up the

ecological -

DR. GIBBONS: Yes, it would not be very friendly to

any fish or -

MR. SHELLEY: No, because I have had the concerns

brought to me by fishermen in that area and to be honest with them, I could not

answer them because I did not know what this process entailed and how much it

would - but it is going to be a question that is coming again, that is why I

just asked it again now.

DR. GIBBONS: Yes, well if it should ever reach the

stage where someone is saying: yes, you know, we have identified a large area

and it is really economically viable to go in and mine this, then you have to do

the environmental assessment of that and see what the negatives would be and see

what you might be able to do if you are going to give approval to go ahead, what

you might be able to do to protect the area to the best you could.

MR. SHELLEY: Okay. I have one last question and

then I will be finished.

It seems to be a little trend now and I guess it is

all related to the economy and everything else, but I will give you the first

example then the second.

Terra Nova mines in Baie Verte have asked for

concessions by their workers, 15 per cent I think it was and they agreed with

it, and also in the agreement was part of the profit sharing if profits happen

later, so they agreed with it and they accepted it. In Wabush mines now, the

companies asked for a five-dollar cut and I think that is right. You know, these

things are continuing and it is fine when the workers agree with it, but, to

what extent are you going to go as a government, say for example, now that at

Wabush mines I think they rejected it. I think they did, well, if they did not,

say if they do - I am just trying to come up with a scenario now of how you

would handle it; when is the government going to intervene on these type of

things, so that - the mine is not going to shut down, is it, because -

DR. GIBBONS: No it is a collective bargaining

process right now and we certainly have to hope that the employer and the

employees can reach an agreement on salary. As you said, in the Baie Verte case

I believe they did reach the agreement and the mine continues. If you do not

reach an agreement and economically they cannot continue, well it is a bit of a

disaster, so I hope that everybody can have a settlement like they reached at

Baie Verte, and you can continue to have eighty people employed as they do there

today. There are other incidents of the same thing.

You see that is having to be done because of the

economics. In the iron ore sector, there is no question when you are competing

with Brazil, Australia and India and China, these have better climates than

Northern Labrador and cheaper conditions in terms of the cost of production and

you have to do everything you can to be as productive as possible. Wabush is in

that unfortunate position right now because of its small size of having to cut

some costs. The employee compensation

part is one part of it only in the saving

on the cost of production.

MR. SHELLEY: Okay, thank you.

MR. CHAIRMAN: Mr. Byrne.

MR. E. BYRNE: Thank you, Mr. Chairman.

Are there any significant number of research projects

ongoing within your department? On going through the estimates it really does

not highlight in detail any major or any research projects that might be

directed towards identifying new sources of energy within the next decade or two

decades.

DR. GIBBONS: No, there are none relative to that

in terms of new sources of energy. I am not sure that we are doing any research

at all in terms of new sources, right now. No, we are looking at the standard

sources we know at this time, we are not looking at others.

MR. E. BYRNE: There are a number of projects

certainly in the Eastern Seaboard in the United States that - certainly in the

environmental area where new areas of energy is being created based upon waste

that society disposes of or sees unfit to use or disuse or whatever, I was just

wondering were there any projects ongoing of that nature?

DR. GIBBONS: No.

MR. E. BYRNE: The second question, other than what

was projected by the Minister of Finance in the Budget presented recently for

Mines and Energy, the projected Budget shortfall, do you suspect or do you have

any indication that that shortfall of $70 million will have any further impact

upon your department?

DR. GIBBONS: I hope not. I hope there is a

solution found in the negotiations with the unions that will not result in any

negative affect. I think if we had gotten the solution with the pension option

before, it would not have any affect on anybody. So, I hope we find a solution

now that will have no negative affects on any department of government.

MR. E. BYRNE: Okay. I will just ask one more

question, with respect to the number of items in the Budget estimates dealing

with professional services, those are contractual sorts of relationships that

you and the department enter into with individuals or groups from time to time,

is that correct?

DR. GIBBONS: In my department's case, that would

be primarily going out and looking for a particular service. It is not someone

that is on staff in professional services. That is not someone that is on staff

that is being paid out of that vote. There might be examples but I do not think

so. I think that is mainly contracts for some particular type of thing.

Consultants, you know you go out for a job that you want someone to do for a

month, two months or something and do this. That is what that is all about.

MR. E. BYRNE: So within that Budget item there,

people that you would hire, how is that normally done?

DR. GIBBONS: No, there is no one in under that

item. No hiring under that particular line.

MR. E. BYRNE: It would be just dealing with a

private company -

DR. GIBBONS: Private sector.

MR. E. BYRNE: - to supply services to the

department, is that -

DR. GIBBONS: Yes.

MR. E. BYRNE: - and no individualized contracts as

such with the department and an individual per se?

DR. GIBBONS: I do not think so, not likely. There

might be an incident when we might have someone come on staff or come into the

office and work for two or three months on something, might there be something

like that? Well, most likely it is going to be external is it not?

Okay, Mr. Dean mentioned to me that we have a contract

with an individual at the university for example, for a particular type of

fossil work that is being done but he is not over in our office. He is at the

university doing that work and (inaudible). We are not paying his salary, that

is just a contract for some services to do some work on fossils, that is an

example.

MR. E. BYRNE: That individualized contract would

be done outside the Public Service Commission?

DR. GIBBONS: Yes, at the university where he is

located.

MR. E. BYRNE: Okay, fair enough. Okay, that is it,

thank you.

DR. GIBBONS: - or at the private sector, wherever

he is located.

MR. E. BYRNE: Yes, okay, thank you.

MR. CHAIRMAN: Mr. Whelan.

MR. WHELAN: Mr. Minister, I was reading an

article

in a magazine last week about these wind generators. I know in California they

have farms of wind generators, hundreds of them, in a single area. A great

portion of the energy produced in California is from the wind. As well, in

Hawaii I believe they have quite a bit of energy supplied by wind power. Some

single wind generators produce up to four megawatts, I understand. Has there

been any consideration given to that type of alternate energy here in the

Province?

DR. GIBBONS: In the past there has been some

research on that. Some of it by the private sector, some of it sponsored -

certainly some of our people in my department, the energy sector, they have

worked on that issue. Newfoundland has a great wind regime along the East Coast

of Labrador and parts of Newfoundland Island. There is a great wind regime - in

terms of comparison across Canada, it is a high wind regime compared to what you

would have in the Prairies or some other places. So it is not a question of the

wind, it is a question of the costs. There were some questions in years past

about the technology but I think a lot of the questions about the technology are

being overcome. The biggest question now is how does the cost of wind generation

compare with the cost of generation by hydro or by thermal at Holyrood or some

other sites.

Recently Quebec talked about putting wind generators

on the Magdalen Islands, because they're using diesel down there and diesel is

probably your most expensive source of electricity generation. Wind can compete.

We may have some remote towns where we could possibly look at wind as an

alternative but right now we're not doing it. Diesel is certainly one that can

be competed with to a degree. Wind cannot compete with what's being produced at

Holyrood or with Hydro in terms of cost. We're talking about at least two times

as much.

MR. WHELAN: With regard to private entrepreneurs,

and research into the possibility of wind generation, are there any incentives,

you know, financial, or probably tax breaks, that may sort of just create more

interest in wind generated electricity?

DR. GIBBONS: We don't have any right now but we

used to have funds that we used to use for small grants to companies to look at

various types of things like that in the energy sector. It started under our

Canada-Newfoundland energy agreements ten, fifteen years ago. We kept doing it

until a couple of years ago but we just can't afford to do it any more with the

budget situation. We would, if the budget allowed, do some types of research

like that.

MR. TULK: Mr. Chairman, could I just ask the

minister a very short question to clarify something he said?

MR. CHAIRMAN: Go ahead, Mr. Tulk.

MR. TULK: I understand the hydro would be cheaper

than wind generation.

DR. GIBBONS: Yes.

MR. TULK: Are you also saying that Holyrood would

be cheaper than -

DR. GIBBONS: Yes. Holyrood too. Holyrood would be

considerably cheaper.

MR. TULK: How do you explain that?

DR. GIBBONS: You have to look at the cost of the

technology I guess for the wind generation and all the support stuff that you

have to have for it. Anything that I've seen indicates that wind generation is

probably at least a couple of times more expensive than something the scale of

Holyrood. Now Holyrood is different from the diesel. Your diesel is much more

expensive because it's much (inaudible) -

MR. TULK: I understand that, but it seems to me

that once you put the technology in place for the wind generation then it's

there and your costs would be... negligible.

DR. GIBBONS: It's still high cost. It's my

understanding it's still high cost relatively, but -

MR. TULK: The technology must be a lot more

expensive

DR. GIBBONS: - but you compare it with diesel

cost.

MR. TULK: I understand the diesel.

DR. GIBBONS: Yes.

MR. TULK: Is that right? That's interesting.

AN HON. MEMBER: (Inaudible).

DR. GIBBONS: Yes, it's an inconsistent supply, as

my deputy is prompting me here. An inconsistent supply because you get it when

it's windy so you have to have large storage medium for energy that's produced

when it's windy. Just like solar.

AN HON. MEMBER: (Inaudible).

DR. GIBBONS: You could have an arrangement like

that, but in terms of cost of production it can't compare with the cost of other

types of production in a grid. You would more than likely put wind generators

off grid somewhere where it's more economical than the other alternatives off

grid. That's why in the Quebec case, in the Magdalen Islands, they're looking at

wind generators off grid where you have a remote diesel site. We could look at

something like... take a remote town that's not presently located on the grid,

either along the South Coast of Newfoundland or some of the islands off the

Northeast Coast, or up the Coast of Labrador, where you're well off the grid.

MR. WHELAN: What you mean there is that'd have a

bank of batteries or something and you'd store the energy in the batteries.

DR. GIBBONS: Yes, exactly.

MR. WHELAN: But if you had the power hooked up to

the main grid, and you were using power at a time when there was plenty of wind,

wouldn't that cut back on the cost of diesel power?

DR. GIBBONS: You don't have the diesel, see,

connected to the grid, but you're right. If you were pumping it from a wind

generator into the grid, well that's fine, but the cost of wind generation is

higher than other sources - it's my understanding, anyway - that you're likely

to have in association with a grid, like big thermal plants like Holyrood or the

hydro sources of supply. That's where it's not (inaudible).

MR. WHELAN: I know in places like California and

Hawaii they're fairly profitable, because they're run by private companies. They

must be making money.

DR. GIBBONS: They must be. They're probably out

filling the desert with wind generators.

MR. CHAIRMAN: Dr. Hulan.

DR. HULAN: I would like to follow up on the wind

generation, Mr. Minister. As you travel through California you will see - well

as far as the eye can see, all through the hills, and the rolling hills in the

desert, you will see thousands and tens of thousands of these things and the

windmill itself looks to me to be very, very inexpensive, the unit itself, and I

am wondering where this cost is coming from?

DR. GIBBONS: Yes. I am not familiar with the

California examples, but anything that I have seen indicates that it is a

prohibitive price.

DR. HULAN: The California examples, Mr. Minister,

simply, it is a stand with one blade, that is all, and it looks to be a very

inexpensive operation. I also would say you know, back in the days when I grew

up on the West Coast of Newfoundland, before electricity, pretty well every farm

had a windmill and we use to generate our own electricity because that is an

area of this Province where the trains used to blow off the track, you will

remember that; so, we still have the winds there, a tremendous potential there

for energy, there is no question; is your department going to be looking into

that in more detail in the future?

DR. GIBBONS: Not in the immediate future. No, we

have no plans in the immediate future. We do not see it competing right now in

terms of the other major options that we have on the grid.

DR. HULAN: Thank you, sir.

MR. WOODFORD: Before we get off that wind thing.

It seems like Mr. Dean and Mr. Sheppard wanted to add something to that wind

generation thing. Did you want to or, something was not said that should have

been said?

DR. GIBBONS: Martin may well have something; he is

the one who would know. If I have been leading you all astray, he is the one who

would be able to put me straight right now.

MR. SHEPPARD: I think when we are talking about

the high cost associated with wind generation in the Province, it is based upon

some of the experiences that we have had such as I guess, the one case at Bell

Island comes to mind in, and it really relates to the high maintenance cost

associated with the technology as it relates to this particular clime or series

of climatic conditions that we face.

It is a very, very good technology for areas that

appear to have dry climates such as the California situation, and also with

regard to southern Alberta. I understand that in the Pincher Creek area in

southern Alberta, there are wind farms as well, and with continuous wind loads,

this is the type of situation that electricity from wind is most favourable and

in the Newfoundland situation where we have the combination of, certainly very

high wind loads, in fact some of the best wind loads in all of North America, I

do not think we have the sustained sort of flow that they have in these other

dry climates, and this, coupled with the fact that we are dealing with icing on

this particular types of machinery, makes maintenance costs on the technologies

that we have used here, at least to date, very high and that contributes to the

overall costs.

It is an effective solution in many areas as an

adjunct power in terms of not as the main supply of power, but as the minister

alluded to in high cost areas, then it at times competes favourably, but with

icing and high maintenance costs, are definitely a serious problem in terms of

technologies as it exist now and the application in Newfoundland.

MR. WOODFORD: I would suggest, Mr. Minister, that

I guess the best place for us to stay for wind flow would be the House of

Assembly.

DR. GIBBONS: On this side?

MR. WOODFORD: I never said what side.

DR. GIBBONS: I sit two seats down from my critic.

MR. WOODFORD: There is a question that has been

bugging me for some time and I ask it now. You may not be able to answer it or

maybe you can. I have been told on a number of occasions, probably ten, fifteen

or twenty times over the last year or so, since Hibernia started, workers come

to me and say they were laid off after two weeks, after seven weeks, after eight

weeks, and they often refer to the Hibernia project as a giant make-work

project. Is this true? I know it is going on with truckers and I know it is

going on with some classification of workers but is this true, when you cannot

do it anywhere else? For instance in any other industry unless you get

permission from CEIC for job sharing and so on it cannot be done, but yet you

can go in on the Hibernia site and they hire you for three weeks, lay you off

and then you go down to the bottom of the list again before you are called. Is

this true?

DR. GIBBONS: Well, I was out there last week and I

was talking to one of the welding people and he told me he has been there for

two years so I think anyone who is getting laid off must have been related to

some aspect of the project where they had to call in some people for something

and when that was finished then they were gone.

MR. CHAIRMAN: Mr. Granter.

MR. GRANTER: If there are small contracts let to

smaller companies the job may only last for three weeks, a month, or six weeks,

and then they are finished. Some of the people have been in there for a longer

period of time and have been with the bigger companies, the companies that will

be there until the project terminates most likely. There are small jobs in there

within that bigger job.

DR. GIBBONS: There are a lot of subcontractors

there now. The hiring is through the unions on site so some of the unions may be

putting their members to the bottom of the list after they have had a short

stay, but others I do not think are doing it that way. I think they maintain the

seniority of their members.

MR. WOODFORD: In the trucking industry the

teamsters are really doing it. Each truck goes out for a couple of weeks, two

trucks or whatever, then you go back again.

DR. GIBBONS: That must be the way the union is

operating with their members, after they have had a stint in and they get laid

off from a particular small contract they then let them go down to the bottom.

MR. WOODFORD: Mr. Minister, can you or your

officials tell me whether or not there is any major capital work to be done in

the White Bay area this year as pertaining to the Cat Arm development? Is there

any cutting of lines, or anything like that? There was some talk of some work

being done there by Hydro.

DR. GIBBONS: There may be some but I am not aware

of anything in particular. Hydro's capital budget this year I understand is

about $35 million, the same as last year, and I do not know of any major

projects. Most of them are just small projects here and there.

MR. WOODFORD: Tally Pond out in Central

Newfoundland.

DR. GIBBONS: Tally Pond.

MR. WOODFORD: Tally Pond, yes. What is new on

that? There was a lot of activity there about a year ago and then all of a

sudden it seems it waned. What is the status of that?

DR. GIBBONS: There is not much new. I can give you

a general comment and ask Mr. Dean for the latest details. That property is held

by Noranda and they have about four million tons of proven reserves, copper,

lead and zinc, with a bit of gold and silver, and it is a bit too small to be

economic at today's prices for these metals. I expect that deposit will

eventually be developed. There is a lot of exploration going on in the area and

we hope they can extend the reserves, or else find some other reserves close by

that will make it economical. I ask Paul Dean to say what the exact status is

today.

MR. DEAN: I think as the minister said we view the

Tally Pond project - I think the largest deposit is known as the Duck Pond

deposit where most of the reserves are. As the minister indicated it is

primarily a copper and zinc deposit with some silver and a little bit of gold in

it. Base metal prices are currently depressed, especially zinc, at the present

time. That is negatively effecting mining operations in Canada who produce zinc.

The other aspect of the Tally Pond development, especially the Duck Pond

deposit, is that it's very expensive. It's a deep ore body and it would be very

expensive to develop. In excess of $100 million. I guess at today's price, and

at projected prices, it's really not an economic project.

At the same time, Noranda, which now owns 100 per cent

of the Tally Pond project - they bought BP's 39 per cent out earlier this year -

MR. WOODFORD: (Inaudible).

MR. DEAN: - so they now own 100 per cent of the

project. That makes the economics look somewhat better. By purchasing the other

BP lands in the Red Indian Lake area they're committing to a fair exploration

commitment on that ground and they have some other targets to drill to try and

increase the total amount of tons on the south side of Red Indian Lake, if you'd

like, that would justify this large capital cost.

MR. WOODFORD: Yes. That concentrate, or that find

there, is something similar to the old Buchans deposit, isn't it? That had

pretty well the same as what you're talking about.

MR. DEAN: Yes, it's similar. The only difference

is in the metal ratios, that's all. Buchans was lead, zinc and very low copper.

This one is copper, zinc and very low lead.

MR. WOODFORD: I see. So that would have to be

taken with a shaft type of mine, the same as the McLean shaft and the Rothermere

shaft in Buchans.

MR. DEAN: Yes, that's certainly the case in the

Duck Pond deposit itself, where the bulk of the reserves are. There are a number

of small ore bodies, if you like, within trucking distance of Duck Pond where

you could mine near surface of say up to about 500,000 tons total.

MR. WOODFORD: Would they go deeper than McLean

shaft in Buchans to their finds? That was down over around 4,300, 4,400 feet.

MR. DEAN: No, it wouldn't be quite as deep as

McLean. It would be more along the lines of Rothermere.

MR. WOODFORD: I have one other question here. I

notice that in the annual report for Hydro this year - I know last year they

mentioned about the high mercury content in the Cat Arm reservoir. This year

there's no mention of it at all. Has that been rectified or is it just that they

didn't mention it this year or what?

DR. GIBBONS: I haven't had an update on that

particular issue, but last year there was a survey done of mercury content in a

number of reservoirs around the Province, and it was noted basically that in all

of the recent reservoirs there's elevated mercury, from Smallwood all the way

south. Nothing could have been done that would have changed that. Only time can

change it. If you go to Grand Lake you'll find that the levels are quite low,

because that's a long-term reservoir.

MR. WOODFORD: (Inaudible), yes.

DR. GIBBONS: Over a long time the mercury that's

in the region that gets flooded will get washed out, flushed out, and gone. For

any new reservoir usually it stays elevated for many years.

MR. WOODFORD: Does it have any affect on the fish?

DR. GIBBONS: No question it does.

MR. WOODFORD: I know it has to have some affect,

but I mean on whether you eat it or not. Any affect on humans?

DR. GIBBONS: No problem if you have a meal once or

twice. If you're going to eat it regularly, continuously, with a lot of fish,

certainly you'd have to be cautioned about that. But if you're going to go in

and catch a meal of trout and have a meal of trout, and not have another meal

for another month or two weeks, I don't think it's a problem.

MR. WOODFORD: I wonder should there be, would it

not be then, some kind of a warning, some kind of sign or something erected in

places like that? Because I know in the Cat Arm reservoir that's one of the real

problems we have down there. People going in with pickup trucks and coming out,

terrible, with garbage bags filled with trout. It's terrible what's going on

down there. I mean they're just raping the whole system. I know they can't eat

them all, but I'll tell you, if they ate one garbage bag of what they bring out

I'm telling you that (inaudible).

DR. GIBBONS: Certainly people should be cautioned

about eating too much from a reservoir where there's an elevated mercury

content.

MR. WOODFORD: Yes, but I've never seen a sign or

anything up or anything in any of those reservoirs, neither there nor anywhere

else.

DR. GIBBONS: I'm not certain what was decided last

year, or it might have been the year before when that survey was done. It was

done in cooperation with the Department of Health and again I haven't seen the

final conclusions of what they would do.

MR. WOODFORD: It probably would be a good idea,

especially where there is one access. For instance one access from the Jackson's

Arm Road into Cat Arm, I do not know, would it raise -

DR. GIBBONS: Again, it depends on the exact

levels. You need to know that but certainly if there is really an elevated

level, you should be cautioned against eating too much.

MR. WOODFORD: Yes, that is it, Mr. Chairman.

MR. CHAIRMAN: Dr. Hulan.

DR. HULAN: Mr. Chairman, I just want to make a

comment on the mercury. The mercury is regulated very, very carefully in this

country through Health and Welfare. In tuna, you cannot mark it tuna if the tuna

contains more than three parts per million of mercury and the same thing would

apply to these fish. So indeed, it is a very, very touchy one and certainly if

it is in that reservoir it should be taken under advisement for sure.

DR. GIBBONS: I am not sure what the levels are but

certainly people should be cautioned against eating too much.

DR. HULAN: Oh, yes.

MR. WOODFORD: Sometime last year I was told, I

believe by the Department of Health officials at that time, I called about it

and they said that there was no reason for concern but I did not get any

follow-up on it. Now, no reason for concern, was it .2 or was it .2.99, I do not

know. Probably I will check a little further with the Department of Health.

DR. GIBBONS: The Department of Health was involved

with the service and if they did not take any action to post signs maybe they

felt that the numbers just were not high enough to bother.

MR. WOODFORD: No other questions.

MR. CHAIRMAN: Are we ready to call the subheads?

On motion, subheads 1.1.01 through 5.2.01, carried.

On motion, Department of Mines and Energy, total

heads, carried.

On motion, the estimates of The Department of Mines

and Energy, without amendment, carried.

MR. CHAIRMAN: Mr. Minister, I would like to thank

you and your officials. This has been a most rewarding estimates meeting. I have

had the privilege in the last four years of Chairing several budget estimate

committee meetings. I do not believe I have ever attended one that has gone as

smoothly as this. I would like to thank the members of the Committee for their

cooperation with the Chair and to allow that thanks to extend to the members of

the House of Assembly who are sitting here and asked a few questions who are not

designated members of the Committee. I would also like to take the opportunity

to thank our Clerk for the evening, Mr. Noel. Mr. Oates with Hansard who has

been here with us this evening and our Page, Jeff Pearcey.

I would like to announce to you that our next meeting

of the resource sector of the Budget Estimates Committee will be tomorrow

morning at 9:00 a.m. at the Colonial Building and we will be reviewing the

estimates of the Department of Fisheries.

Do you have any closing comments, Mr. Minister?

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

like to express thanks from me and my officials to you, the vice-chair and all

the members for coming to ask questions and for the staff who are here today. I

will make a comment to you, sir, that with Rick Woodford in the vice-chair

position, it always runs this way. I think Mr. Woodford has been around for

several years in that position, certainly last year or maybe the year before, as

vice-chair of the resource estimates.

MR. CHAIRMAN: I will now entertain a motion to

adjourn.

MR. WOODFORD: So moved.

MR. CHAIRMAN: Thank you and good-night.

The Committee now stands adjourned.

Document details

Collection	Newfoundland and Labrador — Committees
Citation	1993-05-31
Type	committee
Volume / chapter	committees_standingcommittees_resource_ga42session1_1993-05-31_rc-me_.htm
Language	en
Format	html
Source	PROVINCIAL
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