Resource Committee

2010-05-17

Newfoundland and Labrador — Committees

May 17, 2010

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

CHAIR (Harding): Okay, I think we are ready to begin.

First of all, I would like to welcome you all as we debate the Estimates of

the Department of Natural Resources, as well as the Status of Women and Women's

Policy Office. We will begin as usual by the Committee members identifying

themselves.

MR. DALLEY: Derrick Dalley, MHA, The Isles of Notre Dame.

MR. VERGE: Wade Verge, MHA, Lewisporte District.

MR. HUNTER: Ray Hunter, MHA, District of Grand Falls-Windsor-Green Bay

South.

MR. BAKER: Jim Baker, MHA, Labrador West.

MS JONES: Yvonne Jones, MHA, Cartwright-L'Anse au Clair.

MS MICHAEL: Lorraine Michael, MHA, Signal Hill-Quidi Vidi.

CHAIR: Okay. We ask the observers also to identify themselves, please.

MR. LONO: Good morning, Simon Lono from the Opposition office.

MS PLOUGHMAN: Good morning, Kim Ploughman, Researcher in the office.

CHAIR: Thank you very much.

We will begin with the I will have the Clerk call the first subhead. After

that I will recognize the minister, who may take up to fifteen minutes to review

her Estimates, and then at that time as well she can identify her officials. It

is important that you say your name any time you are asked to answer a question

or want to clarify something.

I will ask the Clerk now to call before we do, we have the minutes of the

last meeting that we had. So I ask for a motion to adopt these minutes.

Moved by Mr. Verge, seconded by Mr. Baker, that the minutes of May 10,

Department of Fisheries and Aquaculture, be adopted as circulated.

All those in favour, aye'.

SOME HON. MEMBERS: Aye.

CHAIR: All those against, nay'.

Carried.

On motion, minutes adopted as circulated.

CHAIR: Okay, I will ask the Clerk now to call the first subhead.

CLERK: 1.1.01.

CHAIR: 1.1.01., shall that carry?

Minister Dunderdale.

MS DUNDERDALE: Thank you, Mr. Chair, and good morning.

Thank you very much for being here today to discuss the budget priorities for

the Department of Natural Resources this year.

Mr. Chair, where we are beginning with the Estimates of the Forestry and

Agrifoods Agency, I will introduce these officials first, and once we have gone

through the Estimates for that part of the department we will then move them out

and Mines and Energy will come in. We have a lot of people here, as you see, and

I am trying to limit confusion about who has responsibility for what.

CHAIR: Okay.

MS DUNDERDALE: So let me begin by introducing the CEO for the agency, Mr.

Len Moores. Len, you can introduce (inaudible).

MR. MOORES: (Inaudible) here is Keith Deering, and he is the ADM for

Forestry.

MS DUNDERDALE: Mr. Chair, I will start the same way that I have in

previous years and provide a general overview of the main budget items for the

four branches: Forestry, Agrifoods, Mines and Energy. After that, my officials

and I would be happy to take any questions you may have on any of those items.

I will begin with Forestry. As we are all aware, our forest industry has been

going through a transformation in recent years due to changing markets,

particularly the decline in the pulp and paper and lumber industries globally.

We have been proactive in response to this, starting with our comprehensive

review of the forest sector and the establishment in 2008 of the Forest Industry

Diversification Fund to assist in the diversification of the industry,

particularly to the sawmill sector. This year we are putting an additional $7.5

million into this fund to continue to modernize the sector and identify new

products and markets.

On the West Coast, Corner Brook Pulp and Paper Limited, a major employer in

that region, is facing significant challenges as it attempts to weather the

global downturn and over capacity issues in the sector. It is working with the

employees to achieve increased efficiencies and competitiveness to improve its

position in the marketplace. Just as the unions are doing, government has

committed to working with the company to improve its competitiveness by entering

into arrangements that will take some of the financial pressure off the

operation.

As we announced on Budget Day, we are spending $15.4 million this year, $30

million over two years, to provide assistance to the mill in a number of areas.

This includes increasing our share of the annual silviculture forest insect

control and forest inventory programs, as well as foregoing the companies

managed land tax. We are also spending $12 million to purchase timber cutting

rights on roughly 447,000 hectares of land currently held by the company. As a

result, we anticipate an additional 144,400 cubic metres of fibre this year to

reallocate to support (inaudible).

Our investments in agriculture this year are targeted at increasing our local

food production and value-added processing opportunities and leveraging

additional funding from the federal government. We are budgeting $2 million over

the next four years for a federal-provincial large scale land development

initiative. The industry has identified a need for additional land and a

reduction in land clearing capital costs. Through this investment, we will be

able to reduce production costs and improve sustainability for the sector. This

will also assist our industry in moving towards increased food production.

We have also earmarked funding for two other cost-shared initiatives with the

federal government to support research and development in the sector and to

advance research and surveillance of important animal diseases for the

protection of the industry and public health. We are waiting for final approval

from the federal government to move forward with these initiatives, so more

details will follow when that happens.

We are also continuing our annual contributions to the Provincial Agriculture

Assistance Program, the Agriculture and Agrifoods Development Fund, the Land

Consolidation Program, and the Cranberry Industry Development Program, as well

as our portion of the federal-provincial Growing Forward Agreement.

In Mines and Energy: first moving into the Mines branch, I am pleased to be

able to say that the mining industry is starting to come around after a

challenging year last year. It now appears that the worse is behind us, when it

comes to the decline in the commodity markets that hit worldwide in the fall of

2008 and continued through 2009.

The recent announcement of the resumption of the Iron Ore Company of Canada's

$435 million Phase I iron ore expansion project in Labrador West will provide

significant economic and employment opportunities for many Labradorians. This

project will contribute to the continued recovery of mining operations in

Labrador and help ensure the regions future growth and development. Our budget

focus in the Mine sector continues to be on bringing increased mineral

exploration and investment to the Province.

As I announced prior to Budget Day, we are spending $235,000 to assist with

the development of our provincial mineral strategy. The strategy will assist

with the long-term economic growth and continued success of the mining industry.

With our significant resource potential, it is important for us to ensure that

future investment decisions and program development encourage opportunities for

exploration, production and employment within the industry.

The strategy will focus on all aspects of the mineral sector, including the

issues of sustainability, competitiveness, benefits to the Province and

infrastructure. The strategy will also provide a comprehensive and timely review

of existing mineral legislation. The first step in the development of the

strategy will be the completion and release of a discussion paper later this

year that will lay the basis of subsequent public and industry consultations. We

hope to have the final strategy issued by mid-2011.

We are also spending $2.1 million this year to improve our geological

understanding of the Julienne Lake iron ore deposit in Western Labrador as well

as its potential market value to the Province. The Julienne Lake deposit has the

potential to provide economic development, employment and opportunities for the

residents of Labrador West, and it has the potential to help us meet the

increased global demand for high-quality iron ore.

The department will issue a Request for Proposals for the drilling, mineral

testing and geotechnical work which will be completed by the end of this year.

This assessment will provide an estimate of the size and quality of the mineral

resources and enable government to properly plan for its future potential use

and development.

We are also spending $5 million for the emergency repair and construction of

the Buchans tailings dam and for the covering of the exposed tailings that

present a dust hazard for the town. I made that announcement at a news

conference with Minister Johnson prior to the Budget, outlining the details of

the work at that time. Approximately $2.2 million of that amount is already

available in surplus pre-committed funds leftover from the remediation project

on the former Baie Verte and Rambler Mine sites.

The Baie Verte Rambler project is in its third and final year and is starting

to wind down. The amount leftover from this will now be transferred to assist

with the Buchans remediation. We are confident that our investments are

encouraging in attracting investment and exploration to our Province, as well as

making a difference in the environmental legacy that remains from former mining

operations.

Finally, the Energy branch: We are continuing our long-term strategic

approach to the development of our energy resources as outlined in the Energy

Plan. This year we are providing $164 million to Nalcor Energy to facilitate its

participation in oil and gas activities and other energy projects. You will

notice in the Budget documents that we did not spend the $228 million that we

had budgeted last year to assist Nalcor in this regard. Our revised expenditure

was $40 million as a result of lower than expected acquisition costs and

expenditures.

We are also spending $12.2 million this year to assist in the continued

implementation of our Energy Plan initiatives, in the areas of geoscience, data

acquisition, energy efficiency, conservation, and innovation. This is part of

our $35 million multi-year commitment to the implementation of the Energy Plan.

We are recognizing the importance of dedicated funding for marketing and

promotion of the Energy sector by increasing our budget for participation in

international oil and gas trade shows and exhibitions by $160,000. Additional

funding will allow us to further build international market awareness of our

Province's resources, our immense resource potential, and our service and supply

capabilities and expertise.

The Budget document also reflects our funding to the Canada-Newfoundland and

Labrador Offshore Petroleum Board to cover the costs associated with the

Offshore Helicopter Safety Inquiry, the Core and Storage Research Centre and the

data management centre. Funding of $550,000 will go toward the cost of the

Offshore Helicopter Safety Inquiry, and $400,000 will complete the Core and

Storage Research Centre. The centre stores and curates well cores, cuttings and

oil samples collected from wells drilled in the Province's offshore area. After

twenty years of operation, the centre is at over 90 per cent of its capacity.

We will also spend $225,000 for the data management centre administered by

the board. It is important for the board to have rapid access to the petroleum

data available in-house to ensure timely decision making in regard to our

resources. The data centre helps to make it possible for the board to better

manage the industry and facilitate further exploration and production.

An increase of $670,000 is going to the board's base budget, largely to cover

the cost of computer hardware and software required by the board's reservoir

engineers and geologists, as well as to cover increased office lease costs.

These expenditures are matched 50-50 by the federal government and are 75 per

cent recoverable from the industry.

These are just some of the main items included in Budget 2010 for the

Department of Natural Resources, and we are now pleased to take any questions

you might have.

CHAIR: Thank you, Minister.

We will begin with Ms Jones. So I guess we will try to I do not know how

you have your questions arranged. Executive and Support Services can we do the

forestry and agrifoods division first, and then just move through the mineral

and energy part after, if that is okay?

MS JONES: Yes.

CHAIR: Ms Jones.

MS JONES: Thank you, Mr. Chair.

Good morning, Minister - thanks for that update - and good morning to your

officials. I am going to start on page 152,

section 1.2.02. I am going to start

with the Salaries, which is 01. Last year, it was budgeted at $1,335,000 and

there was around $1,066,000 spent. So, you did not spend the total amount, and I

ask if it was because of vacancies in the department or some other reason?

MS DUNDERDALE: No, the revised variance is due to vacancies in the

division as well as several retirements we had during the year, which

facilitated salary savings for various lengths of time while we were refilling

the positions.

MS JONES: Okay. Again, there under Purchased Services, you spent over

$60,000 more than you had budgeted, and I am wondering what that was spent on -

1.2.02.06.

MS DUNDERDALE: Higher than anticipated expenditures were associated with

Purchased Services, such as paper shredding, file storage and retrieval, as well

as facility and room rentals associated with training and workshops for

departmental staff.

MS JONES: Was some of that unexpected because it is strange that you

would only budget $22,000 and spend $88,000 and this year you are only budgeting

$12,800. So, was it unexpected, something that you will not do every year?

MR. IVIMEY: Philip Ivimey, Director of Financial Operations.

Yes, some of that was unexpected. We had some higher expenditure costs

associated with file storage and retrieval in our registry operations this year.

That was primarily due to the cleaning out of some old files and the storage of

those files that were located in our building to Iron Mountain storage facility.

That was kind of a one-time thing that was done during the year to clean up the

registry operations. So no, that would not be expected for next year.

MS JONES: So they are not in storage any more, you have destroyed the

files?

MR. IVIMEY: Yes, some files were destroyed and some files were sent to

storage, but it was an overall process that was incurred during this year to

clean up some of the files that were located in our building.

MS JONES: Under 1.2.03., Property, Furnishings and Equipment, you have

increased your budget by a million dollars this year over what you had budgeted

last year, can you tell me what that money is going to be used for?

MS DUNDERDALE: It is for a foreign animal disease laboratory to bring the

current post-mortem building up to code and replace the existing biomedical

waste incinerator. The budget also reflects $1.1 million reduction related to

the end of a three-year plan to replace aging vehicles within the Forestry and

Agrifoods Agency. It also now includes a base, ongoing funding of $500,000 a

year to maintain forestry and agrifoods fleet of vehicles.

MS JONES: Under Forest Management, 2.1.01., again the salaries that you

had budgeted for, you spent a lot less this year. Can you tell me which

positions were vacant in the department and if they have been filled since?

MS DUNDERDALE: You are asking about the increase?

MS JONES: No, you budgeted $4.7 million and spent $4.259 million. I am

wondering why you spent nearly half a million dollars less than what you had

budgeted for and what positions were they that were not filled, or what happened

there.

MS DUNDERDALE: It was late recruitments and vacancies in forestry.

MR. DEERING: Keith Deering from the Forestry and Agrifoods Agency.

We had four positions that were pretty much vacant for the full year. It was

a resource protection specialist out of our Legislation and Compliance Division,

which is now filled. We had a provincial ecologist position, which was not

filled until late in the fiscal year. We had a supervisor of insect control

position, which was filled only about two weeks ago, as well as a roads

engineer, which was filled fairly late in the fiscal year last year as well.

MS JONES: Why were all of those positions vacant? Did people retire, or

did they quit, or did they leave, or move into new jobs within the department or

what?

MR. DEERING: They were all retirements, with the exception of one which

is the provincial ecologist position, which is a new division that was set up

last year under the Budget.

MS JONES: Okay.

I guess that is why the employee benefits were up as well - because of the

retirements, was it? It went from $61,800 to $163,100.

MS DUNDERDALE: Yes, and that was due to higher than anticipated worker

health and occupational safety compensation payments.

MS JONES: The Professional Services under that heading what

professional services do you use there? You spent $377,200 last year. What would

that have been spent on?

MS DUNDERDALE: Those fees are associated with forest management planning

and specifically aerial photography

interpretation work.

MS JONES: Are you redoing all new maps and charts or whatever?

MS DUNDERDALE: We do that on a regular basis.

MS JONES: Okay. So are there any particular areas that you are doing?

MS DUNDERDALE: Keith.

MR. DEERING: We are aiming to put our inventory on a ten-year cycle right

across the Province. What that means is that every ten years the photography

will be updated everywhere.

Last year we had

interpretation work on the Northern Peninsula, and this year

our program is going to be focused in Central Newfoundland.

MS JONES: Okay.

The Purchased Services, last year you budgeted $2.8 million, you spent a lot

less than that, $1,599,000. Can you tell me what you were budgeting for that did

not happen last year, and then I will get into what you are going to spend the

money on this year.

MS DUNDERDALE: It is not that it did not happen, it came in under budget.

MS JONES: Okay. Do you want to tell me what it was?

MS DUNDERDALE: It is not always a negative thing.

A number of tenders for various required services came in under budget, as

well there were some delays in obtaining aerial photography of forest sites,

which in turn delayed the calling of tenders for

interpretation contracts during

the year. So, it kind of has a domino effect. If you do not get your aerial

photography done, then you do not move ahead with your

interpretation.

MS JONES: So all the Purchased Services money was spent on aerial

photography last year?

MS DUNDERDALE: No, there were other pieces of that, but that is the

explanation for the variance why it was less than

MS JONES: Okay, could you tell me

MS DUNDERDALE: Are you asking why it was less than we budgeted?

MS JONES: Yes, I asked why it was less and what it was used for.

MS DUNDERDALE: It was because tenders came in - if you are asking what it

was used for, we are happy enough to tell you that, but if your are asking why

it was less than we had budgeted, it was less because tenders came in lower than

expected and we were delayed in starting our aerial photography. Therefore, if

you do not have the photography, you do not need the

interpretation. So, that

gets pushed out as well.

MS JONES: Okay.

Could you tell me what it was used for besides aerial photography?

MR. DEERING: Keith Deering.

Aerial photography is the big piece here. We also have the mapping work

associated with that, that goes out to tender as well. That is the bulk of it.

MS JONES: Who does the aerial photography work for you? What company did

that work?

MR. DEERING: There are several companies that

[Disturbance - alarms sound]

CHAIR: I guess we can carry on?

MS JONES: (Inaudible) minutes, Mr. Chairman, if that is okay with you.

[Alarms stop]

MS JONES: Good. All right, Keith, go ahead.

MR. DEERING: All of our aerial photography work goes out to a public

tender process. There are several local companies that have bid on this work in

the past as well there are some companies from outside the Province that have

bid on it as well. Most of the work in the past few years, in my memory, has

gone to local companies within the Province.

MS JONES: This year you have budgeted $8.7 million, can you tell me what

that money will be used for under Purchased Services?

MS DUNDERDALE: The bulk of that money or a significant part of that money

will be used for the buyback of fibre from Corner Brook Pulp and Paper.

MS JONES: How much are you paying for that, Minister?

MS DUNDERDALE: Twelve million over two years.

MS JONES: The rest of it, I guess, will be used to continue with the

programs you were doing in previous years.

MS DUNDERDALE: We had a number of cost-shared programs with the pulp and

paper companies. What we have done to offer assistance to them and make sure

that we are keeping on the right side of international agreements and so on, is

we are taking on a lot of the forest management responsibilities entirely.

MS JONES: Do you want to explain to me how that contract works with

Corner Brook Pulp and Paper in terms of the purchase agreement and so on?

MS DUNDERDALE: What, the overall

MS JONES: Yes, what the overall deal was.

MS DUNDERDALE: The overall deal is $15.4 million a year for two years. It

means, as I said in the overview in my opening remarks, that we will take over

full responsibility for areas such as silviculture, insect control, inventory

programs and so on. These were programs that we shared on a 50-50 basis with

Corner Brook Pulp and Paper previous to this. We bought back the lands from

Corner Brook Pulp and Paper under your Administration some years ago but leased

the fibre to them until 2037. So what we have done now is bought that fibre

back. Some of that fibre will not be used in the industry. It will go to help

resolve some conflicts we have in our natural areas systems plans.

There are some parks and so on that has conflicted - there has been a

conflict between departments on how we deal with the forestry resource and at

the same time is protecting values around park lands and so on. Some of that

fibre will be used to resolve those conflicts and those issues, but the bulk of

the fibre will be used in the sawmilling industry, where we have some pressures

and people are looking for more fibre and so on. So, not only does this help

Corner Brook Pulp and Paper, but it helps the sawmilling industry around the

Province generally as well. So part of the funding will go to them from that.

As well, in the Rate Stabilization Plan, there is now a surplus due to $10

million that we put in there when Abitibi left Stephenville. There was a deficit

in the Rate Stabilization Plan at that point in time that all of our industrial

customers, that are part of that plan, would have had to pick up. As a

government, we felt that we ought to do something to relieve that pressure. So

we put $10 million in there to protect the rest of our industrial customers. We

now have a surplus in the plan, and that $10 million is available to us again.

We will remove that over the next two-year period and use it to continue to

support the pulp and paper industry here in the Province. They are the three

main areas that constitute that $30 million over two years.

MS JONES: The $10 million that you put into the Rate Stabilization Plan,

that was a one-time $10 million. You did not put that in every year did you?

MS DUNDERDALE: No. It is $10 million that we earmarked to help the

industry when the Stephenville pulp and paper mill closed.

MS JONES: Now, of the $15 million that you are putting in this year, is

some of that money coming from the community trust fund?

MS DUNDERDALE: Yes, $4 million of that will come from the community trust

program and you will see that I will point that out in our Estimates as we

move through them here, where that money is.

MS JONES: Okay. Well, I will wait until we get there then.

This injection of money right now for programs like you just outlined, will

that provide the stabilization that they need with Corner Brook Pulp and Paper?

MS DUNDERDALE: Yes. We put a lot of effort into this. The union came

forward first in terms of working with the company and finding savings. We made

a commitment to the union and to the company that we would be there as well. If

they stepped up to the plate, the provincial government would be there with

them. So they came forward with savings to the company.

Corner Brook Pulp and Paper has opened their books to the government and have

been completely transparent in terms of their financial situation. They,

themselves, continue to make significant investments here in the Province and a

huge commitment. This is not a shareholder corporation. This company is held,

owned completely by Joseph Kruger. So when there are losses, and there have been

significant losses, in the face of that Kruger continues to make investments in

Corner Brook and seems to have a very solid commitment to that region of the

Province and to the people who work there. Even though it is a high-risk

investment in these troubled times in the industry, in our view, given

everything we have seen and the level of commitment by Kruger, it is still a

worthwhile commitment.

MS JONES: How many jobs were protected through this investment? How many

people are employed there?

MS DUNDERDALE: Yes, we have about does that include harvesters?

OFFICIAL: (Inaudible).

MS DUNDERDALE: With the mill and the woodlands, we have about 700 jobs

directly, and of course significant indirect employment.

MS JONES: Were any of the local contractors affected or any of the local

contracts cancelled?

I only ask that because I had a phone call back some time ago but I did not

have a lot of details on it and I did not get anything to follow up, so I am not

sure if that became any significant problem whatsoever at that time.

MS DUNDERDALE: Suppliers are impacted from time to time as they

reconfigure. We have had two machines shut down and the company is always

looking for innovative ways to cut their energy costs or to find a more

efficient way to get biomass to work with integrated sawmillers and so on. So

they are starting to take as much fibre and as much chips as they can from

integrated sawmillers, for example, rather than having to chip at the mill and

so on. From time to time that has had an impact but it tends to be in the normal

ebb and flow of business. It is something that we monitor very carefully.

We had an occasion last year - two operators were impacted as they tried to

reconfigure to get more efficiency in the mill. They have to do that because

they have to try and manage their losses and cut their losses, and the mill has

been operating at a loss for some time.

MS JONES: Okay. You talked about resolving some of the fibre conflicts

and you said that some of this fibre would go for use in the sawmilling

industry. In the Economy 2010 report it also stated that the mill was spending

$500,000, I think it was, to do a study of the fibre in that particular area,

what was available and so on. I am just wondering if there was any concern about

the supply of fibre at that time or if was like a normal research and

development practice for the company or

MS DUNDERDALE: Yes, well Corner Brook Pulp and Paper

MS JONES: What the purpose of it was, I guess.

MS DUNDERDALE: No, if they had concerns about - for them it is about

efficiency and how do you provide biomass, particularly for the mill. I am sure

that they constantly look to a time when perhaps they will not have to use their

wood (inaudible) any more. We watch all of that carefully because that impacts

employment, but certainly in terms of - they have sufficient fibre to do what

they need to do and that is why they are in a position to be able to allow us to

do this buyback of fibre here in the Province. So, it is not an issue. They get

a lot of their fibre they have agreements with integrated sawmillers, which

works very well for us, where an integrated sawmiller will go on either

Abitibi's directly - well, lease lands. They will take the sawlogs for their own

operations but harvest the pulp logs and deliver them to Corner Brook Pulp and

Paper. That is how the industry has worked here for years. So it is a symbiotic

relationship. Now some of the mills are actually into chipping, and that is more

efficient for Corner Brook Pulp and Paper as well.

MS JONES: Yes, I am just wondering because the government is buying back

fibre from the company and then the company is looking to do a study on fibre

supply. So it is just -

MS DUNDERDALE: It is just good management and good planning, and that

will be part of their whole management piece. That is what we do as a Province

on a regular basis. As Len just spoke, we are trying to get into a ten-year

rotation so that we clearly understand what is happening in our forest here in

the Province and what we need to be doing in silviculture, pest control, all of

those kinds of things.

Abitibi has leased significant fibre here in the Province and it needs to

have a plan around how it is going to use it, how it is going to manage its

fibre supply on a go-forward basis. We are certainly not aware of any they

have huge tracks of fibre that they are not using, especially on the Northern

Peninsula.

MS JONES: How many sawmills are operational in the Province right now?

MR. MOORES: Three right now and when the Northern Peninsula sawmill is up

and ready

MS DUNDERDALE: Integrated sawmills, three large integrated sawmillers.

MR. MOORES: Integrated sawmills. When the Northern Peninsula is

operating, that will be four large sawmills operating.

MS DUNDERDALE: And a large number of sawmill operations but not

integrated.

MS JONES: Yes. Can you tell me the three integrated ones? I think I know

but I will just ask.

MR. MOORES: Sexton Lumber, Cottles Island Lumber, and Burton's Cove

Logging.

MS JONES: What was the last one?

MR. MOORES: Burton's Cove Logging.

MS DUNDERDALE: And will soon be in production on the Northern Peninsula,

wholesome products. That will be our four large integrated sawmillers, and there

are a number of many small operations throughout the Province.

MS JONES: So, you are saying there is a demand for more fibre by those

sawmill operators, is there?

MS DUNDERDALE: They are always looking for fibre because they are able to

boost their production, but there are other sawmilling operations, as you know

from Terra Nova last year, that sawmillers are looking for fibre and we now have

an opportunity to be able to relieve their pressures that they are under as

well.

MS JONES: What are the indicators like in the sawmill industry now? Is

our sales up within the Province? Are our export sales increasing? I know we

went through a difficult period a few years ago but I am just wondering where it

is now.

MR. MOORES: For this year we are forecasting a bit better. The price is

stronger; it has gone up. In fact, the last figures I saw it doubled from this

time last year. So we are expecting this year to have a bit better industry and

probably increase our sales, but as you know, for the previous two years they

were below our average.

MS DUNDERDALE: Some of the pieces have come about as a result of lack of

investment in the industry, and that is what we were trying to address in our

diversification strategy and we believe that it is starting to work and take

hold. We have been able to go into these operations and work with the owners to

make sure, first of all, that they are operating properly, that they have the

equipment they need to be efficient in terms of their operations.

There is an ongoing piece of work around market developments. That expertise

really does not exist within the industry. We are working with them to develop

that expertise within the department and to share that with all of them and to

build that capacity within their own companies. The Department of Natural

Resources, working with the Department of INTRD and with the industry, are

trying to work with them so that they have the capacity to identify markets,

access that market, get contracts and fill them. That whole export supplier

development piece is ongoing.

MS JONES: Just before I move onto the last line under that estimate, I am

just wondering if you could give to us the sales and export values of the

sawmilling industry for the past five years, if you could get that for us.

OFFICIAL: (Inaudible).

MS JONES: Yes, okay.

I guess a couple of things there. Under Property, Furnishings and Equipment,

you spent $330,000 last year. I am just wondering what that was for?

MS DUNDERDALE: Additional equipment for program delivery, GPS units,

plotters, printers and Tablet PCs as well as the purchase of new and replacement

ATVs and snowmobiles for field inventory work.

MS JONES: Okay.

Can you tell me what the Grants and Subsidies

section is used for here?

MS DUNDERDALE: Grants and Subsidies - our pellet rebate program would be

under that heading.

MS JONES: Pellet, you said?

MS DUNDERDALE: Yes, if you buy a pellet stove, you get a 25 per cent

rebate of $4,000 $4,000 is the maximum. So a maximum of $1,000 rebate on the

purchase of a pellet stove.

MS JONES: That is all that is under that Grants and Subsidies, is it?

MS DUNDERDALE: That is Grants and Subsidies. We had a lower take-up in

that when we started the program, but we have continued it because people are

becoming more aware of it. Also, the variance there has to do with grant

payments to the Mtis and the Innu with regard to our forest management

agreements.

MS JONES: So you did not pay it out last year or what?

MS DUNDERDALE: No, we did not have new agreements negotiated, so we are

in the process of doing that now.

MS JONES: So they did not get any funding last year?

MS DUNDERDALE: The Innu did and the Metis did not because we were not

involved in the process and now we are starting to do a new management plan. So,

once we start to do the new management plan this is real work that has to get

done. Now that we have started the new management process, we are engaged with

them now talking about a new agreement and what that will look like.

The big piece of it is that to have Aboriginal people engaged in the

development of a management plan right through from A to Z so that when we get

to the approval phase and we are prepared to put it forward to Environment and

Conservation for approval that there has been engagement the whole way

through.

We have had some difficulties with that in the past and we pay a lot of money

for that advice, that direction and so on. We have gotten to the end of the

process and we have still found ourselves at loggerheads with one another. So,

we are trying to clarify all of that so that both parties understand what it is

we are doing here, what the expectations are, what the goals are, and so on. We

are in the process of having that discussion now with the Metis.

MS JONES: How much do they get in the grant?

MR. MOORES: Len Moores.

The Innu agreement is up to $340,000 a year.

MS JONES: I am sorry, I did not hear you.

MR. MOORES: The Innu agreement is up to $340,000 a year. With the Metis,

there is funding available up to $200,000 for an agreement.

MS JONES: The only other question on that

section before I move on and

Lorraine takes over is: Under the Administration and Program Planning section,

the Temporary & Other Employees, you spent $582,500 last year, can you tell me

what that was? What were the temporary positions, what the other employees were

and why they were other or temporary (inaudible) -

MS DUNDERDALE: Where is it? Sorry?

MS JONES: It is in the salary funding. It is a separate book from the

Estimates and it is on page 113 of the salary Estimates.

MS DUNDERDALE: I am sorry, I do not have it. We do not have it.

So, it is Salaries under Administration and Program Planning, 2.1.01.01.; the

question relates to that -

MS JONES: Yes.

In the Administration and Program Planning it breaks down the Permanent

Employees, Temporary & Other Employees, Overtime, and Permanent & Other

Adjustments. I am asking what the nearly $600,000, what positions they employ on

a temporary basis in that

section of the department.

MS DUNDERDALE: We will have to get more detail on that for you, but we

expect that it has to do with the cross over between inland fish and

conservation officers, but we will get more detail and provide that to you.

Conservation officers are with our program, and some of our conservation

officers do inland fish, but they go over to the Department of Justice in the

spring and come back in the fall, so-

MS JONES: In your whole department, Minister, there is over $10 million

paid out to temporary and other employees and we are going to be asking a

question on every section. So, if you are going to get the information, we may

as well ask for it all now.

MS DUNDERDALE: Yes.

MS JONES: In the Forest Management

section alone, not including

Agrifoods, there is $6.6 million paid out.

MS DUNDERDALE: By its very nature, in forestry and agrifoods we have

temporary workers. For example, the silviculture program is done by temporary

workers. You would not have a permanent or the bulk of your employees would

not be permanent around that piece, and the spray program and so on. Off the top

of my head, I think I know the answer to your question, but I have to go back

and check it, because I cannot give you a definitive answer where all that is

coming from.

MS JONES: Yes, well we are looking for the breakdown on the Temporary &

Other Employees. I understand other employees could be people that are called

back every season and so on.

MS DUNDERDALE: Yes.

MS JONES: I understand that. The temporary employees, we want to know how

many of them and for how long they would be in the department and what positions

they would hold, because it is a lot when there is one department that is paying

out $10 million in salaries for temporary and other employees. It is a

significant amount of money.

MS DUNDERDALE: I will have to check that for you, but like I said, in

terms of forestry, in terms of conservation, silviculture, all of those kinds of

things, spray program, all of that work by its very nature is seasonal, and

therefore you would only have temporary employees to do it.

MS JONES: Yes, and it does give me the breakdown, actually, for

silviculture and the amount that is permanent and the amount that is temporary

and the amount that is overtime, but it is only a fraction of what the total

budget is.

MS DUNDERDALE: We have to do an investigation with regard to that. We did

not come prepared with that kind of detail this morning.

MS JONES: Lorraine?

CHAIR: Thank you, Ms Jones.

Any additional information that is provided, if you could channel it through

me, as Chair

MS DUNDERDALE: Absolutely.

CHAIR: and I will pass it to the other members of the Committee then.

Ms Michael.

MS MICHAEL: Thank you, Mr. Chair.

I do not have a lot of questions because a lot has been covered in the

discussion. I will not repeat any questions that I had, because they have been

asked and I do not think I need clarification on much that has been said.

On line items, though, 2.1.01., continuing on there, under the Revenue, could

I have an explanation of the federal revenue? That was the $4.8 million that is

showing there.

MS DUNDERDALE: That is the community trusts.

MS MICHAEL: Pardon?

MS DUNDERDALE: That is the Community Trust funds

MS MICHAEL: That is a Community Trust fund, okay.

MS DUNDERDALE: that we talked about earlier with the Leader of the

Opposition.

MS MICHAEL: Right, you said you would let us know where it was.

MS DUNDERDALE: Yes.

MS MICHAEL: Okay, that is great.

Then, coming down to 2.1.02. Operations and Implementation, 04. Supplies,

there was an over expenditure of $427,900.

MS DUNDERDALE: That variance is due to increased expenditures associated

with the cost of fuel for vehicles, as well as additional costs of outfitting

new and replacement vehicles purchased during the year with tires, winches,

light bars, racks, et cetera, required for operations, so all to do with vehicle

operation.

MS MICHAEL: Which was unexpected, I take it? Well, the cost of fuel, of

course, you cannot bank on that one.

MS DUNDERDALE: Yes, and even when we buy new vehicles or used vehicles

there are still pieces of work that have to be done.

MS MICHAEL: Right. Thank you.

Under Purchased Services, line 06., again an over expenditure of $364,600.

MS DUNDERDALE: Due to higher than anticipated expenditures associated

with vehicle repairs and maintenance, as well as office rental and storage

facilities.

MS MICHAEL: Okay, thank you.

Heading 2.1.03., Silviculture Development, 03. Transportation and

Communications, quite a large over expenditure there, almost double the budgeted

amount.

MS DUNDERDALE: The revised variance is due to internal reallocation of

funds during the year. Allocation of the silviculture budget is done early in

the fiscal year. At that time a number of projects have been certified to

proceed, so some projects proceeded as planned and others do not. Some tendered

projects come in beneath the estimated cost, therefore funds are reallocated

from Purchased Services within the activity, where public tender contracts for

silviculture projects are budgeted, to Transportation and Communications and

Supplies during the year to allow the department to proceed with other

silviculture work that can be performed internally by the department. It is not

having a clear enough picture. By its very nature, you are just not able to get

it all clear, straight, on how you are going to do it, so you reallocate

internally.

MS MICHAEL: That is how you do deal with that on a regular basis every

year?

MS DUNDERDALE: Yes, because you do not know what your tenders are going

to be and you still want to spend your budgeted amount of money on the

silviculture.

MS MICHAEL: Right.

Minister, could you just give us an idea of how the silviculture program is

going in terms of the planting of seedlings and what percentage, on a regular

basis, is being renewed.

MS DUNDERDALE: Yes.

I will let Len or Keith speak to that piece, but we are very lucky in this

Province in that an awful lot of our land has natural reforestation -

MS MICHAEL: Yes.

MS DUNDERDALE: - properties, really high quality of reforestation

ability, so we do not have the same requirement to do silviculture as in other

areas of the country and the world. I will let Keith speak to it.

MR. DEERING: Annually, we have the production of about 13 million

seedlings at our Wooddale facility in Grand Falls. Over the past couple of

years, leading up to last year I should say, we have had a fairly healthy

appetite for programs. We had a correction last year with the Abitibi piece in

that we had to take a year to review the land base, the former Abitibi land

base, to determine what needed to be planted. As a result, we did not have as

many silviculture projects last year.

This year we are anticipating having a full program again. In fact, a lot of

tenders have already been advertised for.

MS MICHAEL: Great.

I am thinking that with the buyback of fibre and these sawmillers who are

going to be looking for that that is going to be a new element for the

reforestation as well, increasing the need.

MS DUNDERDALE: Yes.

MS MICHAEL: Thank you.

Still under 2.1.03., line 04. Supplies, an over expenditure of $404,700.

MS DUNDERDALE: We spent I am sorry.

MS MICHAEL: Line 04. Supplies.

MS DUNDERDALE: It is the same explanation as the last one. It is just

that reallocation internally to maximize our silviculture program.

MS MICHAEL: Right, I thought it might be.

Thank you.

Under line 06. Purchased Services, it is actually an under expenditure last

year a fair bit, $3.4 million.

MS DUNDERDALE: Yes, that was the silviculture program that we had

earmarked for Abitibi that we did not do last year.

MS MICHAEL: Okay, Abitibi, of course.

That is all of my questions on that section.

MS DUNDERDALE: Thank you.

CHAIR: Thank you, Ms Michael.

Ms Jones.

MS JONES: Do you want to move on, Lorraine, or do you want me to -

MS MICHAEL: If we are finished with Forestry, the minister may want to

make a change -

MS DUNDERDALE: We are going to make changes here, so it is just

MS JONES: Oh, no. I have Forestry questions though, I guess.

MS MICHAEL: You go ahead, Yvonne.

MS JONES: I have a couple of questions with regard to the mill in Grand

Falls-Windsor. I am just wondering if there are any plans for that mill at this

stage or what government intends to do with it?

MS DUNDERDALE: Not at this point in time.

MS JONES: Okay. What is the cost right now of maintaining that property

and providing the security, doing all those things that need to be done?

MS DUNDERDALE: I can get you that estimate because we just had it done.

It is the cost of security and some maintenance. I want to say $100,000 a year

but I am not going to go there. I will get you the number.

MS JONES: Okay.

MS DUNDERDALE: We have costed it, but that is basically what it is

costing in security.

MS JONES: Yes. Have you contracted that out for someone to take care of

it or are you just doing it directly?

MS DUNDERDALE: It is being done through the Department of Transportation

and Works.

MS JONES: Okay.

MS DUNDERDALE: What we have tried to do in Grand Falls and anything in

that region, anything associated with the mill we have spent out a significant

amount of money in that area since the mill closed to lessen the impact of the

closure, to do everything we can to diversify the economy and create employment

there.

It certainly makes sense to us when there are employment opportunities

associated around the mill, even with work that we are doing, that we use those

opportunities to help relieve some pressure on the people who are most directly

affected, which were the workers in the mill. Doing it through the Department of

Transportation and Works allows us to do that and we work in co-operation with

the union.

MS JONES:

Section 2.1.05., the Forest Industry Diversification program.

Obviously, the amount of money budgeted last year was not spent. This year

government has allocated another $6.5 million. How many sawmill operators took

advantage of this funding in the Province?

MS DUNDERDALE: Two last year; Holson and Sexton Lumber. Significant

investments; they are two very large integrated sawmilling operations here in

the Province. They employ significant numbers of people. In fact, Holson is now

the pivotal point for the whole forestry industry on the Northern Peninsula.

MS JONES: Yes. Is all that money interest-free loans or is some of it

grant money? How does that work?

MS DUNDERDALE: Some are grants and some are interest-free loans.

MS JONES: So, it is two components. You are considered for the two

components?

MS DUNDERDALE: Yes.

MS JONES: Were there many proposals at all or was that the only proposals

or what?

MS DUNDERDALE: No, we still have proposals. There are a number of

proposals that are under consideration at the moment, ready for sign-off. There

is a healthy interest in the program. You have to have some strength about you

as a company in this industry at the moment if you are going to sustain yourself

and be able to develop a good, strong business plan, but we have had enough of

those applications that we are drawing down this year we will draw down the

whole fund that we have available.

MS JONES: The proposal that came forward from Deer Lake, I think that was

probably a year ago, maybe even two years ago now, and they were talking about

the super mill concept. Did that ever get funded, or is it off the table?

MS DUNDERDALE: She withdrew -

MS JONES: Okay.

MS DUNDERDALE: - but that proposal has been on and off the table for a

significant amount of time, much longer than a year.

MS JONES: What is happening with the proposal submission for Labrador,

the one that the Innu were involved in? Has that been approved, finalized? I

know that there was another call for proposals, so I am not sure where it went.

MS DUNDERDALE: We went out two years ago, or three years ago on an

expression of interest for development of forestry in Labrador. We had three

proposals back under the expression of interest. We looked at them all. We took

one of the proposals that seemed to be the most solid of the three from a number

of different perspectives, and we asked which one was the Innu proposal. We

asked the Innu who had submitted that proposal then to go back and develop a

business plan because until you get the business plan you would not make a final

decision.

The business plan that came back in did not in any way reflect what had been

proposed under the EOI. Just on the basis of fairness, you would not be able to

accept that proposal. It would not be fair to the other proponents. So, given

that, we went back to an expression of interest call again, that closed a month

or more ago and we have two proposals coming in under that EOI. The committee is

reviewing it and a recommendation will be made to me in due course.

MS JONES: Okay.

In January of last year, you announced that you were retaining a market

consultant to develop a market strategy for the sawmilling industry. Was that

ever completed? Where is it, or was it released? I have no idea; I just have not

seen it myself.

MR. DEERING: Keith Deering. We had retained a consultant, Laue Guay, out

of Quebec to craft a piece of work for us and the second step to that process

now is that the department is crafting a strategy around the consultant's report

and I guess at this point we are in the very final stages of completing our

strategy, at which point both documents will be released.

MS JONES: Any idea when that is going to be?

MR. DEERING: I would have liked to have thought that we would have been

ready to do that right now. I am thinking that within the next couple of weeks

we will be finished our piece, at which point we will undertake a review of the

executive level of that. That is the internal strategy.

MS JONES: Okay. It is interesting you are taking advice from consultants

in Quebec on the forest industry, but anyway.

On the forest management plan, I think you guys talked about having it

implemented by 2011. I am just wondering where that is right now, what has been

happening with that, and have you finished all the consultations and so on?

MR. DEERING: I am just looking for clarification, for which plan was

that?

MS JONES: I am not sure; I do not have it here. How many were you doing?

MR. DEERING: We are currently undertaking a process for -

MS JONES: This was a five-year forestry plan.

MR. DEERING: Yes, we are currently undertaking a process for districts

ten, eleven and twelve.

MS DUNDERDALE: Just for a point of clarification, we do a five-year plan

for every forestry district in the Province.

MS JONES: Yes. I guess that is -

MS DUNDERDALE: So, a number of them, they all do not come due at the same

time. There is a forestry management plan always in the works, you could say,

for somewhere in the Province at any given time.

MR. DEERING: Last year we would have completed plans for districts

fifteen and sixteen on the Province's West Coast. We would have submitted a plan

for district twenty, which is Cartwright. That plan was released a couple of

weeks ago from environmental assessment. We are currently undertaking a process

right now for districts ten, eleven and twelve in Central Newfoundland and we

expect to have a plan implemented for those districts on January 1, 2011.

MS JONES: When you do these plans, do you do consultation with commercial

permit holders and others that are actively involved in the industry or do you

just consult with certain specific groups? How does that work?

MS DUNDERDALE: Anybody who wants to participate in our consultation

process has the opportunity to do so. There are various notices sent out to the

municipality, they are published in the paper. We welcome public comment and

involvement in every stage of the process.

MS JONES: Okay.

Minister, you opened up a number of new areas to harvest fuel wood on lands

that were formally licensed by Abitibi Bowater. What was the take up on that?

MS DUNDERDALE: As far as I know, very good. These people traditionally

harvested domestic wood off there in any case. So, this was not new. Abitibi

traditionally allowed this kind of harvesting on their lands. We have tried to

keep everything whole and not see any of our own people, or other operations

outside of the pulp and paper industry negatively impacted in any kind of a way.

So, we have allowed that tradition to continue.

MS JONES: Okay.

I am finished with the forestry sector.

CHAIR: Okay.

Ms Michael, do you have any further questions on the forestry sector?

MS MICHAEL: No.

CHAIR: Okay.

We will move into the Agrifoods sector now.

Ms Jones.

MS JONES: Do you want to go, Lorraine?

CHAIR: Ms Michael.

MS MICHAEL: Thank you very much, Mr. Chair.

First of all, line items, under 3.2.01., Salaries was overspent last year by

$206,000 and I notice that the estimate for this year is back down to more or

less last years. What happened last year that required that increase?

MS DUNDERDALE: Is it 3.1.01.?

MS MICHAEL: 3.2.01., and then 01. Salaries.

MS DUNDERDALE: Okay, sorry.

3.2.01., okay. In terms of the variance in 2009-2010, it was higher than

anticipated salary expenditures associated with temporary and seasonal positions

required for the operation of the seed potato farm. We have the variance coming

forward for the new budget for the 4 per cent increase for next year in

Salaries, as well as removal of the twenty-seventh pay period, as was required

in 2009-2010.

MS MICHAEL: Yes, that one I understand because it is actually just about

the same as this year. It is only $7,000 variance.

MS DUNDERDALE: Yes.

MS MICHAEL: So the $206,000 then was all towards temporary and seasonal

positions with regard to

MS DUNDERDALE: Seasonal employees all associated with the seed potato

farm.

MS MICHAEL: Could you tell me about the seed potato farm, please?

MR. WHALEN: Jeff Whalen. It is the research that we have in Glenwood,

where we basically try different varieties of potatoes for Atlantic Canada,

particularly for Newfoundland. Those potatoes then, once we do the research, go

out to seed producers in the Province to produce seed.

MS MICHAEL: Very good. I think this is the first time I have heard about

it, actually. This is owned by the government and run by the department.

MR. WHALEN: Yes.

MS MICHAEL: Very good. How does it work? Do farmers apply to get the seed

potatoes or do you seek them out? I am just curious.

MR. WHALEN: What we do, basically, we try different varieties and we give

certain varieties out to seed producers to try. So we do the research on the

farms as well, plus we have the producers do research.

MS MICHAEL: Okay. I am just wondering why you had such an unexpected

increase last year if this is an ongoing program.

MR. WHALEN: The reason for the potato seed farm variance, basically, is

in previous years the potato seed farm was funded underneath a cost-shared

agreement which could not come forward this past year. So there lies the

variance with the potato seed farm.

MS MICHAEL: You hope for next year that the cost sharing will happen.

MR. WHALEN: We hope to put the potato seed farm underneath our Research

and Development program.

MS MICHAEL: Okay. That sounds like a logical place to have it actually.

Thank you very much.

Line 10., Grants and Subsidies, there was quite an under expenditure last

year and the Budget is also down quite a bit this year from last year's estimate

as well. Could I have some explanation of what is happening there?

MS DUNDERDALE: All of that had to do with the Aleutian Disease response

in the mink industry. We did not have the expected draw down on funds and the

disease seems to be better managed now. We have other funding available and so

on, so it is not required to bring forward under this heading.

MS MICHAEL: Okay, and that is all related to the Aleutian Disease?

MS DUNDERDALE: All of it.

MS MICHAEL: Okay, great.

Thank you very much, Minister.

Under the Marketing Board, just one line item, not a major one, 3.2.02., line

05., underspent by $50,000. It looks like you just keep $70,000 on that line for

Professional Services?

MS DUNDERDALE: Yes, and that is per diem expenditures underspending of

per diem by marketing board members.

MS MICHAEL: That is a nice one to hear.

MS DUNDERDALE: It is.

MS MICHAEL: 3.3.01, Agricultural Business Development Administration.

It is not a major one, but since it is marked, I will ask. Line 07. Property,

Furnishings and Equipment, you had a small over expenditure there.

MS DUNDERDALE: The over expenditure was due to the purchase of a display

booth for the division, as well as the upgrading of a fax machine and

photocopier.

MS MICHAEL: Okay. Thank you very much.

3.3.02., agribusiness - none of these are major, actually. I am not even

going to ask about them, they are pretty minor in terms of expenditures.

Let us come to 3.3.04., please, which is the Agriculture and Agrifoods

Development Fund. It is only one line, of course, the Grants and Subsidies.

Budgeted last year at $4 million, with a big under expenditure, and this year

the budget is down by just over a million.

MS DUNDERDALE: That is our very large project development fund. So, your

project has to be $1 million or less to qualify for this program. It is the same

program we use for the expansions to Central Dairies, Brookfield Ice Cream, and

the egg grading facility out in Roaches Line, for the making of cheese,

specialty ice creams and so on. So these are very, very large projects. They

require a great deal of analysis and so on before you do approval.

We find that fund has pretty much hit its mark, and we are making some

changes now. Instead of $1 million - the value of the project - we are moving it

now to $500,000, so we are able to go out to the next layer in the industry and

help them grow and expand and really try to get into some secondary development

of their products here in the Province.

MS MICHAEL: Right.

Who would you anticipate would do the take-up on that? You have $3 million,

so let's say if you had $500,000 projects come in or proposals come in, where

would you see it coming from?

MS DUNDERDALE: Jeff can speak to it more fully than I, but we have

opportunity here in the Province. Most people do not realize we have some of the

largest dairy farms in the country here in Newfoundland and Labrador. What we

want to be able to do in those areas, as well as others, in agriculture, again,

is maximize opportunities on secondary processing.

MR. WHALEN: Basically, all the small to medium companies the medium

companies would be companies such as mink producers; you would get the poultry

industry. These types of companies would basically avail of the $500,000 or

less.

MS MICHAEL: Okay, thank you.

I am just going back and forth between questions I have over here, along with

the line, to make sure I am covering everything. Under 3.3.05., the Growing

Forward Framework, line 01. Salaries, you must have had some unfilled positions

last year, did you?

MS DUNDERDALE: Late recruitments and vacancies.

MS MICHAEL: Late recruitments, yes.

Under Grants and Subsidies, the spending was down by $1.97 million last year,

and the budget is going up this year, so if I could have an explanation on both

sides.

MS DUNDERDALE: That is the negotiation of the Growing Forward agreement.

It was late getting approved last year, so on a go-forward basis there will be a

bigger drawdown on those funds.

MS MICHAEL: Okay, because of the late approval last year.

Last year you talked about the frustration of negotiating it, so this year

I am just noticing the notes. So you are not as frustrated this year, I take it?

MS DUNDERDALE: Well, I am not in the midst of negotiating an agreement.

MS MICHAEL: That is right.

MS DUNDERDALE: It is a very frustrating process, because as you well

know, when you look at Ontario, Alberta, Saskatchewan, Manitoba, B.C., and the

size of the agriculture industry in those provinces, that most of the federal

government response in the Growing Forward Program is targeted towards them. We

have a very small industry here. It is very important to us and very important

in terms of food security for us, where we are paying a whole lot more

attention, but it is worth a Farm Gate Sales of around $500 million a year.

Given the design of the federal program, because our industry is so small, we

miss all of the criteria. Trying to develop an appreciation and an understanding

for that at the federal government level to say to be fair to everybody and to

be fair to us, you have to treat us differently; that is an argument that we are

very familiar with.

MS MICHAEL: Right.

MS DUNDERDALE: Trying to maintain some success in doing that - and the

most frustrating part of last year was using all our energy in trying to fight

for what we had and keep what we had. It would have been really good if we had

been able to use some of that energy to try to get more.

I am putting a sustained effort with our Atlantic counterparts, whose

industries are also much bigger than ours, to develop an appreciation for that

point of view so that we have some kind of support when we go forward. That is

one of the challenges of doing this kind of business in the country. You are all

together at breakfast, by 11:00 o'clock in the morning everybody is looking out

their own best interest, and it can be a very frustrating process.

MS MICHAEL: Thank you, Minister.

Two things, one is just an update on the cranberry industry, how is that

going?

MS DUNDERDALE: It is going very well, and I will ask Jeff to give you a

full report. We did not have the take-up that we expected last year, but there

is a very keen interest and everything about this industry bodes very well for

us.

MR. WHALEN: The cranberry industry, as the minister said, is going really

well. We did not have the up-take in our program because the federal government

came out with a cranberry program as well for Central Newfoundland and the

cost-sharing ratio was much better than what ours was. It was late in the year

starting, so this year we are expecting ours to really take off. There are

several producers; I think it is ten in Central Newfoundland plus the five we

have outside of Central Newfoundland, of the East and West Coast. It is going

really well. Production is really high.

MS MICHAEL: Has the Province changed its cost-sharing ratio -

MR. WHALEN: No.

MS MICHAEL: - to be competitive with the federal?

MS DUNDERDALE: Not at this point in time. We also bring other things to

the table in terms of preparation of the land. It takes approximately $30,000 to

prepare an acre of bog for production, and the provincial government absorbs all

of the cost of that.

MS MICHAEL: Okay.

Another general question under Research and Development - it is not a line

item just a general question. Is the department involved at all with any groups

with regard to research with regard to organic farming in the Province?

MS DUNDERDALE: Jeff.

MR. WHALEN: None to this date. We are looking at basically using that

program to cost-share with the federal government as well to make a much larger

program and invite interested parties to come forward. So, organic farming would

be a part of that process.

MS MICHAEL: If somebody comes forward?

MR. WHALEN: Yes.

MS MICHAEL: It is all based on that, somebody coming forward?

MR. WHALEN: In the new process it will be, yes.

MS MICHAEL: It will be?

MR. WHALEN: Yes.

MS MICHAEL: Okay.

What was it in the old process?

MR. WHALEN: The old process, basically staff met with producers,

different industry groups and they would suggest research ideas, the priorities

that they would want. The organic industry in this Province is very, very small.

MS MICHAEL: Yes.

Even though you need the request to come from the other side, will you be

doing some advertising around that and getting that word out? I know the

industry is very small, so maybe the word is out already.

MS DUNDERDALE: We work very closely with the industry, with the

Federation of Agriculture.

MS MICHAEL: Right.

MS DUNDERDALE: There is almost a daily interaction with our department. I

meet with the association on a regular basis, so we have very good communication

between the organization and government.

MS MICHAEL: That is good to hear.

Thank you. I do not think I have any more questions in agrifoods and

agribusiness.

CHAIR: Thank you, Ms Michael.

Ms Jones.

MS JONES: Just to pick up on the organic piece, didn't you guys give a

grant or something to a local company - ACORN or someone like that,

ACORN-Newfoundland and Labrador or something - to do some training or something

in the organic farming piece? I thought I saw that in a press release or

somewhere.

MR. WHALEN: Jeff Whalen.

I cannot recall. ACORN is a company in Atlantic Canada and in Ontario as

well. We may have gotten them in to do some training for organic producers, but

I cannot recall.

MS JONES: Okay, that is what it was then. They were just training

producers in this Province.

section 3.1.02., Limestone Sales, is limestone being bought in the

Province now or are you buying it outside and bringing it in, or what is the

story on that?

MS DUNDERDALE: No, it only did for a very short period when one company

went down. We had to, as a stock measure for farmers, bring in some limestone.

There is another company up and operational on the West Coast, that is where our

limestone is obtained.

MS JONES: Okay.

The subsidy was down last year. I guess that was because the take-up by the

farmers was down, was it?

MS DUNDERDALE: Yes.

MS JONES: Okay.

section 3.2.01., to deal with the Aleutian Disease, I guess, with the mink

farmers and so on. I know you said the amount of money that you budgeted was

down because you did not have to do as much cleanup or there was not as much

take-up or whatever, but have all the farms now that were infected, have they

all been cleaned up? Is that piece finished or not?

MR. WHALEN: Jeff Whalen.

All of the large producers that availed of the program, yes, are cleaned up.

MS JONES: Are all of those farms still in operation? Did any of them have

to close up or anything like that?

MR. WHALEN: I cannot recall any farm any mink producer that closed

up.

MS JONES: Due to the Aleutian Disease?

MR. WHALEN: Due to Aleutian Disease.

MS JONES: Is there a different process in place now in the Province for

checking for that disease before the transfer of animals or anything of that

nature?

MS DUNDERDALE: To the best of our tests - and the testing is pretty good

- animals are Aleutian-free when they come into the Province, unless it came on

the cage.

Anecdotally, the information we have received is that there were mink

industries here back in the 1950s and people described a disease that sounds

very much like Aleutian Disease that took hold of animals in those farms at the

time. A lot of those animals were released into the wild. While very limited

testing was done on mink in the Province prior to the industry being established

here, in the animals they found, they did not find any kind of Aleutian Disease.

We suspect that the disease has been here and here since the 1950s. That is

confirmed, to some degree, by the fact that the type of Aleutian Disease that we

had to deal with here several years ago has not been found anywhere else in the

world, it is particular to Newfoundland and Labrador. It would substantiate or

give a lot of credence to the anecdotal information we have about we thought we

were Aleutian-free, but that was not quite the circumstance.

MS JONES: Okay. Are there any court cases against the Province as a

result of the Aleutian Disease?

MS DUNDERDALE: Not that I am aware of.

MS JONES: Okay. Just to go back as well to

section 3.1.04., with regard

to the acquisition of land, how much farmland under the Agricultural Land

Consolidation Program has been acquired by the government right now and how much

of that has been leased out?

MR. WHALEN: Jeff Whalen. Do you want to know what was purchased last year

or over the life of the program?

MS JONES: I would like to have it over the life of the program.

MR. WHALEN: Over the life of the program it is roughly between 1,400 and

1,500 acres. All that land usually is reallocated to producers. We are in the

final stages now basically of reallocating the last land that we purchased last

year back to producers. The committee met, and I guess it will be in the next

few weeks, it will be reallocated to producers. Last year, it would have been

somewhere in the range of about 100 to 150 acres.

MS JONES: There is no shortage of demand I would think, is there, for

land?

MR. WHALEN: For land? No, absolutely not. We cannot purchase enough land

for what is required.

MS JONES: Yes. Okay.

Under 3.3.04., I think this is where this falls, the Agriculture Development

Fund. I am just wondering, what large-scale initiative would have taken place

under that fund last year? That is the money that is used to stimulate and

attract large-scale investments in agriculture and agrifoods.

MS DUNDERDALE: Yes, the large project last year was the one we announced

with regard to the dairy farms and dairy farmers and the production of pasture

land here in the Province. The number one priority for them and very

well-received, I must say. They were absolutely delighted because it is a big

pressure on them to find proper pasture for their animals. As I said earlier, we

have a big dairy industry in this Province. We have some of the largest dairy

farms in the country, in fact, here in the Province.

MS JONES: How many dairy farms do we have in Newfoundland and Labrador?

MR. WHALEN: Jeff Whalen. There are thirty-eight quotas and approximately

thirty-six farms, because you can have quotas on different farms but there are

thirty-six farms.

MS JONES: Wow. Were there many people who made application, many farmers,

under this program last year?

MR. WHALEN: This program basically - we went through the Dairy Farmers of

Newfoundland and Labrador, that is who we basically ran this program through,

and then the individual farmers would go through their association to clear

land. So it is pretty well - most of the producers would have gone through their

association.

MS JONES: Okay.

MR. WHALEN: The contract was between government and the Dairy Farmers of

Newfoundland and Labrador Association.

MS JONES: Yes. Do you have any stats, Jeff, on the number of new entrants

in the agriculture industry over the last number of years? There have been a lot

of incentive programs, both federally and provincially. I do not know if there

are a lot of new people going in or if there are lot of people expanding or

developing different scopes of industry.

MR. WHALEN: Two years ago there were two new entrants brought into the

industry. The Dairy Farmers of Newfoundland and Labrador Association, they

advertised for new entrants. There were two, two years ago; there were two this

past year this current year, actually. So, it is four over this past two

years.

MS JONES: That is overall or just the dairy?

MR. WHALEN: That is just the dairy, new.

MS JONES: Okay. What about overall in the agriculture sector?

MR. WHALEN: Of producers in the Province?

MS JONES: Yes.

MR. WHALEN: New entrants? I would expect that it is pretty well stable,

or actually a little declined. It seems all across Canada the agricultural

producers, age-wise, are getting older all across Canada. The average age being

fifty-seven, and we are trying to basically put in new entrance programs to get

new entrants back into the as in other provinces into the industry.

MS JONES: Okay.

What are the egg production levels like in the Province now? I know back

years ago there were something like thirty or forty different quotas of egg

producers and I think today we have what? I don't know, four, six, or something

in the Province? I am just wondering, has that affected the production levels

and the overall quotas in the Province?

MR. WHALEN: You are asking: Has the quota level changed in the Province,

in eggs?

MS JONES: Yes, for egg production.

MR. WHALEN: No. What has happened, basically, is the number of producers

in eggs has gone down, but one large producer, basically, purchased that quota.

So, the quota stays the same.

MS JONES: Okay, that is what I was wondering.

There are a lot of grants and subsidies in the agriculture estimates for the

department. Can we get a breakdown of all the grants and subsidies that are

given out on an annual basis?

MS DUNDERDALE: Yes.

MS JONES: Yes, okay.

The only other question that I have is on you guys were doing something

with the forestry building. I am not sure if it was a new building - and I am

trying to remember because I forgot when I was doing the Forestry

section - in

Lewisporte and Winterland.

MS DUNDERDALE: Yes.

MS JONES: Did that get completed?

MS DUNDERDALE: They are done.

MS JONES: Okay. Were you doing something as well in Port Hope Simpson and

Roddickton?

MS DUNDERDALE: We are doing something in Roddickton. I do not know about

Port Hope Simpson.

MR. DEERING: We had crafted a proposal to add on to the building in Port

Hope Simpson, but again, it fell short of the priority in Roddickton.

MS JONES: Yes, okay.

Is it going to be done any time soon, because there is not enough room in the

building for the people who are there? I think they sit in the truck and take

turns using the office. I am serious, it is really filled up. It is just a small

place.

MR. DEERING: Yes, it is a small place and a lot of people there, no

question. I do no think the priority list has been completed for this years work

yet. Transportation and Works will usually have some influence over the final

list.

MS JONES: Okay. Would there be money in the Budget to do that? Wouldn't

those priorities be decided for this year? It is just an overall budget, or

what?

MS DUNDERDALE: There has been no money allocated this year that I am

aware of, for work in Port Hope Simpson.

MS JONES: Okay, just Roddickton.

MS DUNDERDALE: Roddickton.

MS JONES: Was there any other places where there is work committed for

this year?

MS DUNDERDALE: No. I think Roddickton is the only place that is in the

Budget for this year.

MS JONES: Okay. I do have one more question.

In the overall Estimates for Agrifoods, this year there is $23,487,400. In

2008-2009 this Budget was $33 million. It is down $10 million in two years. I

would like to know why that is overall, where the big shift in estimates and

expenditure came from.

MS DUNDERDALE: The Aleutian Disease program would have been a significant

piece of that.

Can you show us were you are seeing that?

MS JONES: Yes. If you look on page 163 of the Estimates book it gives you

the Total for Agrifoods Development, and the total money that you are voting to

spend this year is a little over $23 million, but if you go back to 2008-2009

Budget, in 2008-2009 you had budgeted $33 million in that year as the overall

estimate for Agrifoods. You did not spend all of that but that is what you

budgeted. I am just wondering where the shift in the budget for that sector

would have been over the last two years? If you do not have it now, you can get

it for me.

MS DUNDERDALE: We will have to go back and check the numbers because - in

fact, money has been increased to the department, not lessened. So we have to

see where it is allocated and so on.

The only thing I can tell you that would have been in the program that is not

in the program now is the Aleutian Disease Program. It is not in this year's

Budget, and that was $5.4 million over two years. I will have to go back and

check the rest of it because there have been no cuts to the department.

MS JONES: Yes, and that is not what you spent. It is what was budgeted,

right?

MS DUNDERDALE: Yes.

MS JONES: Expenditure was different. Yes, okay.

MS DUNDERDALE: Yes, and the expenditure will be different from year over

year because, as I said throughout the whole piece, there are different draw

downs. You make money available, but it depends on where businesses are, in

terms of their own planning and whether or not they feel they have the capacity

or want to at this point draw down those funds from those programs. So, you have

no control over those pieces, but in terms of the Agrifoods branch, there has

been no trimming of their budget whatsoever, none. It would have to be

associated with one-time funding or that it is not required at this point in

time because our base budgets have not been touched. In fact, we put more money

into agriculture in this Province than the federal government does, and we are

the sole Province who finds ourselves in that position.

MS JONES: Yes, I am finished that

section now.

CHAIR: Okay. Before we move into the Mineral Resource section, I guess

you need to -

MS DUNDERDALE: Yes, we will do a change up.

CHAIR: change some of the officials around now.

MS DUNDERDALE: We are ready again, Mr. Chair, and I will introduce the

people who have joined me in the front row here.

CHAIR: Okay.

MS DUNDERDALE: My Deputy Minister of Mines and Energy, Robert Thompson,

and I will ask Robert to introduce the ADM.

MR. THOMPSON: Thank you.

To my left is Pierre Tobin, Associate Deputy Minister for Energy, and to his

left is Dick Wardle, Assistant Deputy Minister for Mines.

CHAIR: Thank you.

Ms Michael.

MS MICHAEL: Thank you very much, Mr. Chair.

We will start with some line items; 4.1.01. Geological Survey, and line 03.

Transportation and Communications. I know particularly the increase this year of

$235,000 more or less. What are you anticipating this year?

MS DUNDERDALE: I am going to ask Richard Wardle to take us through both

pieces.

MR. WARDLE: That increase was due to higher than anticipated expenditures

associated with travel and transportation, mainly chartered aircraft and

helicopter time to support field operations.

MS MICHAEL: Okay, that was the revision from this year. I actually did

not ask about the revision, but thank you. I am looking particularly at the

$235,000 more that is estimated for this year's budget over last year's budget.

MR. WARDLE: Okay. A reallocation of funds from Purchased Services to meet

higher operational needs anticipated for this year.

MS MICHAEL: Okay. I guess there is going to be more activity this year in

the industry. Is that why you are anticipating higher needs there?

MR. WARDLE: Primarily, it will be a location of field programs. If we

have more programs in Labrador there is a higher fixed wing aircraft component

and higher costs.

MS MICHAEL: Okay. Thank you very much.

I think the reallocation then that you have just mentioned probably explains

lines 06., Purchased Services, which is going to be down by $238,000. I presume

that is the reallocation?

MR. WARDLE: (Inaudible) to meet different operational needs this coming

summer.

MS MICHAEL: Right. Okay, thank you.

Under Mineral Lands, line 01. Salaries, last year the revision was $189,600

over the budget. It looks like that amount of money is not expected this year. I

am just wondering what the overexpenditure was about?

MS DUNDERDALE: Overtime (inaudible) employee expenses associated with

quarry inspections, field work for core collections, field operations of the

core storage program and field inspections of mineral exploration sites and

mining lease boundaries. Increased expenditures also were incurred during the

year related to the reclassifications for several quarry inspectors.

MS MICHAEL: Okay. Thank you, Minister.

Line item 05. Professional Services, the expenditure was $45,000 over what

was expected. It looks like you do not usually expect much in professional

services there - 05.

MS DUNDERDALE: That higher than anticipated expenditure is related to the

Mineral Adjudication Board. That is associated with several hearings related to

grievances under the Mineral Act that are being heard.

MS MICHAEL: Okay, thank you.

I will just keep going; I have some more line items. 4.1.03.01., Salaries,

once again the Budget this year is no I am sorry, I had my columns mixed up.

The revised budget last year was $185,000 less than the estimated budget. What

happened there?

MS DUNDERDALE: We had two vacant mineral development engineer positions

within the division during the year.

MS MICHAEL: Are they filled now?

MS DUNDERDALE: Are they filled?

OFFICIAL: Yes, one of the positions was filled (inaudible).

MS MICHAEL: Okay, thank you.

MS DUNDERDALE: It is difficult to keep our positions. We have a mines

division within the department that is really top drawer, so we receive high

praise for the work in that part of the department. Of course, when you do your

work really well, people are well aware of it and there are opportunities

outside of government. It is a constant challenge.

MS MICHAEL: Competition with industry which pays higher.

MS DUNDERDALE: Pay higher wages, so it is a constant challenge trying to

keep these positions filled.

MS MICHAEL: Right. Thank you.

Under line 05. in the same section, Professional Services, I am looking

particularly at the variance between last year's budget and the projected budget

for this year, and the variance is $1.7 million. What are you expecting in

Professional Services that would bring it up that much more this year?

MS DUNDERDALE: This is the whole piece of scoping work we are going to do

in Labrador around Julienne Lake, which is a very large deposit.

MS MICHAEL: Okay.

MS DUNDERDALE: Before we put those lands up for exploration we would like

to have a better idea of what is contained within, how large a deposit this is,

what the quality of the ore is and so on. It goes hand in hand with what we are

doing in terms of the development of the mineral strategy. It just makes the

work of ensuring that we are being good stewards of the natural resources of the

Province for the people. We are doing that work properly. So, when people come

to bid and we go to negotiate the kind of industrial benefits that go with

developments, that we have a really good understanding ourselves of what it is

we are talking about and dealing with.

MS MICHAEL: Okay. That makes sense.

Under Purchased Services - this might be related - which is the next line,

06., once again the variance between last year's Budget and this year's Estimate

is $1.8 million.

MS DUNDERDALE: The variance between last year and this year or the

projected?

MS MICHAEL: No, last year's budget and this year's estimate.

MS DUNDERDALE: And the variance?

MS MICHAEL: Yes, the variance.

MS DUNDERDALE: That had to do with less than anticipated expenditures

with the Baie Verte and Rambler Mine rehab program. We had planned to do a piece

of work in one year but found that if we moved it on to the second year and

bundled it with other work that we were doing that we could really lower the

cost. So, we did that. We had the same amount of work done and fulfilled our

obligations there but were able to do it at savings by delaying it and bundling

it.

MS MICHAEL: Okay.

Obviously, with that one out of the way you are estimating less money this

year than you had budgeted last year.

MS DUNDERDALE: That one is for the Buchans tailings dam - $5 million

there.

MS MICHAEL: Is that all of it?

MS DUNDERDALE: All of that is going to Buchans.

MS MICHAEL: To Buchans. Okay, thank you.

I have some general questions. With regard to the Mineral Incentive Program,

you are into the third year of funding this year, I think, for the Mineral

Incentive Program. Things certainly were not great last year, but what are you

projections for this year, especially with some of the projects you have in mind

yourself, like the Julienne Lake? What are your future hopes?

MS DUNDERDALE: Well, the activity is starting to pick up again, and we

are happy about that, as prices rebound worldwide. In terms of the Mineral

Incentive Program, this is a program that is drawn down by junior explorers

MS MICHAEL: Yes.

MS DUNDERDALE: and so on, who go out in the field and do that kind of

work. Exploration is critical to development in that industry. So, we do

everything we can to encourage that kind of work to continue, which is the

reason why we increased the program. It is a little less than that this year,

but expectations are good.

MS MICHAEL: How does exploration on the Island compare with exploration

in Labrador?

MS DUNDERDALE: We have pretty robust exploration right throughout the

Island and on the mainland, but the bulk of the work, I understand is Dick,

you can speak to it.

MR. WARDLE: Over the past two years the bulk of the exploration work has

been in Labrador. A lot of it was targeted at uranium, but with the onset of the

recession, interest has switched very much to gold. So, we are seeing a relative

increase in exploration on the Island because the Island has the greater gold

potential perhaps of the two areas.

MS MICHAEL: Right. I think the cost of gold just went up again.

MR. WARDLE: I am sorry?

MS MICHAEL: I think the cost of gold just went up again, too.

MR. WARDLE: Yes.

MS MICHAEL: I think I heard that this morning on the radio.

This is more of an internal question, Minister: How is the work with OCIO

going to develop and launch the on-line approval of mineral exploration, or is

that fully in place now?

MS DUNDERDALE: We have done quite a bit of work in terms of technology

and innovation in technology, and have received awards for it, in fact. You can

now stake a claim in this Province from anywhere in the world, I guess, if you

have access to a computer. We are putting all of our geoscience we are moving

to put all of that on-line, our staking system is on-line. So, we are trying to

do everything we can to make information available, and to make access as easily

available as the information. So, we are having a great deal of success with

that and doing groundbreaking things here in the Province, which is always good.

MS MICHAEL: Thank you.

I think that is all the questions I have, Mr. Chair, on that section.

CHAIR: Thank you, Ms Michael.

Ms Jones.

MS JONES: Thank you.

I have some questions under

section 4.1.03. Just to pick up on the Julienne

Lake project, the mineral assessment that government is doing there, is this

something new for government or is it something that has been done in the past?

MS DUNDERDALE: This is something completely new for government.

MS JONES: Is there any reason why the Province would be doing this as

opposed to the mineral claimholders in that deposit area?

MS DUNDERDALE: Well, normally, in the past, that work has always been

left to explorers and developers, and we always have not had a good idea of what

it is that we are dealing with. In the energy sector, we developed the Energy

Plan and everybody understood why that was a really good thing to do. There were

calls for it for quite some time. and it had been worked on by your former

Administration and then ours. It took some time to complete, so it was to have a

really good understanding of what was involved in terms of the resources

available to us around energy and what the principles were going to be in terms

of development of those resources.

We are doing the same thing now with the mineral piece and that has been

really well received. Some of this piece is we have an opportunity here to

understand more fully what it is we know about Julienne Lake and we know that

it is a very large resource within Labrador. We would like to know more about it

before we actually put it out for permitting or development. To do that in

context with the development of a mineral strategy for us makes good sense

that we develop both things at the same time. We will see where we are at the

end of our mineral strategy in terms of how we approach the development of large

scale projects like Julienne Lake.

MS JONES: Is this going to be a normal practice now for the department?

Are there any other assessments going on or is this the only one?

MS DUNDERDALE: This is the only one ongoing at the time, and this is a

pilot project for us. In what we do in the future, it will be very much driven

by what we find out in the Julienne Lake piece as well as the development of the

mineral strategy.

MS JONES: Are there any mineral claims held in that area?

MS DUNDERDALE: No, not on Julienne Lake.

MR. WARDLE: Dick Wardle.

The Julienne Lake property belongs to the Crown, but there are areas around

it that are privately held. They have been staked in the same way that you would

stake any other area of the Province.

MS JONES: How are they affected by this or are they not affected at all?

MR. WARDLE: I am sorry who

MS JONES: The work you are doing is not in any of the areas that they

would have had mineral claims right?

MR. WARDLE: No.

MS JONES: Okay.

On Vale Inco, I am just wondering if you can give us an update on Long

Harbour. In the last few weeks I have had a couple of calls about contracts

going outside the Province that was bid on by in-province companies that had the

expertise to do the work. They are obviously not pleased by the fact that they

are not getting it, that it is going outside. I am wondering if you are aware of

that, I am sure you are and if there is anything that can be done about it.

MS DUNDERDALE: Very aware of the issues around and we have been very

aware from the beginning in terms of the initial debate around the development

of the project here in the Province and what kind of benefits we are going to

accrue to the Province.

Under the original contract, the only proviso around contracting to companies

and to the labour force here in the Province was full and fair opportunity; that

is all. When we were able to amend the agreement last year as a result of Vale

Inco failing to have their development plan ready for submission on time, we

were able to negotiate 8.9 million hours of labour that had to be performed here

in the Province. Out of that over 400,000 of those hours had to be in

engineering. We were able to negotiate that last year. That was the first time

in that agreement that you had firm commitment to employment here in the

Province.

We have put in place a number of mechanisms to ensure that we monitor them

very carefully. We have an engineer who goes in and does regular checks. That is

done on a scheduled timetable. We also monitor the full and fair opportunity

with regard to companies bidding for the work.

Having access and adjacency are important components in the full and fair

opportunity, but at the same time the lowest bid also has an important role, or

the lowest bid that meets all of the benchmarks that they have set out also

plays an important role. Every time that a complaint has been registered with

our government we have gone directly back to Vale, sat with them, questioned

their rationale. We have sat with the companies ourselves. We have arranged

meetings between Vale and the companies and we have also acted as a facilitator

in terms of the exchange of information.

Complaints have been raised about the capacity to do the work. There have

been issues around bundling. We have addressed those because they are important

from our perspective to ensure that the work is not bundled in such a way that

shuts out our people, but at the same time some bundling is required because it

has to make economic sense for the company as well. So, we are working hard to

make sure that that balance is maintained, but do we have a mechanism within the

agreement other than the 8.9 million hours to say to Vale Inco you must do this

work here in Newfoundland and Labrador? No, it was never negotiated, ever.

We have found so far in all of our investigations, which we spend a fair

amount of time on, that there is no indication at all that we could find that

Vale Inco is not operating within the terms of the agreement and the spirit of

the agreement. When contracts have been lost there have been significant

differences between the bidders, huge differences in fact.

MS JONES: Can you tell me what is happening with the mining operation in

Voisey's Bay, if they are preparing to go underground with the operation and

what the time frame is around that?

MS DUNDERDALE: It is an issue that we continue to press with them on a

regular basis. We very much want to see underground mining in Voisey's Bay and

the maximization of the resource that is there. In terms of their commitments

under, again, their agreement on Voisey's Bay, they have met all of their

requirements, over expended the amount of money that they committed in the

agreement to spend on the development of underground mining. They continue to do

pieces of work, and they have an engineering study that is due when is it,

next year?

OFFICIAL: 2011.

MS DUNDERDALE: in 2011, that might give us some indication where they

are headed. We continue to apply a great deal of pressure around this issue with

the company because it is very important to us.

MS JONES: On the new mines in Labrador, the Thompson mine and the

Labrador Iron Mines, I know the finds are on the Labrador side of the

Schefferville-Labrador border, what, if any, production is going to be done in

Labrador around those mining operations?

MS DUNDERDALE: This is a long negotiation that went on around these

projects. Under the environmental assessment, we negotiated a number of benefits

to the people of the Province. So I will let Dick take you through it.

MR. WARDLE: Labrador Iron Mines will be a completely Labrador-based

production. It will start off with about a million tons and build to somewhere

in the region of three to four million tons over the next few years.

I believe you referred to Consolidated Thompson? Their mine is actually in

Quebec. It is the Bloom Lake Mine. The only development in Labrador has been the

construction of the Bloom Lake Railway, which transports that ore to the Quebec

North Shore and Labrador Railway for transport status to Sept-Isles.

MS JONES: Thompson does not do any mining on the Labrador side of the

border?

MR. WARDLE: No.

MS JONES: Okay. It is all on the Quebec side?

MR. WARDLE: Yes.

MS JONES: So, it is just the railway access, and that is the upgrade that

is going on right now, right?

MR. WARDLE: Yes. Under the terms of their benefits agreement with us they

have to provide largely provincial operating personnel for that railway, and

they are training those at the moment.

MS JONES: Yes. So, Labrador Iron Mines is

MS DUNDERDALE: In terms of the employment within Labrador, we have carved

off the maximum amount of employment that can be had, leaving them the ability

to honour their Aboriginal IBAs. So they

MS JONES: Is that with Thompson you are talking about?

MS DUNDERDALE: Labrador Iron Mines.

MS JONES: Oh, Labrador Iron Mines.

MS DUNDERDALE: Yes, because there is no secondary processing that goes on

with that ore, because it is so pure.

MS JONES: Yes.

MS DUNDERDALE: So the benefits are around getting the ore out. In terms

of transporting that through our lands, they have to hire our people to do it.

It is the same as Consolidated, and I think the amount of employment is

MR. WARDLE: Well, I think on Consolidated it comes to 100 per cent of

railway employment.

MS DUNDERDALE: One hundred percent of the railway employment with

Consolidated, Thompson has to be people of this Province, and 75 per cent on the

other one has to be people of the Province - and only 75 per cent because we had

to leave them enough room to honour their Aboriginal IBAs.

MS JONES: Okay. I guess all of that information is public through their

environmental assessments?

MS DUNDERDALE: Yes, it is.

MS JONES: Okay.

New Millennium is still going through EIS is it? So there is nothing

happening there yet.

MS DUNDERDALE: I am not sure. Are they in EIS yet?

MR. WARDLE: Yes, it is still in the (inaudible) process.

MS JONES: Yes, okay.

Just another question here because it is somewhat connected to the mines

bordering Quebec and Labrador, but also it has to do with the Lower Churchill

and the Innu involvement, and that is the panel or the discussion or the group

that the federal government has set up through Chuck Strahl's office. I think it

involves the Quebec and the Labrador Innu and its purpose is to try and resolve

any conflicts or issues that arise with regard to overlapping claims in those

areas. Is the Province a part of that process?

MS DUNDERDALE: No. We have negotiated our Land Claims Agreement with the

Innu. Those were the two parties, the Government of Newfoundland and Labrador

and the Innu Nation. The Innu Nation's next piece now is to negotiate with the

federal government their fuller land claims piece, which will include the New

Dawn Agreement. The federal government in their process has a function of

negotiating overlaps. So the overlap in their area will be between the Quebec

Innu and the Labrador Innu. That is a function for the federal government.

MS JONES: Yes, but I understood from the Innu maybe I am wrong that

this particular committee was set up as a result of - of course, the Quebec Innu

making claims on the Lower Churchill and also because of impeding, I think in

particular, the Labrador Iron Mines development or whatever in terms of benefits

and all of that.

MS DUNDERDALE: No. The process has to do with the negotiation of a lands

claim. So the government has a piece that it needs to do with the Aboriginal

groups (inaudible).

MS JONES: No, I understand that. I thought this was a different

committee.

MS DUNDERDALE: No. Well, it does not have anything to do with us. We have

concluded our negotiations with the Innu on land claims. They now have to

negotiate with the federal government on the larger piece, which will include

ours. The federal government, in the negotiation of that land claim with the

Labrador Innu, has a mechanism to deal with complaints where there is an

overlapping claim. That is the process that you are referring to.

MS JONES: Yes, I am well aware of all that but I just want to know: Was

the Province invited to participate in this process?

MS DUNDERDALE: There is no role for the Province.

MS JONES: Because I understood the Province was invited and the Quebec

provincial government was invited, along with the two Aboriginal groups.

MS DUNDERDALE: No, there is no place in that process for governments.

That is a process between the federal government and the Innu.

MS JONES: You were not invited to participate?

MS DUNDERDALE: We did not expect an invitation to participate. This

process is not special. It is part of the normal land claim negotiation that

happens with the federal government when they are negotiating Aboriginal land

claims. There will be overlapping claims from time to time.

MS JONES: That is all my questions on the mining section.

CHAIR: Okay.

Ms Michael do you have any

MS MICHAEL: No, more on mining.

Thank you.

CHAIR: Okay.

I guess we can move into the Energy Resources sector now.

MS DUNDERDALE: Sure.

MS JONES: Did you want to go ahead, Lorraine?

MS MICHAEL: No, you can start.

MS JONES: Okay.

MS MICHAEL: I do have questions but you go ahead and start.

MS JONES: Okay.

Under

section 5.1.01., Professional Services, last year you budgeted

$373,500, you spent over $8 million. Can you tell me what that was spent on?

MS DUNDERDALE: That was spent on environmental assessments, legal work

and advice associated with the NAFTA challenge. That is the $8 million you have

been asking some questions about and have a freedom of information request in

on.

MS JONES: Okay.

The Purchased Services under that

section as well, can you tell me what that

was for?

MS DUNDERDALE: The variance from $321,000 down to $220,000?

The variance was due to lower than anticipated purchased service

expenditures, such as rental and lease of office equipment, like photocopiers,

rental of meeting room facilities, printing services, advertising, on-site

recycling and shredding services.

MS JONES: Okay.

Again, in the Salaries

section I just skipped over it in there - but 01. of

course, was down by $300,000. Were there some vacancies there somewhere?

MS DUNDERDALE: Yes, and slower than anticipated recruitment.

MS JONES: What positions

MS DUNDERDALE: And we have ongoing restructuring in the Electricity

Division. So we are including the establishment of a climate change office and

the hiring of a director of energy efficiency.

MS JONES: Okay.

Then to move on to

section 5.1.02.; again, the Professional Services under

this section, can you tell me what was done with that estimate? What that used

for?

MS DUNDERDALE: Professional Services, again, that is Abitibi.

MS JONES: Under 5.1.02. Petroleum Development?

MS DUNDERDALE: Oh, sorry. Pierre, can you speak to that, please?

MR. TOBIN: Specialized engineering advice in the sector.

MS JONES: Specialized engineering advice?

MR. TOBIN: Advice, that would be correct, and geoscience advice.

MS JONES: Under the oil and gas

section you put some money into the West

Coast oil development. Where is that in the Estimates?

MS DUNDERDALE: That is within Nalcor.

MS JONES: It is done through Nalcor, okay. Did they complete that

exploratory drilling work or anything at this stage?

MS DUNDERDALE: It is ongoing as we speak.

MS JONES: That is in Parson's Pond, I am referring to.

MS DUNDERDALE: Yes.

MS JONES: Okay. So we do not know what the results are at this stage, I

guess?

MS DUNDERDALE: No, and there are two objectives there. If we hit oil,

which will be marvellous, but the geoscience is just as valuable to us at this

point, that they will find as they bore.

MS JONES: Okay.

Last week when you announced the consultant to do the review of the offshore

oil spill, what resources are going to be provided to do that, besides the

independent individual that you appointed?

MS DUNDERDALE: We are working through those issues now as we develop the

work plan. The work plan should be completed, hopefully, by the end of this

week. Once we get through that - because what it is we are reviewing is the

prevention of oil spills, oil spill response and liability associated with it

and all of the policies and legislation that refer to all of that. So, when we

get the work plan done, then that will show to us, very clearly, what kind of

resources that he is going to require to get this work done within ninety days.

All of that will be provided to him.

MS JONES: Is he also going to be examining what our liabilities are as an

equity holder?

MS DUNDERDALE: Yes. It is liabilities, so the liabilities will be

inclusive of our own responsibilities.

MS JONES: Okay.

I guess the ninety days will be after those things are settled and ironed

out?

MS DUNDERDALE: I would imagine.

MS JONES: Okay.

So, you do not know how much money you are going to need to commit to that at

this stage?

MS DUNDERDALE: Not at this point in time. The Premier promised a

comprehensive review, so that is what we are going to provide. We will have a

better sense of that as we get through this work plan piece.

MS JONES: Yes.

MS DUNDERDALE: It is not like we have to reinvent the wheel here. This

information is out there. What he is doing is reviewing what exists. We do not

expect the cost to be exorbitant.

MS JONES: As well, under that section, under the salary component, there

was savings again last year. Were there some vacancies there or people retiring,

what was the situation?

MS DUNDERDALE: On what heading?

MS JONES: Heading 5.1.02.

MS DUNDERDALE: Okay.

Again, it is recruitment issues. We have the same issue in the energy branch

as we do in mining. These are highly specialized jobs and skills that are

required. The industry is looking for them as well and you can make a whole lot

more money outside of government than you can within, so it is a constant

challenge trying to hold onto people.

MS JONES: Can you tell me what is happening with the natural gas

development off Labrador? Was there anything done there this year?

MS DUNDERDALE: No (inaudible). There is no drilling program that I am

aware of. There is seismic work that has been committed to this year, and I know

that companies are working to contract people to come in and do that piece of

work off Labrador.

MR. THOMPSON: Robert Thompson.

Just to expand a little bit on that, there is a work commitment off Labrador

that companies have made to the offshore board. They have started the community

consultations in Labrador and started all their planning work for the seismic

and other kinds of evaluation that they will do, but that is about the limit of

it right now.

Pierre, do you have anything to add to that?

MR. TOBIN: No, that covers it, Rob.

MS JONES: What companies are those that have those options? Those parcels

MR. THOMPSON: It is led by Chevron, isn't it?

MR. TOBIN: Pierre Tobin.

Chevron would be the most recent successful bidder in Labrador, yes. There

are others.

MS DUNDERDALE: There are a number of (inaudible) in offshore Labrador and

some of them are numbered companies and some are smaller companies, some

recognizable and some not, but Chevron certainly would be the biggest player

that is there to date.

MS JONES: Okay.

In the 2007-2008 Auditor General's report he raised an issue with regard to

the royalty collection on the audits from the three oil projects at that time:

Hibernia, White Rose and Terra Nova - I think. Where is that to now?

MS DUNDERDALE: Well, we have a work plan in place. You have a number of

years to complete a royalty. Certainly, when I came to the department, four

years ago in July, none of those audits were up-to-date, although work had been

done on a number of them. We developed a work plan two years ago and we continue

to implement that plan. We have not lost a dollar yet because an audit has not

been completed, nor do we intend to.

MS JONES: Okay.

MS DUNDERDALE: It is a massive piece of work to have undertaken.

MS JONES: Moving on the Canada-Newfoundland and Labrador Offshore

Petroleum Board, I guess lately there have been a lot of calls out there, I do

not know about a lot but there certainly have been opinions expressed that the

dual role of the board is not sufficient in terms of the environmental

protection and safety aspect of it. Is this something that government has

reviewed in terms of the operations of the C-NLOPB and whether it is serving our

purpose at this stage or if there is more that could be done?

MS DUNDERDALE: Well, first of all we have spent a great deal of time

trying to understand the argument that has been put forward about the dual

nature of the board. In terms of some of the activities that have been

attributed to the board, it has been argued that these activities are what give

the board the conflict of interest.

The arguments that have been put forward to date are not correct. First of

all, in terms of the board, they do not set or collect royalties. They do not

negotiate industrial benefits when we have a project. When we developed Hibernia

South, White Rose extension, Hebron and so on, the government does that

negotiation. We negotiate the royalties, we negotiate the industrial benefits

and it is the Department of Natural Resources who monitors all of those things.

The royalties come directly to the government. It does not have anything at all

to do with the board.

In terms of promotion of the offshore, the board does not do that either.

That is an activity that is undertaken by my department. It is what we do in

publications, it is what we do in advertising, it is what we do at oil and gas

shows all around the world; we promote the offshore.

While the board is responsible for land sales, there is a difference between

our land sales and the way they are conducted than the way they are conducted

elsewhere. In Newfoundland and Labrador there is a sole criterion for land sale,

and that is: How much money are you going to spend?

When we put a piece of land up for sale here in the Province, it goes to the

highest bidder. Again, there is no negotiation required, there is no interaction

with oil companies, and there are no other benefits that get negotiated around

that piece. It does not require the board to be engaged at any kind of a deep

level with companies.

When we have seen boards split elsewhere in the world, what they have done

and what they are currently doing in the United States is structuring their

boards exactly as our board is structured. They are carving out the economic and

the fiscal pieces from the regulatory and legislative responsibilities of the

board.

That is exactly what President Obama announced this week. He is taking

responsibility for royalties away. He is taking responsibility for any kind of

negotiation of economic benefits and so on. All of that is now falling away and

going into a separate agency.

In terms of that piece, trying to get that established in the public debate

has been a task that we have had to undertake in the last weeks, because it is

important if you are going to have a debate that we are all working from the

same understanding of the role of the board.

So, the role of the board is for safety, for regulation of the offshore and

so on; that is the responsibility that they charged with. In terms of the review

now, we are going to have a look at oil spill prevention, response and

liability. We are certainly going to have all of that reviewed.

There has also been a call in the Province, especially around the Wells

inquiry, for discussion around the board's role with Occupational Health and

Safety. We will see in terms of what the recommendations are coming out of the

Wells inquiry with regard to those pieces. We are more than prepared to engage

in the discussion. We are certainly interested in what the Wells inquiry will

say, and we are interested in what labour has to say around these issues. I have

had some preliminary discussion. It is important to understand what their point

of view is and why they feel that way. We need to have a look at it and see what

we can do with regard to it.

The other piece that we also have to remember is that this is a shared

jurisdiction, so the Province does not have the authority. I have to work with

the federal minister on every decision that is made with regard to the board. We

are open to hearing what it is that people have to say, but any changes have to

based in fact and they have to have good, strong arguments for change. You do

not likely go in and open up Accord Acts, you have to do it with very good

reason and there are all kinds of risks associated with that.

MS JONES: The C-NLOPB also put in guidelines for petroleum companies in

the Province in terms of the Research and Development Fund. It was contested in

the Supreme Court and they were denied an appeal. That money that the companies

are spending now in R&D, who monitors that, and does government have a process

by which you ensure that they spend the money and what they spend it on and so

on?

MS DUNDERDALE: The C-NLOPB would certainly be engaged in terms of what

the companies are doing around R&D. They have a responsibility in terms of

monitoring that piece, but the government is also very engaged in that piece, in

terms of how do we direct that money. The companies have a lot of ability to

control where that money goes, so it is extremely important for us that the

money be directed here in building capacity, not only for the companies in the

offshore to do their work better and to have innovative technologies and

safeguards available to them in doing this work, but that we are also building a

legacy in this Province that there are benefits.

So, there is a strong engagement from the government in terms of these

pieces, but the C-NLOPB also has a role in ensuring that those monies are spent

on R&D.

MS JONES: Okay.

Under heading 5.1.04., the Royalties and Benefits, the government budgeted

over $2 million last year for Grants and Subsidies, this year it is down to a

little over $1 million. What is the grant and subsidy money used for here, and

why is it reduced this year?

MS DUNDERDALE: Bull Arm transferred to Nalcor.

MS JONES: The transfer of Bull Arm?

MS DUNDERDALE: Of the Bull Arm facility to Nalcor.

MS JONES: Okay.

So, they get the expense of it now, we do not, under this budget? The other

$1 million there, what would that be used for in Grants and Subsidies?

MS DUNDERDALE: Can you speak to that, please?

MR. TOBIN: Pierre Tobin.

There is $1 million left there for Bull Arm to take through the transition

period. Nalcor would pick up the balance through revenues associated with the

site, but there is $1 million there in case there is a requirement for that for

the upcoming year.

MS JONES: Okay. So, all of that grant and subsidy in 10. was relative to

Bull Arm?

MR. TOBIN: For all intents and purposes. There is also a small grant that

was there for PRAC, Petroleum Research Atlantic Canada, which is no longer

required as well.

MS JONES: Okay.

When you announced that Nalcor was going to take over Bull Arm you guys

announced also - or at least back in June, I think, last year you announced a

refit program, a major refit for Bull Arm. Was that work ever completed, or what

is the status of it?

MS DUNDERDALE: Ongoing pieces of work are happening within Bull Arm. Some

of the money we made available we need to go in and ensure that that yard is

ready for Hebron. There has been significant work going on in that yard over the

last two years. About 500 people were employed during the last year on a refit

out there. So, we are reinvesting that money back into the plant.

It just came to my attention this week, that there are some remediation

pieces that need to be addressed out there in terms of the building on the

highway. There is some mould found there that needs to be dealt with and there

are some other issues that need to be dealt with, but the site has been

generating revenue because of the work that is ongoing.

MS JONES: The money that would be in the budget here would be the

operating costs, I am assuming, of the site, right? What was the cost of the

refit, the dollar amount rounded?

MS DUNDERDALE: Yes, it is a grant given to Nalcor for the operation of

the site. So they could use it in a variety of ways. The site also generates its

own funds from having work ongoing at the site. The site is leased now and has

been leased and has had hundreds of people out there working for months and

months and months on the refit of a rig.

MS JONES: Yes. How much money is government or Nalcor putting into the

refit? What is the cost of that?

MR. TOBIN: Pierre Tobin. It is an ongoing piece. It was much smaller than

what we initially thought a couple of years ago. As the minister indicated, the

revenue that is being generated through lease of the site is covering off a

substantial portion of the cost in any event. There has not been any significant

capital investments required out there of late. It is largely taking down some

old buildings, those sorts of things. The figure is not as large as was

contemplated a couple of years ago.

MS JONES: Can you tell me or provide to me what the total cost of the

refit was and what portion of that was paid by the Province and by Nalcor?

MS DUNDERDALE: (Inaudible) what we can do is give you the repairs and

maintenance since Nalcor took over the site and how much money that well, it

is quite clear how much money we were putting into it.

MS JONES: You announced a refit program. You must know how much it was

going to cost and how much you had to put in.

MS DUNDERDALE: No, we did not announce a refit program per se. What we

announced was that Nalcor would get the site ready. I do not

MS JONES: Someone must know how much it cost.

MS DUNDERDALE: We will get you whatever but we did not announce a major

refit program. What we did announce was that we would get the site ready for

Hebron development and that Nalcor would take on that responsibility. We

certainly did not announce any particular program to do that, not that I recall.

MR. TOBIN: (Inaudible) enough money for ongoing maintenance and repairs,

not a major capital program.

MS DUNDERDALE: (Inaudible) reflected in any of our budgets that we made,

because that is out of the monies that we have made available for Bull Arm in

the budget. There is not any other allocation that we have made to Nalcor

anywhere else for the refurbishment of Bull Arm. It is all under that heading.

MS JONES: Yes. I will just wait until I get the information.

MS DUNDERDALE: Sure.

MS JONES: I have no other questions on the oil and gas portion, so I will

turn it over to Lorraine.

CHAIR: Ms Michael.

MS MICHAEL: Thank you.

Just a couple of line questions first, nothing big. In 5.1.03., the C-NLOPB,

the Grants and Subsidies, I am just curious as to why the amount of money they

get is not a fixed sum. There is a variance between last year's budget and the

revision of $520,000, and then this year the budget is going down by $205,000.

Is that the same for the federal government as well, that it varies from year to

year?

MS DUNDERDALE: Well, no, the variance this year is due to the Wells

Inquiry.

MS JONES: Okay.

MS DUNDERDALE: And the $1.6 million that is required to do the inquiry.

The additional requirement was partially offset by savings due to delays in the

data management project, $175,000, and savings due to the delays in the

construction of the cold storage and research centre expansion, $900,000.

Delays in the data management project are a result of significant manual

efforts required to effectively load and quality check the technical data in

order to populate the system, and delays in the cold storage and research centre

expansion are as a result of adverse weather, timing and delivery of raw

materials, such as structural steel and unforeseen circumstances encountered

with bedrock at the site. So the savings from those two things, and the

variance, is what makes up the $1.6 million for the helicopter inquiry.

MS MICHAEL: Okay. So, per se ,

that money is not going to the C-NLOPB, the inquiry money.

MS DUNDERDALE: No, it is

MS MICHAEL: It is, and the

Document details

Collection	Newfoundland and Labrador — Committees
Citation	2010-05-17
Type	committee
Volume / chapter	committees_standingcommittees_resource_ga46_2010-05-17_20_rc-natural_20resources_.htm
Language	en
Format	html
Source	PROVINCIAL
Identifier	b935df251e7ce77c9b1a6cb436ad303e7d993172

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