b " -. PROVINCE OF NEWFOUNDLAND AND LABRADOR HOUSE OF ASSEMBLY Volume 1 Number 40 4th. Session 34th. G81111111 ~ly VERBATIM REPORT TUESDAY, APRIL21, 1970 SPEAKER: THE HONOURABLE GEORGE W. CLARKE

April 21st. 1970 :rhe llouse ~tet at 3:00 P.H. Mr. Speaker in the Chair. ~m. SPEAKER: Order! Tape 545 PK -1 HON. J~l!.. SMALLWOOD: (PREHIER) Mr. Speaker, I_ have the honour to annonnce that the hon. the Hinister of Labrador Affairs, the hon. member for Labrador North has become Acting Minister of Fisheries, in place of Mr. Aiden Maloney. Or perhaps the correct statement is, that he has become Minister of Fisheries Acting. Mr.

Speaker, I am sure I speakcfor every hon. member and for every Newfoundland, when I say that we mourned the tra~ic death of some twelve persons in the lost of the Steamship Patrick Morris, and the Saiter Enterprise. We mourn especially the death of Captain Penny, the Captain of the Morris. This is one of the most tragic thinp,s to happen for a long time. And I know our hearts go out to the relatives and friends of these twelve men, in their tragic loss. Mr.

Speaker, I wish to extend a word to the whole Rouse, a word of cordiallt welcome to some fifty students of Grade IX from Queen Elizabeth High School of Foxtrap, in the custody, if that is the word, of Mr. George Evans. I must say that they have picked quite a day to come. They could not perhaps a more interesting day, in this whole session than they have done. And there are large numbers I understand of adults down in the main lobby of the building waitin~ their turn to get in. And so the galleries will be filled by them as soon as the students go.

But the students of course are terribly welcome here, and I hope they will remain as long as they feel like it. And I am sure I speak for the whole House, when I say that. Mr. Speaker, by consent of the House I would like to move a Resolution and if the Resolution be adopted, I would suggest that the ordinary preliminaries be dispensed with today, and I understand the Opposition have indicated a generous willingness on their part, should the need arise, to forgo their right to private members day tomorrow, provided it can be held on Friday.

So provided they do not lose a day this week, in case it is neededJso that if 2371

April 21st. 1970 Tape 545 PK - 2 ~fR. SMALLWOOD: the House feels any desire to go on with the meetings, with these gentlemen whom I have invited here, today and tonight they may do so, and tomorrow, Wednesday private members day, Thursday is of course, Thursday afternoon is Budget Day. And that takes precedencJ I think over everything. But I wanted to be quite clear that the Government are entirely at the disposal of the House with regard to the length of time the House may desire to have to meet with these gentlemen whom I have invited to come here today.

The Resolution is as follows, if the House agrees, and dispenses with notice: ~1ereas the House - of Assembly by Act No. 86 of 1968 entitled

an Act To Ratify, Confirm And Adopt an agreement made between the Government, and Newfoundland Refinery Company Limited and other companies, and to make provision respecting other matters connected therewith. Authorized the Government to enter on certain conditions into agreements relating to the construction of an Oil Refinery at Come-by-Chance; And

whereas it is expedient that the members of the House be enabled to question the progress achieved since the passage of the Act,and the economic viability of the project;

Be it resolved that the several persons involved in the project now without the bar of the House, be invited to enter onto the floor of the llouse, to enter such questions as members may wish to put to them for the aforementioned purposes. I have the honour to move that Resolution. Seconded by the Leader of the House, the President of the Council, and the Minister of Justice. MR. ANTHONY J. HURPHY:- {Leader -of the Opposition); Hr. Speaker, possibly just before we 'deal with the motion, I would like to join with the bon.

Premier in the expressions of very deep regret at the very tragic accident that \ ~ - happen ':"our ferry~he Partick Horris. And perhaps, Mr. Speaker, what makes . \ it more personal to me at this time, is the fact that the hon. member for Gander happens to be a first cousin of the deceased Captain, and grew up withr.trm "'3,.}? " . , ..

April 21st. 1970 Tape545 PK - 3 41 1 ~~~ on Indian Islands before he lived in Lewisporte, and the member phoned me this morning, that due to having make some arrangement with the family, that he would be a bit late and he drove in, and just arrived in , the House, just now. And I am sure we all join with the Premier, and all the people of the Province in our sympathy to the relatives, not only of Captain Penny, but of all those people who so tragically lost their lives. I would also, Mr.

Speaker, welcome the students from Queen Elizabeth High School, and I am sure the Premier said, this might be perhaps the most faithful, most impor~ant days, in the history of our Province when we are here to discuss with those concerned a very vital matter of estahlishing an industry at Come-by-Chance. And possibly if I may speak a word on the motion, Mr. Speaker, and I think I am entitled too, I would just like to set the record straight, that we here lvill direct such questions as we think are in the best interest of · the Province to those people concerned. Because after all, Mr.

Speaker, we are dealing with now the future of many thousands, perhaps hundreds of thousands of the people of our Province, when we are considering such a huge project this is. And I would like to make it perfectly clear, that we on this side have no copies whatever of any agreements that have been made recently, we just have the Bill that was passed in 1968, I think, to go on. Unfortunately it was not seen fit to furnish this side of the House with copies of agreements where l•Ye could perhaps discuss it far more intelligently than we may today. But, Mr.

Speaker, I will say that we will do the best we can with what material we have to question, probe if you like, and discover just what information we can get for the people of the Province. And as I said earlier with what tools we have at our command. MR. JOHN CROSBIE: j &I iii±&) II 8R 2373

mw April 21st., 1970 Tape no. 546 Page 1 UIG &±L,WIU .t: Mr. Speaker, before just speaking briefly on this --- ~ -c - - . -- - - - - -- motion. I would like to join on behalf of the Independent Liberal ~roup and the House in extending our condolences to those who lost their lives from the Patrick Harris and the Enterprise, Captain Penny and the several other engineers \vho were lost on the Patrick Harris.

If there is any conciliation for their family, there can be none real~y, it is the fact that they lost their lives while doing the noblest thing that a seaman can do and that is p,oinp. to the rescue or help of others who are in trouble on the high seas; so although that is not much condolence, they have lost their lives in the great tradition of seafaring, and I think that we should recornize that and certainly we feel very deeply for their relatives and friends, as all members of the House do.

We would also like to welcome briefly the students from Queen Elizabeth High School in Foxtrap, part of the district of Hr. Hain. I think we can be sure that they should find this interesting at today's session. Now, Hr. Speaker, on this resolution, He are, of course, heartly in accord of the resolution. One of my colleagues~he hon. member from Humber East7nd myself were engaged in the task of drafting the agreement that is attached to the Act that was passed in 1968 and in all do modesty, I think we can say that it was a well-drafted agreement.

What we are going to discuss today is not the agreement that was drafted in 1968. but what has happened since, under the terms and conditions of the legislation and the agreemen~ What has been the progress to date? \fuat are the new, under that agreement, many new contracts have to be entered into? What contracts have been entered into? ~~at is the progress?

What is the change in the cost of construction and all the other information that will be of great interest to the people of this Province and to the people even of Canada for that matter, because this is one of the birgest projects ever to be undertaken with tht help or the assistance of the Government of Newfoundland. ~ve will all be seeking information today, }fr. Speaker. and I 2374

April 21, 1970 Tape no. 546 Page 2 hope that we will have a very interesting session. We have a lot of questions to ask, not in a spirit --not in anyway being against the project or wantine to damage it. Any questions we ask and that the party feel that they cannot make public at this time,of course, they are at liberty to say as private information and they cannot release it at the present time. It is a big project and there is a lot of information now, that after two years, needs to be made public. We are heartly in accord with the resolution and we will support it, \vhen it is voted upon by the House. lffi.

JOHN }11\HONEY: Hr. Speaker, if I may join l-dth the previous sneakers in, and I am sure that I am speaking for all Newfoundlanders in eh~ressinr, our deepest sympathy to the families of those men who lost their lives on the Patrick Morris and on the Enterprise and I would particularly express my sympathy to the hon. member for Gander, in his families loss. I do, Mr. Speaker, as member for the district of Hr. Vain. express a warm word of l-relcome to the fifty Grade IX students from Queen Elizabeth Regional High School in Foxtrap.

Perhaps it is not known generally, but this beautiful ne"r high school naw is the successor to the first regional high school in Newfoundland which was constructed at Foxtrap and is still serving the people of the district as a junior high school. The scholastic record of the students from that hi2h school is known certainly throur,hout the district of Hr. Main and throughout Newfoundland. I have much pleasure in welcoming these students and their teacher, Hr. George Evans/with them to the House this afternoon and I hope that they find the session both instructive and inforrative. MR. BURGESS: Mr.

Speaker, I too would like to join in the expressions of sympathy for the families of the seamen who lost their lives in the last tragic two days. There are no· "'ords that can adequately describe and console the families of these people except as the hon. member of St. John's has said, '"they lost their)ives in a very valuable cause. I would like to take the opportunity of welcoming the students of 2375

April 21, 1950 P)a~e 3 Queen Elizabeth Jlip,h. They certainly did, as the hon. the Premier said, they picked a ~ood day to come here, because they will ~et a good insig~ as to exactly how their money is bein~ spent. The money of the people of the Province, and I hope it is a very revealing insight. I also would like to extend con~ratulations to the - I do not know if ·it is sympathy or conpratulations to the hon. }~inister of Labrador Affairs in that he has assumed an additional portfolio.

I am ~lad to see that the hon. gentleman ·~ts at last gainfully employed, because there has been very little happening in Labrador Affairs an~~ay. I hope that he does a good job in the Fisheries Portfolio. On the motion, I am heartly in accord with what will transpire in this hon. House today, and as we can see by the packed ~alleries so also are the people who are as vitally interested as everybody here in this hon. House are. Thank you. MR. SPEAK}:R: Has the hon. minister leave to introduce this motion? On motion resolution carried.

Will the Sergeant-at-A~ escort these members who have been invited to the floor to take their place, please? 2376

-r--- -- - - ·- MR.SMALLWOOD: Mr. Speaker, while they are obtaining more chairs I should tike to present these gentlemen to the House individ~ally by name and by title and by function. On this side of the H6use are representatives of the Shaheen Petroleum People with one representative of their Paper Mill plans and on the opposite side of the Rouse are the representatives of Procon, the English company who are going to build the Refinery. And also on that side of the House the last two gentleman down representatives of Jacobs Engineering Company of California.

The firm who have been ~etained by the Government to examine the UOP feasibility report and to update it, two separate functions. Here immediately in front of me is Mr. John M. Shaheen who perhaps might stand so that he could be seen. Mr. Shaheen is 53 years of age. He is an American citizen. He attended the University of Illinois and the University of Chicage. He was a captain in the United States Navy. He is President and chief executive officer of Shaheen Natural Resources. He is the President of MacMillian Ping Free Oil Company Incorporated.

He was formerly the director of Ultramar Company Limited of England, and President of Golden Eagle Refining Company Incorporated which he founded and which built the oil refinery at Holyrood. Thank you,;Mr. Shaheen. Mr.Romer Hbite, 51 years of age is the President of the oil company. Mr. White is a chemical engineering graduate of the University of Oklahoma , he is a southerner. He was an officer in the United States Navy serving as middle East petroleum supervisor for America in World War JJr. Mr. White has been with the Shaheen Organization for eight years.

He has had twenty- nine years experience in the oil industry, and he is also an executive vice- president of Shaheen Natural Resources. Previously~Mr. White was the Refining Supervisor, for Goldea:.Eagle Refining Company of Canada and in that capacity he built the oil refinery at Holyrood. Mr. White is the man who built the Goldea Eagle Refinery at Holyrood. Before that he served as manager of technical services with Continental Oil of the United States and before that refining supervisor fOr Creole P~troleum in Venezuela. Thank you1Mr. White. Mr. Albin. w.

Smith, 44 years of age, is senior vice-president of the company. He is a graduate of Kenyon College, a vice-president of ~habeen ·2377

•·r.. ....... -.. •., • v lb Natural Resources and he is also the President of Newfoundland Ammonia & Refinin~ Company. This is the company that is to build the Anhydre Ammonia Plant at Come by Chance. Mr. Smith has been with the Shaheen Group for four years. He has had seventeen years experience in the oil industry. All marketing activities production activities and chemical interests of the Shaheen group report to him. He was formerly the assistant manager of the International department of Phillips Petroleum and was also a director of Phillips Oil Products,Limited, and liquified Petroleum Gas Limited.

And before he was with Phillips Mr. Smith was with Shell Oil Company. Thank you~Mr. Smith. Mr. G. H. Cook, 56 years of age is a director of the refining company. Mr. Cook has had thtrty-three years experience in the international oil industry with Standard Oil Company of New Jersey. He has had extensive background in development and construction and in the operation of oil refineries. For six years he was supply and refining director of Esso's Italian affiliate company. H~as previously concerned with new project development and ~irecting refining. Thank you Mr. Cook. Mr:·. Charles R.

Granger, is well-known to all of us here. He is a vi-ce- president of the company, 57, He is vice-president of Shaheen and of the Newfoundland Refining Company and of the Newfoundland Pulp and Chemical Company and of the Newfoundland Ammonia and Refining Company, He is a former member of this House and a former member of this Government. A former member of the House of Commons and a member of two federal cabinets and he is the co-ordinator of international activities of this company. Mr.Oscar A Blake, 35 years of age, is the financial and legal co-ordinator of the enterprise.

He is a graduate of Cornell University Law School and a member of the New York State Bar. For seven years he ~as ~egal co~se~ with - I""J '!( W .R.Grace Company. And for tw~\ a legal counsel with Ashland Oil and R·?fimLng Company, of Ashland Kentucky. His experience with these companies was primarily in negotiating, evaluating and consummating corporate acquisitions. He is the head co-ordinator for finaneial activities and legal matters both domestic and foreign for the company. He served in the United States Army from 1951 to 1954. Thank you}Mr. Blake. 2378

Brigadier General Otto Lessing. of the United States Marine Corps Reserve, 63, he has had 37 years in the oil industry both domestic and foreign. Including 20 years with Standard Oil of New Jersey and affiliates. He was formerly c~ief engineer of American independent Oil Company. Project Manager , the Lummus Compan,; and Chief Engineer, Kuwait National Petroleum Company. He is now stationed in Newfoundland and spends his time in St. Joh~'s and at Come by Chance. Thank you .. General. ./ Mr. William F.

Zimmerman, manager of the cnntract of Contract <1 Administration, age 39, graduate of Drexel Institute of Technology, Philadelphic, Pa. He has had 16 years experience in the p~troleum industry. He was employed by Sinclair Refining Company for 13 years. in mechanical engine~ring. His responsibilities included purchasing of major equipment for demestic refining and foreign operations. Mr. Zimmerman worked for three years with the Atlantic Refining Company as a mechanical engineer in the Engineering Rhsearch Division of the Engineering_ and Construction Department.of that great company. Thank you Sir. Mr. Donald c.

Severs, refinery operations manager, I think he is the gentleman who used to manage the plant at Come by Chance. The General Manager of the plant at Come-by-Chance. He graduated from the University of Toronto~ he is a Canadian, in 1956 with a BASe. degree in Engineering and Business Administration. He was employed by Esso Standard Oil from 1956 to 1969 in their Aruba refinery in the Netherlands Antilles. That is to say the Dutch West Indies. Mr.

Severs responsibilities during that period covered unit operations, product blending and shipping, marine terminal operation,process engineering, mechanical engineering, construction· coordination and process computer applications. It sounds like a lot of experience to me but I do not know too much about it. Mr. Severs will assume direct responsibility for the operation of the Come-by-chance refinery. Thank you1 Sir. Mr. Norman Inkster, assistant vice-president age 30.

Seven years field engineering experience, seven years, graduated from the University of Alberta• ~e too7 I believeJis a Canadian, graduated in Civil Engineering. Mr. Ingster 2379

is concerned primarily with the site engineering work at eome-by-Chance. Raymond B. Osmond,age 42, inter-plant coordinator at Come-~Chance. Mr. Osmond attended University of New Brunswick,Nb spent 18 years with Domtar Limited of Quebec in the pulpwood and newsprint industry and Mr. Osmond is in charge of pulpwood operations or to be in charge of pulpwood operations for the paper mill at Come-by-ChaRce. Thank you,Mr. Osmond. Captain Wallis, is a master mariner he is to be in charge of the tugs and marine works the shipping of oil products from Come~y-Chance andthe ships coming into Come-by-Chance.

He is to be in charge of the whole port, he is to be a sort of port manager and marine superintendent.for I believe he is an Englishman b' birth. Is that correct? Scottish,well, that is as close as you can get. Thank you. Mr. Cecil R. Soper, manager of community relations in Come~~Chance. He is to be the man who is to try ~o keep the people happy representing the company sort of communications man. Thirty-eight, Newfoundlander/former Town Manager of Clarenville and a member of the rnt~rnational.4ssociation of (;\Lnicipal Glerks and tfilmagers.

He is appointed by the Lieutenant Governor. in Council as a member of Local Improvement District of Come-~y-Chance. on July 22, 1969. Thank you~r. Soper. 2380

April 21st. 1970 Tape 548 PK - 1 MR. SMALLWOOD: on the opposite side of the House are first seven representatives of Procon. Procon are the English Company owned by an American Company, the English Company who are building the Oil Refinery. Hr. William Cripps, Project Manager of Procon Great Britian Incorporated, and he~. has been in the Refinery Construction Industry for more than twenty years. Thank you, Mr. Cripps. Mr. John Trett, Senior 1fh-oject ~gineer, Procon(Great Britian). ke has spent twenty-two years in process and project engineering. Thank you, Sir. And finally, tlvo other gentlemen, Hr.

Robert Brown, is the vice-president of Jacobs Engineerinp, Company of California. He has had twenty-five years experience in Oil" Refineries. He has many engineering administrative and executive position with major oil companies, including nine years at processing and project a new plant startup~. management, seven years line supervision of major process units and off-plot facilities, and ten years executive management of total refinery process operations. It sounds like a lot of experience.

He served as General Superintendent of Operations of a ~or oil company's 110,000 barrels a day Los Angeles Refinery and 55,000 barrels a day San Francisco Refinery ?nd as Manager - Refinery Program for their Eastern Division. In the later function he was responsible for organizing and coordinating the initial planning and analysis for a new 150,000 barrels a day grass-roots refinery. And I have learned in the last day a grass-roots job means, that a job 0 you start from the ground up, where you build a refinery from the grass-roots up. A grass-roots refinery. Thank you, Mr. Brown. Mr. George J.

Figge, is the chief economist of the Jacobs Engineering Company. The Chief Economist, responsible for preparation of economic evaluations, including project and process studies, acquisition and investment analyses, and profitability reviews of existing operations. To develop methods and techniques to~~measure and express profitability, sensitivity, and risk. To collect cost and market related information on processes, industries, and geographical areas. And to follow general economic environment, including 2381

April 21st. 1970 Tape 548 Pk - 2 tariffs, import regulations, tax legislation .· and interest rates. He was formerly with Rexall Chemical Comapny and Shell Chemical Company as their Senior Project Evaluator. Thank you, very much, Mr. Figge. Mr. Speaker, these are the gentlemen whom I have invited to come here today to be questioned by members of the House. I propose to put two or three basic questions having the same rights as any other hon. member of the House, I am a member of the House, and I have a right to put questions and I propose to use my right, as l : hope •. all other bon. members will do.

And there are two or three basic questions, I would like to put to Mr. White who is the President of the Company and the man who is putting this whole thing torether, this whole project, Mr. Shasheen, being the principle owner and the father of the tning, but Mr. l,bite being his right hand and maybe his left hand men as well, the man who is really putting the whole thing together.

I want to ask him, one question which is tormenting many people in Newfoundland, and that is, why it is that a 100,000 barrel oil refinery at Come-by-Chance, 100,000 barrels crude oil today, it is costing so much more money than another 100,000 barrels a day crude oil refinery : ,. near the city of Quebec, is costing7 There as we know Golden Eagle a company founded by Hr. Shasheen, a company that has built an oil refinery and is operating it, very successfully, at Holyrood.

There.. that company now is / building an Oil Refinery with a 100,000 barrels a day, the same number of barrels~ Why is this Oil Refinery in Quebec costing so very much less than the Oil Refinery in Come-byChance, this is tormenting a lot of people and we must have an understandable answer to it.

Then we want to ask some other questions, many other questions without the shadow of a doubt, we want this afternoon to know, this afternoon or tonight, and tomorrow and the next day and the day after, as long as the House may wish you gentlemen to be here, and we want to ask you to tell us what progress has been made since this House passed the Act two years ago, this House passed

an Act, and what has happened since then? Are you doing the things that were provided for in the Act? Are you living up to the conditions? What progress are you making? How does the Refinery stand today? And when 2332

April 21st. 1970 Tape 548 PK - 3 ~M£! __ IIIB. is it going to open? How many people is it p,oing to employ? What wages are you r,oing to pay? Is it going to be profitable? Or is Newfoundland in any danger of being stuck to meet the guarantees that we are giving?

We want to ask all these questions and we might start Mr. wpibe~. if you will please, and everyone who asks,a question will you please remereber that there are four microphones two on this side, and two on that side, and if it is necessary for you to move closer to the microphone, than you are, do not hesitate to do so, the House ~11ill not mind, in fact if you speak into the microphone, we will like.:.it very much more. Why is the refinery in Come-by-Chance costing so very much more than the one in Quebec? MR. HOMER l-.THITE: Mr.

Speaker, and hon. gentlemen, this question I think will require a rather len~thly answer, because it is a rather involved and somewhat technical question. But, let me MR. CROSBIE: Mr. Speaker, •••••••• what this Refinery is going to cost, we do not know yet, what this one is going to cost. Just very roughly. 2333

JW April 21, 1970 Tape 1549 Page 1 MR. WHITE: I honestly do not feel that this sort of information should be made public at this time. This is a very easy thing for the other competitors in the market to find out just what our costs are. I think that in the press there have been a number of stories of what the cost will be. And I do not feel that we should really make a public announcement at this time. MR. SMALLWOOD: Mr. White 1 if you will allow me to interrupt?

I am afraid we have to know this. -The House and the people of Newfoundland have to know what the Oil Refinery is going to cost, because it is not enough to explain to us why it is costing so much more than the one in Quebec. We have to know how much more it is costing, because the public statement has been made that the Oil Refinery in Quebec is going to cost $70 million. It is a 100,000 barrel refinery, and some statements have been made about the cost of the one in Come-by-Chance, talk of $130 million and talk of $160 million, and talk of other large amounts.

We really must know because you see the Newfoundland people and the Newfoundland Government and the Newfoundland credit are tied up in it. So we really must know, and if you will not tell, and I cannot force you. If you will not, I will. I know so you might as well tell because it is going to come out. What is it going to cost the Refinery in Come-by-Chance, and you might, while you are at it, spell out, well you must because I have asked you. Why is it costing so much more than the one in Quebec? What is the difference in these two?

And why is one costing seventy or seventy-five, and the other is costing a lot more than that? Would you be frank and tell us? Never mind your boss now. MR. SPEAKER: Before Mr. White continues his answer which he already started, I should make it clear right at the very beginning so that there will be no misunderstanding later ott. that when one of these gentlemen is asked a question, I think he should give his answer uninterrupted. If anybody wishes to have a clarification of his answer, he can ask a supplementary question a little bit later on.

But I think in all justice to the people who are answering the questions, they should be asked to answer one question at a time without interruption, and then if there iA any point that needs explanation 2S34

April 21, 1970 Tape #549 Page 2 or clarification it should take the form of a supplementary question. I think that should be agreed right at the very beginning, because otherwise the questioning may get out of control. MR. WHITE: Mr. Speaker, it seems that we will have to go into the price, · or have someone else tell it anyway. The announcement that was made in the press of a contract of ~0.3 million stirling is the size of the financing required for this plant. This will be the size of the contract with the Procon people. Now this will convert into Canadian dollars, approximately $155 million.

This covers a lot of things other than just the hardware of the plant. This covers such items as catalyst and chemicals, spare parts and a lot of other necessary things, things that are not normally considered, when you consider just the building cost of the plant. But we do have with these people a contract for a complete refinery. This is not any part of a refinery, but they will build a complete refinery in operating condition, and turn it over to us for the contract parts. So there is no question about the amount of money needed for completion.

If their prices go up we do have that type of p~otection, and Procon have agreed to do this job for us under specifications which have been written and spelled out in very much detail. To get back to the differences in these refineries. The Refinery that we are building is a quite modern plant, not just a fuels refinery, this is to form the core, the nucleus for a petro-chemical complex. Now you can have various types of Oil Refineries, the same as you can have different automobiles. You can have a very simple automobile, or you can have a bicycle, or you can have a cadillac.

We have the same basic type of things in the refining business. The refinery that we are building will contain ten major processing units. These are ten different processes to convert the crude oil into gasoline, jet fuel, heating oils and a very small amount of what we call residual fuel oil, or black oils, the heavy materials burned in power plants for road asphalt and that sort of thing. Now the other refinery that has been referred to to be built in Quebec is also a 100,000 barrel a day plant. It only has four major processing units.

It does a very simple job of producing a little gasoline, some jet fuel, some ~iddle 2335

April 21, 1970 Tape #549 Page 3 distillates, and a sizable portion of the yield is the residual fuel which is fairly low-priced material. Now to put it in another way, the product value from our oil refinery will be in the neighbourhood of a dollar a barrel more than the product value from the other refinery. This is a decision that we had to make and in our engineering judgement, our economic judgement, analysis of the markets, we felt that this is the only type of refinery that would be economically viable and would accomplish the purpose that we set out to do, which was just not to build a refinery.

Our whole purpose in this thing is to build a petrochemical complex here. If it were just a refinery, we could have possibly gotten by with some simpler units, and that sort of thing. However, we do have another facet of this refinery that you want to take into consideration. That our plant will be able to use a very wide range of crude oils. We can use heavy crude oils from the Persian Gulf. We can use Kuwait or we can use Venezuelan crude. We can use crude from the Far East or the Middle East, or from the Mediterranean.

Now the other plants that do not have all of this more sophisticated processing type of units will be much more limited in the type of crude that they can run and the products they can make from it. Because you have to make salable products, you cannot have anything left over when you refine a barrel of crude. There is just nothing you can do with it if you cannot sell it. You cannot even dump it in the Say, because I think the Fisheries people and the local residents would not like that. So you have to sell everythinR you make and therefore, it has to meet certain specifications.

The products that we sell will all be low sulphur. We will remove the sulphur from all of our heating oils, gasolines, jet fuels and that sort of thing. Now to give you a little idea of the product mix from our refinery, and this is the way the refinery talks about it. It is how much steak and how much hamburger you get when you butcher the cow. We say how much gasoline, how much heating oil do we get when we manufacture the fuel from our crude oil. wu-.-'&~' •1---)~ 2386

April 21st, 1970 Tape 550 JM - 1 liii f§d• ~ will make approximately thirty-per-cent gasoline from our crude which is a moderate amount of gasoline but if we had a very simple refinery such as some of the others that are built they would only get fifteen, ten, ten-per-cent, fifteen-per-cent gasoline from this same type of crude.

We will make a very high yield of jet fuel~ we will make about, of the aviation turbo-fuel which is the commercial grade, we will make about twenty-five-per-cent yield on a barrel of crude, Now a part of that gasoline that I have told you can also be jet fuel that is the gasoline type of the military jet fuel. So this leaves about a thirty-per-cent yield of heating oil that we will make and a very small amount of this heavy residual fuel.

Now the other people, the other refineries and there are a number of refineries like this, it is not just one, there are several building and being built, that will make maybe ten or fifteen-per-cent gasoline, five to ten-per-cent of kerosene and aviation turbtntfuel and maybe twenty-per-cent, twenty-five~per-cent of heating oil. The balance of their production will be residual fuel. Now these are the reasons why the plant is going to cost more.

We can, actually we have reviewed this thing very carefully, we have gone into the cost of all of these plants and we have been able to reconcile our figures against a lot of other . figures and we can say very positively that this is about the way the economics works out. Now our economics on a plant of this size is good because we do get a fairly high yield of the more high priced products. This alone repays for the high capital cost and gives us the flexibility and gives us the refinery that we want.

When we go to talk about how much the other people are paying I do not want to do their engineering for them but I feel certain that the announced figure that I have heard around of some $70. million, Canadian, is only the construction of the refinery. I am sure that there are a lot of other things that are included in our costs that must be included in theirs before we come up with a figure. Also some of these contracts were made fifteen, eighteen months ago. Now knowing that there was some concern and there was some 2387

April 21st, 1970 Tape 550 JM - 2 concern on our part on this thing, we have asked the engineering people, '·who by the way are building both refineries, to give us a little bit of some numbers on this. They told us that there has been an escalation in cost of approximately twenty-per-cent between the time that refinery was bid and priced on and between the time that ours has been done so that you could certainly add this escalation cost on there in addition to the additional cost of the much more sophisticated units. MR.

SMALLWOOD: Before you sit down, you say that the one at Come By Chance wiil have ten and the one in Quebec will have four, you said units or ten something and four something. Would you explain that, ten what and four what? MR. WHITE: This is the engineers way of expressing the various operations that we preform on this crude oil and to try to simplify it a little I say every refinery has to have the initial separation stage. That is a unit where you bring the crude oil in, you separte it into a light gasoline component-·­ some middle .distillates and some residules.

Then the Quebec Refinery will have at that point a second unit, that is one unit, they will have a second unit which will be quite a small unit but will take a little of the residule fuel and reduce it a paving asphalt which they will sell also. What I am telling you now is, I am not revealing anything that we have particular access to, this has all been in the trades publication,so it is public knowledge that I am giving you now and honestly this is all I know about that plant is what I have read in the journal.

But they do have the crude unit which is one, they have a small vacuum unit as we call a vacuum unit for the preparation of asphalt. Their third unit is what we call a reformer, this takes the raw gasoline component which have a fairly low octane number and are not satisfactory for use in a modern automobile and chemically change that material into a high octane gasoline which can be burned in the car with a certain amount of lead. Now I understand that with the controversary over the lead in gasoline this is even m~re important that we get the octanes by reforming rather than by adding tetraethyl lead.

Now you have either route 2333

April 21st, 1970 Tape 550 JM - 3 IB t811!'18: -- -- - - but in order to get this octane you have the reformer which is a process unit and is one of the things that we have in our refinery and they also have one in the Quebec Refinery. Ours is more than twice the size of theirs because we are making more gasoline and we will also have a higher octane capability because our design work came along at about the time the big agitation started for the removal of lead so that we will be further along, we will have more capability for producing a lead free gasoline than the other people.

The fourth unit that these other people have announced is a unit for removal of sulphur from the middle distillate, from the heating oil , so that the oil that you use in your homes, in the stores and buildings like that will have the sulphur removed. Sulphur is a rather oderless compound and when it burns it makes a rather acid gas which is unpleasant and helps to form smog. Now a lot of the municipalities, states and provinces are beginning to limit the amount of sulphur that can be allowed in the fuel. They will have this unit for the removal of sulphur from the middle distillates the same as we will have.

Now that is the four units they have. We have six units in additional to that really that add to our complexity and I am going to refer to a note here for a minute on that because I have just more or less estimated what these units will cost us as a part of our contract, what they have added to the cost of our contract. Now our vacuum unit for the preparation of asphalt or the heavy oils is as I say much larger and we will really have two of these units.

That particular unit being much larger, you can almost consider that a second unit, and that will add an additional $5. million over what the basic plant would require. Then instead of making asphalt we are adding another unit which we call the viscosity breaker because this asphalt that you get out is a very heavy material, you pour it on the ground and it solidifies, but in order to make that useable as fuel because really there is not enough road work in all of the Maritimes and in Quebec I think to absorb the amount of asphalt that we would make in this refinery.

We would make an enormous volume of asphalt 2389

April 21st, 1970 Tape 550 JM- 4 and we will use this unit to convert that into a usable residule fuel oil and that is the product of tltat unit is the residule fuel tha .t we are selling, some six to eight-per-cent of our total · produ .ction will be that. The reformer that we have is two and a half times as large although this breakershY the way, will add about $4 million to the cost of this plant. The reformer t)lat we are putting in will add an addi tiona! $4 million dollars. 2300

April 21, 1970, Tape 551, Page 1 -- apb 'fl I I L 1 h I Ul ad I gHRi ai $' il? I •. The0when we reduce all this material to ashphal t we get a heavy oil. It is too heavy to burn as a number two oil or a home heating oil, and yet it ia too valuable to sell as a residual fuel. Now in the other plants they just do not take this oil out;• and it is sold as a residual fuel. We will put in one of the very modern plants to convert this material, This is called a hydro-cracker. It actually che~ically converts this very heavy viscose oil into gasoline, jet fuel and a number t\:70 heating oil.

This unit is designed to give us a very high yield of jet fuel. Now I have heard in the past that people have said "oh you cannot make more than ei~ht, nine ten per cent of jet fuel from a barrel of crude oil." Well you cannot if you just distill it, but with one of these hydro­ crackers you could really make fifty or sixty per cent into jet fuel if you really \Jan ted to. We are actually making about t\Jenty-five per cent of trlis material, of the total into jet fuel range material. By the way, this jet fuel is exactly the same thing that some of you know as stove oil or kerosene, that burns in the lamps.

That unit, that "Isolmax Unit " which is the trade name for the hydro-cracker \:Till add $24 million to the cost of this plant. Now to s~pply hydrogen for that plant, in the process this material absorbs a lot of hydrogen which is a light gas, and which gives a lot ot energy to this lighter fuel oil. ~ole have to produce that hydrogen, we have to make it in the refinery from some of our other materials so that we can use it for this hydro-cracker. No~ that plant alone for the production of hydrogen will cost around $17 million, with all of the off sites, the boiler plant and evetything that is required.

These t"ro plants alone are very large, very complex, very advanced units. Of these hydro-crackers I think there are some fifty or sixty that have been built and a lot of them are being built now to make this new low sulfur fuel oil and to make the higher octane gasolines that are required. Some of the Canadian refineries that have had bi~ refineries for a long time are just now getting their hydro-crackers built, because the process i1as only been commercially proven and in operation on large scale for auout six yc.Hs 23!J1

~pril 21, 1970, Tape J51, Page 2 -- apb I would say. It actually is a very old process, but the engin eering techniques and the metallurgy required in this have only been really developed in the last ten years. No1.• another plant that He are putting in which \~e could leave out I guess, if \ve did not •1ant to recover it, and we did want to go into a little problem on atmospheric pollution is a sulfur recovery plant. Now we are going to spend about $3.5 to $4 million to build a plant to recover the sulfur that we have taken out of all these distillates.

To give you some idea of how much it is, we will recover about 135 tons a day of sulfur. Nm.r this 11-•ould normally be sulfur that \vould be either vented up to a flare and burned or burned in the furnaces, or in the homes in the gasoline. He are putting that plant in to recover the sulfur. We are not doing that entirely to hold dmm on pollution \vhile it ~es help, we also can sell that sulfur at a fairly decent prioe.

We do not make as much money on that plant as \·Te \vould by putting that same amount of capital into additional oil refining facilities, but He feel that we should . put this plant in in the beginning to where it will be making a very minimum of material that would cause pollution and give us problems dow~ the line. MR. CROSBIE: Can I ask a question before .t-IR. SHALLHOOD: (J . R.): Hill you let me, you have our HR. HURPHY: :-!r. Speaker, I would not like to see this conversation monopolized HR.

S' W..LivOOD: It is not going to be monopolized, if we .are going to be here for three or four or five days, I said I had some basic questions to ask, and I am still asking that one and the answer is for all. I am asking it but he is answering but I am not the only one getting the ans\ver. Now I want to ask you this question. lfuat we are discussing is why one refinery is costing more than another and all your answers are dealing with that. The refinery in Quebec will have four things and this one will have ten and you have explained.

The area, the space, if you go and look at the one in Quebec when it is finished and the one in Come--by-Chance when it is finished will they look different, will they cover, will one be much bigger that the other? Hill one cover more acreage than the other? lvill it be 23&2

April 21, 1979, Tape 551, Page 3 -- apb obvious to anyone that tills is a far bir,gcr plnnt? MR. l~JllTE: Ycs-;Sir, I think parlicularly to an experienced refinery man, he ; could spot the difference immediatelj to the lay man, yes he would see a lot more towers, vessels, ladders and that sort of thing around. The tanks will be about the same and really tanks are what take up a lot of the area. The volume of oil to be held will be about the same in the two plants, but the processing units themselves will be, there will be a lot more of them.

For instance, we just roughed through this sort of thing, we will have about three times as many pumps and compressors, we will have more than twice as many tmvers, t11ese long, tall towers, some of them going up 100 to 150 feet and that sort of thing. Yes it '1-'ould be very obvious that this is a larger more complex refinery to anyone just driving down the road. }'[R. S:1ALL\mOD: Did I understand you to say that we would take 100,000 barrels of crude oil every day of the year.

That that oil when you do what you do with it in the Come-by-Chance refinery, that oil will be worth one dollar a barrel more than the same oil in the refinery in Quebec, the Golden Eagle one. One dollar a barrel more you will get for it, you will sell it for one dollar a barrel more that is $100,000 a day every day for 365 days by having a more complicated and expensive refinery. Did I understand you to say that? MR. h'HITE: Yes.Sir MR. CROSBIE: :-rr. Speaker, I would like to ask several questions at this point to.

Nr. mlite, you said that the refinery is going to cost $155 million, or that is your contract \vith Procon. Does that $155 million include the financing costs and all cost in connection \·rith the refinery including repaying the interim financing, the $5 million advanced? I. $155 million the total cost, including everything? }ffi. lt.1iiTE: The $155 million is the total cost yes, Sir. / HR. CROSBIE: Including interim finance ;' ~!R. toll!ITE: All financial charges including all spare parts, catalysts, chellticals everything yes.

April 21, 1970, Tape 551, Page 4 apb everylihie• g ; ll· NR. CROSBIE: All costs including duties. TI1e $155 million is the \>hole thing interest and everything else. When that is finished they turn over a refinery ready to operate, to use, is t~at the position? MR. WIITE: Yes \\'hat ""ill the gross sales of this refinery be a year? A 100 barrels of crude to take in, what do you estimate the gross sales per year to be of all these products? HR.

WHITE: Well I have told you the volume of products and I think that this type of information is certainly getting into the business field which I do not think should be made as a part of a public statement like this. This is included in the feasibiiity studies, the contracts which have been revie\'7ed by a number of different people, and the annual sales revenue has been determined from these contracts and from the volumes of sales and prices, and this has all been given to the engineering people who have \-rorked up the feasibili ties.

It has been shown to the directors of the building company, and the members of the Cabanet. I feel that it is not anything that should be given out because of the competitive nature of this thing. We do not want to tell anyone what our costs are or what our sales prices are. 1-ffi. CROSBIE: Mr. Speaker I am not asking-''llli?._ _____ ilill_.~'llliib:iiD!i?r. """ ........... . 23!i4

April 21st., 1970 Tape no. 552 Page 1 . ,~ ---. ±#.:: what the sale prices are. I am asking what are the anticipated gross sales of the refinery a year? That can tell nobody nothing. It does not tell them what their sale price is or what their costs are. I am only asking what is their anticipated ~ross annual sales from the refinery a year? Will be it $100 million or $150 million? In what area will the ~ross sales be? :1-lR. HHTTE: I can state this: that the ~ross sales in this will be sufficient and the profit will be sufficient to make this venture an economically, viable project. HR. CROSBIE: 1'1r. Speaker.

I am not doubt in!! that, but that does not answer the question. ~ -!hat ~:ill the gross sales be a year; presumably, of the House? No, not in barrels, in dollar volume. I submit that the question should be answered. MR. ~~ITE: ___ I am not atliberty to give any more detail .•• MR. SPEAKER: ___ If I may interject here, I have to say this: that the nature of this inquiry is such that a person asking a question may answer the question or he may answer it in a way that is not satisfactory, actually, to the person ''bo asked. But, 'l-7e should not start a debate on whether the ansHer should be insisted on.

I do not think anybody can insist upon an ans\7er. The people of hearing are not ,.ritnesses. They are not brought before the House. 1bey are here by invitation go !!ive information, and they will pive information; if'they say they do not deem it advisable for business or other reasons that the ans'l-rer cannot be revealed . then, of course, hon. members cannot insist that the question be answered. They can be persistent, but they cannot insist that the question be ansl>;ered. It may have to be rephrased and put in another form. ~~ -- ~~!--AY.: __ _ Mr.

Speaker, I wonder if I could, just for a matter of correction in answer to a question posed by the hon. member for St. John ' s West and that was when Ur. ~bite was answering, I believe, he may have mentioned that the total price included the import duties. I would assu~e 23r;5

April 21st., 1970 Tape no 5_52 Page 2 that the import duties would be extra and not involve the $100 million or $150 million. I think it is essential that we make that clear so we would not be -what would the import duties be, for example,~ir? MR. WHITE: This is one of the reasons that we would like to go to the British financing, the import duties were not included in that because they will never be financed by anyone else. However, since we do p,et the preference, the Oommonwealth preference on import duties, a lot of this material is not manufactured in Canada and a lot of it would be duty free an}",Tay.

The duties will be a fairly small amount. This would be considerably less than the duties that would be coming in from the other European, you know, the Germans and that sort of thing. I would estimate that the very maximum, the maximum amount that our people have estimated on this, and we have had a consultant in Ottawa, who has looked over our entire list of equipment and has discussed this with the Internal Revenue people there that the very maximum it would be, would be less than $2 million, and we think "'e can get it for less than a $1 million total. MR. J.nJRPHY: Mr.

Speaker, arising out of the answer by Mr. ~''hite to the hon. Premier, with referen~e to the comparison of costs, between Golden Eagle in Quebec and the Come-by-Chance refinery, I just jotted some notes as the gentleman was going throur,h, and possibly he could correct me. At Come-by-Chance our production will be approximately thirty per cent gasoline, as I made it; nrenty-five percent jet fuel, thirty per cent heatinp, oil, fifteen . per cent residual or I would say, bunker sea - '~ould I be ri~ht in this? MR WHITE: No, sir, the residual fuel will be in the range of six to eip,ht per cent.

The balance of this is plant fuel that we will use up. ~~ate rial that will be consumed in the operation, and the shrinka~e that we pet. ~o that if you are addinv up exactly what we had, you should get about ninety- three per cent of the crude. In other words, if we charpe a 100,000 barrels a day, we should ~et about 93,000 barrels a day of product exclusive of o~r pl~nt 23G6

April 21st., 1970 Tape no. 552 Page 3 fuel. This is something we consume in the plant. So I hope my figures add up to that amount. Well actually there is about one-per-cent of this '\otill be what we call LPG or propane, which we will sell also. There will be about a 1,000 barrels a day of that. So the numbers I have piven, have, of course, been rounded off somewhat, but they should add up to approximately 93,000. ~- · -}~~.!!}'..:_ The reason I asked the question, Mr. Speaker, was the fact, and I did not allow for any shrinka~e or loss in the processing. I made it up 100 ~er cent.

But in comparing this with the Quebec one and in this day and age, it rather strikes me as being short-sighted on someone's

part in Quebec; particularly,

whereas I see it now and I have made up 100 per cent again. In Quebec, they are only manufacturing fifteen per cent gasoline, five per cent jet fuel, twenty-five petcent heating oil and the balance will be in this residual, and this; of course, explains the reason why our plant costs so much. You know, I am rather doubtful about erecting a plant that its greatest production is purely, oil almost valueless,Aif I am speaking of bunker sea, which perhaps selh for nto or th~ee cents a gallon. I think I am right on this and another question arose with this question of sulphur.

Would this be commercial sulphur such as: ERCO is importing say from, I think, the Texas area that is bringing it into Come-by-Chance.? Would this be the same type of sulphur that could be used in ERCO, in the ERCO plant there~ MR~IJE: On the sulphur question first. Yes the product that we make will be regular, actually we will ship it out as molten sulphur in the liquid form, but it will be a good commerical grade of ,pure sulphur. The paper mills here use it. The acid plants over in New Brunswick.

There are a number of different plants in the area that consume sulphur and we will sell it, of course, locally and take advantage of freight savings. Now as to the other plant,-! think with the numbers th~t you have written down, I think, you have done a very p.ood job of analtzing exactly the 23!J7

April 21st, 1970 Tape no. 552 Page 4 same thing that it took us a lonp, time to conclude after a number of case studies. So basically this is the case. There will be a lot of the lower costs oils, the crude oil will cost more for the less complicated plant. I believe that was all your questions. MR. BURGESS: Mr. White. I am sure the Leader of the Opposition is very comfortable in the knowledge that he can secure a job with your company in the event that he is defeated in an election.

In explaining, Sir, the difference in· cost , in ans•Ter to the Premier's question, wherein he outlined the facts that it was alleged that the operation of Quebec will cost $70 million and wherein you stated that the refinery here will cost $155 million and this is explained because of the fact that there are six additional processes in the Come-by-Chance operation. 7 Now may be I missed something, when you were explaining the additional processes.

I only noted five, but I think you mentioned that there were two •mits in one place, but you made reference to certain amounts of money that these additional processes were ~oinp, to cost and you said that fer a vacuum unit, ~5 million; for asphalt a usable residual fuel oil, $4 million: fo~ hydro-cracker, $24 million; for a hydrogen producer, $17 million; for a sulphur recovery unit, $4 million.

Now this is all I have noted down, and I think this is the only figures that you quoted actually, and if you add those up it comes to a total of $54 million, which leaves - the difference bea1een $70 million and $155 million as yol:l quoted, i1; $85 million and the total of the figures which you ~uoted in explainin~ the additional processes was $54 million: so there is $29 million which is unexplained. Now did you have any additional infor~ation in order to make this clearer? ~'R.UHITE: Actually there was one unit that you missed, and that is the additional reformer that was so much larger.

There was an additional $4 million there, so that brin~s your $58 up to •• AN HON. HVIBF.R: $54 million. MR. 'NHITE: Yes. Now I do not Hant to stand here and actually calculate all 23!)8

April 21st.~ 1970 Tape no. 552 Page 5 of the economics and all of the cost for the other people's plant. That is their concern, but as I pointed out, under present day conditions, costs are about tHenty per cent hir.:her now than they were then. As far as the number of units are concerned, ~~len I said six units, the sulphur recovery plant that I put in, really is two plants. One is a plant for the scrubbing of the gases. It has to clean up all of the gas and concentrate this gas and then it brini!S that into a sulphur plant.

It has to prepare · the feed for the sulphur plant, so that pives ~ou the six additional units that we are talking about. The cost as I estimated is around $58 million more. You add that to the $70 million and you get $128 million. Then if we take another twenty per cent and add it on to that, I think you are rettinr. pretty close to the same numbers that we have, and as I told you before, the $70 million, there are a lot of thinf!s that are not included in that; at least, if they have not been announced that they were included in that job,Qecause they normally are not.

The price we ~ot from Procon on this particular job was a little unique in that thev have included evervthing, because we wanted to be adequate - · sure that ~>'e hadAfinancinp, that we did not have to go back to anyone to get anymore money to do this job, so we have told them things that ue normally, as the owner's representative would see to it that we r,ot and that we would buy for the owner of the plant.

It is up to them to buy it and have it in there; to have our warehouse stocked with spare parts, when we get there; to have the chemical tanks all filled up and ready to go for us; to have the catalyst and all this sort of thinr,; all of the supplies in the laboratory; even some canned goods in the commissary so that when we go to serve lunch, we will have something there; rags; oil everythinr.. This will be a complete turn-key plant which is a little unique in that repard. It is not somethin~ that has not been done before, but it is something that is not ordinarily done in the regular plant construction. 23:J9

April 21st. 1970 Tape 553 PK- 1 MR. BURGESS: It is quite a sizable chunk of money. \~at you are saying in essence is give or take $25 million on this overall project, and that does not make sense. MR. WHITE: I do not see where you get $25 million really , because you add ~p to a $128 million if we just add the units together. Then if we add twenty percent on top of that, that will give us another $25 million, and $25 million added to $127 million, comes up to $152 million, nowlthink that is pretty close. MR. WELLS: ?-lr. Speaker, at this stage we are only talking about generality.

I would be more interested,Sir, getting some details on what has happened / recently in Europe? And I wonder, if }!r. White or somebody else would advise me the names of the companies, I think I know but I am not certain, so I would like to be certain, the names of the companies that will actually borrow $155 million, and the amount each will borrow? And as well, Sir, I would like a list of all the agreements that have been signed since January of 68 when the original agreement was signed, particularly those signed recently in Europe.

I would like a list of all the agreements that have been signed, and the party that signed t~em, with some kind of an indication in brief terms of what they provided for. In otherwords if there is an agreement signed obligating the Government of this Province to $45 million with somebody, I would like to know about it? And I am sure the people of Newfoundland would. So if it is not Mr. White, it is somebody else can give us the information as to what companies will actually borrow what amount? And from whom? And a list of the agreements that have actually been entered into recently?

This is key information, before we can discuss further. MR. HHITE: In the city of London we are dealing with Kleinwort Benson Limited a commerical banker, in our application the E.C. ~ •• 10. we named them as our banker. Now they have the prime responsibility of putting together a syndicate of banks to raise money both in sterling and Euro dollars to support this project. The amount of money they are raising in sterling is /;39.1 million. In Euro dollar .f6.9 million, total ,-:46 million. Both ~ 2400

April 21st. 1970 Tape 553 PK - 2 HR::::::t.!llE!': sums are being raised with an non-conditional guarantee from E.C£UJP. And additional amount of Euro-dollars is being raised independently by Kleinwort Benson and that number escapes me, it is less than $30 million, SOME HON. GENTLEMAN: Roughly · :~14million. MR. WHITE: That is correct, roughly 14 million. MR. WELLS: Dollars or pounds? }ffi. l~ITE: Euro-dollars. That is right it is Canadian dollars being raised in Euro-dollars. }ffi. CROSBIE: The las~ gentleman, would he just follow it u~ Mr.

Speaker, you say that the Kleinwort Benson are raising _; 46 million, are in Euro dollars. Are these fifteen year bonds? or just what are they arranging and could you tell us what the interest rate is? And whether or not the Newfoundland Government - '"here is the Newfoundland Government's $30 million that they are suppose to guarantee, where does that come into the picture? MR. BROKAW: I will defer that question, and I will answer one of your other ones . The-;,: 39.1 million sterling, is being rasied at five and a-half percent.

And Kleinwort Benson is wheeling a~di¢ate of bankers, the actual banker is putting the money up will be the British Clearing Banks of which there are numbers. The 6.1 million in Euro-dollars to be used for cost incured in Canada, also guaranteed by E.C. G. D. will carry an interest rate, which is yet to be determined. He are looking at a rate that will be equated to the six month inter Bank rates for Euro-dollars. MR. WELLS: Inaudible. MR. BROKAH: Yes. }ffi. CROSBIE: Is this long term •••• MR. BROKAH: Terms?

The terms of the $39.1 repayment of principal 'and interest commences in month 36, and is in-equal semi-annual installments with in month 132 from contract awards. The 6.1 million repayment of principal and interest 136, repayment a months 96. The question with resepect to the provincial building equity money, I will deferred to others. 2431

April 21st. 1970 Tape 553 PK- 3 HR. WELLS: Sir, in my original, I have further information, but my priginal question has still not been answered. And may be I did not make it clear enough. What company, Provincial Building Limited, Provincial Refinery,Newfoundland Refinery Limited, Shaheen Natural Resources. Who is borrowing the money? And what are the obligations of the Government of this Province in repect of it, and what amount? And what agreements have actually been entered into, that in any effect this project? A list of them that is what I would like to have if I may. 'HR.

WHITE: As far as the borrower of the money, of course, this is strickly in accordance with the Act. This will be Provincial Building Company. MR. WELLS: The entire amount? MR. WHITE: The entire amount, is the Provincial Building Company. This money will then be paid into Provincial Building for the construction of the plant. As a matter of fact this is not really money paid in this is the1 a credit expension, we are buying / equipment, we are buying these services on an installment plan.

And we start paying 36 months after we sign the contract to build the plant, and we will continue paying it off at the rate that }1r. Brokaw has explained to you. The borrowing will by Provincial Building Company. This is in accordance with the Act. HR. WELLS: What are the agreements that have been entered into to date? Can you list them and the parties, and just an indication just what each one does? MR. ~~ITE: I think in the Act, ~ewfoundland Refinery Company, Shaheen Natural Resources were required enter into three agreements, with the Building Company, with Provincial Refining Company, MR.

WELLS: I am familiar with the requirements of the Act, as Hr. White probably knows, what I want to know is what were the numerous pa~es of agreement that the Premier mentioned that he signed and was going into in Eurppe. What were the actual agreements that were si~ed, this is what I want to know? MR. ~THITE: \\'ell, I am afraid that I do not quite, 2402

April 21st. 1970 Tape 553 PK - 4 ~LLS · : What agreements were entered into with Newfoundland Refining Comp~ny Limited? What: ap.reements did they enter into'? lf any? MR:. WIUTI;!:: Newfoundland Refining Company, not t'ecently but some time back, has entered into three agreements, as provided in the Act. We have entered into the 2403

JW April 21, 1970 Tape fJ554 Page 1 ~one agreement with the Provincial Euilding Company for the supervision of construction of the refinery. We have entered into a second agreement with the Provincial Refining Company for the management of the Provincial Refining Company Refinery at Come-by-Chance. We have entered into a third agreement a Sales Agency agreement with Provincial Refining Company. These really are the only three agreements that we have entered into with Government Companies at this point. MR. WELLS: Mr.

Speaker, to me much of this is meaningless until we know what the obligations are or what the agreements were. All we are doing is going over the old Act. Before we proceed any further and waste any time, if none of these gentlemen can provide the information, can the Government provide a list of the agreements that were actually entered into~ MR. ROBERTS: Mr. Speaker, if I may. The Government Provincial Buildings which is a Crown Corporation of which I am a director, entered into two agreements in Europe, in London actually the other day.

One was with Procon UK Limited, and dealt with the contract to construct the refinery at Come-by- Chance. The second agreement was with Kleinwort Benson and Company, and dealt with the raising of the money. Those are the only two agreements entered into,Sir. They were entered into not by Mr. White or Mr. Shaheen, / but by the hon. the Premier, the Hinister of Justice, the Minister of Supply and Services, the Minister of COmmunity and Development and myself, in our capacity as directors of the Crown Company. MR.

WELLS: Would the hon. minister also advise us whether or not these agreements are available for our examination? MR. ROBERTS: Mr. Speaker, the agreements have not been tabled, and at this time we are not able to table them. MR. WELLS: Can we anticipate that they will be tabled in a few days before - MR. CROSBIE: On a financial point here 7Mr. Speaker. We are told that the size of the contract with Procon is $135 million and there has been 46 million arranged Euro-dollars with Kleinwort Benson. And another Sl4 million is going to be arranged separately - $14 million which is roughly four or

JW April 21, 1970 Tape U554 Page 2 five million pounds, so that would be about/f~Sl million. And there would appear to be another nine million that have to paid Procon that has not been accounted for yet, so where is the other nine or ten million, which would be $30.million. Now is that the Newfoundland Government guarantee, and where are they going to obtain the money from? Who is lending that money and where does it come from? Can somebody answer .·that? MR. SMALLWOOD: Mr.

Speaker, the Government under the law are required either to guarantee a second ~ortgage bond issue for fifteen years, or to see that the money is provided. We are doing that. The Company are doing that. We are not in a position to give any detail on it today. The thing is being done, it is being done by the proper people, the proper financial agents, and it is very much a matter not for tabling at this stage. It would be very wrong. It is in the midst of being done and in the midst of being negotiated in the financial world, and it is no moment to deal with that.

The Government are required under the law to guarantee or to find, to guarantee itself or to provide the money, $30 million second mortgage fifteen vears, and this we are doing. it is MR. CROSBIE: Mr. Speaker, under

Section S(a)of the agreemen~ · \the obligation of Refining to arrange the Government loan to sell and distribute,on behalf of the Government, bonds or other securities in the amount of $30 million. The obligation under the agreement is on Refining to arrange then for the GOvernment, within two years of signing of the agreement. If that is under- way and you do not want to show us the details, well that is quite acceptable. But it is Refining who have an obligation under the agreement. MR. SMALLWOOD: We are very familiar with the Act and with that Clause, and we are acting fully in conformity with it. MR.

CROSBIE: Well the answer given by the hon. the Premier did not sound like he was thoroughly familiar with that point. Now.Mr. Speaker, I would / like to ask the financial gentleman, he said these funds were guaranteed by E.C.G.D. which the English Export Credit Guarantee Department. Do they guarantee these funds? The people who put up the money or the Procon people are guaranteed by this English agency. If there is any default they will receive their money. Is that the effect of it? And if so does that apply to 24G5

April 21, 1970 Tape /1554 Page 3 the whole eight years the period of the loan? And do we have to give them any gqarantee ourselves? Row does it work? MR. BROKAW: Kleinwort Benson is guaranteed by E.C.G.D. and E.C.G.D. makes the facility available to us as a British supplier, that they actually guarantee the banks and in turn the clearing banks, and for that reason they can loan five and a half percent money. I would like you to ask me your second question again. MR.

CROSBIE: ECGD guarantees to you, to Kleinwort Benson that you will receive repayment of this money, but the Provincial Building Company Limited, presumably will then be indebted to E.C.G.D. if E.C.G.D. had to do anything in connection with the matter. Is that correct? MR. BROKAW: There will be a guarantee made by Provincial Building to ECDG and to Kleinwort Benson, or guarantee that is satisfactory to E.C.~.D. MR. CROSBIE: Is there any goarantee requested from the Government other than from this Crown Corporation, from the Government of Newfoundland? MR.

WELLS: I have one further question before we get away from this 5 (

a) Mr. Speaker. If I might read the first part of it. It will make it quite clear what it says. Refining.that is Newfoundland Refining Company Limited, l hereby covenants and agrees with the Government that (

a) within two years from the date of ratification of this agreement Refining shell for the purpose of providing the amount of the Government loan sell and distribute. Now the obligation is on Refinipg, what I am asking is not what the Government is doing, will Refining be able to discharge their obligation under that clause by the middle of this coming month, which would be 'two years after ratification ..., of the agreement~ Will they be in a position to do that? MR. WRITE: The answer is to that question is a very simple yes. MR. WELLS: If I may now ask Mr. Shaheen if he would answer these questions.

They are related, so I will ask them both at once. Why was it that Shaheen Natural Resources would not guarantee, would not take responsibility for repayment to the Government of this Province of the $5 million interim financing advanced under Section (6) of the Bill. They refused to guarantee this. This is supposed to come out of the first $30 million, but Shaheen Natural Resources 2406

JW April 21, 1970 Tape 11554 Page 4 would not take responsibility. ·Why was that? And why was it that Shaheen Natural Resources would not take responsibility for the obligation of ~be Newfoundland Refining Company Limited, which is the company that the Government has entered into the agreement with. But it is a paper company. Why was it. Shaheen Natural Resources would not guarantee their obligation? !fRo. SHAREEN : I understand your question. ¥gu ·aJl'e·refH~t:o..,,.._._"''!B~ld- 2407

April 21st, 1970 Tape 555 JM- 1 ffctually you are referring to some old history. This is not a current matter, it is something that is - MR. WELLS: It is very important as far as I am concerned. MR. SHAHEEN: I know that, I am trying to understand the time sequence. Is this something historical to which you refer, Sir? MR. WELLS: I will clarify it for you. Under the Act that was passed in 1968

Section 6 of which provided for an advance by the Government to the building company of $5. million, ·why was it that Shaheen Natural Resources would not guarantee repayment of this amount to the Government if the building company could not do it and a related question, why, in general terms, was it that Shaheen Natural Resources would not guarantee the obligation of Newfoundland Refining Company Limited with whom the Government entered into the agree- ment,but this was basically a paper company, why would not Shaheen ~atural Resources take responsibility for their obligations if necessary? MR. SHAHEEN: Mr.

Speaker, you mean outside the Actf MR. WELLS: Put in within, it could have been put within the Act but it did not go because Shaheen Natural Resources refused to do it. Now why? MR. SllAHEEN: Not in the Act, is it? I think we have lived up to the Act . MR. WELLS: Why was it that Shaheen Natural Resources would not go along with it? MR. SHAHEEN: Sir, we have lived up to the Act. Are you asking me why we did not do something that is not called for in the Act? And I am only really trying to understand the sense of the question, Sir. MR. WELLS: Abundantly clear. MR.

SPEAKER (NOEL): We have to have some terms of reference here. The terms of reference that we have are to take the thing forward as it were, the progress achieved since the passage of the Act, in other words what is the status of the project and the economic viability of the project and I really do not see how negotiations leading up to the Act or to the agreement that is incorporated in the Act are material at this stage? MR. WELLS: Well I will put the question this way, Mr. Speaker. I agree I will not go beyond as Your Honour has directed. Will Shaheen Natural Resources now 2408

April 21st, 1970 Tape 555 JM - 2 Nl 1416~ guarantee the obligation of Newfoundland Refining and execute such a guarantee in favour of the Government. MR. SHAHEEN: I understand that question very clearly and I think that our answer would be one to be made directly to the Government with whom we are negotiating. If the Government puts a question like that to us we will treat with it at that time, Sir. MR. WELLS: But you refuse to answer the question. MR. SI~HEEN: I have answered the question directly. Our negotiations are with the Government under Law 86, Sir. MR. CROSBIE: On other financial matters under the agreement that was entered into,Section 5 (

h) has stated, yes

Section 5(h), it was stated that there would, well, first under

Section 5 (c) - Refining,that is Newfoundland Refining pas to I / have assets of $10. million which can be converted into cash in advance to the oil refinery as working capital. I would like to ask Mr. Shaheen has this been provided? That is the first part of my question and I can come back to the second part. The other thing I was going to ask, you can remember this with your agile mind, I am sure. Under

Section 5 (

h) it was contemplated that there is going to be an aida grant of $5. million and if the $5. million was not forthcoming from the Area DevelopmentAuthority of the Government of Canada you were obliged to find that $5. million. what is the position on that $5. million also~ MR. SHAHEEN: The answer to the first question, Sir, is that we have arranged and provided and satisfied the Government about the SlO. million cash, we have so done.

Number two, Sir, I do not think there is any aida grant available to this Crown Corporation and we have arranged the additional $5. million exactly in accordance to the Act under 5 (h), Sir, we have so done. MR. WELLS: Is that included in the $155 . million? MR. BARBOUR: Sir, may I ask Mr. White the following question? When your refinery is complete could you tell the House how many people will be employed and how many during construction period and how long will it take to complete the project at Come By Chance? Why I am interested in this is because I represent a district 24G9

April 21st, 1970 Tape 555 JM - 3 where there are a lot of people who will no doubt find work at this. MR. SPEAKER (NOEL): Order please. I· do not think we can get into a speech on this thing. MR. BARBOUR: I just want to qualify my question. May I proceed? MR. SPEAKER (NOEL): Ask your question. MR. BARBOUR: The question is how many people will be hired after the refinery is built? May I also add .)after the wharf has been built .and how long it will take . / and how many people will be working in these projects and other complexes after all the complexes are completed?

MR. ~n!ITE: In the refinery itself durjng the construction period we look at a · work force of approximately 2,000 men. Now this will cover everything from the labourers to the welders, all the craftsmen, the engineers and this will be employed both by the prime contractor, by sub-contractors and others working in: the area. MR. BARBOUR: Not the wharf? MR. l~ITE: No, Sir. This is for the refinery. The wharf I understand will have at a peak around 450 people working on that and after the plant is in operation the refinery itself with all of the ancillary services that will be required will hire 125 people.

Now this will include the operating people in the refinery, the people working around the docks, the people on the tug boats and that sort of thing. As the complex develops further into a petro-chemical operation there will be.a much higher number of men employed but I think that we could look forward over a long period of time to a very sizeable work force, however in the beginning 425 at the refinery. MR. NEARY: I wonder if the prospective manager of the refinery, I think it is Mr. Severs, just to take the heat off Mr.

White there for a second, I wonder if he could tell us if the top management and the middle management rolls will be filled by Newfoundlanders and if he does not think it would be a good idea if they are going to be filled by Newfoundlanders to send Newfoundlanders elsewhere now to get on the job training to help guide the management of the new plant and 24::.0

April 21st, 1970 Tape 555 JM - 4 · .. M~i3!Dll'i'! as I come in contact daily, Mr. Speaker, with people who because of their lack of skills are forced to apply from time to time for social assistance, has.•the ·­ company any plans for defining in advance the type of skills that may be required for the rank and file worker and are any steps being taken to provide these people with the training in skills and attitudes that will make them su.ftable workers and perhaps when Mr. Severs is answering this question he could also indicate what wages will be paid to workers in the refinery? MR. SEVERS: Mr.

Speaker, your question of course is quite complex. First of all as to the matter of top management I assume you mean management in Newfound­ land. Our current plans are to staff the total refinery · in Newfoundland with all Canadian force if possible. MR. SMALLHOOD: All Canadian or all Newfoundland1 MR. SEVERS: All Newfoundland, if possible. All Canadian second if it is not possible to start with all Newfoundlanders. Only if we cannot find qualified Newfoundlanders will we go outside Newfoundland. As for the operating personae!, these we anticipate will be,the vast majority will be Newfound­ landers trained here.

We have had some discussions through General Lessing with the education officals here who have assured us of their corporation in setting up whatever training courses are required. The operating personnel, of course, will not be required until two to four months prior to start up of the refinery. So we do have some time at our disposal yet. As for the wage and salary scale, all I can say is that we will pay competitive wages. MR. SMALLWOOD: Yes, but you can say more than that. What will they want, roughly, what will they average for the 425 men, what will they average in a year? 2411

April 21, 1970, Tape 556, Page 1 -- apb HR. WIIITE: I wonder if I could help Hr. Severs out on that because '1-le have been working with the economics of this plant fairly closely. The average wage for all of the Harkers, this does not necessarily mean any particular one, but the average for all of them in this plant \vould be approximately $8,000. to $8,500. per year. NoH that is a pretty good wage right now. You will have to remember that some of these people are highly skilled_technical people, the graduate engineers and that sort of thing.

However, even the plant operators \vill make a good rate of pay as you can see from this wage scale. The oil refining industry does have a good wage rate, and I think you can just look out at the Holyrood refinery and get a pretty good comparison. Hm.;ever, this is something that we are going to have to arrive at with, as we go along and develop the exact hourly rate for each person , or the monthly rate depending on their scale. To amplify a little what Hr.

Severs said on the staffing of this plant with Newfoundlanders primarily, a few of our people will have to have years of experience and this is the only way we can entrust millions and millions of dollars of plant to these people. Of course, we have to get the best qualified people we can in our top management, and we will make every effort to train the ~lewfoundland people. Now this is not necessarily anything unusual on our part we always try to do this because, we have found that the best people, the best workers that we get are the people who live in the community.

The people who are not someone who has just come in to get a good paying job for six or eight months, earn some money and then go home. We do not want that kind of worker in the plant. 1· It takes us a long time to train them, and it takes a long time to get them to where they are really the kind of people we can trust with this complex, highly technical plant. We make every effort to have steady employment, to keep people on for a long time. if I think/you will look at the history of this type of process plant you will see what I mean.

It is nothing like the seasonal employment that you get in some indu~tries. liON. J .A.l·iOLA!\ C·!inister of Supplv): I •.:ould like ask a question of :·!r. 1./hite please, in two parts:

(1) I realize there are a lot of teclmical questions and 2412

April 21, 1970, Tape 556, page 2 -- apb financial ones here today, but there is one very basic one that I think most people in Newfoundland \.,rould be interested in, or a lot of them, one is, when do you anticipate actual start of construction on the refinery, and the second question I would like to ask is, that since we have had and indication that the wharf will be built by the Federal Government at a possible cost of $16 million or maybe $18 million, and since there have been some questions raised as to the viability of the refinery, did the Federal Government ask for and get a close study of all that is required to make this refinery go, and did they arrive at a decision that it was a viable proposition before committing themselves to $16 million or $18 million for the wharf?

NR. Hl!ITE: Yes, !-1r. Speaker, the first question concerned the time that we would be in a position to start some actual construction work on the site. Well in the past, some work has gone on, a sizable amount of \vork has been accomplished there already. A lot of the engineering work has been done. In our review here we will get a much clearer answer in the next fe,..r \veeks oecause, the Procon project manager and their field people are here, tnere \11ill be more of them here to see just exactly where they stand and to be ready to call for tenders for some of the local work.

We expect actual work to start on the site within a period of a few weeks. Now we certainly will have to move fast to try to get all of our work done that we can during the good dry season that we can anticipate this sunnner. MR. SUALLHOOD (J.R.): How long will it take from the time you start until you begin refining oil? MR. WHITE: There again we Nill have to see \Yhat the delivery schedules out of England are on certain vessels and sort of thing. '~e have a tentative target of,· we would really like to see an eighteen month period bet\veen the time ''e plan the contract and get it in operation.

I think that the critical materials will delay us longer than that, so in order to be conservative we thing tuenty­ four months is from the time of the contract, is a ~ood time period for us to shoot at, to be sure. Now the dock itself will require approximately this same ti>~ Cnty- 24!3

April 21, 1970, Tape 556, Page 3 apb four months of time to get it in. I think that some of the marine engineers have estimated that they could probably do it in about nineteen months, but you have to be sure and pick the right months when you work in that deep water because we will be in water one hundred feet deep. HR. CROSBIE: What is the rate i-Ir. White on the dock? The Federal Government apparently is going to construct this dock, can you tell us what it is supposed to cost, and v.rhether you are going to pay for it over a period of time by user charges, or just exactly what is the arrangement? MR.

NOLA.t~: Hr. Speaker, I wonder if Hr. White could answer the second part of my question. HR. SPEAI~ER (:lOEL): Order please, I think you might just as well answer t:1e question from the hon. member from St. John's 1-lest and then revert to ans1~er the hon. Minister of Supply. HR. WHITE: As far as the assurances on the dock, this is something that is handled bet1veen the governments, and we would not be free to comment on tile actual arrangement between the tHo Governments. However, we have provided in our economics that the dock lvill be a cost of around $16 million.

This •:as done by some of the t;ngineering companies, we have had a number of comapnies revie1v the engineering plans and specifications for this dock, we have had about six proposals given to us for this construction, and under these specifications it looks like a cost of approximately $16 million, and about nineteen months of construction time 1vill be required~ Therefore in the economics and the planning that we have done for projecting the profitability of this plant, VJe have assumed t:1e cost to 0c 516 million, and He have assumed that the Federal Government through one arrangement or another lvould require that ~·Ie repay this capital that we return this money to them over a period of time.

Therefore, l"o'e have provided in our econorics an annual or seni annual payment to the Government which will amortize t'1e total cost of this dock plus the interest, carrying charges and the whole thinr: over a period of tlvcnty-five years. HR. s:-I.ALLJ.lOOD: (.J. R.) : ·rr. Speal~cr, I 1·7ould like to set ~!r. ~,':lite strai ::1t and the answer he gave is perfectly truthful and honest so far as he is conceneJ 2414

April 21, 1970, Tape 556 , Page 4 -- apb but he is wrong. It is not between two Govern ments unless you can say , if one Government asks another Government to do it, and the other Government does it , then that is between two Governments. The only thing the ilewfoundland Government had to do with that p.reat wharf in Come-bv- Chance is to ask t he Canadian Government to do it 30d they have said" yes." We have used our best ~ff~rts as we are required to do, and thev were successful. We did get Ottawa to build the wharf . But, they are building it at their expense and they wil l collect from you, not from us . 2415

MR.CROSBIE: Are you required to pay the Government of Canada five per cent of your gross profits every year until the ~barf is repa~d. As Mr. Arthur Laing has been quoted in the paper as saying. MR.WHITE: I can say no we are not required to pay the Government of Canada or anyone else five per cent of this, for the use of this dock.

As I have told you the usage that we have tentatively planned and we expect, we have reason to believe this is the ~ay it will be because we have discussed it. with several of the cab~net ministers in Ottawa that they would allow this dock to be repaid over a period of twenty-five years. As long as , to a users charge or some type of charge the details of this are still under negotiation we are not completely ssttled except that we do have it set. MR.J.NOLAN: I could repeat the second part of my question again.

In view of the fact that the Federal Government have agreed to build the wharf at a cost of sixteen or eighteen million dollars or whatever it is. Was it necessary for youto satisfy the Federal Government of the total viability of the plant at Come by Chance and if you were,were you successful in doing so to their satisfaction? MR.WHITE: Yes, we met with members of the Federal Government in fact with the Department of DREB (Department of Regional Bconomic Expansion) and have discussed this on a number of occasions. They required that we show the~ evidence that we were capable of financing this project.

That we were~capable of procuring the crude, buying the crude, selling the products and all of this. They actually went through the agreement much the same as we have gone through it with others and we have established the viability of this project, we have allowed them to review our sales contracts in with their economics department th~re was two gentlemen there who went over all our sales contracts, our crude contracts, the whole thing, They reviewed all of our financing arrangements and they reviewed our cash projections. They prepared numbers on their own and have reviewed these.

I have not seen any report that they have written that says it is good or bad. We have been assured by a news releas~ that was put out recently that the Federal Government is in fact going to do it so I think we can , from that we can draw the inference that the review that 2416

April 21, 1970 Tape 557 Page 2 LB they performed was successful. And I might add, Mr. Nolan, that the Federal Cabinet Minister in Ottawa were not the only people who have looked at this. The people in England, the ECGD economists and underwriters have spent a lot of time reviewing this same thing, going over all of our contracts, going over all our plans, our specification yields and all of that, and they have arrived at this conclusion.

This was also done by the European financing people, Hermes in Germany, Poface in Italy and ---------in France, the Control Bank in Austria, the Swiss Bank, they have all reviewed this thing and have all agreed to the financing. So I think that we can say that our economics and our contracts have been reviewed by a number of different people, and they have all, apparently, given them a clean bill of health, because they have all agreed to enter into the financing on the basis of what we have given them. MR.WELLS: Mr. Speaker, can I ask Mr.

White if he would tell us what if anything Newfoundland Refining Company did since February 23, of this year to alter the opinion earlier expressed by Mr. Arthur Laing, the Federal Minister of Public Works when he indicated on, at least he was reported asiindicating on February 23, that to qualify for federal assistance in any deal of this kind that it must be proved that the operation is economically viable and that hhere is real earnestness on the part of the developer, now those are basically Mr. Laings words and he said that Mr. Shaheen's relatively small investment did not indicate that this was present.

What if anything did Newfoundland Refining Company do to alter Mr. Laing's opinion since February 23, 1970~ MR.SMALLWOOD: Mr. Speaker, the relations between, the relations with the Govern­ ment of Canada were between the Newfoundland Government and the Government of Canada and they were conducted mainly by me on our side and Mr. Jamieson on the Canadian Government side and Mr. White would not know anything in the world, wide world except second hand about ~hat. MR.WELLS: Mr. Speaker, my question was what if anything did Newfoundland Refining Company do and that is the company with which Mr.

White is President of I believe. What if anything did th~t company do to alter the opinion earlier expressed by Mr. Laing after February 23, 1970? MR.WHITE: I have never met Mr. Laing and I have never met with him. I met with Mr. Jamieson and members from the department of DREE and economics department and Mr. Marchand. As far as any statement I have heard that Mr. 9A~7

1\.i-'.L.l..L 1..&. .&.~IV Laing had made some statements that they had not completed their review at that time and as a matter of fact in February they had not completed their review of the contrats and the review of the whole thing we were right in the middle of this review at that time. I do not know that he ever changed his mind, I do not think his mind was ever made up. I do not thing the mind of any of the ministers was made up until they had a final review. I do not see how they could until a report had been made to them. by their Deputy Minister~.

MR.WELLS: I can take it then that Newfoundland Refining did nothing between February 23rd 1970, and now to alter the ministers opinion. The minister has not denied these statements and he has been quite clearly quoted in the newspapers as refusing the project.

What I want to know, his statement was this is on February 2, his statement was that the companies financial involvement will have to be several times what it is in the original proposal and that the company would have to reapply,their present application was turned down, now what I want to know is what if anything are Newfoundland Refining or Shaheen Natural Resources did between those dates, between early February and now. Can I conclude they did nothing and that it is still going ahead anyhow? MI. WHITE: We were never notified, we were never advised that anything was ever turned down.

I cannot say that we did nothing, we worked with the economists, we worked with the people answered the questions that they posed to us, and allowed our case to rest at that point. However, I can say that Newfoundland Refining nor no one in Newfoundland Refining nor anyone in Shaheen Natural Resources ever had any contact with this gentleman. All of our contacts were with Mr. Marchand and with Mr. Jamieson. MR.WELLS: Thank you Mr. Speaker, and I thank the hon. gentleman. These statements made or attributed to Mr.

Laing have given rise to some very grave doubts not only in my mind but in the minds of a lot of people and I would nsk Mr. Shaheen if he would tell the members of the House exactly what equity he has in the project and advise us on the matter that he mentioned earlier we did not get a full answer to,he was l'.ot asked a full answer but a supplementary quest~on on that. The five million dollars that was in lieu 2418

April 21 1970 Tape 557 page '/J4 lb of the ADA grant is that included in the $155 million? Is that included and what equity does Shaheen Natural Resources have in this project? MR.SHAHEEN: Mr. Speaker, I think there are two questions. The five million is included in the one fifty-five Sir, and the equity that Shaheen Natural Resources has in it will be in exactly in conformance with the Act. The cpntract which was later enacted into legislation by this body Sir, Law 86 as we call it . MR.WELLS~ Would Mr.

Shaheen mind telling the members of the House in dollars the public of this Province are putting up $155 million or borrowing,-in dollars? what is the equity of Shaheen Natural Resources in dollars in this project? MR.SHAREEN: Exactly what is called for in Law 86 which is MR..SPEAKER: Order please, order please, we are not having an argument we are just asking questions and asking for information. MR.SHAHEEN: Exactly in accordance with the Law 86 Sir, MR.CROSBIE: Mr. Speaker, on the same point. · r. MR.MURPHY: Mr. Speaker, these are a few questions I would like to put forward regard to the feasibility study.

I think some of the answers may be:.apparent I think it would be nice to get them on the record, and to find out just what the actual situation is. Did the Universal Oil Products Limited carry out a feasibility study for Shaheen Natural Resources for the Come by Chance oil refinery? Has the contract for conttruction of the refinery been signed with Procon (Great Britain) Limited ? Is Procon Limited a subsidiary of Universal Oil Products Limited? What competitive bids were received for the construction of the refinery?

From what firms were competitive bids • received - possibly that will do for that part and I do not know if anybody would like to answer these questions as I go along, I do not want to rattle them all off and then have someone stand up and we have to go back overthem The first one: Did Universal Oil Products Limited carry out a feasibility study? 2419

April 21st., 1970 Tape no. 558 Page 1 MR. WHITE: Mr. Speaker, yes, Universal 0il Broducts. They performed the first feasibility study on this plant sometime ago, and have continuously worked with us as our plans have developed. They have followed this whole thing, and we do have a feasibility study now prepared by Universal Oil Products on the most recent information and based on the firm contracted prices. Yes, sir.

The Universal Oil Products Company does have a subsidia r y, Procon and Procon G.B. is a part of thatfamily of companies. !ffi-~~__!IY: ___ The contract and construction -was that put on tender? .:1-~ere competitive bids asked for on this? !~·__':-l!J_:t;JE:__ On a project of this size, allow me to explain a little of the practise of the industry , sir. .A- contract of this size is usually negotiated after it has been discussed and proposals received from various engineering companies.

Now it would cost, to prepare just a fairly basic proposal,it would cost an engineerine approximately $100,000 just to prepare that. If they were asked to prepare a proposal on a firm price for a ref~nery that they l.rould stick to and guarantee the plan, it would be at least " $250,000. Now you cannot p,o out and expect ei~ht, ten, twelve, twenty engineering companies to all spend this kind of money and give you a good price. They just could not afford to do it. There is too much Hork involved. So we have selected and negotiated with about seven different engineering and construction firms.

We have compared all of the proposals that they have put fovward: how they can do this thing; what their relationship is: what their completion dates are and one other thing that is uniaue, I think, in our industry and that is their relationship with our competitors ·. Now they are professional people and all that, but we pick those people that we can trust with our secrets, because they get our inner-most secrets. They get the inner-most workings of the company and our plans, before the plans have really had a chance to be formed up and carried out to where they cannot be frustrated.

So we have to be very careful in selecting the engineering construction firms to do this. We have, as I say, 2420

April 21st., 1970') Tape no. 558 Par,e 2 we have negotiated through several stages, through very serious: and second stage negotiations with several of these companies. There was only one that I am free to mention, because I do not think that we should go out and tell people, well we talked to all these different people, but we did not give them the job. There was something wrong with them. I do not want to do that, because I am going to haverto go back and negotiate with these same people again.

I can tell you, though, that in the end the negotiation narrowed down to two competitors and it was a very close negotiation as even some of the gentlemen over here can tell you, ' the Premier and several of the ministers sat through the final stages of this negotiation and it went right down to the wire. The other ~roup was the European rroup,a consorti~m headed by the the Thyssen Mannesmann firm in Germany. Now the other people, since we did not get that far, there was oo publicity on them.

I do not feel that I am free to tell you who they were, but I can assure you that we did go through a number of companies with this proposal and talked to them. Others we eliminated either because of their connections with competitors or because of the work load they had or other reasons that were good and sufficient to us. MR. CROSBIE: They have not been in any detailed plans yet, have they? I mean this is only ar~roposal. Hr. Speaker, it is on the same topic, and if we are going to skip over ••• MR. MURPHY: I was goinr, to carry on •• MR. SPEAKER: The hon.

Leader of the Opposition has the floor to finish his question and then we can come around. MR. CROSBIE: In connection with the hon. leader's question •• l~~~-~ERi_ We will let the hon. Leader of the Opposition ask his question. A!L_H_!)N ·..l!!?ffiER:__ He does not know what it is. NR. MURPHY: I am not aware what the hon. member's question is, but I am aware 2421

April 21st., 1970 Tape no. 558 Page 3 of what mine is. With reference to this question, MR. Speaker, we are not at the stage where ~niversal Oil Products did the feasibility study and they consulted with several engineers and then their subsidiary company took the contract; In other words not like tendering for a public building, this is an immense thing, as the gentleman pointed out.

But he speaks about plans of $100,000 so on and so forth and costing -but if you take the percentape of preparation of plans for this great oil refinery which was $155 million compared to what::.draft plans are for some smaller thin~, you know, you are not too far out. Of course, the ~entle~an tells ~e again that he cannot disclose perhaps various na~es and what not and I will accept his answer for it, but basically it means that one company carried out the feasibility project.

They consulted with a subsidiary company and says; look this here is a job for you, we will get $155 million for it and now someone else may get $120 million, but look all right this is it. ~o basically this is the answer I wanted to get. Now, with reference to this, there is more questions here that have been passed on; Jacob's Engineering Company. ~m.s~~LWOOD: The hon. Leader of the Opposition would he, before he goes on to Jacobs or anyone else, wouid he allow this question to be asked? If E.C.G.D.

British Covern~ent guarantee this money, do they insist that the buildinp must be built, the refinery must be built by an English company? MR. r-•HITE: MR. Pret:~ier the answer to that is "yes.' They do require that the plant be built by an English firm or a U.K. firm. It must be someone in the U. K. and I think to po on with the thinr,s that you have mentioned, I do not think that U.O.P. exactly went to Procon and said; look fellows here is a job you can have, because as a matter of fact. we had oone nretty far in our ne~otiations with the Thyssen Mannesmann consortium at the time 2422

April 21st., 1970 Tape no. 558 Pa~e 4 :-·that we started talkin? with Procon seriously about this matter. The enp,ineerin~ was done, the preliminary enpineerinp. was done by Universal Oil Products and then this was furnished to the Ralph M. Par~ons Company. Now Ralph Parsons did a lot of enr.ineering. These prices are not established on the basis of a few sheets of paper. They are established on the basis of many, many hours of engineerinp. time, of process know-how and of all of the 'things that go in the makinr. of a plant.

This right now - the cost of the enpineering work alone on this plant has run about $1.5 million,. to this point, and will be several millions bei;ore l-7e are finished with it, because it is a hip.hly engineered plant. As far as hol-T fair the allowing of the two people to make their prices, they were furnished identical sets of specifications for the refinery, Procon and the Thyssen Mannesmann p.roup were working with exactly the same specifications and were given the same information on the site and all of the things like that. They were even furnished identical copies of the essay of hhe crude.

We tried to work this thinp as completely fair as we could, to not let either one have any advantage over the other one, because we wanted to give all the information and get the best price we could out of the people that would give us a good job. MR. l-IDRPHY: Thatkyou very-.much. I do not know if the bon. gentleman is aware, but .calling of tenders is a very tender subject in this Province. I understand there were four bids on the Ouebec plant, whether it is right or wrong, possibly that mi~ht mean the difference, some of the difference in the cost. MR.

SHALU.l'QOD: How many bids were there on the Come-by-Chance plant? MR. HURPHY : Two • ~m. SYcALLWOOD: How many bids were there? How many firms \orere approached? MR. ~]TE_: __ Mr. Speaker, we actually nep.otiated the buildinp of this plant with six firms, nep,otiated seriously ~'ith six firms and furnished them all 2423

April 21st., 1970 Tape no. 558 Page 5 preliminary information. Four of these firms were actually eliminated in the early stages of bidding~ before they had really expended too much money: for, as I say, good and sufficient reasons. He had a very good relationship with the Snam Pro~etti people. We had a very good relationship with the Procon people, but as I say, we could not ask five or six people to.prepare this type of bid without reimbursing all of them for preparine it, because it just involves too much money and too much time, and they would not have done it.

The engineering companies just cannot afford to do this. Now I do not know very much about what went on with the Golden Eagle plant, but I am sure that they followed very much the same procedure. Hr. Grosse apparently has something to say, so I will ••• ~-~ - ~0~~~__:_ Procon bid on the Golden Eagle job "torith one other competitor. It was Snam Progetti in Italy. 2424

April 21st. 1970 Tape 559 PK - 1 MR._ SP.9:Sili.l -~~~· e~t!:f:otoz '"8"' Pl'op;etti MR. SMALU~OOD: Speak up we cannot hear you. MR. GROSSE: I said there were two·bidders on the GoldennEagle job, Procon and Snam Progetti of Italy. MR. SHALLHOOD: Two, one from Italy and one from England. MR. CROSBIE: t-lere these reople bidding? Are all the detailed plants and specifications for the Oil Refinery completed when they bid? And if not a provision in your contract with Procon, that if when they call tenders themselves in various ·phases, that they can have this done a lot more cheaply.

Are you to get any reduction in price then? MR. HHITE: The engineerin~ plans and specifications are all written for this plant. As I say this is the plant that Procon has bid on, they have given us a firm priee, they will deliver us a plan in working conditions already to go for this price. If the people in Pro con are able to make.•.some saving, then they will make that much additional profit. If in the meantime inflation runs even faster, and they lose money, well this' is one of the risks they have to take in their business.

We did have very spirited bidding, then we went ri~~t down to the end, and I think we probably got just about every:concession we could out of Procon. I know we had gotten our very last concession out of the other people before we made our final dicision. MR. COLLINS: Hr. Speaker, I would like to ask a question to Hr. '1-.'hite.

One of these things which is suppose to be selling this Oil Refinery makin~ it worthwhile and get people all enthused about it, is the fact that we are s~ppose to have a great large, huge petro-chemical industry follows, now Sir, where is the raw material to carne from for the petro-chemical? I presume it is coming from the refineries. You have not got much residue left when in the refinery which you propose to build at Come-by-Chance. You have about even per-cent or somethin~? MR. WHITE: Yes, Hr.

Speaker, as I stated before the real object of this is to develop a base for a petro-chemical industry here. ~ow petro-chemicals come in all sizes, shapes and conditions. From the very lighest of gas to the very heaviest of resins. The feed stock for petro-chemical plant is quite varied, some of the best feed stocks for the plant, are the gasoline compounds and the light hydrate carbons that we will be producing. 2425

April 21st. 1970 Tape 559 PK - 2 MR. WHITE: comes in all sizes, shapes, and conditions. From the very lighest of gas to the very heaviest of resins. The feed stock for petro- chemical plant is quite varied, some of the best feed stocks for the plant, are the gasoline compot_ents, and the light hydrate cat'bons that we will be producing. Now as MR. WELLS: When you consider residue. ~m. WHITE: Not necessarily, no, Sir •. In a technical term residue, what we call residue is the heavy black residual left from the the distillation. No this is normally not used in petro-chemical operations.

The most common feed for that is the lir,ht gas, like the LPG, the propane,' 'naphtha and certain of the gas oils which will be available. Now petro-chemicals are not made in the volumes that fuel products are. Fuel products are sold by the barrel, petro-chemicals are sold by the pound and there is a great difference in price, there is a great difference in the processing that is used to upgrade. Now if four or five percent of the output of a refinery final winds up as a petro-chemical, that is a fairly, highly developed petro-chemical plant. Ten percent is extremely high.

I would imagine that world wide now only one or two percent of all our petroleum 1 hyd~ated carbon reserves go into petro-chemicals. So that really you have to have the refinery to produce the feed stock. Because they are very highly selective you have to go through an awful lot of gasoline to find the specific compotents that you need for your petro-chemical operation. So you have to have a large refinery to back it up. But you still even with a.petro-chemical operation have a large production of fuel. Now this does not mean to say that we are struck at exactly 100,000 barrels from now on.

This plant will operate as we begin to need more materials this is the very best thing we could have, it to have to expand this plant. I would love to have this plant in a year, if we had enough petro-chemical products requirements to have to do that. We would be very happy too. MR. EARLE WINSOR: Mr. Speaker, I would like to ask Mr. White, we understand the ships to be used in transportation of the raw materials will be other than Canadian bottoms, and will be chartered. ~~ question is what will the position be regarding the tug-boats, will they be privately owned, and will

April'2lst. 1970 Tape 159 PK - 3 Hr. Winsor; they be manned by Newfoundland crews? Or will they be constructed in Newfoundland? lffi. '~ITE: Hr. Speaker, yes the ship transporting the crude oil will probably be of foreign registery because they are in international trade, however the tug-boats will all be Canadian registery, certainly will have to be Canadian built, and certainly could be built right in the Province. I understand we have investigated this, and I think the Harystown Shipyard has the capability of doing it. However, MR. S'HALLWOOD: 1-.'hat size shall those tugs be'? HR.

WHITE: The tugs that we need for each ship, according to our marine advisors are 2700 horsepower each. Now this is a pretty large tug, we will require three of these tug to dock the large vessel. We do not intend to own these tugs, we would like to charter them from some operating preferably a Newfoundland company to allow them to have the tugs built and operate them for us, for a fee. In all of our studies we have made provision for chartering these tugs as apart of our marine operation.

Our policy along this line has ordinarily been, if we can contracted it up with someone else, we would rather let them do it, because we are in the oil refinery business we are not in the tug operating business. We would rather let some local contractor who is in the shipping business operate the tug, for two reasons; (1) he knows a lot more about it, than we do, and that is his principal business. He puts his full time on it , and not just the odd few minutes that we would be able to give it. He will would have his full time. And the other one is, that it gives us a lot more local identification.

It helps us to be in the local scene, and alae this fellow has a bigger crew of labour, he has the seamen and all of that, we do not have to worry about a crew. He can spell these off with other people that he has, and gives us a lot more flexibility in keeping a crew. I·ffi. SNALLWOOD: How many men 2427

April 21, 1970 Tape 1560 Page 1 MR. WHITE: With this operation we are estimating about forty-five men will be ~equired for the tug operation. MR. SMALLWOOD: What could you use the tugs for? MR. WHITE: The tugs will be used mainly for docking and undocking the large tankers, because a large tanker in these restricted waters is not very manoeuvreable, cannot make a short turn and that sort of thing. It has always been the practice of the ship operators with big ships to bring them in and work them with ~ugs and to handle the lines. Now the ships that we will be bringing in are 225,000 250,000 dead weight tons.

Now this is an enormous vessel. It is over a thousand feet long. It will be over a hundred and fifty feet wide, have a draft maybe of seventy feet. You can just imagine this sort of thing moving through the water, so you have to have tugs to control it, and you have to have tugs even to take the lines out, because the lines are so big and heavy a launch would sink them, they could not handle them, they would have to be pulled out and handled with a tug, so that there is a lot of this kind of work.

Additionally there will probably be some local shipping in barges and that sort of th~ng, that we can utilize the tugs for when they are not actually engaged in docking and undocking the ships. MR. H. COLLINS: Mr. Speaker, before Mr. White takes his seat, maybe he could explain to the members of the House just what the precautions have been taken in terms of an accident by the pier, oil going into the water, and what precautions have been taken in terms of pollution and the land surrounding the plant? MR. WHITE: Mr. Speaker, this alone is a question that we could spend a lot time on.

I think it is a very very valuable thing. We have to look at it. And let us start with the statement that whenever you handle oil or water or anything else, there is always the possibility you will get it spilled. There is always the human element that comes into this thing. I do not care how well you design anything. We cannot guarantee absolutely that there will never be a drop of oil on the bay. To do this would be silly. We could not do it. However, we can design, to minimize this sort of thing, to try to avoid this type of accident. The ships themselves of course are 24·28

J' April 21, 1970 Tape f!560 Page 2 coming in to a fairly open Say. We have had the marine people. We have had the Canadian hydrogr~phic service look this bay over. We have checked the app~oaches. We have checked the radar returns from the cliffs. We checked all this sort of thing. Captain Wallis has spent a lot of time on this, and feels that there is a safe approach to the harbour, that the ships will be able to come up even in heavy fog and wind and in perfect safety, right up to a safe anchorage .

They will only be docked at the dock when weather conditions are reasonably safe, so that the ships will not be in any peril whatsoever, once they clear the Cape St. Mary, I believe it is, where you take your departure. From Cape St. Mary up . The provision for handling, now this would be prudent - MR. SMALLWOOD: Before you go any further, you come around Cape St. Mary's and you are heading into Come-by-Chance in a 250,000 ton ship with what a million barrels of oil? MR. WHITE: ClosEr to 2 million Sir. MR. SMALLWOOD: Now between Cape St.

Mary's and Come-by-Chance, it is all very well to have a nice harbour in Come-by-Chance, but what is there between the harbour and Cape St. Mary's to constitute hazard or danger for that ship. MR. WHITE: It is a very good, very open channel, quite deep, that the ship can come up with a hundred fathoms of water under her keel right up to the entrance of the b~y. There is only two slight course changes required to get the vessel all the way up there. These are not abrupt course changes, and there is sufficient manoeuvring room all the way along. So from the navigation point of view, we have a very good harbour.

We have I think a whole lot better than any of the other deep-water harbours in North America. Now I think down at Point Tupper in Nova Scotia, they have to go through a pretty narrow straight there, and it is a pretty hazardous navigation in our opinion to get in there. We have avoided this in Come-by-Chance because of the configuration of the bay. They plan to bring 250 or even 312,000 tonners in there too Sir. MR. COLLINS: Could you tell us Sir, what precautions have been taken in terms of the possibility of leaks in the tanks on the land surrounding 2429

JW April 21, 1970 Tape 0560 Page 3 the plant? MR. WHITE: Well let us get the oil at the dock. Let us get the oil into the tanks from the tanker. At the docks, we will not have rubber hoses, which are the old way of doing this, but we will have all metal flexible connections, so that there will be flexible connections all the way from the ship, right on to the dock and through a steel line which has been hydro- statically tested and is certainly adequate for this service and much more than adequate. The pumps on the ship will be manned continuously by the ship's personnel.

We will have people right on the dock at all times watching this thing. We wiil have motor operated valves right at the dock, right in the tank farm, and along the line, and we will have separate communication. We will have a regular telephone system and a separate communication signal as well as instrument indications if there ever is a leak. Now all this does, if there ever is a blow-out of the line or anything like that which is qutte remote, but there is always that possibility.

There would only be a small volume of oil, only the amount that is in the line could get out, because we do have the motor operated valves. You do not even have to depend on a man to do it, because that takes quite a bit of time. These large valves have to be driven by motors, because they are so large and require a lot of effort to get them closed tight. There will be these valves on the ship itself. It has these valves and right at the dock just beyond the flexible connection we have another one.

We will have other valves on the shore, so that at any point along this line, we can shut these valves, if there is any indication of a leak. Now sometimes as you disconnect these you have flexible connections