Volume 1 PROVINCE OF NEWFOUNDLAND THIRTY..SEVENTH GENERAL ASSEMBLY OF NEWFOUNDLAND 1st. Session VERBATIM REPORT THURSDAY, MARCH 25, 1976 SPEAKER; THE HONOURABLE GERALD RYAN OTTENHEIMER Number 37

~arch 25, 1976, Tape 1425, Page 1 -- apb The House met at 3:00 p.m. Mr. Speaker, in the Chair. MR • SPEAY.ER : Order! STATEMRNTS RY MINISTERS: "!R. SPEAKER : The hon. the Minister of Industrial and Rural Development. MR . !.!11\"'lRIGAN: Mr. Speaker, I would like to make an announcement of some siP,nificantly r;ood news for the people of Burp;eo. I Hould like to announce the awarding of tenders for the first phase of construction of Burgeo Leasing Limited, the first three contracts in the first phase.

The first contract for the construction of the timber crib wharf and preparation of the plant site is aHarded to Avalon Construction and Engineering Limited of St • • John 1 s. ~1R. FLIGHT: ~iTho? ~1R. LUNDRIGA~: Avalon. ~- Nl!RPHY: Avalon. MR. LU"'DRIGAN: Avalon. Avalon Construction. The value of the contract is $1,357,170 -. ~R. NF.ARY: Is that your buddy? ''IR. L1JNDRIGA.'J : I beg your pardon? Mil.. NEARY: Is that your buddy? !fR. LUNDRIGAN: I am not aware of any of the owners of the companies involved. HR. !\lEARY: Mr. Wilson is an old friend. HR. LUNDRIGAN: If Mr.

Wilson got it he was the lowest tender. l·fR. YC'l'NG: Hear, hear! ~R. LUNDRIGAN: ~sa matter of fact his bid is S1,357,170. The contract is to be completed by December 20, 1976. I would advise the hon. member that the range was from there ''to in excess of $2 million for this particular wharf. The bids are excellent bids. They are the best bids that we have had for quite some time in t~rms of our own exoectations. 3803

March 25, 1976, Tape 1425, Page 2 -- apb MR. LtmDRIGAN: Contract 2 is the construction of the cold storage plant, and it is awarded to C.C.M. Construction (Nfld) Limited of St. John's for the amount of $550,000. Completion of this building is scheduled for necember 1st. as well - December 1st., the last necember 20th. - December 1st., 1976. Contract 3 is for the supply and installation of refrigeration sys.tems in the cold storage building. 'l'his contract has been a~•arded · to A.E. Hickman Company Limited of ~t. John's in the amount of $90,180.

Work on this contract will be completed by the middle of February,l977. The value of the contracts awarded in this phase is $1,997,350. Th.e work on the project, this particular project, this particular phase will start immediately. Tenders ~vill be called for the remaining phases of the proflect throughout the continuation of the next twelve months and we expect the final completion date to be September of 1978. SOME liON. ~!EMBER S : Rear , bear ! ~ . SP P~R : The hen. the Leader of the Opposition. HR. RO~ERTS : Mr.

Speaker, my comments with respect to the minister's announc .ement will be quite brief, We welcome .the news, of course, that at long last the physical construction of the new fish plant at Burgee is to get underway. The gentleman from Burgeo-Bay d' Espoir C1r.Simmons),the member for that constituency, is at present in Burgee and if the hon . gentleman would let me hav.e a copy of his statement I will make sure that it is telephoned through to the member as there is a large gathe:dng there t·oday, I. believe, on transportation. The member has arrang .ed to have a numbl!r of people there.

Indeed the 'Minister of tz-ansportation, I had thought, was to be there but obviously he ha~ other matters to . attend to than the conference in Burgee. Tam sure that every citizen of Burgee will want to know of this news and I am sure that everyone of them will greet it as we do, Sir, with pleasut'e. 3804

l·farch 2'; , 107(>, Tnre lt,zo;, T'age 1 -- nph 'fit . SPEAKER: Further St atements by Vinis t ers . The hnn. the 'f:inister of Tourism . '11'.. 1'1C:l<P.Y : ~!r . Speaker, a very sho r t statement hy way of a nror, r ess repnrt on the Norma and Gladys . sONF. JlO~l . 'fF."'nF.RS : near, hear ! Hear , hear ! MR. l!lCJT..FY: T Rhould - l"R. "'nRC:AN : ~fit . 'TTC:Kf:Y: Hear, hea r ! ' wav to p.o! I shouJd inform hon . members, ~r. Soeaker , that t he vassPl arrivecl i n ~arcelona last f'ri.day.

Bet wt:'P.n 2.10l1 ancl ?:!I'll'\ pr.oonl r vi!<ited the vessel :mrl viewed the exh1,l,1t on the 2""~ mi J !' 111'11 t on C:11turday. The Canl'rtia.'l Etnbassy pPople tell nr that - and it is an approximate figure - approximntely t, f,f)() to 1, 70() neo\'llP n~r <lay visitnrl the vessel. She left yes t <'rclay fc:r t he next rort of c..;ll,r.enoa t cluP to arrive, T helicve,on ""tlJrrlay . Al 1 thP ere:~: a;'l<l C:antain are well and tlte V<'SScl is rcrforMinn vr.ory well . '!R . Nl!Rl'l!Y: t!o<.;n now' ··r.. ·l rA~v: ' IT' . ST'f.<\I'J'P: J!o11 !'l:my stowe~! clown?

Ahout lflr) c~ses so far . furthe-r StAte::~cnts hy ' 1inisters? 3805

March 25, 1976 Tape 1426 PK - 1 PRESENTING PETITIONS MR. SPEAKER (DR. COLLINS): The hon. member for Lafoile. MR. NEARY: ----- Mr. Speaker, it gives me great pleasure, Sir, to present a petition on behalf of thirty-four residents of the Old Broad Cove Road, St. Phillip's, Thorburn Xoad, the Tolt Road, and that is it, Mr. Speaker, none from Hogan's Pond. The thirty-four residents, Sir, are objecting to the new increase in electricity rates. The prayer of the petition, Mr.

Speaker, !;lays "We the undersigned wish to protest vigorously the new rate increases that are being applied by the Newfoundland Light and Power Company." And I say to that, Sir, hear, hear! In supporting the prayer of this petition, Mr. Speaker, I wish to point out to hon. members that the government,even as far back as 1972, even though they knew at that time, at least they indicated in this hon.

House at that time, that oil prices were increasing, they still encouraged our Newfoundland people- and some of these petitioners, Sir, are caught up in this situation- they encouraged our Newfoundland people to use electricity to heat ~heir homes. They were encouraged, Mr. Speaker, at that time by the lower rates, and now I am told by some of the petitioners that taking into consideration the increase in the sales tax, the 10 per cent sales tax that is not exempt from people who heat their homes by electricity, that for these people, Sir, life is almost unbearable.

The resul~ of this blind faith that they have had, Sir, is the fact that they are now reporting power bills of well over $300 for every two months. In one case, I think, I was told it was $350 for two months electricity bill. So the impact of these increases, Sir, are absolutely fantastic. The protests, Mr. Speaker, are being noted both inside and outside of this House even though the Leader of the old-line Liberals seems to be suffering from some illusion that people are becoming disinterested and are becoming complacent. 3806

March 25, 1976 Tape 1426 PK - 2 MR. SPEAKER (DR. COLLINS): Order, please! The han. member is quite aware that debate must be avoided in presenting petitions, and he is getting somewhat near that point. The han. member for LaPoile. MR. NEARY: Yes, Mr. Speaker, I realize I am getting near the point,but I have not reached the point yet, When I do I am sure Your Honour will bring me to task. But, Sir, one of the reasons given by tbe government for increasing the rates of their own creature,Newfoundland Hydro,is the fact that oil has gone up in price.

Well, Sir, I contend that they knew this in 1972, they knew it in 1973, but even knowing this they still encouraged these people to heat their homes with electricity. And now, Sir, - MR. CROSBIE: On a point of order, Mr. Speaker. MR. SPEAKER (DR. COLLINS): A point of order. MR. CROSBIE: I refer, Mr. Speaker, to the Standing Orders, Standing Order (92) which is very clear on w:,<tt a member offering a petition to the House can &ay.

Standing Order (92) says, "Every member offering a petition to the House shall confine himself to the statement of the parties from whom it comes, the number of signatures attached to it and the material allegations it contains. In no case shall such a member occupy more than five minutes in so doing, unless by permission of the Rouse upon question put." The han. gentleman is not confining himself to the statement of the parties from whom it comes, and the number of signatures and the material allegations that the petition contains. Therefore I submit should be ruled out of order, Mr. Speaker. MR.

NEARY: To that point of order, Mr. Speaker, The bon. member, Sir, who just raised that point of order must be either deaf, dumb, hard of hearing or all three, Sir, because I did specify the number of residents, signatures on this petition, I did read the prayer of the petition, and now I am addressing myself to the prayer of the petition, Your Honour, and I suggest to the han. House that I am completely in order. 3807

March 25, 1976 Tape 1426 PK - 3 AN HON. MEMBER: MR. SPEAKER (DR. COLLINS): Order, please! On the point raised, I think, the issue is contained in the phrase "and the material allegations it contains." 3808

March 25, 1976 Tape no. 1427 Page 1 - mw Mr. Speaker (Dr. Collins): This point has been discussed previously in the House in private meeting, as you will recall, and I would ask all hon. members to co-operate as clearly as they can to the feeling of the House in this matter. I would ask the han. member if he can confine his remarks to the material allegations in the petition. The hon. member for LaPoile. MR. NEARY: Mr. Speaker, I thank Your Honcur for the ruling and the right to carry on, Sir, without being rudely interrupted by members on the government side. Mr.

Speaker, just to conclude my remarks, Sir, all I want to say at this moment, although it may seem to han. members both inside and outside of the House at this moment that all is quiet on the consumer front, we can see from the petitions that are still coming in,like the one I have here in front of me now, Sir, that all is not quiet, that the situation is still seething beneath the surface and could blow up again,Sir, at any moment. So, Mr. Speaker, it gives me great pleasure indeed to present this petition on behalf of these thirty-four irate residents of St.

Phillips, Thorburn Road, Tolt Road and so on, and asked that it be placed upon the table of the House and referred to the department to which it relates, in this case, the Minister of Mines and Energy who I am sure, Sir, must be smarting by now under the attack of all these - MR. SPEAKER (Dr. Collins) _: Order, please! MR. NEARY: - petitions, these signatures that are pouring in to our offices almost daily. MR. SPEAKER (Dr. Collins): Further petitions? The hon. Leader of the Opposition. MR. ROBERTS: Mr. Speaker, I thought the minister might have been smarted into saying a word on that petition.

May I say a word in support of it, not because of anything the hon. gentleman from LaPoile (Mr. Neary) has said, he is obviously off in a dream world of his own, but let me say a word in support of it, both in the general prayer of the petition against the increase in electricity rates but also as a resident of the area, the general 3809

March 25, 1976 MR. ROBERTS: Tape no. 1427 Page 2 - mw area, in which the petitioners live. I would have thought there were far more people than thirty-four in the area - indeed I know there are - and the petition cannot have been a widely circulated as it might have been or it certainly would have gotten more signatures.

I, for one, as a householder of Hogan's Pond, which is in the general area - it is bounded on one side by the Tolt Road,and on the other side by Bennett's Roads,and on another side by Old Broad Cove Road and on the fourth side by the Thorburn Road - I, for one, as a householder, resident, and as a user of electric heat, whose electricity bills do tend to get very high, particularly in the Winter, would gladly have signed it. I think that the people throughout the Island continue to feel very strongly on this issue.

I was in Grand Falls yesterday and had the pleasure of being on open line show there and a number of the phone calls that I received made that point as indeed a number of the petitions have. I predict, Sir, we will have many more petitions on this. I must have another three or four or five or ten in my office that have come in the last day or so that will be presented in the House, and I think other hon. members have them as well. It will be a continuing process , Mr.

Speaker, because people continue to feel very strongly about it, and it will continue at the very least until and unless the government realize how strongly people feel, and they are prepared to give the people of this Province some opportunity to find out exactly why rates are going up, and then out of that to answer the question of whether they should go up or not. Most of us, Sir, have very real doubts as to whether any rises are justified. Certainly, we have seen nothing to show that. I support the petition, Sir. MR. SPEAKER (Dr. Collins): The hon. Minister of Mines and Energy. MR. CROSBIE: Mr.

Speaker, I would not normally get up to respond to this petition since there have been a number of them, but since I am a resident of the Tolt Road area and responsible for having the road paved last year - SOME RON. MEMBERS: Hear, hear! 3810

March 25, 1976 Tape no. 1427 Page 3 - lllW MR. eROS1I:U:: - for which I hope that they are pi:operl.y grateful, although it cost me $900, because the road was not salted or sanded, and I went off the road going up there in January. MR. NEARY: A point of order ,, Mr. Speaker. MR. SPEAireR (br. Collins): A point of order has been raised. MR.

NEARY: Sir, I un1lerstood from the expert on parliamentary procedure in the House, the b-on. 11linister who is now speaking, that you h~e to ~e relevant, that your remarks have to be relevant to the petition, and I am wondering if having the road paved and reconstructed towards Hogan's Pond has anything to do with the petlt:Lon that I just presented. I would submit that the minister, Sir, is out of order. MR. ,CROSBIE: Mr. Speaker, on the 3811

March 25, 1976. MR. CROSBI.l: : Tape 1428 RH - 1 point of order. The Standing Order I Lead addressed itself to the person presenting the petition, not to a person speaking on the petition. So there is a world of difference. · We have a Standing Order that clearly says what the person presenting the petition can say. We do not have any Standing Order that says what a person speaking on the petition. ~•ho did not present it can say. Since the rules here seem to be that anyone can get up and speak on a petition and say what he likes I submit the same rule should apply to me. MR.

HICKMAN: You are being discriminated against. MR. NF.ARY: Could He have a ruling, Your Honour. }ffi. SPEAKER(Dr. Collins): Order, please! I think that we have to confine ourselves to the matter of whether debate is being entered into. I think the minister's remarks may not have been relevant but I do not think they have actually gone into the area of debate. I would ask him to continue his remarks. }fR . CROSBI E: Frankly, ~lr. Speaker, I should have said it was an electric car I had. Then it would have been more relevant. Anyway, all I w ant to say on this petition, Hr.

Speaker, is that we received it with a great deal of sympathy. t-le can do very little about it ~as can most governments. I do not know if any government in Canada can do any­ thing about this. Then I suggest that we communicate with the P.C. Opposition in Nova Scotia,who are now presenting petitions from irate people all around Nova Scotia about electricity and energy rates there ano we will see which Opposition can get the most petitions going. Will it be the P.C.

Opposition in Nova Scotia to the Liberal Government of Nova Scotia and in P.E.I. to the Liberal Government of P.E.I.,or the Liberal Opposition in Newfoundland to the P.C. administration because all three governments have the same problems. They are both different political party. There is nothing that anyone of those governments can do about the increasing costs of energy. So I suggest let us have a competition. Can our Liberal Opposition here get together 1,000 petitions? 1,500 petitions? 2,000? If I was in 3812

Harch 25, 1976. }!R. CROSBIE: Tape 1428 RH - 2 Opposition I am sure I could get at least 10,000 and perhaps I could get 300,000. So let us get a competition going and we will challenge Nova Scotia and P .E. I. lolho can get the most petitions against these abominable, horrendous,barbaric increases that hon. gentlemen are worried about? The hon. gentleman who is the Leader of the Opposition has an alternative to electric energy. He told me this morning how he has got a cord and a half of wood that he is chopping up in his hack yard and he is lucky he has this alternative. I commend that to him. MR.

SPEAKER: Any further petitions? The hon. member for Bellevue. MR. lol. CALLAN: Mr. Speaker, I beg leave to present a petition on behalf of the residents of North West Brook in the district of Bellevue. I will not use up the five minutes that I have. The prayer, if you can call it a prayer, of this petition is very, very straightforward and simple. There is no lawyer's language at all. It simply says, "We, the under­ signed, do request the following three improvements necessary for the safety of our community." In the petition they talk about a bridge in North West Brook.

They talk about a paved road and also guard rails. Hr. Speaker, the residents,possibly in mentioning three items here hope at least that probably if they cannot get all three perhaps one of the three or two out of three might not be bad. This petition, Mr. Speaker, is signed by 129 residents of North West Brook. I thoroughly support the intent of this petition. I ask that this petition be tabled and referred to the department to which it relates. MR. SPEAKER: Any further petitions? PRESENTING REPORTS OF STANDING AND SELECT COMMITTEES: HR. SPEAKER: The hon. Minister of Justice. HON. A. HICKMAN: Mr.

Speaker, I table all of the financial statement of the registrar of the Supreme Court for the year ending March 31, 1974. HR. SPEAKER: Any further reports? 3813

~larch 25, 1976. Tape 1428 RR - 3 NOTICES OF MOTION: MR. SPEAKER: The hon . Rouse Leader . }!R. R. to/ELLS: tlr . Speaker, with the consen t of members of the Rouse I ll)OVe that the times of sittings of ·the Rouse be altered for the balance of the session beginning on Nonday next when the times 1~ill be as follows : Honday.s, from 2:00p.m . to 6:00 p.m. ; Tuesdays, from 2 :00 p . m. to 6 :00p .m. and 8:00p.m to 11:00 p.m.; Wednesdays, from 3 :00p .m. to 1\:00 p .m. ; Th11rsdays, 2:00p . m. to 6:00 p.m. and 8:00p.m . to 11:00 p .m.: Fridays, from 10:00 a .m. to 1:00 p .m. MR. SPEAKER: Is that noti .ce of motion?

MR . l~LS: That is the notice . t~ell , I s11ppose by consent it could be treated a.s a motion because we have the consent of t.he House. ~!R. S~1ALLWOOD : He should co it now, because w~ cannot very well act on it tom<'rr ov. HR . !.JELLS: Yes, that i s correct. ~!R . SPEAKER: Is the Rouse ready for the question? Shall the motion be adorted as presenterl? All those in favour "aye", contrary "nay". The "ayes" have it. 3814

Harch 25, 1976 Tape 1429 IB-1 ORAL QUESTIONS; YR. SPEAKER (Dr. Collins): The hon. Leader of the Opposition. HR. ROBERTS: Thank you. l'r. Speaker, a question for the Hinister of ~'ines and Energy. Could the minister tell us, please, whether it is now proposed to begin work on the tunnel across the Straits of Belle Isle,or underneath the Straits of Belle Isle,only on the Ne,,d"oundland side instead of to carry out work from both the Ne~~oundland side and the Labrador side as had been hitherto planned? }!R. SPEAKER (Dr. ('ollins) : The bon. Minister of Hines and Energy. l'O'. CFOSBIE: t!r.

Speaker, the engineering plans are still being worked on for the tunnel and no decision has been made as to whether they will build the tunnel on both sides or from one side to the other, The original plan was to start the tunnel on each side and that is now being reviewed as to whether there will be any change. There has been no decision made yet. "1-T.. ROBERTS : A supplementary question, Mr. Speaker.

Could the minister - ''ell I have to put it as a question although it is really almost a statement - but could the minister tell us whether a decision is expected to be made by the end of this month,which is Wednesday of next week? That is the impression that has become widespread throughout particularly the Labrador side of the constituency and people are very concerned about it. MR. CROSBIE: I cannot say when a decision will be made but when any decision is made, if there is to be any change we will certainly advise the bon. members of the House. But what is the significance of the end of next week? ~1R.

ROBERTS: Well, ¥-r. Speaker, a further supplementary. The significance is sjmply that people on the Labrador side understand that that is the date that has been given as the date of the decision. That is hardly a question. Let me put the question. Does the minister expect a decision to be made imminently? MR. SPEAKER (Dr. Coll ins ): The bon , Minister of Mines and Energy. 3815

}farch 25, 1976 Tape 1429 }11-t. CROSBIE: No, Hr. Speaker. MR. SPEAKER (Dr. Collins): The han. member for LaPoile. ~'R. NEARY: Mr. Speaker, I would like to put a question to the ~:inister of Public WorkE and Services, Sir. Would the tfinister of Public Works and Services tell the House under what authority he has sent his troops into protect the North Side of-the United States Base in Argentia? SOME HON. HEMBEPS: Hear, hear! }'P.. SPF.AKER (Dr. Collins) : The bon. }~inister of Forestry and Agriculture. MR. ROUSSEAU: }lr. Speaker, we have done it with the authority IB-2 of the Lieutenant--covernor in Council.

This government feels very strongly that the fact that the vandalism is occurring down on the North Side of the Argentia Naval Station is one that may or we hope will not be in the worst interests of this Province. hle hope of course that the Americans decide to stay on the base and fully reactivate it. In the event they do not and the base is turned over, the money of the taxpayers of this Province will have to go into refurbishin~ that base. The federal goven1ment have not taken any steps whatsoever to protect the buildings that are down there.

There has been quite a bit of vandalism and the member brought it to our attention and my two colleagues, the 1'inister of Industrial and Rural Development and the }'inister of Fisheries accompanied the HilA doY.'TI. It ~1as discussed by government, and it lvas this Province's decision that we would send people down there to safeguard the buildings that are down there and to ensure that if they ever should be passed over to the Province that 1ve will have some control over the amount of vandalism that will occur in the future and hopefully he able to keep the buildings in as good a shape as they are now. }ffi.

SPEAKER (nr. Collins): The hon. member for LaPoile. 11R. NEAPY: nr. Speaker, a supplementary question. Would the minister indicate if the troops ,,,ere sent in there after prior consultation 3816

::arch 25, 1976 Tape 1429 }lr. . NEAP.Y: with the Unit ed States commander of the base or any of the 11nited Sta tes authorities in this Province? ~~. SPE.IIlJ:R (nr . Collins) : The hon. ltinj.ster of Forestry and Agriculture . HR . ROUSSEAt': Cons uHation \o."as held , Hr . Speaker, '-'ith ll nu~:~ber IB-3 of official:> rlown there . There was to be a meeting with the commander and the commander - PRT:~IIER ~fO ORF.S: They clo not 01.m it? '!R. Rot!SSE.!\li: Pardon? PREiliER l!OOPP.S: They do not own that stuff. ~fl! . NEARY: ~!ho o"ns it?

The Americans still have control of i t. :~o , it has been passed alon& to the federal authorities and they coulc' not figure out "'hat to do with t he burclen, so they passed it over to us . I'R . flOUSSEAU: But t he ~Mtter is under discussio n. ~m . NEAl'S: They o"n the buj.ldio::;s . ~1t . P.Ol'SSEAli: He are holdi.ng a meeting wi th them and we are sure there is something of an acceptable nature and satisfllctory that will be carried out. I:R. NUP.Y: ~:r .

Speaker, a supplel'lentary . l~ould the minister indicate if the s ecurity people •~h o will be down there protecting ches~ buildin&r. - personall.y I thin!~ it is a bit late - but 1dl.l the y be wearing side arms? .'IN liON . ~!JWBEn: No . ~!'R. NEARY: :~o . lu:e you sure? 1-!R. ROUSSEAU: ~ r. Speaker, in the opinion on this sirle of the !louse "'e do not think the :;ood people of the area need to have people down there ~o.'ith side al'l:IS. It is just a matter of controlling who soes in and out of the building . That is all. llR. NEARY: 1;r . Speaker, a question for the hon. the Premier. 3017

March 25, 1976 Tape 1430 MR. SPEAKER (DR. COLLINS): Order, please! hon. member for Eagle River who was up - MR. STRACHAN: I was on my feet. PK - 1 I recognize the MR, NEARY: I recognize members when they are on their feet, Mr. Speaker, not when they are in their seats. MR. STMCI:IAN: I was on my feet. MR. _SPEAKER (DR. COLLINS): Order, please! I might point out to the House that the hon. member for Eagle River was on his feet,and I was about to - HR. NEARY: P.e was in his seat, Sir, when you recognized him. 11R. SPEAKER (DR. COLLINS): Order, please! The hon. member for Eagle River. MR.

ROBERTS: To a point of order, Sir. Is the hon. gentleman suggesting that Your Honour did something improper in recognizing my colleague from Eagle River? That seems to be a clear implication of what - MR. NEARY: Sit down! Sit down! SOME HON. MEMBERS: Oh, oh! }ffi. ROBERTS: That seems to be the clear implication of what he is saying. Your Honour clearly recognized the gentleman from Eagle ltiver .That means Your Honour considers it to be in order to recognize the gentleman from Eagle River. t·lll. NEARY: Sit down, Mr. Happiness! MR. ROBERTS: Hr.

Speaker, I have risen on a point of order, If the gentleman from LaPoile (Mr. Neary) wishes to speak on it he obviously has the same right as any member, but he surely has no right to question Your Honour's decision other than the normal process,which is an appeal. MR. NEARY: To that point of order, Sir. I have no objection, Your llonour, to the member for Eagle River or any other member tising during the Oral Question Period, Sir, to ask questions of ministers of the government. But, Sir, my

interpretation of the rules of this House is that a member is recognized when he is standing and not when he is sitting, Sir, next thing they will by lying down and asking 3818

March 25, 1976 Tape 1430 PK - 2 Mr. Nea.!Y2_ for recognition. MR. STRACHAN: On a point of order, Mr. Speaker. MR. SPEAKER (DR. COLLINS): o:r:ler? Order, please! On the same point of MR. STRACHAN: Yes. MR. SPEAKER (DR. COLLINS): The hon. member for Eagle River wishes to make a few remarks on the point of order. MR. STRACHAN : Mr. Speaker, when you recognized me I was on my feet 9 The only time I sat down was when the Speaker started to speak, which I think is in the rules. SOME RON • MEMBERS : Hear, hear! MR. SPEAKER (DR. COLLINS): Order, please!

It is in our Standing Rules that an hon. member ~~ishing to speak rises in his place, is recognized by the Chair, and he then proceeds with his remarks. In this particular case I did recognize but one hon. member and that was the member for Eagle River. The hon. member for Eagle River. MR. STRACHAN : I thank you very much, Mr. Speaker. If I may be light-hearted for one moment, Mr. Speaker, I had intended bringing in a large delicious caribou steak for the Minister of Tourism, but,however,when I looked at the new caribou regulations I found that I could not do it and this is the purpose of my question. MR.

ROBERTS: Legally you could not. MR. STRACHAN: Could the minister tell us whether the reason we need an export permit or licence to ship caribou meat out of Northern Labrador is a m~thod of conservation of the caribou herds,or it is based on Labrador being overseas and therefore requiring export licences? MR. LUNDRIGAN: That is argumentative. MR. SPEAKER (DR. COLLINS): The hon. Minister of Tourism. MR. HICKEY: Hr. Speaker, - MR. LUND~- It is out of order. MR. HICKEY: Mr.

Speaker, I could have solved the problem a moment ago by getting up and asking the member for Eagle River what he wanted because I am the only one he asks questions to. However, Your Honour, 3819

March 25, 1976 Tape 1430 PK - 3 Mr. Hickey: I suggest that in the light of the line of questioning by the member for Eagle River either he and I should have a meeting or maybe he should put his questions on the Order Paper in future. SOME RON. MEMBERS: Hear, hear! ~ffi. SPEAKER (DR. COLLINS): The han. member for LaPoile. MR. NEARY: Mr. Speaker, a question for the Minister of Mines and Energy.

Would the minister tell the House if a study or a survey has been done recently, within the last year or so,on the headwaters of rivers that originate in Newfoundland, the headwaters in Newfoundland, and the rivers flowing into the Province of Quebec? ·If such a study has been done, has been completed,would the minister tell the House what the purpose of such a study was? MR. SPEAKER (DR. COLLINS): The han. Minister of Mines and Energy. MR. CROSBIE: Mr. Speaker, there is no special studies done that I know of on the rivers running into the Gulf of St. Lawrence that originate up in Labrador. MR. SPEAKER (DR.

COLLINS): The hon. Leader of the Opposition. MR. ROBERTS: A question for the Premier, Mr. Speaker. Could the Premier tell us whether any of the minister will be going to China on the Extension Servicetrip which is to leave,! believe, early in June? HR. SPEAKER (DR. COLLINS): The hon. Premier. PREMIER MOORES: Mr. Speaker, I think bon. ministers are back from China, and the Speaker as well 1 who is not feeling too well. I do not think there is any plan for any further ones to go, unless the Norma and Gladys pulls in there, MR. ROBERTS: Can the Premier check because - PR];MIER MOORES: Yes. I will.

S011E HON • MEMBERS : Oh, oh: PREMIER MOORES: I will. MR. ROBERTS: So the newspaper tells me. PREMIER MOORES: I will check it~sure. MR. SPEAKER (DR. COLLINS): Order, please! 3820

~larch 25 , 1976 Tape 1430 PK - 4 MR. NEARY: Can we end this little private conversation between the Leader of the Opposition himself for a moment? can the Leader of the Opposition restrain MR. LUNDRIGAN: The hon. member should be in permanent restraint. MR. NEARY: Mr. Speaker, I would like to find out from the Premier if there is anything new to report on the Come By Chance Task Force yet? MR. SPEAKER (DR. COLLINS): The hon . Premier . PREMIER MOORES: Not regarding t he Task Force t o my knowledge, Mr. Speaker .

I have not been in touch with the Federal Manpower and our Manpower people and the others who compose tha t Task Force. The c:omm;ittec of the union and the rep r esentatives of the town in the area I met with last Friday and I will be meeting with them again tomorrow, and when something evolves I will be passing it on to them and hopefully to the Rouse. 3821

March 25, 1976 Tape 1431 NM- 1 MR. SPEAKER (DR.COLLINS): A supplementary? HR. ROBERTS: No, I had another question. MR. SPEAKER (DR. COLLINS): The hon. the Leader of the Opposition. MR. ROBERTS: It is for the Minister of Tourism. I hope it finds him in a hetter frame of mind that did my colleague from Eagle River. Would the minister, ~r.

Speaker, ar,ree to make public all details of all the contracts, any and all the contracts, entered into hetween his department on the one hand and the Cabot Group 4 Limited firm on the other, including details as to whether the contract in each case were given to the lowest tender and including details as to whether the contracts were awarded on the original call for tenders or on a second call for tenders? MR. SPEAKER (DR. COLLINS): The hon. the Minister of Tourism, MR. HICKEY: Mr. Speaker, I will be glad to take that matter under advisement. MR. SPEAKER (DR.COLLINS): The hon. the member for LaPoile. HR.

NEARY: Mr. Speaker, I have a question for the Minister of Transportation and Communications, Sir. In view of the answer that was given the House yesterday by the ~finister of Finance concerning Affiliated Marine Metals Limited restoring the wrecked cars in at the former steel plant, would the minister indicate to the House if it is nm• not time to have an immediate accounting of the dollar that is charged on every licence in this Province that is paid over to this firm?

As a result of the answer to the question where they appear to he in trouble, this company appears to be in trouble and cannot move the cars, does the minister not think it is now time to have an immediate accounting o~ this money that is turned over to this company? l!R. SPEAKER (DR. COLLINS): and Communications. The hon. the Minister of Transportation HR. MORGAN: Mr. Speaker, the responsihility and the .iurisdiction of the collection of old vehicles around the Province is not within my responsihility or jurisdiction. It is within the 3822

March 25, 1976 Tape 1431 NM- 2 MR. '!ORGAN: responsibility of my colleague, the Minister of Provincial Affairs and Environment. MR. NEARY: Mr. Speaker, would the Minsiter of Provincial Affairs and Environment give us the answer? I understood it was under the Minister o:f; Transportation's estimates. Could the minister enlighten us on that matter? MR. SPFAKF.R (DR.COLLINS): The hon. the Minister of Provincial Affairs and the Enviro~ment. MR. MURPHY: That is a nice question for the Order Paper, Mr. Speaker. MR. NEARY: 11r.

Speaker, I am dissatisfied tvith the answer and tdsh to debate the matter during the late show this afternoon. "P. SPEAKEl> (DR. COLLINS): The hon. member for Fogo. CAPT. IHNSC'Il': 11r. Speaker, I ~1ould lil:e to direct a question to the hon. Hinister of Transportation and Communications. Can the mtnister tell the House t-rhen and if there will be any contract called for what i.« knmm as the Loop ~oad this Spring? ~~. SPEAKEQ (D~. COLLINS): The han. Minister of Transportation and r.ommunications. ~'R. MORGAN: ~'r.

Speaker, any contract work for this year will not be made known unti.l after the Budget is brought before the House of Assembly. CAPT. HTNSO!l: Supplementary, Mr. Speaker; would the hon. minister confirm or deny that he had confirmed to the newly elected President of the PC Associ~tion, Fogo District,that contracts would be called? h'ould he confirm or deny this? MR. SPEAKER: The han. Minister of Transportation and Communications. ~'R. ¥0~GAN: Mr.

Speaker, T. am in continuous consultation with my colleague;; the presidents of different associations of my own party Rround the Province. }fy only as surance given any person, whether jt he a l'rogrel'l!live Conservative or any other person,Has that He are mak:!ng continuous efforts to the federal level of government that the work on the Bonavista Loop Road this year will continue. 3823

March 25, 1976, Tape 1431 NM - 3 CAPT. WINSOR: A supplementary, Mr. Speaker. MR. SPEAKER (DR. roLLINS): A supplementary. CAPT. IITNSOR: Would the hon. minister then confirm that such a statement was made to the present PC - HR. HORGAN: 1-Tha.t statement? CAFT. \VINSOR: That the contracts, or the Loop Road will be constructed on similar arrangements as last vear? MR. LUNDRIGAN: }lr. Speaker - }fP-. }<ORGAN: Just one second 'John'. ~!R. SPEAKER. (DP. COLLINS: A point of order. }ffi.

LUNDRIGAN: I have not got the specific Standing Order in front of me. >.<y colleague who is an expert on the rules, the I.eader of the Opposition,will confirm that it is totally out of order to raise a question of a minister asking to confirm or deny or to respond to that type of question. If that were the case it is almost in the form of an allegation, if I can sort of put it in my own language, but the rules do not permit that type of question to be asked. >~ . • SPEAKER (DR. COLLINS): The hon. Leader of the Opposition. ~. ROBE~TS: To that point of order, Mr.

Speaker, the rules are, for the benefit of the gentleman from Grand Falls who has had lots of experience in question periods in another place, the rules are set forth in Reauchesne. I think the - 'ffl. LUNDPIGAN: Yes. HR. ROBF.:"TS: - citations are page 191 from momory but any copy of neauchesne would have them, The question,! would submit, is quite in order, Sir. All that the gentleman from Fogo, my friend, is doing is asking the minister tvhether he has made certain statements.

The fact rema:lns that the minister has made out the gentleman ~•ho is tr e spokesman for the Tories in Fogo district to be a complete and utter - T cannot use the tvord, but to have misstated the position completely ~ecause the gentleman made statements which the minister has now contradicted. And that is quite in order, Sir, in my view. 3824

!1arch 25, 197f> Tape 1431 NN - 4 ~!". S!lea ker, to that point of or•te ·r - }~. SMALL~OOD: Mr. Speaker, to that point of order - HR. SPEAKER (DR. COLLINS): Point of order, the hon . member for 1'\~iJ.Hneate (?'r. Smallwood) on the same point of order. ~ - SMAI.LWOOl): 0o this same point of order, am 1 not correct, 'lr . Speaker in thinking that the only que..o;tion tha t may be asked of the minister about ~ omethin~ that he had said outside the House is whether or not IJhat he Baicl represente d the government ' s view , a decision ·Or opinion of the gove-rnment, hu t o therwise 1.t is his own personal opitrl .on and is not to he ouest:l.oned in thh House ? 3825

March 25, 1976 Tape no. 1432 Page l - mw MR. SPEAKER(Dr. Collins:) The han. House Leader. MR. WELLS: Mr. Speaker, questions are asked on matters of the day which are of public concern and importance. What the minister may have said or may not have said to a private individual outside the House is not a matter of public concern or importance. What is is the matter of road work,which will be dealt with after the budget is brought down. MR. CROSBIE: Hear, hear~ MR. SPEAKER (Dr. Collins): The han. member for Fogo. CAPT. WINSOR: Mr. Speaker, on a point of order. I was trying to establish, Mr.

Speaker, if the gentleman accused of making that statement and saying that he had been in contact with the Minister of Transportation - and the minister confirmed it - yet he is telling this gentleman outside the House things that he cannot tell us inside the House. MR MORGAN: Mr. Speaker, to that point of order. I am willing to answer the han. gentleman's question. The President of the P.C.

Association met with my officials and myself a few days ago making representation on behalf of the people in the area,requesting that funds be made available this year for some road work in that area, and I was very pleased to inform him that we are making every effort to obtain funds from the federal department of Regional and Economic Expansion to carry on work in that area this year. SOME HON. MEMBERS: Hear, hear~ MR. SMALLWOOD: And in so doing the minister spoke for the government. MR. MORGAN: Right! M.~.SPEAKER (Dr.

Collins): Order, please~ I think the House can understand, therefore that the point of order raised has been disposed of. The han. member for Lewisporte. MR. WHITE: Mr. Speaker, I have a question for the Minister of Intergovernmental Affairs. Would the minister indicate to the House whether or not DREE funds are available from Ottawa with respect to Lake Melville and why the delay is being caused at the moment? 3826

.. March 25, 1976 Tape no. 1432 Page 2 - mw MR. SPEAKER (Dr. Collins): The hon. Minister of Intergovernmental Affairs. MR. CROSBIE: Mr. Speaker, any observer of the federal scene will know that DREE funds are available for anything under the sun • Whenever you ask DREE are funds available for X, Y or Z, DREE will never tell you that funds are not available for X, Y or Z.

So, I therefore assume that DREE funds are available for the Lake Melville area if we can get DREE to agree to a subsidiary agreement under the general development agreement,and we agree with them on certain things to be done there,and DREE agrees to all of that then funds are available. Now DREE has indicated - the Minister of DREE has indicated that they are willing to expend some funds in the Lake Melville - Goose Bay area this year if an agreement is entered into.

However, he did not make it clear at the same time that he was not prepared to make funds available from DREE for other matters, that the DREE fund this year - ' the_ spending will not be in excess of the spending last year. So any DREE funds spent in the Lake Melville - Goose Bay area will obviously be to the detriment of other rational and reasonable DREE expenditures in other parts of the Province.

So it is true to say that DREE has indicated that they are willing to enter into a sub-agreement, a subsidiary agreement on the Goose Bay area, but it is going to cost other very necessary projects in the Province a diminution of funds. Now at the same time we are quite willing to enter into a subsidiary agreement with DREE when we have agreed with them on the things to be done so that there will be expenditures in the development nature in the Goose Bay area.

At the same time we have had a long and protracted series of negotiations with federal agencies about the takeover of assets down in Goose Bay and Happy Valley where they want the Newfoundland Government - and we have agreed to take over their sewerage facilities, water and sewerage facilities and their electricity facilities and other public services there where we have agreed to take them over, but we have not agreed to assume the horrendous amounts of money it will take to bring those services up to par and to put in proper water and 3827

Harch 25, 1976 Tape no . 1432 Page 3 - mw Hr. Crosbie . sewerage facilities and the like. And the Government of Canada is displaying an extremely niggardly and unsatisfactory attitude to those responsibilities in the Goose Bay, Labrador area. So when the federal member for the district, }lr. Rompkey, says that DREE mollies are available for things in Goose Bay - Lake Helville, that is true. They are going to be available, but they will cost us less DREE spending elsewhere in the Province of Newfoundland this year.

But he should address himself to getting a breakthrough 1~ith the federal government on their making a decent contribution to upgrade the public services in the Goose Ray - Lake Melville area before they force the Province to take them over and operate them and spend tens of millions of dollars bringing them up to par in capital expenditure. So it is not as simple as these simplistic statements of the federal member, Mr. Rompkey, would make one believe. SOME HON. ~!EMBERS: Hear, hear! 3828

March 25, 1976. Tape 1433 RH - 1 HR. SPEAKER: The hon. member for Twillingate. MR . J. SMALLWOOD: Mr. Speaker, I do not know if this is a supplementary question to the hon. the Minister of Mines and Energy. I have missed my chance to ask a supplementary because someone else was recognized. I would like to ask him if he has any information as to how many rivers of importance, importance from the standpoint of producing electricity, there are ori ginating in Labrador l;>ut ending in Quebec and emptying into the North Shore of the Gulf of St.

Lawrence, how many there are, and a ball park estimate of how much power can come from them? Has the minister got that general - I do not ask for specific,actual figures because T doubt that he has them,but has he got ball park figures? How many rivers and how much power? MR. SPEAKER: The hon. ~1inister of Hines and Energy. MR . CROSBIE: Well I believe, }lr. Speaker, that there are five rivers involved. This will have to be checked for exact accuracy. It could be that if they '"ere all developed there would be around 3,000 megawatts power in Quebec. NR. SMALL HOOD: That is about four million horsepower . HR .

CROSBIF: No, three million megawatts would be - I do not know what that is in horsepower. 'lR. SMAJ.Lh'OOD : HR. CROSBIE: ~!R. SMALLHOOD: ~IR. CROSBIE: MR. SMALLWOOD: Three million megawatts? Sorry, 3,000 megawatts, three million kilowatts. 3,000 - 3,000 megawatts of power. - megawatts would be about five million horsepower. I am not sure how much - I do not know how much in the way of horsepo wer it is. ~IR. CROSBIE: _MR . SMALL HOOD: Between four million and five million. NR. CROSBIE: It would be about - AN liON. }f]lMDER: 5,200 megawatts. MR.

CROSBIE.: It would be just over half of what was developed on the llpper Churchill. MR. S¥ALLWOOD: Yes. 3829

Ilarch 25, 1976. Tape 1433 RH - 2 ~m. CROSBIE: But these are rivers that can only be developed in Quebec. HR. Sl·1ALI-WOOD: Joint - HR. CROSBIE: The head waters are in Labrador. HR. SPEAKER: A supplementary. The hen. member for LaPoile. HR. NEARY: Hr. Speakr, a supplementary. Is that one of the matters that was discussed with the Province of Quebec recently when the minister and the Premier visited Mr. Bourassa and Quebec-Hydro? ~m. CROSBIE: Mr. Speaker, I think the Premier has already said that - MR. NEARY: No, he did not say . MR.

CROSBIE: - there was discussed the whole gamut of matters involving hydro and energy matters were discussed between the Premif'r, Hr. Bourassa and myself and Mr. Bourassa's minister. I think that the Premier has said that it is to no one's benefit to go into E>.ny more detail at this time. All the details will be made known once there is any conclusion reached. NR. SPEAKER: The hen. member for Twillitu~ate. MR.

SMALLWOOD: Could the minister give the translation of those megawatts into horsepower; Most of us, Sir, are far more familiar with estimating and appraising the amount of power by horse rather than by mega. PREMIER MOORES: How many horsepower in the Upper Churchill - NR . S !ALUIOOD: Upper Churchill is about seven million horsepower. HR. CROSBIE: 5 ,300 mega~vatts. l'P.EHIER ! OORES : 4. 5 million horsepower on the North Shore then. HR. S!IALLHOOD: 4 . 5 million horsepower, horsepower.

My recollection was that is was around four million. l~ile I am on my feet,would the minister or woulr! the Premier say whether they have reports in this building submitted to the government, the former administration by BRINCO and others who made at most, I suppose, cursory or preliminary surveys of those rivers, would those reports not be here in this building? HR. CROSR At Hydro, I imagine. IUZ. SH•\LLHOOD : While I am at it, not only those rivers but other rivers originating and ending in Labrador and not crossing the border at all but emptying into the Atlantic Ocean? 3830

.. ~1.1 rch 25 . 1976. Tape 1433 Rll - 3 · ~ . SPF~KP.R: The hon. the Premier . _rR~;11rr.r. IOORF.S: tlr . Speaker, Ne will check and see exactly what there is nvailahle in that particular regard from the previous administration. I think it r.dght he pointed out as well that there are a great many <>ther rivers originatin~ in J.abrador and headwaters that flow into Quebec rivers as well. That is the George River flowing into Vngava. TI1ere is 11 fnir amount of water that flows westward from Labrador into that par­ ticulat rl ver. So there is a \·Jhole gamut of areas of possible concern . J!R.

SMALI.WOOI>: ~lust be 15 million horsepower altogether . PRI:."l-IIER HOORF.S: Could be . I have no idea of the exact figutes but there is a lot of po~er. MR . SPF..J\1\ER: The hon . the memher for vlindsor-lluchans,who has been attempting to get a question in for some time. }ffi . LUND R H'..A.N : ~1It . Fl.If:JIT: ~I'R . LUm>Rit.AN: 'IlL FLIGHT: 'tR. LUNDRICAN: ~IR . SPEAKER: Is it for the Minister of Kighways? What ~as my hon . friend from Grand Palls saying? for H.ighways? No, that is the second time you are wroo2. He will see . Order, please! ~lr .

S]'leaker , a question for the Minister of Hanpot~er and Industrial Relations. Hould the minister advise the House as to whether or not his department has recently hired,or in the process of hiring,boiler inspectors or elevator inspectors on the mainland for the purpose of working in Newfoundland? .JfR. FLIGHT: 3831

~~arch 25, 1976 Tape 1434 IB-1 !~. Sl'EAKCR (Dr. Collins): The hon. Hinister e>f ~l anpower and Industrial Relations. I'R. MAYNARD: I have no idea, 11r. Speaker. I know that we have some openings for boiler inspectors and elevator inspectors. It was acvertised through the Public Service Commission in the normal manner. The applicetions 1vere received. The selection committee was set up by the Public Service Commission and they recommended as to whom should be appointed. But I do not kno~; whether they are from the i'lainlancl or from some other location. HR. SPEAKE!', (Dr.

Collins): The hon. member for Hindsor-Buchans. ~m. FLIGHT: A supplementary. Would the minister endeavour to find out and advise the House and at the same time advise whether or not the government is going to pay the relocation expenses of these people from their-residences now to the Province and whether or not the skills necessary were not indeed available in the Province? ~!R. SPEAKER (Dr. Collins) : The hon. Ninister of Yanpower and Industr i al Relations. NR . ~!AYNARD: ~~r.

Speaker, I assume that anyc,ne in the Province who had the necessary skills and were interested in taking the job would have applied for it. We have found over the past three or four years especially that we have a great deal of difficulty jn attracting people into the job of boiler inspectors or elevator inspectors. I will be quite frank, that I am not going to complain one way or the other if people come in from outside and take the jobs since Newfoundlanders have not been very anxious to do it in ;tny case. HD.. SPEhli.ER (Dr. Collins): The hon. member for I.aPoile. 'lR . !lEARY: ?-lr.

Speaker, I would like to ask the Ninister of Transportation and ConmiUnicationB, Sir, if he ~rould tell us about the meeting he had last night, I think it was, in Clarenville with the unions r _epresenting the CN employees and/or any officials of CN that are visiting the Province at the present time? I:R. SPEAKER (Dr. Collins): The han. Hinister of Transportation and Communications. 3832

Hardt 25, 1976 Tape 1434 IB-2 ~·r. Speaker, yesterday evening I met with a group of C:N employees at Clarenville, but the employees were from the communities of ~~1itbourne and llrigus, Fort Blandford, Bishop Falls, ;md in fact a number of C!l stations along the r:astern part of the Province. It was at their request that I met with them and ,,dth my colleague, the l!inister of Social Services who is the rn-TA for the Clarenville area. He met ~:ith the employees, many of them union representative5.

They expressed to us their concern over "'hat they feel is a downgrading of the service, the raihray freir;ht service in the Province by CN.

The facts they gave us, for example, are that in Port aux Basques there are 104 cars of freight, a backlog of 104 cars and despite the collllllitment 3iven to me as llinister of Transportation and Commu11ications ,and given to the unions back in the latter part of January by the CN vice president for the Atlantic region, !-!r. navicl Blair, despite the commitment given then, the f:irm commitment given that v1hen the freight volumes would improve in the Province that the nen laid off back in January, a total of forty-eight men, a.s soon as the freight brought in 10as improved that these men would be rehired, I ~~as quite surprised to learn last evening that out of the total of forty-eight men laid off in January, the early part of January, 1976 that only five men had been rehired, yet the freight volul'le has improved substantially, mainly because of the fact that the strikes which were on pt the time, the strikes in the pulp nnd paper industry has been resolved and that freight is back on the lines, and the freight volume has improved substantially, in fact,up to the point where it was even greater than "'hat it was January 1, 1976.

There was a resolution passed at the uteeting last nieht by the CN employees and the CN unions that what they consider to be a top level meeting be convened in the Province. They have asked me to convene that meeting whereby CN officials, top officials, not just provincial officials, but CN officials be invited to attend the meeting, representation from the Federal 3833

!'arch 25, 1976 Tape 1434 ll!-3 ~!R . !'ORGAN: l:inistry of Transport be invited to attend, and all the CN unions across the Province . l have agreed t~ do tl~t. I have ag~eed to attempt to convene thllt meeting as early as possible whereby the CN unions and l'lyself .:~nd my officials can (inc'l out from CN exactly '•~lat their intention s are in this Province ,,•ith tegards to the rail f reight operations. MR.. NEARY: ~low soon will the meetings be held? Mll. ~·ORGAN: Today I am meeting with - this aftemoon,after the quest i on period - I :un meeting with ttr .

Latimer who is t.he senior executive vice president of CN nationally. lie is in the Province today. I om meeting w;fth him this afternoon, and I 'I.-ill be expression the concern of the employees and incleed my concern as l!inister of Transportation to the senjor executive and ask that this meeting be convened as soon as possible in the Province. ~lR . NEARY: Hco.r, hear ! SOliE liON. lfJ!~ffiERS: Hear, hear! 3834

March 25, 1976 Tape no. 1435 Page 1 - mw MR. SPEAKER. (Dr. Collins): The hon. Le:tder of the npposition. This will be the last question of the Question Period. MR. ROBERTS: Thank you, Mr. Speaker. My question is for either the Minister of Education or the Minister of Public Works,as I am not sure which of the two gentlemen will deal with it. What I want to know, Sir, is when construction of the new residence for vocational school students will start? Or alternately,just what progress has been made towards bringing that project to fru1tion 1 making it a reality1 MR. SPEAKER (Dr. Collins): The hon.

Minister of Public Works. MR. ROUSSEAU: I will take that as notice, Mr. Speaker . ORDERS OF THE DAY: MR. SPEAKER (Dr. Collins): t1otion 8. The hon. Minister of Mines and Energy adjourned the debate. MR. CROSBIE: Hr. Speaker, when I concluded the other day - I had adjourned the debate the other day? MR. MURPHY: Right. MR. CROSBIE: I was dealing with this agreement that was entered into by UOP, Ataka and the Shaheen Companies on October 28, I think, in Chicago, after the negotiations in London had been abortive because of the attitude being taken by Mr.

Shaheen and their inability to reach an agreement, and this agreement then of October 28 that was entered into between these parties, well I suppose in Chicago. I was dealing with some of the main clauses of that agreement.

I pointed out that the agreemnt provided for a voting trust agreement so that management and control of the companies would be in the hands of UOP and Ataka rather than the Shaheen group; that Ataka and UOP only obliged themselves to use their best efforts to continue the operations of Provincial Refining and that they had the right to terminate that support whenever they decided they could not continue it on a profitable basis, which was unsati~factory. They agreed to cause Provincial Refinery to deliver a third mortgage,if that was agreed to. They agreed that Mr. Shaheen could continue as chairman of the 3835

March 23, 1976 Tape no. 1435 Page 2 - mw Hr. Crosbie. board,that that would not given him any apparent authority. They agreed to pay Hr. Shaheen or one of his companies out of the assets of PRC a sum of $10,000 a month as long as the agreement continued in effect, which would be $120,000 a year, and that they also agreed that they had 120 days to decide whether or not they would go ahead under this agreement or not; that they had an option to buy Hr.

Shaheen's shares for $3 million to be paid $250,000 a month under the agreement, and he had an option then to buy them back if that happened within two years thereafter. They agreed that ordinary creditors would have an option to participate in the third mortgage, and they included in Clause 8 a peculiar provision that the third mortgage would also secure the obligations of SNR Delaware Incorporated, one of the Shaheen companies, and the First National Bank of Chicago and Procon. Now this is an amount of some $11 million which the IDelaware Company had borrowed, which Mr.

Shaheen's company have bor:~;owed three or four years ago from the bank to invest in Provincial Refining as equity, and this was therefore an attempt to have this equity of $10 million invested in Provincial Refining tome under the third mortgage so that it became a secured obligation of Provincial Refining which did not owe the money in the first place. And then there were certain other provisions in the agreement - I will not go into them all. There are copies being tabled -and among those provisions was a release where Mr.

Shaheen and all his companies agreed to give UOP and Procon and all the companies associated with UOP a release of any claims by Provincial Refining, Newfoundland Refining or any of Mr. Shaheen's companies against UOP or Procon and the rest of them. These are the claims that Mr. Shaheen now says are worth $189 million. _HR. SMALLWOD: Mr. Speaker, I wonder if the minister would look at Clause 6 (

d) of the Statutory Agreement and will he not find there that the $10 million equity provided by t'RC or to PRC rather, by "<RC

March 23, 1976 Tape no . 1435 Page 3 Mr. Smallwood. was in fact originally advaned to PRC against the $10 million subordinated debenture specifically provided in the Statutory Agreement, Clause 6 (

d) and that this has always been a debt obligation of PRC? 3837

March 25, 1976 Tape 1436 PK - 1 Mr. Crosbie: Mr. Speaker, the hon. gentleman will have a chance to make his remarks later. I am making my remarks now. Under those original agreements }1r. Shaheen's $10 millions of equity he was permitted - or PRC issued subordinated debentures in connection with that equity. But those subordinated debentures ,,,ere never to he paid back if the company had any failure whatsoever, it was not to be paid back until the first and second mortgages were completely repaid, and it was to be 1 in effect,equity.

And that provision went in those agreements over my strong objections,I also recall. But the bon. gentleman claimed that it would make no difference . But it was equity and the subordinated debentures were only to be paid after the rest of the debt was paid. Under this agreement Shaheen Delawareowes some $11 million to the First National Bank of Chicago. That is what it is the debt owed by Dela1vare to the First National Bank of Chicago guranteed by Procon to the First National Bank of Chicago for repayment. It has not a single thing to do with Provincial Refining.

And there is an attempt here to make that $11 million debt of Delware to be assumed by Provincial Refining and come under the third mortgage, so it would come ahead of all the rest of the creditors. And as I was saying, Mr. Speaker, there was a release then hy }!r. Shaheen and all of his companies of any claims that they had against UOP and Procon, which claims they now say are worth $189 million. This is what he was willing to do if that agreement had gone forward. And then there is attached to the agreement the release that would be assigned to UOP and Procon, and several letters. Now, 'lr.

Speaker, negotiations then ~~ent on as to whether F.C.G.D. and the government would agree to give, to permit Ataka to get a third mortgage under the terms of this agreement. And on Novemeber ~, in F.ngland - and I will table this also - E.C.G.D. gave Ataka a letter referring to this memorandum of agreement, referring to undertakings given them by Ataka and saying, 11 We will agree to a third 3838

March 25, 1976 Tape 1436 PK - 2 Mr. Crosbie: mortgage in refinery being granted to Ataka America - MR. SMALLWOOD: Why? }ffi.

CROSBIE: - and other presently unsecured creditors provided that the form of the third mortgage is acceptable to us and make in accordance with the laws of Canada (That had to go in because the laws have to be observed here) ; that Ataka procured the cancellation of the debenture in favour of the First National Bank of Chicage. (You will recall that the First National had foreclosed under their debenture) ' ; that the security of the prior mortgages shall not in any way be affected, and the debt secured by the first and second mortgage shall not be rescheduled (In other words, the mortgages our prior mortgages were not to be disturbed); and fourth, we shall have received advice acceptable to us from our respective letters prior to the granting of a third mortgage - MR.

SMALLWOOD: Respective Lawyers, MR. CROSBIE: -that the said memorandum of agreement i~< valid and binding on the parties thereto in accordance with its terms, and that the same does not in anyway prejudice,diminish, or otherwise affect our rights as prior mortgagees and the rights of third parties who are at present unsecured creditors.

And on the fulfilment of those conditions there would be agreed also to the granting of a debenture to the Japanese bankers to replace the debenture to the First National Bank of Chicago. 11 So E,C.G.D. advised that they would agree to a third mortgage if those conditions were met, and if our lawyers and their lawyers could give that opinion that the memorandum was valid and binding on the parties,that it did not prejudice, diminish or otherwise affect our rights or the rights of other unsecured creditors.

And on November B the Newfoundland Government also agreed and endorsed the letter given by E.C.G.D. and said that we would agree to a third mortgage if UOP, Ataka, and the Shaheen companies could meet - if their memorandum met these tests. And as a result of that the Japanese permitted the Golar Betty to discharge oil at Come By Chance and the vessel discharged her cargo. They did pay off the First National Bank of Chicago, the Japanese then paid them off, and they 3839

~larch 25, 1976 Tape 1436 PK -3 Hr. Crosbie: got a debenture to replace the debenture on the inventory that the First National Bank of Chicago had. Now could anything be more fair or reasonable than that, Mr . Spe aker? These were certainly the minimum conditions that E.C.G.O. and we should have reqdred before toe granted o third mortgage to these companies. More fair a~d more reasonable you could not expec t. l.'ell, •tr. Speaker , after that then this had to be referred to our various lawyers. And it was referred by E.C. G.O. to their lat.yers, and it was referred by us to our lawyers in New York. 3840

March 25, 1976, Tape 1437, Page 1 -- apb "'R. CROSBIE: They studied the situation and on November 25 they gave us their opinion. And our lawyers were Paul,Weiss, Riskind, Wharton and Garrison, a well-known law firm in New York, and they gave us exactly the same oponion that the lawyers of ECGD gave them 1 and that was that under no circumstances should we carry on on the basis of this memorandum of agreement. I have tabled a letter of their opinion dated November 25, 1975.

What their opinion says is that, "Based upon our examination of relevant matters we are unable to advise you that the memorandum of agreement is valid and binding on the parties thereto in accordance with its terms but at the same time does not in any Hny nrejudice, diminish or otherwise affect your rie;hts as prior mortgagee and the rights of third parties who are at present unsecured creditors." They go on to say that, "It is not a final agreement and that more definitive agreements between the parties are contemplated and required before the memorandum of agreement can he made effective.

The courts will not enforce such agreements to enter into further agreements not yet made specific. In addition there are SP.veral provisions which are invalid or unenforceable inclucing the follmving: the provision in the last sentence of paragraph 8 calling for a third mortgage from PRC to secure obli~ations vThich are not its obligations but are presently existing obligations of Delaware; the provisions in paragraph 6 for l'RC to pay out of its funds $10,000 per month to SNR lJilmington without receipt of any consideration therefor; (

c) the provision in paragraph 8 for unsecured parties to acquire participation in the third mortgage after its registration and the provision in paragraph 14 for a release under a construction contract which has been mortgaged under the first and second mortgages •11 So for all of those reasons,and there were others, our lawyers advised that this memorandum of agreement could not be acted upon. And they so advised ECGD and they so advised the Government of Newfoundland who advised Ataka, UOP and Mr. Shaheen and his companies that we 3841

l1arch 25, 1976, Tape 1437, Page 2-- apb MR. CROSBIE: could not proceed on that basis. !l.nd <7e were perfectly right not to proceed on that basis. · And if the Newfoundland Government had proceeded on that basis ECGD would not have proceeded on that basis so it would have been irrelevant. In other words, what they were attempting to do were to do things that favoured UOP, Ataka and Mr. Shaheen and his companies and were prejudicial to all the rest of the other creditors. Anc who could participate in that? So it had to be turned down and it was turned down.

Now on November 25 there was a meeting in New York of representatives of the various creditors with representatives of ~lr. Shaheen, including Mr. Furmark, Mr. Rrocaw, Nr. Rob Walsh and the like,to review the situation at the refinery. At that time Mr. Furmark said that Ataka and UOP were now at the offices of Refining and were participating in the operations - they had no ~oney except what the Japanese advanced to them - and he reviewed the operations. They were operating at a low service factor because of the hydrogen plant. They had to store 900,000 barrels of vacm~m gas.

They were manufacturing a product down there that you could not sell because of the fact that they could not operate the hydrogen plant. They had 900,000 barrels of gas gone through not properly finished, that could not be finished properly that was on hand there and the cause of terrific losses. The problems were predominantly in the hydrogen plant they say not in the isomax. They had had failure of the product compressors and so on and so forth. They had only produced, I think, that week at the role of 30.000 barrels a day.

They had two principal areas of trouble, the furnace which had to be rebuilt, the lining in the burner blocks and the scrubbing system. And so on and on it went. That they were ~oing to run out of crude by the end of the year unless financing was arranged for more crude shipments. They had a problem, Mr. Speaker, with wax precipitation in the fuel tanks. This was something new that I had not heard 3842

~1arch 25, 1976, Tape 1437, I' age 3 - apb :-tR. CROSBIE: of . They had a lot of wax in their fuel tanks down there. Hundreds of thousands of barrels of the oil had turned into wax because they did not have precipitlltors in the oil storage tanks . In other worrls, the normal course of affairs, particularly in a cole! climate,is to have in the crude storage tanks precipitators to keep the oil moving around. But to snve a few hundred thousand dollars 3843

~~arch 25, 1976 Tape No. 1438 NM- 1 }ffi . CROSBIE: the management of the refining companies had not installed these precipitators and as a result they had- I have got the figure here later on- some hundreds of thousands of barrels of oil down there v7hich was wax and which you cannot sell and the only way you can get it out of the tanks is to cut the tanks open and heat it up and get it out that way. ~'R. S ·!ALLHOOD: They have made improvement in the design by TTOP. Mll .• CROSBIE: They were not put in, ~1r. Speaker.

It was up to the mvner whether or not he wants to have certain things put in and the owners choose not to - MR. SMALLWOOD: He di2 not design it. The design was by U0l'. MR. CROSBIE: I do not care, Hr. Speaker, who designed it. I am explaining to the House what was one of the things we-discovered on November 25th. Nm~ whose fault it is,they can sue between themselves. The fact is that the owners had not seen that there were precipitators put in the fuel tanks and they hold themselves out to be experienced refinery operators.

The fact is there were no precipitators in the crude oil tanks dol~ there and hundreds of thousands of barrels of crude were tied up and turned into wax,and that crude oil is cost1ng $12 a barrel and you multiply that by 100,000 barrels and you have $1,200,000 tied up, and ·by 500,000 barrels you have $5 million or S6 mi.llion tied up that you cannot get out of the inventory. That was one of the things that we learned at this meeting. Now v1hose exact fault it is I do not know, but if I am an owner and I know lvhat the oil refinery business is I darn well would see there is precipitators in the crude oil tanks.

I would not need an architect or designer to tell me. •m . Sl>!ALLWOOD: The designers should say that. Jacobs Engineering should have drmvn attention to it. ~m .. CP.OSBIE: I do not care, Mr. Speaker, who should have drawn attention to nhat. The f'lvners and managers of the oil refinery was }~r. Shaheen and his associates, Mr. Homer White and others - They did not design it. 3844

l~arch 25, l'l76 Tape No. 1438 Nl'' - 2 ~'R. CROSBIE: They are the owners and managers. They are responsible for its operation. Now what excuse they have got I do not care. I am not arguing about their ability. I am just saying that this 1ms another de.ficiency down at the oil refinery. There are seven or eight feet at the bottom of each tank which they could not pump out and they were then engaged in putting in the mixers. But it was a bit late to put in the mixers, two years after the t~ing had started. The cost of the mixers new was ~430 ,non.

This material •vas included in the inventory although they could not use it. I mean it was included on their balance sheets and inventory although they could not use it, about 480,000 barrels of this wax material was there. W'. ROBERTS: m\at was that? 1"\. CROSBIE: 1fuat was which? MR. ROBERTS: 480,000 ·barrels. >~. CROSBIE: 480,000 barrels of - t'R. ROBERTS: 500,000 barrels - MJl. CROSBIE: That ties up at least $6 million. That 1ms one of the problems that they were having down there. They said that there may be l' htg joh to come on the hydrogen plant.

Hell we have been hearing for months that they hydrogen plant was all fixed or was going to be fixed the next day. They had spent considerable monies themselves on the hydrogen plant and UOP had been down there but 1 t still •·ras defective. They needed two more crude storage tanks at Come By Chance. They said they were losing $3 million a month, ~3 million a month on shipping since their ships were not properly utilized. The refinery was only averaging 50,000 barrels a day, instead of 100,000 barrels a day. They only needed four crude oil tankers, four VLCCs if they operated at 100,000 barrels a day.

They had seven of them on charter, three more than they needed, presumably because they thought they were going to have a refinery in Nova Scotia or they were going to have a~other one in Newfoundland. They took a fantastic gamble hy arranging for seven VLCCs on long-term charter parties 3845

"arch 25, 1976 Tape No. 1438 !l.o/ - 3 "R. CROSB!E: when ~hey only needed four , 1\nd ~eir p;amble did not work and the tanker charter market is gone to hell in the last t¥o years and tanl<.et; owners all around the HOrld are in gr ave financial difficulty and they have them under charter for the next twelve, fifteen, ~~enty years. They are losing $3 million a month on tankers alo::te. This is ,.,hat ~~e wer e told at this meeting.

They are negotia:ing with tanker owners to try to get some relief over the next year oo this to postpone some of the payments, to defer the rates that t hey had to pay and they ~~en ~ into their m-~rketJ~g problems and othe r s . They wer e having seve r e losses because thev had to sell number six oil in the world mar.<et. The lsomax would eliminate 35,nOO barrels a day of six oil and turn i t into hir;he r p-rice products but it was no~ working. and on and on it went with the list of problems that they had down there and they went into what they owed, the mortgages and to other cTeditors .

This was a meeting held do~m in Nc~r York, in - !"R. ~flll!J>HY: !\Then 1Jas that on.e? ''R. CROSBIE: On Novem!,er 25th . 'fP . ~1\IRI'FlY: That 1·1as last - 'IlL Cllo:::arr.: At the same time, lr . Speaker, and at that 111eetioR •·e were ~lven an internal balance sheet for the nine months up to September 30th . • t<l75.

IJ«>; received that do1o10 at that meeting. for Provincial refi ntn~ r~mpany Limited, and that showed that P~C had lost during thl" onP. month of September, it had lost $11,374/lOO in one month, and that its losses since it had started operatin g - its losses then for the vear and nine month were $164 million , 3846

!larch 25, 1n6 Tape 1439 IB-1 t-:T~. CT'.OSBIE: $164,330,000. These were its losses. The only equity in it was $10 million put in by Hr. Shaheen. Can anyone doubt that the company was insolvent? Losses o£ $164 million, yet they are dmvn arguing before the courts,or >~ere, that they are not insolvent. ~o that is their own statement. This is an internal conpany statement, not prepared by someone else, that shmvs they had lost $164 million and that they were then losinr; $11 million to $12 million a month. That 1 s also t11blecl, 1'r. Speaker. So the prognosis is certa.inly not good.

The Japanese were ov1ecl. over, in excess of $300 million, the same Japonese that !'r. Shaheen aow says are not entitlecl to !Je paid anything. Ile no,., soys they are not entitled to be paid at all until the refinery goes into complete and proper operation, that they are just supposed to keep advancing him money until the refinery defects are all cured and it operates properly - the most ridiculous and silly suggestion that I have ever heard an}'l•here and which the courts tvill bounce out as soon as that matter goes to trial! }ffi. MURPHY: 't-1!1. C:ROSBIE: !low could they be ov.,ed that high an amount?

He now claims that the Japanese are ~n some kind of partnership or joint venture tvith him. If that ,,•as the case t,•hy tvil.S thls agreement of October 28 ever signed? It is too .foolish to talk about. Hell that tvas the meeting there then on November 25, J•'r, Speaker, and the situation 'Vlas pretty grave. So, what happened after that? }ITt. SYALLHOOD: I thought that agreement was signed? l!R. C:P.OSBIE: Pardon? ~·TR. S}-!ALLWOOD: I thought the October 28 agreement was signed . . !·'Tt. CROSBIE: It was signed but never - '-IR.

S~'ALLVIOOD : l3y the Japanese, by Ataka, by Shaheen, by everyone but the ~letvfoundland Government and the British Government. MJ' •• r.ROSIJIE: It never became effective, }:r. Speaker . 1'R. SHPLL\JOOD: No, because they would not accept it. 3847

}larch 25, 1976 Tape 1439 IB-2 J-:JZ. CP,OSBIE: I am not - MR. S~tALLI-'OOD : nut those parties did sign. }ffi . CROSBIE: That is completely correct and I just said that a half hour ago, or · fifteen minutes ago. FR. Sl·CALLV!OOD: No, the hon. gentleman just said it was never sign"d. !IlL CP.OSBIE: Those parties signed the agreement but if they were partners together 1 and if Ataka was supposed to supply them with hundreds upon hundreds of millions and to keep supplying them with credit and money until the refinery operated properly, why ,.,auld then, l ~ r.

Shaheen, have to have them sign this October 28 ar,reement where he surrendered management and control? I am simpJy pointing out the inconsistency of this ridiculous ar~ument that has been put up by them since. That is all I mentioned that for. •!ell that agreement was signed between those parties on October 28. Now, }'r. Speaker, at the same time all this t.•as going on our own Ne~>f oundland and Labrador Hydro was owed some $500,000 by the ope rat ion during the 1975 year.

There ••as some metering defect which was not discovered until during the Sununer 1 and when it was discovered the amount was figures out Has some $500,000 • And they had a perfect ri~ht to turn off the mdtch to the refinery j f they ~Jere not paid under their agreement, and they have the right under the agreement to be paid and even if it is disp11ted you have :;ot to go to arbitration. Tiut they ~Jere never paid and they did not take any such action as that because of course He coulc not have them ta~ce any action such as that.

It is just another mark along the way of 1vhat v1e are at tempting ttl do to assist the refinery to soMe solution of this horrendous problem caused not by us and caused not by the Japanese. MR. J. CARTER: Woulc the minister permit a question? 'T.. CROSBIE: Yes. 1-~r .. J .. CARTER: At what rate did the companies get power from the Newfouncllann Government for, from its subsidiary? 3848

)·larch 25, 1976 Tape 1439 IB-3 I!R. CrOSBIE: The rate that they paitl was originally supp0sed to be 2.5 mils per kilowatt-hour. That was the arrangement in the original agreements but it 1:o1as changed later to the - in 1970, I think it ~;as or if not after that - to the ordinary commercial rates or ~dtatever is in effFct for that size industry. So they were probably paying eight or ten mils. I am not sure what the rate was. Now, }:r.

Speaker, you had a very difficult situation here because, you kno,,·, the creditors that Here working together all ha(l certnin interests <Jhich could be a conflict with the rest of the creditors and the mortgagees. For example, UOP's participation becausP. they were involved in various guarantees and owed monies by the refinery. As we can see in that October 18 agreement they tried to take advantage of their position to get a release from PTIC ancl Nl<C and all these companies of any claims against them in the future. Well any such release was prejudicial to every other creditor.

If PPC or NRC have a good claim against GOP and Procon for $1 million or $10 million or $189 million - I am sure it is not $189 million,or anything approaching that - but if they have ~ good claim that is money that goes to PRC and then becomes available to all the other creditors. But ltr. Shaheen and UC1P and Ataka were willing to aRree to all that being released, all that possibility being released if A taka got a thirci mortgage.

So the situation v.•as fraught with peril for the ordinary creditors and the nortcagees and our position from the start '"as that we Here not going to agree to anything that prejudiced the other creditors or the mortgagees. I cannot see hoH anyone can bJame us for that. Hell, l'r. Speaker, '"hat happened after we advised of our ler,al opinions vTas that further tneetings commenced to see tvhat coulci be clone. There ·vere further meetings over in England bet1veen the Jnpanese and ECCD and ourselves and the 3849

11arch 25, 19711. HR . CROSBIE: Tape 1440 Rll - 1 Shaheen representatives and Kleinwort-Benson- held in St. John's actually, and then held over in London, England to see '"a.s there any way around this. The Japanese were still trying to find some way around it. They are owed this huge sum of money, could they get a third mortgage? Could they carry on themselves? Could they meet some of these objections? They were still exploring this. Could they get some agreement with Mr. Shaheen because they could do nothing without Mr. Shaheen's agreement. Mr.

Shaheen was still looking out for his own interests and wanting a considerable price. So various meetings continued to go on after November 25 in London and in other places. As a matter of fact, to assist them ~~e said we would attempt to buy Bunker C from the oil refinery during 1976. This was one of the things that we would do, if the refinery survived we would have to pass legislation in this House to change certain other legislation. We agreed that the Hydro Authority o;muld huy Bunker C from them.

We nctually gave them, we gave them an order for Bunker r. from Labrador Linerboard, because they were a local refjnery here in the Province. There were tenders called, but we agreed to split it between the refinery at Come By Chance and Golden Eagle because there are two local refineries operating in the Province, as lon g as they matched the lowest price there was something else to help them.

These are all things that we did to try to help them only to be accused a few weeks later of sabotaging them and stabbing them in the back and downing them and the rest of this nonsense and tripe that ~•e heard on February 13 once the bankruptcy action was commenced. l·lell I am not sorry that ~!r. Shaheen tried those tactics because 1t gives me every reason in this world to just let it all out, put all the facts before the House and hide back nothing. So at that same meeting of November 25, if I might get back to that, there was another interesting clocument filed that showed the company's setup.

There was a document p,iven to us that shm•e<l a draft consolidated balance sheet for S .N .R. lloldinp:s Tncorporated and its subsidiaries. Now S.N.R. Holdings 3850

Harch 25, 197fi. HR. CROSBIE: Tape 1440 RH - 2 Incorporated has three or four subsidiaries including P.R.C. and N.R.C. in this complete corporate structure of Mr. Shaheen. There is Mr. Shaheen and he owns 100 per cent of Shaheen Natural Resources Company Incorporated, and it owns 100 per cent of S.N.R. Delaware. Then Delaware owns 74.9 per cent of S.N.R. Holdings, and S.N.R. Holdings owns lOrl per cent of Newfound­ land Refining and Newfoundland Refining owns 100 per cent of Provincial lluil.ding, Provincial Holding and Provincial l!oldinp, owns lflO per cent of Provincial Tlefining. It is like a jigsa~• puzzle.

Now the consolidaterl balance sheet prepared for the year ending 1974 of S.N.R. Holdings and all these subsidiaries, which should never have been issued but which were issued ·to the meeting, shoHed that the position of S.N.R. Holdings and all of those companies and all of those companies at the end of 1974 was pretty grave, although we were never told that at the time. It showed huge losses, that this company, with all its consolidated balance sheets, had a net loss of $74 million in 1974 and substantial losses continuing into 1975.

It showerl that its crude oil and refined products were carried at net realizable value which was nearly $9 million less than their cost, and that the company had a continuing obligation to purchase crude oil at a cost which when combined t<ith processing cost tvas in excess of net realizable value based on present selling prices. In other words, there is no way these companies coulrl operate and do anything hut lose money, because when you took the crude oil and processed it it had to be sold at less than it cost them to purchase the crude oil.

ThPy had a conti .nuing oblie;ation to purchase the crude oil and to continue purchasing it or they are open to huge suits. It sho1ved fees that they had charged, that S.N.R. had charged this company in connection with - $1.5 million they charged the company for services relating to the financing of the refinery in 1970. It 3851

!'arch 25, 1 ')76 Tape 1441 Ill-1 _yR. CTl.OSDIE; showed fees of $11,401,000 paid by PRC to NRC and up through it to this company in 1974. It explained the long-term debt of the company. It shm~ed that the Japanese had loaned them $42 million in 1974. It said the company is in default - this is now the statements for tlte encl of 1974 -- is in default under an agreeMent relating to the establishment of letters of credit require~ for crude oi1 purchases.

The agreement is vTith the holder of the notes due in 1985, and a result of a clefaul t may also be deemed to be in default of the agreement relating to these notes. In other 'l<rords, they Here admitting in their ovm statements that they \o.' ~re in clef;mlt to Ataka at the end of 1974 in establishinr, letters of credit. It shovrer., }' r. Speaker, huge liabilit:!.es and coml'litments in connection with tankers.

The coll'pany has collll!littnents, prind pall y tanker charters, for the follov1ing approximate amounts: 1975, $57 million; 1976, $60 ll'il.lion; 1977, $50 million; 1978, ~49 million; 1979, $49 million; 1980 through 1984, $200,500,000; and 19~5 t~lrourh 1989, $1•3 million. Tanker charter hires of a pproximately $60,952,000 <·Tere charged to income in 1974. C:ertain of the tanker charters are subject to escalati.on for increased nperati.nG costs.

Then it r,oes on in the next paragraph to say they have violaten. provisions U'lcler another of the letter of credit agreements .:mel ir. connection witi a st;omd by letter of credit they had entered i.nto l<itll 1\t;~ka. :lov, of conrse, they say that Ataka is supposed to supply them ~'ith l!loncy until the Hhole thing becor1es stabalized un<l operates properly. \Jell, 1'r.

Speaker, these meetings ><ere held in London nne' ECCD -- by this til!le of course the Japanese, their bank se,:med tn be col!ling more to the fore - but at these meetings jn London ECCP took a very clear posiU .on, that they uere absolutely f'"cl up tfit], \vhat was r,oin~ on and they ~Jere r;oi.ng ;~lons no further 1d th ;my of these su ggested rescue operations. The result of those discussions is embodied in a telex. I t·m.s there trying to er.courage ECGD not to take too bard a line, 3852

~'arch 25, 1976 Tape 1441 t'Tl. CROSBIE: o:hich l':r. Shaheen well knows but \>'hich he apparently misinfonned his agent here in the Province about, and which I do not forget and am not going to forget. I never forget a trimmer. Now, l!r. Speaker, I have tabled here a telex dated December 5, 1976 which shot,rs the conditions ECGD now wanted observed before they would agree to a third mortgage. It is tabled here. You have a file of all the documents. That is a l'ong telex sent by t!r. IB-2 1lirch of ECGD to Ataka with copies to the rest of the involved parties.

"Thank you for your letter of December 4 concerninG proposals fron your head office in Japan relating to the contjnued operation of the refinery. I am pleased to inform you th:1t Kleinwort- Benson an<l oun,elves uou]d be prepared to consider giving our consent for the Erantins of a third nortgage to presently unsecured creditors of PPC and Nr.C. In tl!is connection I must repeat th11t in our viet-' such consent ~10ulc only be r.iven if the proposals put to us provide a reasonable assurance of the continued operation of the refinery on et long;-term basis '"ith the object of establishinr: its eventual viability.

That is our position." That was our position too. There is no point giving a third mortgage if it closed the next ,lay. Then tJ.ey give a \<hole series of conditions. 11 One, a new consortium sh211 be fomec to operate and manage the refinery co~prising yourselves, certain Japanese banks and the company expert ;m<! the oil trade.

Two, the Japanese consortium shall acquire full and effective control over Pr.C and its associated companies included :in the refjncry's operations up to and including SNR nelaware such ccmtrol to be retained until all the creditors securell by the exjsting Jaortgages and the proposed third mortgage shall have been paid in full.)) I wilJ not read all the conditions. Any member who is interested can see the memorandum. 11 The memorandum a~:reement shall be valid ancl forceable in accordance of the laws of Delaware and in any event should not contain any provisions for (a), any payment to 11r.

John Shaheen or any company in "7hich he has an interest 3853

l'arch 25, 1976 Tape 1441 IU-1 ~~ . CrOS8IF.: to be made out of the funds of rRC or its associated companies; Hill not contain any provision for the inclusion in the third Mortgage of debts other than those of PRC. (In other words, the SNr. "lclawnre debt was not to be included .) The Japanese consortium shall undertake to use their best efforts to operate it on a long- terM l>asis, r r ovi.de adequate commercial 1 technical and finnncia1 resources, strengthen it i n all areas , given the details of .. a new tn.'lnneenent structure and so on.

It soes onlconc!ition after condition . 11 r.ondition t hirteen ~ the Japanese bank shall jointly and severally r uarantee to Kle inwort-tl enson payment of th e installments t!ue on }'arch 31, 1976 under the various loans . 3854

Harch 25, 1976 Tape 1442 PK- 1 Mr. Crosbie : - ------ (They are even asking the Japanese banks for a gurantee, that they would guarantee payment of their mortgageJ The Japanese Consortium shall indemnify Kleinwort-Benson and E.C.G.D. against any claims made by other creditors," and on and on this goes.

It shm·7S the conditions that E.C.G.D - only under all the serious of conditions would they consider a third mortgage. '1I should stress that this letter is not to be construed as granting consent to the third mortgage but we are prepared to carry on further discussions." So that was the position of E.C.G.D. and a sensible one. Who could argue a~ainst it? I came back to Newfoundland from London, Mr. Speaker, and after going over all this with the Cabinet, a telex was sent by the Newfoundland Government which is also filed here.

On December 8 when we sent a telex to all the parties about the conditions under which we would accept a third mortgage, and they were must less stringent than those of E.C.G.D.

I will not read them all, but the form of the third mortgage had to be acceptable; the security of the first and second mortgage is not effected; the present debenture held on inventory could be increased to $30 million if they provided more credit; that within ninety days of the registration of the third mortgage they were to cause PRC to pay the debts owing all presently unsecured creditors with the exception of some four or five of the major creditors who might agree to participate with Ataka in the third mortgage.

So that all ordinary creditors owed amounts under $1 million would be paid off by Ataka or PRC or NRC within the said ninety day period, with the remaining major creditors having already agreed to come under the said third mortgage. That was the Newfoundland Government.

We were insisting that all unsecured creditors owed a million or less should be paid off within the ninety days of the third mortgage, and any major creditors should agree to come under it, That Ataka should obtain full and effective control over the management, that they must have arranged for competent management of the oil refinery, and that they must commit~ condition (7),that Ataka must commit itself to provide financial support, including 385!5

March 25, 1976 Tape 144Z PK - 2 Hr. Crosbie: finance in crude oil purchases so it will carry on at optimum capacity at least until the 31st. of May, and so on. That was our position, a position that was certainly less stringent than that of E.C.G.D. but certainly as far as we could go if we were to have any interest whatsoever in the unsecured creditors of the oil refinery or in the people of this Province who have provided $41 million which is no'" owing to them under the second mortgage. Now with all of these efforts, Mr.

Speaker, it is a bit annoying and irritating to be attacked with unparalleled ferocity and falseness when the operation finally did succumb to its ills, that were caused by no one but the owners and managers and certain other world events in connection with that refinery. So those documents are filed also. So that was the position then on December 8. E.C.G.D. were taking a very strict position. I do not think it was too strict.

They were not stricter because of the Newfoundland Government~ b'ecause the Newfoundland Government was urging them not to be too strict, because we kept urging them - we had to do our best to try to keep the refinery operating. Because if they took the normal position of any mortgagee or any financial concern that had loaned money they would have had it shut long ago. They were only going along with all these abortive attempts to carry on because of the Newfoundland Government, and because of their regard for us, and because they wanted to assist us and see if it could keep operating.

On December 10 negotiations still went on about debentures, they had to get debentures on another cargo of oil. And I filed a telex on that from Mr. Birch on the 22nd, about this debenture - I "'ill not go into those details now. I do not think that it is that important - and our telex back to him, where we were agreeing for them to get another debenture so that the ship known as the Eleftheropoulis could be discharged. So they were still going around then, Mr. Speaker, seeing "'hether an arrangement could be made, although they had gotten nowhere in London at this meeting with E.C.G.D and ourselves. 3856

"arch 25 • 197f\ Tape No. 1443 !~. CR0SBIE: As ECGD told them at that meetinr;,the future ~~as in Atakii 's hands and that of the Japanese banks. it was up to them to come up ~1ith some solution if they could ~and they took the position that they must now have their debt guaranteed by the J:tpanese hanks. So apart from discussions and talks on the debentures. "r..

Speaker, the next thing that we - well we did have a telex from thP J:tpanese suggesting some conditions under 1·1hich they >-•auld make a new offer but it only included their best efforts to carry on, 11nd th11t they •,muld try and pay unsecured cred:l . tors who rendered services rer.ularly to the refinery,and it did not meet any of the conditions and it ~~as not satisfactory to any one.

So that the next thing when we heard - naturally during this period there Here various conversations going on and the Japanese continued talking to the Shaheen ~eoplP. no1m in New York to see if they could come up H:!th something. But the next thing that we heard of any major consequence>. was on De.cember 18th., when the Japanese informed us, and !'organ Stanley :!.nformed us, that they had retained ~•organ Stanley to advise them, thP Japanese had retained them to advise them, Atalca had retained them, the Sumitoma Bank, to advise them as to what to do in this situation.

Hell they certAinly needed someone to advise them, because I have never seen anyone who was mmed jn P.Y.CP.Ss of $301) r.dll:!on unsecured take so long to do anything about it. In any event they Here going to acquire the expertise of "orp;an Stanley to advise them as to what they should do in this c;1.tuation. So l 1orgltn Stanley uent in to advise them ~tttd that was neccmber 18th. , and on December 18th. I was phoned 1->y Mr. Tagaki, ¥•ho had been the !'anaging Directcr of Ataka America Incorporated, and who hart gone> hac k to Japan but who had been involved in al 1 these deals 1-.rith ~~r.

Shaheen for some two or three years - Mr. Tagaki hnd heen involved in all these meetings, he was going back to Japan from New Yorl: - he called to tell me that he could nbt: get 3857

M:1rch 25, 197F Tape No. 1443 "~. r:pnslHE: anywhere 1d th "'r. Shaheen, no sensible arranr:ement. t'r. ShahE'en uanted $10 million: he told me now, to co-operate and to give up his management and control. He told me that loans had beE'n made hv 'l'e~Jfoundland Refining, monie>: advance.d from 'ler~foundland l'efining up to other Shaheen companies the~t they could r:et no explanation of as to why the loans had been made, what they ~>.•Pre made fnr or when they were going to be paid back. They couJ rl get nn explanation of that. He 1,ras getting nowhere with ''r. Slv1heen.

He was goinp: to Tokyo that night and consulting with h:l s principals in the banks, and that is the last that "'e ever heard from "r. Taf(al'i because he has not appeared bacl: on the scene apl.in. So Morgan Stanley had then come in and they were going to investigate the o,•hole situation and for the next three or four weeks - Now. ''r. Speaker, I '·rould not have to bore the House with all th:is excent for these ridiculous allegations that have heen made, It is not boring :Is ft? S'IYE 1ln"l.

"1F.¥.8F.RS: No, no. ,.,.. . r:nnsrnE: n]ray, p,ood. 1·1ell then the next th:lng, there were v11rions rl:lscussion then Nent on about they l·•ere running out of crurl<', T mPan everv two or. three <<eeks they <~ere running out of crude and tl1ere had to he another sh1 plead of crude come. Tlut a shipload of crude, l'r. Spea].·.er, today is 2.5 million barrels of oil a~ )12 a barrel, you tave got $23 million or $75 ~illion of oil every time a ship was coming.

So their continuing discussions on gettinr, debentures on these shiploads of oil so that Ataka could get some protection for the crude oil that they were still f:lnandng. But r.tpart from that we were simply ~vaiting during this period to hear from Ataka and from '-forgan Stanley a~ to ~Jhat they could do, i.f anythjng, Fhat they we~e going to propose because they were now studying it and if they thought anything could be done they o1ere going to make n propos:.] . N.mJ during the negotiations for the third debenture,and T am ref~rring to this because of a statement made that Er.Gn,we were told, 3858

~t a.rc!t 25 , 1976 Tape ~lo. 1M3 ~:! 1 - 3 !tiL f:RO~llll': 1wul <I ar;rc~c to 1\t:-~l : n ~oinr. in under thP. f h"st mnrtnnr.c. nuri.nl!. these nor.otiations it was su~~csted by Norll,an Stanlev that the cargo of oil on board the Ardtaraig , which was t he l ast tanker down at C:orne Ry Chance, that they sugp,estecl that the vnlu e of that cargo, t~at they s~oulcl P,Ct a firt lien on t.he rcf'l.ncr y j,n return for dischar~ing this cargo of oil, that they should come ahend 3859

March 25', 1976 Tape no • 1444 Page 1- mw Mr. Crosbie. of the first mortgage and the second mortgage and everyone else as security if they agreed to discharge the Ardtaraig, or whatever her name was • And ECGD telexed them back - we would not have agreed either. We did not agree.

But that being our position all along we were not going to agree to anyone coming ahead of our security- but ECGD telexed them back -and a copy if filed here - "With reference to your telex dated January 23, we have noted the position put but regret that we are not prepared to agree that security in relation to sums advanced in respect of the Ardtaraig cargo should be secured by a first lien on the refinery.

As already advised we are willing to agree to a third debenture maturing on May 1 on terms similar to the second debenture." They would not agree to them having a first, that they should get a first lien for this cargo of oil. So ECGD's position was very clear. At no time did they ever agree that At~ or anyone should share their first mortgage with them or come ahead of the first mortgage, although that was stated by Mr. Shaheen in one of his later outbursts and by his agent, It is not true. And I called Mr.

Cotterell myself, the head of ECGD who confirmed it was not true and The Evening Telegram called them because they wanted to check things out a td Mr Cotterill confirmed to them that it was not true. So there you are. \lbo are we to believe, Mr. Shaheen or ECGD - I have no doubt about who I would believe-or Mr. Cotterill. So we were waiting then during this period and the only work going on was on the debentures.

It was eventually agreed,or the Japanese agreed eventually that they would only discharge 500,000 barrels from the Ardtaraig because they were only going to get a debenture on the inventory,and that is what they did discharge. So things were getting pretty close to a final decision at that time. This was around the end of January. They were running out of crude. 3860

}larch 25, 1976 Tape no. 1444 Page 2 - mw Mr. Crosbie. On February 3 - now, Mr. Speaker, I must make it clear that I am only explaining what happened, and Mr. Roy Furmark who i s an ingenuous and able man and the men we are talking about are ingenuous and able men also - but on February 3 Mr.

Furmark , because I presume that he knew that Horgan Stanley and the Japanese were about ready to make their final position known, and because presumably they feared it was going to be very favourable, he put together a proposal dated February 3, 1976 which he sent to Ataka, and he sent copies to us, and I presume to other people, a proposal to continue operating the refinery.

And this is what was suggested in this proposal. 11 The highlights of our operating plan are summarized as follows: Issue of fourth debenture for the balance of the Ardtaraig cargo and discharge immediatel y ; operate medium crude runs and so on; open a new letter of credit for the next cargo;( do this, that and the other! ) We have got to complete a capital building programme of high stacks and heat recovering unit, which will give us savings", -and then he goes on -"as will he seen from the enclosed

schedule we have not shown any payments being made to the first and second mortgage holders on March 31, 1976 ." So he was now proposing that they make no payments to the first mortgagee or the second mortgagee on March 31, 1976. They wanted to accomplish the following: Defer the principal and interest payments due March 31, 1976 on all mortgages; minimum deferral of the principal payment3 on the first mortgate due September 30, 1976 and March 31, 1977. So they wanted ECGD to have no principal payments during 1976 and 1977.

There was no consultation with ECGDand no way the Government of Newfoundland would we agree to all these little proposals in this document put forward February 3. 11 Second, defer the wharf fees payable to the Government of Canada for a number of years." Now the wharf at Come By Chance was built by the Government of Canada and under an agreement where if the refinery or PRC pays back the cost of the wharf 1 and interest and so on over a period of yearl'i, which I think is fifteen years, they will then become owners of the wharf. 3861

t-larch 25,1976 Tape no. 14444 Page 3 - mw Mr. Crosbie. And si:lce the w!1arf cost in excess of ~20 million, PRC had to put up the amount in excess of ~20 million, and 1 think the amount owing on the wharf is ~23 million and some odd. And the fees payable are $460,000 every three months, I believe, is the amount that you got to pay on the wharf . I will come to that specifically later. Anyway it is a hefty fee every quarter . So here was a suggestion that they are going to defer the wharf fees payable to the Feder al Government of Canada for a number of years. They had not asked the Government of Canada .

They had not consulted the Government of Canada . You can see, Mr. Speaker, this is not any kind of a serious proposal. They were just coin~ to defer their wharf fees. "Three, raise additional fi.nance under the first and second DlOrtgages to complete the high stacks and heat recovering units as well as other items 306 2

~'arch 25, 1976 Tape 1445 IJI-1 HR. CROSlliE: required to rring the refinery up to design capacity under a capital building programme. \Vithout so much as a by your leave they are going to have us 1under the first and second mortgages, advance them another $25 million to $30 million to complete this building pror,ramme. ,. Four, the issuance of a third mort;ca!_';e approved by all parties as well as a first mortgage position for any future financing provided by Ataka up to an amount to be agreed upon by all parties.

Fifth, complete rearrange~ent of ship charters which are in various stages of completion. (All seven owners of those 1~CCs wjll have to agree to this.) Six, reduce interest rates under a.ll loan agreements and in certajn cases defer for extended periods of such interest;' This is their proposal. If we all accept this proposal they can carry on for another few months. So it is not a proposal at all, as they have been told repeatedly from the start.

And that we should give a $60 million debenture on the inventory and accounts receivable to Ataka~ They go on to say, 11 It is our opinion that the first and second mortgage holders wil1 agree to share the first mortgage with Ataka." So on and so forth. This is their proposal. This is the group that is arguing before the courts they are not insolvent and are holding up the business. In

schedule A (6) they say what needs to be don£ to bring it up to scratch. l«rhe attached

schedule outlines the $14.5 million building programme required to bring the refinery up to designed capacity. In addition there is an urgent requirement for the building of high stacks and a heating recovery system which will cost an additional $7 million to $10 million.( So that is, say, $10 million plus $Il~.5 million is $25 million.) The funds required for the above programmes are $21 million to $25 million and should be available from the following sources: ECGD for lOC Goods and Services; the Newfoundland Government to cover Canadian cost~and UOP Signal Company should provide the down payment and other funds required!' 3863

~·arch 25, 1 ')76 Tape 1445 Pll. C'10SlliE: Nmv if that is nnt complete ancl utter hogwash and balderdash and nonsense, what is? Ill-2 But it «as put out, it was issued so they could say - I am surmising - so they could say ''hen the Japanese made their move that they had just put a proposal in that made it feasible and possible for the ,,hole thin~ tn keep operating. T'tat is Hhy it ,.ms put in. They kne·.v that no one, A taka or us or the first l'lOrtgaf!ee or anyone else was going to agree to those suggestions, .'!nrl the Government of Canada were certainly not going to agree ~lith it. So, }rr.

Speaker, on February 11, 1976 the Japanese had arranged to co!'le to meet here in St. John's and they met "·Hh several cabinet ministers and other people familar \dth this situation, and they reported that they had reviewed the whole situation thoroughly. They hac" ''ith them their Japanese clients and la~.'yers. They harl done everything they could to see if the refinery coulrl ~e made viable. They han retained Pace Engineering nn the mechanical and technical side, Arthur Young and Company on the financial side ancl Davis Polk as legal counsel. They had the re;)Ort from Pace.

They discussed that report with UOP and PRC ancJ other oil companies. Their conclusions were that they could not advise the Japanese that they '"ottld be protected if they put any more crude in the refinery. Of course this is why they only nlloued 500,000 barre] s to be discharged. They said that ••hat had to be <lone was,one, nn orde.rly shut down of the refinery to protect the nssets for 11ll the creditors and,secondly, in the long-term ret the refinery into stron~er hands.

As to the reasons for the perilous position of the refinery, they menUoned they had seven tankers when they only needeCI four ,,•hich I have m~ntioned. They saj c1 there •. .,ere $49 PIHlion 1vorth of funds transferred t:o other Shaheen r,roups, "'!Iiclt I 1dll col'le to in a minute, "'hich ~:as not explained and was not being repaicl. The last financial information 1vas only up to tlovember 30 , 1975. 3864

rl:uch 25, 1976 IB-3 ~·n. CP.OStiE: There was no new tenn prospect of gettinc any funds bRck, funds that had heen aclvanccd tn other Shaheen companies so the ShRheen companies have said. There Here no long-tenn sales contracts. with one or t1vr> exceptions. They '"ere all spot sales. 3865

~larch 25, 1976 Mr. Crosbie: Tape 1446 The technical problems at the refinery were in connection with the hydrogen unit that we have talked before, the Isomax and PK - 1 the hydrogen unit. Pace gave their opinion that the hydrogen unit lvould have to be rebuilt from the start. This would cost them $16 ~illion to $lli.5 million. UOP said that you could rehabilitate it and repair it but it would cost some $10 million. Hithout the hydrogen unit you are severely limited because you cannot produce above the lmver value products.

They said that the heating units needed a lot of additional ''ork, high stacks and special refractories and the like- I am not familiar with all the technicalities- that the sales posit~on was extremely bad, there were no long term sales contracts. And they said that you cannot operate the refinery profitahly on any set of assumptions. So they could not advise their clients to r,o ahead and make any further proposals.

And then they went into the marketing situation~which is bad in the United States, which is not good in Canada for refined products, which is had in Europe,so that the refining picture is bad everywhere. There is a surplus capacity on the East Coast of Canada. Europe is even worse. Refiner~es are opercting there under eighty per cent of capacity.

Then they mentioned that there was an amount of some $17 million owed to the Government of Canada by the refinery, because they had received compensation under the crude oil import compensation programme :md had not sold the product in Canada,so they were in debt to the Federal Government for another $17 million, which will have to be repaid. And on and on it went. By the way, Hr. Speaker, you know, once the refinery went into the trustees hands, the trustee,now Clarkson, are trustees under this debenture on tbe inventory.

And the Canadian Government to my mind is taking, you know, a most unfair advantage of the Japanese who supplied the financing for this crude oil and who are now attempting to get some of their money back on that inventory. The Japanese had an inventory and a debenture,they financed that oil. The Canad1an Government,however this system works,permitted the refinery to get $16 million to $17 willian ahead of them. They paid them $16 million or $17 million more as compensation for the importing 3866

March 25, 1976 Tape 1446 PK - 2 Mr. Crosbie: of crude oil which was supposed to be sold in Canada, than \vas done. That was not the cause of the Japanese, Theywere not operating or managing the refinery. But after the trustee went in under the debenture and an application was made to the court the Canadian Energy Board,or whatever the names are, refused to permit them to export any of their oil products outside of Canada, said it all has to be sold inside Canada, which is going to cost them, I believe the figure is something like $10 million, they realize ~10 million less on what they have got on that refinery.

And the unfairness of it is even more unfair because the crude oil and the product that is do\m there now - the crude oil it was manufactured from-vas not compensated for under that programme. These are amounts owed in connection with crude oil that went through that refinery,or so I am informed,before, not the crude oil that now remains down there but previous.

So the people that they are now harming by taking this stict action now are the wrong people, the people who went in there to proceed under their security are being dealt this blow by the federal government, by officials up there, and I think the whol E> matter should be properly looked into,and there should be some explanation of why they are taking this action which has been appealed to the federal authorities, and I think the appeal was turned down. There should be action on the political level to reverse that.

That the Japanese,who are already suffering these huge loses and who financed this crude oil and got debentures shc:uld then be turned around and given a dart by the Government of Canada when they were not at fault in anyway is to my mind barbaric, and I hope that will be changed. HR. SPEAKER (DR. COLLINS): Order, please! I am reluctant to interrupt the hon. m~nister, but if he will permit me pursuant to Standing Order

(31) I bave to inform the House that at the adjournment of the debate today three questions will be debated. The hon. member for Laroile (~ir. Neary) to the hon. Minister of Education concerning our educational system training, and if there are any plans to canvass employers concerning attitudes etc, The hon. Leader of the Opposition 1 a question 3867

March 25 , 1976 Tape 1446 PK - 3 Mr. Speaker (Dr. Collins): to the Hinister of Municipal Affairs concerning financing of the I' arkway. And the hon . member for Lal'oile to the ~linister of Transportation and Communications concerning Affiliated tlarine Metals. That is the order in which these questions were submitted. The hon . ~lin is t er of Mines and Energy. ~IR . CROSBIE: So thee at this meetinr, these were some of the things that they told us at t his meet i:lg .

And the Japatlese said that they were not inte rested ir. any third mortgage , that there was no point in any salvase operation , that they could not expect to get any of the money that were putting out . If they refurbi Rhed it , it could not carry on because of its tremer.dous load of debt, and there was simply nothing they could do , and that they intended to take action to protect themselves, 38 68

Narch 25, 1971i. MR. CROSBIE: Tape 1447 RH - 1 as far as they could be protected 1 under the bankruptcy legislation. That is what they told us at the meetings. Now at that point, Mr. Speaker, there was nothing the Newfoundland Government could do. If thP Japanese,who already had over ~300 million in it had come to the conclusion there was nothing further they could do,then any sensible rational person has to come to that same conclusion. There is nothing that anyone can do to save those two companies from going under.

Now saving the oil refinery is a completely different matter than saving the two Shaheen companies. These are two different things. The way to save the oil refinery is to have the oil refinery sold, the physical assets that we have a mortgage on there, second mortgage,and E.C.G.D. has a first . Those physical assets can be sold and can operate again and be taken over by a new buyer, someone with some stability and money and whatever is needed to get it operating, finance it. That can be done. The refinery can operate again. But that refinery can never operate again owned by P.R.C. and N.R.C., never.

The two companies between them owe over $600 million. There is just no way that anyone is going to buy those assets for $600 million. They are not going to do it and they will not do it. But they may well buy them for something considerably less than $600 million. They can only do that if they buy from a trustee in bankruptcy or from the mortgagees. They cannot buy it from the Shaheen management and do that because any creditor could challenge the sale. You could not get good title. So it is two different things: One is saving the oil refinery,which we want to do.

We want to save and operate it again in Newfoundland; secondly is the problem of saving it while it is still owned by those two companies. Any chance of saving it still owned by P.R.C. and N.R.C. went the rlay the Japanese came in here and said on February 11 - whatever it was·. I just gave the date - that they could go no further and would not go any further. That was it. If they had gone further I do not think they could have saved it because you could not meet the huge load of debt that had built up on that refinery and the huge interest expenses and all the rest of the impediments that that meant. 3869

Harch 25, 1976. "'R. CROSBIE: Tape 1447 RH - 2 So that was their position and I think that that was on Wednesday or something or other. Then on a Friday they went ahead and filed a petition in bankruptcy,or took action down in the court here in New­ foundland. Anyone lJho wants to - they filed dmm there a notice of motion and affidavits which confirms a lot of what I have said here and what l>Tas owed and the reasons for the problems there. }' ow the reasons for the downfall of this refinery are not - they are not all Mr. Shaheen's fault or his management's fault.

Some of them are; Rut there are a number of reasons. No one could have foretold -when the feasibility study was done for this refinery in 1970,I think crude oil was $l. sn a barrel. After October, 1973 we all know \Jhat it is. It is gone up to $11.50 and $12.00 a barrel. Since the October, 1973 Arab-Israeli war the marketing situation for refined products is gone to hell. There is a suwrplus of refined products because people are buying less hPci'luse the product has become so much more expensive. Then every country adopted special measures to deal with the energy situation.

You had to get a permit to export from Canada. That was not in effect before. This \~as supposed to be an export refinery and export most to the United States. The Americans put on controls dovm there. All these things have occurred. They v'ere required to sell in Canada, and they l{ad no organization in Canada and no retail and distribution outlet and so on. So a lot of these reasons have nothing to do with, cannot be said to be any fault of Mr. Shaheen or his cohorts. Some of these matters are their fault. The refinery was insuf­ ficiently financed.

I mean it is only by stoke of luck that they got on to A taka-or it might not have been a stroke of luck. The. member for Twillingate(Hr. Smallwood) might have had something to do with it - it is only by a stroke of luck that they found someone who would put all of this kind of money and to kee? on financing the crude oil purchases when they <>ere not getting paid. But $10 million in equity in that refinery was not sufficient to carry the operation of the refinery. It was not enough working capital,particularly when oil became $12.00 3870

Narch 25, 1976. Tape 1447 RH - 3 HR. CROSBIE: a barrel. Now there are a number of things that are not Mr. Shaheen's f~ult and there are some which are his or his management's fault. 3871

March 25, 1976 Tape no. 1448 Page 1 - mw Mr. Crosbie. They gambled and lost. They might have gambled and won, but they g~mbled and lost. Things went against them. Having seven very large crude carriers was a gamble that lost. They onlyneederl four at best for 100,000 barrels - MR. SMALLWOOD: It was not a gamble. They had no choice. MR. CROSBIE: Well I do not know enough about it. If they had no choice or were forced by the people we were dealing with - MR. S~1ALLWOOD: 'J;'hey were forced by Ataka,yes. HR.

CROSBIE: - Ataka or whoever they were dealing with,to have more than they needed- then still if you are forced to have more than you needed I would not have done it. I do not know the details of all that. Well, let us say it is a mistake to have seven when you need four, because they were gambling that they were going to have other refineries, Nova Scotia or wherever. I think it is another fair criticism that they did not have enough money in it, that they try to operate- Mr.

Shaheen is a promoter who operates with leverage and as a promoter you put as little in yourself as you can, and you get as much leverage as you can, and that is all right if you can get away with it. He was able to get away with it for a long time, but when the economic conditions of the world WEnt as they did, he was no longer able to get away with it.

I believe, my o~m view is, that the management or the owners of the refinery were too busy promoting other things before they got this refinery going, and got this refinery properly operating, and I believe they had far too high overheads and far too many management personnel and so on being paid out of this refinery but doing work all over the world on other business of their own and other promotions. The money had to come from somewhere and unless you borrow it it has got to come from the cash flow of something and it came out of the cash flow of this refinery, such as it was.

I think that that is a legitimate criticism. Get this one here going first and see that it operates before you start to extend it or 3872

March 25, 1976 Tape no. 1448 Page Mr. Crosbie. put a new one here and a new one in Nova Scotia • But that is not Mr. Shaheen's style. Well he paid the penalty or he is paying the penalty for that. I think that is not an unfair criticism of what happened. 2 Then,as I say,world conditions. Yes, but the main factor