2011 Legislative Session: Fourth Session, 39th Parliament

HANSARD

The following electronic version is for informational purposes

only.

The printed version remains the official version.

official report of

Debates of the Legislative Assembly

(hansard)

Thursday, May 31, 2012

Morning Sitting

Volume 40, Number

ISSN 0709-1281 (Print)

ISSN 1499-2175 (Online)

CONTENTS

Page

Reports from Committees

Select Standing Committee on Public Accounts, first report for the fourth session of the 39th parliament

B. Ralston

Motions Without Notice

Appointment of Special Committee to Inquire into the Use of Conducted Energy Weapons and to Audit Selected Police Complaints

Hon. R. Coleman

Orders of the Day

Committee of the Whole House

Bill 51 — South Coast British Columbia Transportation Authority Amendment Act, 2012 (continued)

H. Bains

Hon. B. Lekstrom

J. Trasolini

Bill 30 — Energy and Mines Statutes Amendment Act, 2012

J. Horgan

Hon. R. Coleman

Report and

Third Reading of Bills

Bill 30 — Energy and Mines Statutes Amendment Act, 2012

Committee of the Whole House

Bill 47 — Coastal Ferry Amendment Act, 2012

Hon. B. Lekstrom

G. Coons

Report and

Third Reading of Bills

Bill 47 — Coastal Ferry Amendment Act, 2012

Proceedings in the Douglas Fir Room

Committee of the Whole House

Bill 54 — Provincial Sales Tax Act (continued)

B. Ralston

Hon. K. Falcon

Proceedings in the Birch Room

Committee of Supply

Estimates: Office of the Premier (continued)

A. Dix

Hon. C. Clark

Page 12629

THURSDAY, MAY 31, 2012

The House met at 10:03 a.m.

[Mr. Speaker in the chair.]

Prayers.

Reports from Committees

B. Ralston: I have the honour to present the first report of the Select Standing Committee on Public Accounts for the fourth session of the current parliament.

Mr. Speaker: Proceed.

B. Ralston: I move the report be taken as read and received.

Motion approved.

Mr. Speaker: Continue, Member.

B. Ralston: I ask leave of the House to move a motion to adopt the report and its recommended resolutions, pursuant to

section 3 of the Document Disposal Act.

Leave granted.

Mr. Speaker: Please proceed, Member.

B. Ralston: I move that the report and its recommended resolutions be adopted and, in so doing, wish to make brief comments.

This report relates to the retention and disposal of government records. It summarizes the committee's review of 12 resolutions for records retention and disposal authorities presented by the Public Documents Committee. Under

section 3 of the Document Disposal Act the destruction of documents requires the approval of the Legislative Assembly on the recommendation of the Select Standing Committee on Public Accounts.

Motion approved.

Motions Without Notice

APPOINTMENT OF SPECIAL COMMITTEE

TO INQUIRE INTO THE USE OF

CONDUCTED ENERGY WEAPONS AND TO

AUDIT SELECTED POLICE COMPLAINTS

Hon. R. Coleman: By leave, I move:

[1005]

[That a Special Committee be appointed to examine, inquire into and make recommendations with respect to specific matters pertaining to the Police Act (RSBC 1996)

Chapter 367 . In particular, pursuant to

section 40.1 of the Police Act , the Special Committee shall conduct a review before December 31, 2012 regarding:

(

a) the implementation of the recommendations contained in the 2009 report " Restoring Public Confidence: Restricting the Use of Conducted Energy Weapons " by Thomas R. Braidwood, Q.C., respecting

(

i) the use of conducted energy weapons by officers in the performance of their duties and the exercise of their powers, and

(ii) the training of officers in the use of conducted energy weapons;

(

b) the scientific research into the medical risks to persons against whom conducted energy weapons are deployed.

The Special Committee must submit a report respecting the results of its review, within one year of the date that the Committee is appointed.

And further, pursuant to

section 51.2 of the Police Act , the Committee must, before January 1, 2013 conduct an audit respecting the outcome or resolution of randomly selected complaints and investigations under

Part 11 of the Police Act and must submit a report to the Legislative Assembly respecting the results of the audit to the Legislative Assembly within one year after the date of the appointment of the Special Committee.

And further, that the Special Committee so appointed shall have all the powers of a Select Standing Committee and is also empowered to

a) to appoint to their number, one or more subcommittees and refer to such subcommittees any of the matters referred to the Committee;

b) to sit during a period in which the House is adjourned, during the recess after prorogation until the next following Session and during any sitting of the House;

c) to adjourn from place to place as may be convenient; and

d) to retain such personnel as required to assist the Committee;

and shall report to the House as soon as possible or following any adjournment, or at the next following Session, as the case may be; to deposit the original of its reports with the Clerk of the Legislative Assembly during a period of adjournment and upon resumption of the sittings of the House, the Chair shall present all reports to the Legislative Assembly.

The said Special Committee shall be composed of: Mr. Coell (Convener), Mr. Foster, Mr. Stewart, Dr. Stilwell, Mr. Sultan, and Mr. Krog, Ms. Corrigan and Mr. Trasolini.]

Leave granted.

Motion approved.

Orders of the Day

Hon. R. Coleman: I have a slight misprint on my orders of the day today. We'll start out with Bill 51, intituled the South Coast British Columbia Transportation Authority Amendment Act, 2012. However, somebody did round down the time for the hon. members to eight minutes. It's actually eight minutes and 22 seconds that they have, and they're negotiating over one second between them.

Following that, we will do committee on Bill 30, intituled….

Interjection.

Page 12630

Hon. R. Coleman: Do you want the second?

...the Energy and Mines Statutes Amendment Act, 2012; followed by Bill 47, intituled the Coastal Ferry Amendment Act; followed by Bill 50, intituled the Athletic Commissioner Act.

We won't finish all of that this morning, but we will continue through the day with the Protected Areas of B.C. Amendment Act and the Pension Benefits Standards Act and the New Housing Transition Tax and Rebate Act.

In Committee A, in the Douglas Fir Committee Room, we will continue the debates of the committee stage of Bill 54, intituled the Provincial Sales Tax Act.

In

Section C, in the Birch Room, we will continue the estimates of the Office of the Premier.

Committee of the Whole House

BILL 51 — SOUTH COAST

BRITISH COLUMBIA TRANSPORTATION

AUTHORITY AMENDMENT ACT, 2012

(continued)

The House in Committee of the Whole (Section

B) on Bill 51; D. Black in the chair.

The committee met at 10:10 a.m.

Sections 7 to 9 inclusive approved.

section 10.

H. Bains: In this

section here it says: "Nothing in subsection (1) prevents a statutory director of the authority from providing to the other directors the views of the mayors' council on regional transportation." The way I read it is that they have the right to share the views of the Mayors Council. But given the fact that these directors are meeting behind closed doors and most of the meetings, or all of the meetings, are in camera, what right do they have to share the information that is collected or discussed in the directors meeting with their fellow Mayors Council?

Hon. B. Lekstrom: The chair and the vice-chair, who will sit on the board, will be able to share the discussion they have at the board meetings. There should be limited issues that are dealt with in camera. I think, certainly, the member is aware and history will show you issues that should be dealt with in camera, whether we're dealing with a labour or legal issue or so on.

I think the input from both the chair and the vice-chair representing the Mayors Council on the board will be able to bring the issues forward, as they see fit, and report back to the Mayors Council on the issues of discussion.

At the board level they will determine what will go in camera and what will not be in camera, though. There is only a limited number of items that should be dealt with at an in-camera portion of any meeting, so I'm very confident the mayors that will be sitting at the table with the board of directors as true board members will be able to come back, report on what's taking place at the board meetings and have that discussion with the mayors at the Mayors Council.

H. Bains: That's all good, but I think there's a reason why this

section is included in the bill. It only gives this right one way to these statutory directors to share the information. It does not say that they have the equal right or the same right to take the information from the directors meeting to the Mayors Council. Why is that missing?

Hon. B. Lekstrom: This is really about, as I said earlier, the ability for board members. They have a fiduciary responsibility as a board member to TransLink.

[1015]

What we wanted with this

section was to ensure that if the Mayors Council had issues or concerns that they wanted raised, now the chair and the vice-chair of the Mayors Council, who will sit as board members, will be able to take that forward, present whatever information that may be, have that full dialogue with the board of directors, of which they are part of, and then report back to the Mayors Council, unless it's an in-camera issue, for which you have to respect confidentiality as a board member.

H. Bains: I understand that, and that was the answer given by the minister the first time, but why is it mentioned here as only one way that information can flow, according to this bill here? It only talks about sharing the information or the views of the Mayors Council with the board of directors, but nothing in here shows that the information that arrives out of there, discussed in the directors meeting, can flow and be shared with the Mayors Council.

Hon. B. Lekstrom: That wouldn't have to be a legislative authority. That is standard practice for any board. If you're in an open meeting, that information can be shared with anybody, let alone just taking the chair and the vice-chair's information back to the Mayors Council. That can be shared. But an open meeting is truly that — an open meeting. It can be discussed and that information shared with anybody. So that is there, Member.

J. Trasolini: In the same light, does this bill envision, when the chair and vice-chair of the Mayors Council participate in the TransLink board, that they are somehow bringing their own views, versus the consensus or the result of a vote at the Mayors Council? The reason I'm asking that is that we all know the rich difference of opinions at the Mayors Council. That could lead to some

Page 12631

issues, controversy and misunderstandings.

Does this bill envision that the positions placed in front of them, as the vice-chair and chair participate in the activities of the TransLink board, are their own opinions or the opinions of the Mayors Council?

Hon. B. Lekstrom: The intent of this legislation is as you've envisioned it, Member. It would be that as members — now being the chair and the vice-chair — of the board, it is envisioned they will bring the views of the Mayors Council forward to that board for discussion on behalf of the Mayors Council that they represent.

J. Trasolini: I guess the concern I'm expressing is that perhaps that's the intent, but why does the bill not have the requirement that it must be coming in as following a vote of the Mayors Council?

The Chair: According to a time allocation bill that was passed yesterday, the time to debate Bill 51 has lapsed.

Sections 10 to 15 inclusive approved.

section 16.

Hon. B. Lekstrom: Hon. Chair, I move the amendments to

section 16 standing in my name on the order paper.

SECTION 16, by deleting proposed

section 258 (4) and substituting the following:

(4) A certificate may not be filed under subsection (1),

(

a) subject to paragraph (b), more than 2 years after the date on which, under subsection (2), the authority is first able to file a certificate, or

(

b) if a review is sought under

section 257, more than 2 years after the later of

(

i) the date on which the claim is withdrawn, and

(ii) the date on which the court makes a final determination of the claim that does not relieve the applicant from liability under the ticket.

SECTION 16, in proposed

section 260 by deleting " ticketed amount. " and substituting " indebtedness. "

SECTION 16, in proposed

section 261 (2), by adding the text shown as underlined:

(2) The authority may assign to a person, including, without limitation, the Minister of Finance on behalf of the government, on any terms or conditions the authority and the assignee may agree, all of the authority's right, title and interest in and to indebtedness to the authority under

section 250, including, without limitation, all surcharges and interest that, under this Act and the fare collection bylaw, have accrued and may accrue in relation to all or any part of the indebtedness.

SECTION 16, in proposed

section 261 (4), by striking out " and " at the end of paragraph (a), by adding " , and " at the end of paragraph (

b) and by adding the following paragraph:

(

c) any payment required to be made by the government to the authority under or by virtue of the assignment may be paid out of the consolidated revenue fund.]

Amendment approved.

[1020]

Section 16 as amended approved.

Sections 17 to 19 inclusive approved.

Hon. B. Lekstrom: I would move that the committee rise and report progress with the bill.

Motion approved.

The committee rose at 10:21 a.m.

The House resumed; Mr. Speaker in the chair.

Committee of the Whole (Section B), having reported progress, was granted leave to sit again.

Hon. J. Yap: I call committee stage debate of Bill 30, intituled Energy and Mines Statutes Amendment Act, 2012.

Committee of the Whole House

BILL 30 — ENERGY AND MINES STATUTES

The House in Committee of the Whole (Section

B) on Bill 30; D. Black in the chair.

The committee met at 10:23 a.m.

section 1.

J. Horgan: My question to the minister is: why did we change the definition of "heritage assets" in

section 1 of the Energy and Mines Statutes Amendment Act?

Hon. R. Coleman: First of all, I'll introduce the people with me. On my right I have Paul Wieringa. Paul is the executive director of alternative energy in the ministry. To my left I have Barbara Thomson, who is with the Ministry of Energy and Mines, titles and corporate relations division. On my left is Jennifer Champion, who is with Ministry of Energy and Mines, electricity and alternative energy division.

The reason for the change is that B.C. Hydro only owns one-third of the Waneta dam. Two-thirds of it is owned by Teck, so we want to make sure the two-thirds owned by Teck isn't caught in that definition.

J. Horgan: How do we determine what one-third of the total of the asset is ours?

[1025]

Hon. R. Coleman: I have a sense of humour this morning. I felt like saying, "Well, take it. Divide it by three. One-third of it's ours," but basically, we have a transaction agreement on the dam with Teck. One-third of the power and one-third of the value are basically B.C. Hydro.

Page 12632

Section 1 approved.

section 2.

J. Horgan: In this

section we are amending the definition of "self-sufficiency." We're holding, to the year 2016 and each year after, the rights to "an amount of electricity that meets the electricity supply obligations solely from electricity generating facilities within the Province."

I'm wondering if I could pose a question. I've discussed this with staff. I had proposed an amendment that we're not bringing forward. It had to do with the downstream benefits, which are a provincial asset owned by the people of British Columbia and not by B.C. Hydro, currently being marketed by a B.C. Hydro subsidiary in the United States.

This is not a contract. It's a treaty obligation. I'm wondering why the government, the B.C. Liberals, don't see this provincial asset as something that could contribute to the self-sufficiency requirement.

Hon. R. Coleman: Because the self-sufficiency is geared to B.C. Hydro, and the downstream benefits on this particular asset are actually owned by the province and not by B.C. Hydro.

J. Horgan: I understand that, and I think I said that in my question. But my question was: why would we not? If we're looking at this as a bill — the Energy and Mines Statutes Amendment Act and, particularly, the Clean Energy Act — not exclusively to do with B.C. Hydro — because it doesn't…. Instead, it's to do with: what are the assets that the people of British Columbia have at their disposal to meet energy demands now and into the future?

It strikes me that the assets of the downstream benefits owned by the people of B.C. are significant. The minister knows that; his staff know that. Why in the world would we not contemplate that source of supply rather than going through the cost, the environmental impact of generating new sources of supply?

Hon. R. Coleman: Two reasons. One is that the asset is subject to curtailment because it's involved in the Columbia River treaty, and we could get notice in 2014 on the treaty, which would mean it could be terminated in 2024. It's not considered a long-term resource that would be applied to this. It's more treated as a contingency resource for hydro.

J. Horgan: Well, some of the long-term contracts that B.C. Hydro has entered into with private power companies are also subject to termination. This is a treaty obligation. I don't see a scenario where the United States and Bonneville power authority would say: "We no longer want you to hold water in the interests of irrigation, in the interest of electricity generation south of Trail."

[1030]

So I don't understand why the government would assume that a treaty obligation would somehow disappear just because…. That's part of the treaty — that we renegotiate those benefits and the extension of the treaty at appropriate times over the course of that international agreement between Canada and the United States.

Hon. R. Coleman: It's true. We are preparing for that eventuality now, relative to the treaty for 2014, and we don't know. I agree with the member. I think the chances are they are not going to want to have a change in water flows and what have you, relative to how successful this treaty has been.

Basically, the decision was made with regards to this. We're relying on what's in Canada as far as the actual power is concerned, particularly in this particular situation, because the transmission corridor is constrained, and evidently we can't always get the power back to Canada.

J. Horgan: Well, as I understand the treaty obligation, they must return the power to Selkirk or Blaine, or we can choose to leave it in the United States and sell it in the spot market or in long-term contracts. That's what the government has chosen to do, and I support that. But the treaty obligation is to return the power.

If transmission constrains that, then it's the obligation of Bonneville to upgrade their transmission to deliver the power where we want it. So again, I don't understand. I appreciate that the physics today is a problem, but the law is not. The law and the treaties say we must have the power returned to either of those two points. In fact, we sought an amendment to sell to the advantage of BPA so they didn't have to upgrade their transmission system.

Again, I put to the minister that the whole notion of self-sufficiency and electricity generated within the borders of British Columbia makes little or no sense in a free market economy. I mean, we don't have self-sufficiency in ferry construction in British Columbia.

These are big things, ferries, as the minister knows. It takes a lot of space for a ferry. Electrons are very, very tiny, and they move freely over transmission lines from a whole host of different places. If you were going to pick one commodity and say, "You must only find it in one place," I would suggest the last commodity I would select is electricity, because it does move around and is virtually undetectable by human beings.

When you create an electron, there's not a tag put on it as there is with an apple from the Columbia Valley. If you buy an American apple, they can slap a sticker on it and say: "This apple comes from the United States." Not so much with an electron. So why in the world did we go this way in the first place?

[1035]

Page 12633

Hon. R. Coleman: The member is right. It has to return. That's the deal.

There are constraints, as I said, on this particular corridor. In the draft IRP — that's the industrial rate…. Integrated resource plan —sorry. I have RFPs, industrial rates. I've got all kinds of stuff going in my head the last couple of days. Basically, it shows we align the existing resources, the Columbia treaty and the market.

The challenge, I guess, here is that there is about $125 million to $140 million made off this power. It's basically sold at market, so it's sort of like the best or highest use of the asset for government, and that would have an effect on the fiscal plan.

However, I am sympathetic to the questions. I actually think we should look at this. I will tell the member that I'm going to look into this and look into it further, simply because there may be something that would be of value to do this a bit differently, versus how we're doing it in the act today.

J. Horgan: I thank the minister for that commitment. It is absolutely appropriate for the Minister of Energy and the government of British Columbia, as we go toward 2014 and the renegotiation of the Columbia River treaty, that we look at this.

It's the economics today that I think are important. I agree that we're selling the downstream benefits in the United States. It was a good idea when that decision was made. I believe it was in the 1990s. Yeah, it was. It was in the 1990s we made that decision. It was a good one, and I'm glad the government is continuing on with it.

However, there is an ability for us to move out of some of the contracts that we have entered into, that Powerex has entered into on behalf of the people of B.C., if it is advantageous for us to do so. Because of this self-sufficiency requirement, particularly based on critical water years, which we're amending with this legislation, there have been scenarios where we have been buying power at many times more dollar value per megawatt hour or gigawatt hour than we are selling the downstream benefits in the United States.

We're buying power high when we have an asset that we own, which the people of B.C. could sell to B.C. Hydro as easily as we sell it to customers in the United States, continue to generate revenue to the Crown for social purposes and also reduce some of the burden on B.C. Hydro. That's why I've been raising this issue over the past number of years. I know that, with your staff there, they probably appreciate the sentiment.

I'm wondering if the minister…. I know there are previous Energy Ministers in the House currently. One just smiled. I'm looking around. Are there any more? There's another one over there. There are so many Energy Ministers during my time.

Interjection.

J. Horgan: There you go, and there's one sitting right next to me.

We're wasting time here. Dummy up. We've got to get on with this.

[1040]

The issue I want the minister to be absolutely clear on — and this would be a policy shift that I would embrace and support — is that when we get into discussions in 2014 in light of the amendments that we're going to be passing today on self-sufficiency, the province and B.C. Hydro coordinate in this now uncertain electricity market, because of depressed prices and an abundance of natural gas and so on, and that we start looking strategically at how we use this extraordinary asset of the downstream benefits.

Will the minister commit that when it comes time, as it has now, that we're buying power for more than we need to when we have an asset that we could actually….? If we bought the DSBs at half what we're paying for some of these IPPs, we'd have more revenue for the Crown and less liability to B.C. Hydro.

Would the minister agree with that statement?

Hon. R. Coleman: First of all, we actually have a team already preparing for the 2014 date. There has been work going on, on it. There is also some representation on that work by Members of the Legislative Assembly over in the Kootenay area.

There are two ways you can look at this thing, I guess. This is an asset of the government of B.C., and we sell that power to make money for the government of B.C. So if you're selling it to B.C. Hydro, they're going to have to pay the market rate, too, at the particular time because you're actually selling it into a relationship between companies including B.C. Hydro. That's how it has been treated — as a tradeable asset of the government and not an asset of the corporation.

So at times it will be low, but there will be other times when you will be paying more. It's a short-term price versus a longer-term price because you haven't locked in a price for the power because that's a tradeable asset that's being done at the provincial level. Actually, I guess we would say through Powerex on behalf of the province. But the province is actually the owner of the assets.

The shift the member is talking about is: do you move that asset into B.C. Hydro, or conversely do you allow it to be calculated as part of the self-sufficiency number as an asset? But at the same time, the price and how it affects the fiscal plan would be the major work that would have to be done to decide which way you would go with that.

J. Horgan: Well, my point is this. It is a provincial asset, and it should not be transferred to B.C. Hydro. That's not what I'm suggesting. I'm saying it should be sold to B.C. Hydro. If B.C. Hydro is paying, on average, $124 a megawatt hour for new sources of supply within the borders of British Columbia, and we could buy it for $80 a

Page 12634

megawatt hour, we would be making more money for the Crown than we are currently with fixed term contracts in the United States.

Powerex, on behalf of British Columbia, is selling the power. Powerex can sell the power to B.C. Hydro as well as they can sell it to Puget Power and Light or any other company — Pacific Gas and Electric — that's purchasing the downstream benefits. We can take that and sell it to B.C. Hydro. Not a problem.

I'm not suggesting we give it to B.C. Hydro. But if we're paying $124 a megawatt hour to independent power producers because that's what the market will bear for the clean calls, then why wouldn't we save money for Hydro and make more money for the Crown?

[1045]

Hon. R. Coleman: In today's prices it looks like a good deal, because the price is down. So the market price spikes above the long-term price or the blended long-term price, and it's not such a good deal.

In about 1990 — I think it was, according to my staff — there was actually $250 million offered by Bonneville Power to lock in a long-term contract on power. They reneged on it because the power price moved. The deal was never done. Ever since then, because we've been selling it at the market price, we're making more money.

I guess the question is: are you asking to move the 1,100 megawatts of power that's available there into the self-sufficiency definition? Or are you saying B.C. Hydro should buy like an IPP — buy a long-term contract from the government, and then have that price and do the trading for the benefit of the company? Or do we continue to trade the power on behalf of the taxpayer? It's not just the ratepayer at that point in time because it's an asset of the province. There are three questions that I'll need to answer as we walk through this, and I'd be interested to hear the member's comments on that.

J. Horgan: The minister is right. It was 1995. We'd booked $250 million for the 1996 budget, based on a commitment from Bonneville Power Administration. This is the first time I've had — thank you, Minister — to stand and talk about the 1996 so-called fudge-it budget.

The reason we went from surplus to deficit was nothing other than the fact that Bonneville reneged. We didn't have that $250 million, and I'm able to say that on the record. Thank you very much.

He's also absolutely right. It was the best thing that could have happened in British Columbia, because at the time the $250 million looked good. Bonneville said that's way too much, and we have been just killing them ever since. In fact, our ability to trade is the advantage that Hydro has through Powerex, which makes the utility as strong as it is today.

I thank the minister for allowing me to correct the record on the 1996 budget. It was all about booking revenue from the downstream benefits, and I'm delighted to have had the opportunity to say that. While I'm on my feet, I will exercise the option that we have under Motion 81. I'd like to add a couple of minutes to our discussion here — just two minutes to take us to 32 minutes total — so we can get this

section completed and move on to oil and gas.

I just want to ask if the minister has at his disposal with the staff available…. If he could tell the House how much extra electricity we purchased for this year because of the self-sufficiency requirements as they are currently written, which is critical water year. Now that we're in a high water year, how much more power have we purchased than we should have purchased as a result of what we had available? That, of course, is the spilling that's happening in the Peace right now.

Hon. R. Coleman: I can't give you that number. I will get it for you, because that would have been part of…. We might have been able to get it when we had Hydro here for estimates. But we can deal with that.

We haven't reached self-sufficiency yet in B.C. on power, as you know. But this changes, as you know, the definition to get there. I'd still be curious about the three options, but maybe we can talk off line about the three options I talked about with regards to this downstream benefit.

Section 2 approved.

section 3.

J. Horgan: This is a consequential amendment. Did we just eliminate the insurance provisions in

section 2, or are we eliminating it by

section 3?

Hon. R. Coleman: It's a consequential amendment because we eliminated the insurance requirement in the previous section.

Sections 3 and 4 approved.

section 5.

[1050]

J. Horgan: This

section adds the word "approval" to the Oil and Gas Activities Act. The member for Peace River South just had a wink at me because he and I debated this bill, the Oil and Gas Activities Act, a couple of times in my time as critic. I'm delighted to have an opportunity to do it again, even only for the next couple of minutes.

Can the minister explain the addition of…? Although it's a consequential amendment, why are we adding "approval"?

Hon. R. Coleman: This is a grammatical change to match up to other legislation.

Page 12635

J. Horgan: We're on

section 5, which is amending

section 9. As I see it, it says: "'approval' means an approval, with any conditions imposed, under a specified enactment to carry out an activity." So the "approval" word is there for grammatical reasons? Okay.

Hon. R. Coleman: We're separating the approvals in the act from other authorizations within the act, because if we do this separation, we are basically…. So "authorization" is elsewhere in the act. This changes out the approvals that they can do, the OGC can do, which don't interfere with things like the National Energy Board pipeline authorization pieces, because the language is a problem.

Sections 5 to 17 inclusive approved.

section 18.

J. Horgan: We're now moving on to the changes to the Strata Property Act, and it's just a brief question. I know we're at the wire, and I'm prepared to pick up an extra minute if we require it for the answer from my allotted excess time, hon. Chair.

The content of these regulations is of importance to many people in the sector. The minister will know this from his Housing days, and I'm glad to see a staff person come in. Can the minister explain the intent and why there are different classifications of regulations being proposed?

Hon. R. Coleman: It's a minor legislative amendment which is required to correct a drafting error inadvertently made in the Strata Property Amendment Act. This minor amendment will clarify to the strata community that the depreciation reports are required of strata corporations developed after December 14, 2013.

The significance is that the legislative amendment provides the clarity to the strata community and follows through on a government public commitment. It allows regulation to be drafted on timing of the first depreciation report for new strata corporations.

[1055]

These regulations will be drafted with stakeholders on the timing of the first depreciation in a strata corporation, and the timing will be triggered by a specific event in the life cycle.

The Chair: Minister, a motion was passed on time allocation, and the time has expired.

Hon. R. Coleman: Absolutely. I think I got the answer in there.

Sections 18 to 48 inclusive approved.

Title approved.

Hon. R. Coleman: I move the committee rise and report the bill complete without amendment.

Motion approved.

The committee rose at 10:56 a.m.

The House resumed; Mr. Speaker in the chair.

Report and

Third Reading of Bills

BILL 30 — ENERGY AND MINES STATUTES

AMENDMENT ACT, 2012

Bill 30, Energy and Mines Statutes Amendment Act, 2012, reported complete without amendment, read a third time and passed.

Hon. J. Yap: Mr. Speaker, I call committee stage debate of Bill 47, intituled Coastal Ferry Amendment Act, 2012.

Committee of the Whole House

BILL 47 — COASTAL FERRY

AMENDMENT ACT, 2012

The House in Committee of the Whole (Section

B) on Bill 47; L. Reid in the chair.

The committee met at 10:58 a.m.

section 1.

Hon. B. Lekstrom: I'll maybe just begin and take the opportunity to introduce the staff I have with me as we go through Bill 47 here this morning. Joining me on my left is Kevin Richter, who is the assistant deputy minister of infrastructure. Behind me, we have Kirk Handrahan, who is the executive director of marine, as well as Maria D'Archangelo, who's with our legal services.

G. Coons: I see

section 1, basically, is just amending the

definitions part, and it's adding "ferry users." Just a question to the minister to get it on record. I believe another bill was talking about looking after the interests of ferry users, but a definition was not put in. Does the minister feel that this definition is appropriate?

Hon. B. Lekstrom: Yes, I think that in the definition of "ferry users" we're trying to encompass and capture the people that utilize the system, their families as well, as is written in there, and I think it captures it well.

[1100]

Page 12636

G. Coons: I do acknowledge that this bill before us — Bill 47, the Coastal Ferry Amendment Act — is based on the recommendations from the Ferry Commissioner in his extensive review, travelling through a lot of communities.

He did say exactly that this should be the definition but also added "which depend on ferry services to be affordable and reliable" for everybody within the classification. As far as ferry users, what can they look forward to as far as affordability with ferries?

Hon. B. Lekstrom: What this does, Member, is it really allows the commissioner to strike that balance, dealing with not only the corporation itself but with the ferry users as well as the taxpayers of this province.

I think the member would agree that previously, as the commissioner has indicated, it seemed to be too narrowly focused on the B.C. Ferry Corporation — only those interests.

I think this change certainly reflects a positive step, being that not only will he or she — in this case it's he, Mr. Gord Macatee — be able to take into consideration the needs of the B.C. Ferry Corporation but also the needs of the ferry users as well as the taxpayers of this province.

G. Coons: Yes, and I think the commissioner highlighted that when he said: "We can find no other examples where the primary responsibility of the regulator is to put the interests of a monopoly operator before those of the public." I think the minister encompassed that in his response. Again, in

section 1, which opens up the definition component of the Coastal Ferry Act….

I think that at this time I would like to put in an amendment. I think both the minister and the Clerks have the amendment. I guess I'll put the amendment forward and then talk to it.

The amendment I would like to put forward is:

[ 1

Section 1 of the

Coastal Ferry Act, S.B.C. 2003, c. 14, is amended by adding the following

definitions :

"ferry users" means

(

a) ferry passengers and their families,

(

b) communities serviced by ferries, and

(

c) business that rely on or utilize ferry services; .

"New Vessel Capital Asset"

means deployment of a new capital asset such as a vessel will require all new vessels built by BCFS must be

(

a) built in BC, and

(

b) when possible, vessel planning and construction should be distributed throughout the province. ]

On the amendment.

Hon. B. Lekstrom: With all due respect, Member, I will certainly speak against this amendment. I understand your intent, and I do think we have world-class opportunities within our province. But to think that we would put into legislation that all new vessels through B.C. Ferries must be, as you've put in your amendment, built in British Columbia indicates that regardless of price, regardless of the competitive nature of any bidding process…. That just is not in the best interests of the taxpayers of this province.

I do think and believe, as we've seen in the past, that history will show you that our people will compete when they can. There may be times when they aren't competitive on those bids. Our primary responsibility, with all due consideration, when we look at issues has to be the taxpayers of this province when we're working on their behalf to find that balance. For that reason, Member, I will be opposing this amendment.

G. Coons: I would think that as we move forward and look at the interests of ferry users and taxpayers…. As the minister has said, it's a high priority, especially with the Premier's jobs plan, that we acknowledge our shipbuilders in this province.

We look at what's been happening with Seaspan. We look at the hundreds of millions of dollars, or billions of dollars, that are going to be spent not only in British Columbia but in Canada. B.C. Ferries over the next ten years needs to spend probably $2.5 billion on vessels and infrastructure.

[1105]

I think this should be a motion that this whole House supports wholeheartedly — to support the shipbuilding industry in British Columbia, especially with the jobs plan that this government is pushing forward.

Amendment negatived on division.

Section 1 approved.

section 2.

G. Coons: Acknowledging the time and the lack of opportunity to actually debate fully a lot of bills before us, I'm trying to look at what's best for ferry users, taxpayers and the sustainability of our ferry system.

I look at

section 2 here, and basically what the minister has done is put in what the primary role of the commissioner is to be. It's to look after the interests of ferry users, the interests of taxpayers and the financial sustainability of ferry operators and to balance them in a manner that the commissioner considers appropriate.

I just have a question to the minister about

section 2 here — "(

i) the interests of ferry users." I'm just trying to see what the definition or the

interpretation is from the minister for "the interests of ferry users."

Hon. B. Lekstrom: What I would interpret that as is it would be to ensure that we have a safe, reliable, affordable ferry system for the people of this province or any other users that would be in need of that service.

Page 12637

G. Coons: If I go back to the commissioner's report, which was the basis for Bill 47, I guess he referred to the interests of ferry users as affordability. He did a chart of the interests of ferry users, the interests of taxpayers and the interests of the operator. So I would think that the key component for the interests of ferry users, from the commissioner's

interpretation, is affordability.

I do hope that's the intent of the definition, as it's coming from the commissioner. I just want to ensure that we're on the right track here and make sure that the number one priority in the interests of ferry users is affordability.

Hon. B. Lekstrom: It is certainly one of the key focuses. But affordability has to be looked at in conjunction with how you want to make sure, first and foremost, that our system's safety has to be the primary issue in everything that we do within B.C. Ferries. I'm very proud of their ability to deliver that.

Affordability in the eyes of different people obviously will have different connotations, but the sustainability of the system has to be key as well. An affordable system has to be a sustainable system, and those have to be looked at in context.

G. Coons: I also think that where

section 38 is being amended in this

section before us, it looks at the interests of taxpayers and looks at accountability. I think the commissioner highlighted that a key component is accountability, and I would think that the public and British Columbians would see accountability as transparency and access to information I believe that the taxpayer should have.

So how does the minister interpret the interests of taxpayers if it's beyond just accountability?

[1110]

Hon. B. Lekstrom: Today the taxpayers put close to $200 million into B.C. Ferries. The majority of that comes from the provincial taxpayers. There's about $26 million — I'm using round numbers, Member, at this time — from the federal government. So it has to be dealt with in the context of what's affordable. I don't get a lot of people banging on my door saying: "I want to pay more taxes so that we can put more money in the different programs."

I do recognize that the majority of us, probably, as elected officials…. I go back to my days when I used to be the mayor of Dawson Creek. Most people are saying: "I'd like more services, but I would like to pay less." The reality is I think corporations, governments of all stripes and levels are doing their utmost to do what they can with the available funds there.

I think the amount of money injected into B.C. Ferries and the work that we've done of late — the consultation with the commissioner, this bill that we're discussing today — have gone a long way to improve what I would consider to be a world-class ferry system already. We're going to ensure that we maintain that level of service and the quality of service we have, but we want to make sure it's sustainable. And where it was headed, Member, it was not sustainable.

G. Coons: To some degree, I agree with the minister, but we have to look at B.C. Ferries as being an integral part of the economy for so many ferry-dependent communities and the Island. So many have felt that the social and economic contract with the Coastal Ferry Act that was introduced in 2003, which this is amending, has been very detrimental and in some instances has devastated some communities, as people have said through the report.

I do acknowledge in this

section that what was eliminated is the priority to be placed on the financial sustainability of the ferry operator as the number one priority. For quite a while that's been sort of the cry from a lot of people, including this side of the House, saying that we have to ensure that the public interest or the interest of ferry users is taken into account in a balance. Finally, the third kick at the can — there was Bill 20 and Bill 14, and now we have Bill 47 — is eliminating that and rejigging the corporate restructuring of our ferry service.

In subsection (1)(

d) it talks about substituting "to be innovative and to minimize," and in the briefing note it says it "adds encouragement of innovation as a principle to guide the commissioner's regulation of ferry operators." I'm just wondering if the minister could expand on his

interpretation of how B.C. Ferries can have more innovation within the corporation.

[1115]

Hon. B. Lekstrom: A very good question, Member, and thank you for the opportunity to actually give my views on what I think can be undertaken here. I think it's being worked on already, to a degree.

Innovation would be such things…. One of the major things that jumps out at me right off the bat is the conversion to liquefied natural gas as the fuel of choice for the B.C. Ferries fleet, for example. There's about a 50 percent savings in fuel costs once we get there. That type of innovative thinking as we look to replace vessels or upgrade vessels has to come into play.

Innovation such as looking at different issues — that's part of the dialogue that's going to take place. There may be routes that passenger ferries versus vehicle ferries would be better positioned.

Interoperability, for example. I think the member would agree when we've seen vessel replacements in the past…. There may be a challenge with a vessel. It may have to go out of commission, for example, to have some work done. In order to get another vessel there to do it…. We have a number of different types of vessels that sail within the islands. I think there's an opportunity to ac-

Page 12638

tually look at the interoperability of those vessels so that they can dock at each other's docks — things such as that, which could be a cost-saving measure affecting the affordability and keeping fares lower.

Right-sizing of vessels. I think we have to be very cognizant of the fact, as we look at the changing world in which we live, that we look to the future and what the needs are.

I know the issue of cable ferries is one that is being looked at right now. That may be a potential that would allow for a more affordable system and meet the needs with…. I want to clarify this. For all of the issues, when we talk innovation or anything with B.C. Ferries, safety is their primary focus on everything that they look at and do to ensure that as we provide this service, the safety of the passengers and the crew that work on those vessels is first and foremost.

G. Coons: Thank you, Minister. I guess as we move along we'll look at how innovation will happen with B.C. Ferries.

I do believe that the commissioner in some of the recommendations had concern with reservations and point of sale and yield management as far as how to increase ridership. I just hope that the innovation that's going to happen and is encouraged by this legislation is going to encourage an increase in ridership, because that's what we're seeing. We're seeing fares unaffordable and ridership at record-low levels. That's concerning as we start to move through this legislation, especially when we get to

section 8.

Again, I'm keeping my eye on the time here, but I think it's important that while we're in

section 2 the minister and I did talk…. I'm not too sure whether it's in this

section or not, but recommendation 4 from the commissioner talked about being hand in hand with eliminating the no cross-subsidization, but having one fare level across all routes. If there is a price-cap increase or a fare increase, it would be across the board, across all routes, and not as it was where the major routes had, for example, a 4.15 percent, and the minors and the northern routes had 8-something.

I'm wondering if somewhere — and I'm not too sure if it's in this

section — it is clearly laid out that there will be one fare level across the board.

[1120]

Hon. B. Lekstrom: So in this section, Member, what we have done is removed the prohibition on cross-subsidization. What used to take place is that the major routes — rightfully so, as you've indicated, Member — used to make money, for example, or have the potential to do that. They're the largest vessels. They're the routes that carry the most amount of passengers to and from the Island.

By removing that, there will be no need now to actually deal with two separate rates to be set. The removal of the cross-subsidization, or the prohibition on that, will allow the commissioner in his setting of the price caps…. He does not set the rate per se. He will set a price cap. The ferry corporation can then deal with that price cap and can run rates up to what the maximum price cap can be, but they can also work within that price cap.

Also, Member, under

section 4 of this bill it will deal with what you're talking about as well. As we get to that — I think it would be the same answer — you will see in

section 4 of this bill that it addresses the question, as well, that you've just asked.

G. Coons: Thank you, Minister.

Getting to

section 4, we'll see how we move on that. I also think the ferry commissioner in one of the recommendations talked about the principle of elimination of cross-subsidization for the major routes to other routes should be removed from the act, and it is in this.

This is another component that…. For many years, since day one, people have had problems with the user-pay concept, which is also being removed, I believe, in this section. The user pay and no cross-subsidization from the major routes have been a thorn in the side of many who were watching fares skyrocket.

This side of the House has pushed forward…. In previous legislation brought here, we put in amendments to go to user pay and eliminate cross-subsidization. Finally, it's good to hear the government listening to some of the amendments that should have been supported previously.

Hopefully, as we move along…. I don't know if the minister is looking at going to take a fourth kick at the can, but maybe we will look at supporting shipbuilding in the next legislation.

Recommendation 11 also talked about, when they refer to the cross-subsidization and user pay…. The commissioner also had a concern with the rate of inflation. It's recommendation 11. "The province should consider an increase in subsidies." And there was an increase. Mind you, over the next term it's close to $40 million, which will look at the losses for this year. It's not going to do much for affordability, but that is a plus of putting some money into the system.

But it also says to hold the price cap to the rate of inflation for the next performance term. So on that, in this section, I'd like to put in another amendment in

section 38. I think the Clerks and the Chair and the minister have it. It's at the end, where it's adding a

section (e):

[ 2

Section 38 is amended

(

a) by repealing subsection (1) (

a) and substituting the following:

(

a) the primary role of the commissioner is to balance, in the manner the commissioner considers appropriate,

(

i) the interests of ferry users,

(ii) the interests of taxpayers, and

(iii) the financial sustainability of ferry operators; ,

(

b) in subsection (1) (

d) by striking out " to minimize " and substituting " to be innovative and to minimize ",

Page 12639

(

c) by repealing subsections (1) (

e) and (

f) and (2) (g), and

(

d) by adding the following subsections:

(5) Without limiting any other power of the commissioner under this section, the commissioner may order a ferry operator to

(

a) prepare a plan to indicate how the ferry operator proposes to achieve an outcome, proposed by the ferry operator or the commissioner, that is consistent with the objectives of this Act or the applicable Coastal Ferry Services Contract,

(

b) review any of the ferry operator's policies that the commissioner considers may not be in the interests of ferry users and taxpayers and do one or both of the following:

(

i) explain the rationale for that policy;

(ii) indicate how that policy could be amended to better balance the interests of ferry users, taxpayers and the ferry operator, and

(

c) undertake public consultation in relation to any services the ferry operator is providing or intends to provide or that the commissioner considers appropriate for the ferry operator to provide.

(6) If the commissioner makes an order under subsection (5) (

a) or (b), the ferry operator must prepare the required plan, rationale or proposed amendment and have it approved by the commissioner.

(

e) in subsection 2(

c) by striking out " that is to apply to each route group to which the contract applies " and substituting " for all routes at the rate of inflation . " ]

On the amendment.

[1125]

G. Coons: The government back in the day of 2003 promised rates at inflation. Mind you, it was only for the first performance term, and I acknowledge that even though some people may stick to it, it should have been through the second performance term. But I think when British Columbians and ferry users look at a fair service, they would look at how an increase at inflation would be fair.

In the last eight or nine years there's been 14 or 15 percent inflation and fares at…. It's hard to keep track because there was a fuel surcharge recently, then an April increase. So you know, anywhere from 40 to 50 percent on the major routes and 80 percent plus on the minor and northern routes versus the rate of inflation of 14 percent.

I think this motion is a motion that British Columbians would agree to, and I would hope that the minister, in looking at the recommendations from the Ferry Commissioner, would also talk to and say: "Yes, it's something that we should commit to."

The Chair: Hon. Member, regrettably, after examination, your amendment would incur additional costs and is thus out of order.

Amendment ruled out of order.

Section 2 approved.

section 3.

G. Coons: I'm a bit disappointed that the minister didn't have a chance to reply.

section 3. I think

section 3 is getting into…. Oh, this is the one where the Privacy Commissioner had a real issue, and there was a bit of debate. The Privacy Commissioner began with having a concern with a

section and asking it to be withdrawn.

I recently got a response to that, so I just wanted to ask the minister. I didn't understand what this

section was when I was first reading through it. I wrote down some notes on this

section previous to the Privacy Commissioner having concerns with it. I had said: "Was this left off from a previous bill when it was put under freedom of information, and what does it mean?"

I just wanted to ask the minister: what does this

section mean, and what's the purpose of it?

Hon. B. Lekstrom: I think the member is aware…. Although the first letter from the Information and Privacy Commissioner — she had expressed concern about this. We had the opportunity then to discuss what the intent of this was. She then put another letter, and I think that the member has received a copy of that, expressing her support now — that there was a discussion about that.

What it does, Member, is that…. For example, you want to protect the interests of the corporation, so you wouldn't release information that would jeopardize that.

I'll give you an example that I think is fairly clear to follow. If the ferry corporation is needing to budget for a replacement vessel, for example, and within their deliberations at the corporation they put in a number of — I'll just use a fictitious number here — $100 million they have available for that…. That's not something you want to put out before you tender the requirements or the requests for that vessel.

If you did, I'm quite confident that the bids would come in right around the $100 million mark, for example. That's the kind of information….

We actually, under Bill 20…. I'm very proud of this. Our government brought B.C. Ferries under the Freedom of Information and Protection of Privacy Act. People were wanting to see that. It was put back, and I think that it's worked well.

G. Coons: Commenting on that, the minister said: "We put it back under." But I guess the minister forgot that they took it, exempted it, from freedom of information in the first place.

Interjections.

[1130]

The Chair: Members, through the Chair.

Please continue.

Page 12640

G. Coons: I do think the minister should acknowledge that B.C. Ferries does not fall under the purview of the Auditor General or the Ombudsman. So there are lots of issues here. We tried to put it back under the Ombudsman. We tried to put it back under FOI previously also. So finally — we've talked about this — the total failure of the Coastal Ferry Act from day one. What we're seeing before us is the backtracking, getting rid of the corporate restructuring and trying to get B.C. Ferries back on track with Bill 47 before us.

I thank the minister for the

interpretation on that. But it was quite a little to-do with the Privacy Commissioner and a few others trying to get this back on track. But the reason this is in here is because it was left out of a previous bill. Was it Bill 20 that it was left out of? Why is it coming to the forefront now?

Hon. B. Lekstrom: Bill 20, as you referred to, put in a mandatory requirement to disclose, if you would remember. And I know you do, Member; you've done a lot of work on this. With that, obviously, once that was in place, there were certain concerns brought forward to deal with the exact issues I've just explained. You could jeopardize or certainly harm the financial stability of a company, for instance, if you disclosed what you were going to pay for something before you put the tender out.

As you've indicated, it was put in Bill 20 for a mandatory requirement to disclose. This is correcting a portion of that, and it is supported by the Information and Privacy Commissioner as well.

G. Coons: As far as

section 3, the response from the Privacy Commissioner indicated they had no problems. The key component was your example of a vessel. Is that correct?

Hon. B. Lekstrom: Maybe what I'll do, Member, is just read part of the letter that the Information and Privacy Commissioner responded to, where it says: "We understand there's a concern that release of some elements of the capital plan of B.C. Ferries would undermine the bidding process in relation to major capital expenditures." It goes on to also say: "I'm satisfied with the ministry's explanation of the proposed provisions."

I think it has met the requirements. I understand that originally, without the explanation and the dialogue that took place, the commissioner expressed — and rightfully so — those concerns. But after, like with most things, with communication, things were cleared up.

Section 3 approved.

section 4.

G. Coons:

Section 4 looks at removing equity. It removes

section 1, which talks about equity. I'm just wondering why that

section is removed.

[1135]

Hon. B. Lekstrom: ROE was removed, as the commissioner is no longer using the return on equity to set the price cap, Member, so it wasn't needed there.

G. Coons: What was the return on equity set at — the requirement under legislation for B.C. Ferries to get under ROE, return on equity?

Hon. B. Lekstrom: There was no set number on that, Member. It was based on a formula which included a bond yield and an equity risk premium, which the commissioner could take into account, and then he would set the ROE.

G. Coons: In

section 4, in (b), it talks about: "…must allow for a return sufficient to enable the ferry operator to (

i) meet its debt obligations…." What are the debt obligations currently with B.C. Ferries?

[1140]

Hon. B. Lekstrom: Member, I'm not sure if you were looking for a number — what their debt obligation was at this time — or if you're looking for the broader issue under what we're talking about here with ROE and so on.

The debt obligations are based on the borrowing terms. As we've talked about in the past, we've talked about affordability for the consumer or the ferry user, the ability for the taxpayer to do that. B.C. Ferries, when they go out to secure money through borrowing and through different ways, have to be assured that they can actually maintain their ability to repay those debts.

As we look at, in British Columbia…. We have a triple-A credit rating now in British Columbia, recognized as one of the best, because of our ability to manage. When you don't have that, you pay more in your interest. You're a higher risk.

All of that has to be looked at. So again, those debt obligations are based on the borrowing terms that B.C. Ferries enters into.

G. Coons: Thank you, Minister. I think currently the debt is somewhere at $1.3 billion, $1.4 billion, and interest on that debt is up to $50 million a year. So very significant that there needs to be a return to meet debt obligations.

The second part of

section 4 also says: "(ii) maintain access to borrowing rates that, in the opinion of the commissioner, are reasonable in all of the circumstances." Once again, could the minister fill us in on what the current borrowing rates are that B.C. Ferries are getting? And what are government borrowing rates?

Hon. B. Lekstrom: There is no one set interest amount

Page 12641

that they borrow. They have a number of different debentures out there as they've gone to the markets to get money that they need. But Member — and I'm quite confident you may have looked at this before — all of those are listed in the public annual report of B.C. Ferries.

G. Coons: Just one last comment on this section,

section 4, which is amending

section 41. One of the recommendations from the commissioner, recommendation 28, said: "Section 41.3(c)(

i) should be amended to add 'and prudent' after 'reasonable.'" I'm just wondering why a simple adding "prudent" in was not done by the minister in this section.

Hon. B. Lekstrom: You know, I believe that the work that's done is very good work. We didn't believe that having to insert the word "prudent" in a piece of legislation was appropriate. I think the work that our commissioner does goes down that path each and every day, and we're comfortable with that.

Section 4 approved.

section 5.

G. Coons: I'm watching the time and keeping my own track of time here.

Interjection.

G. Coons: Okay, and we're right on with our 13½ minutes here with this type of pushing through legislation.

[1145]

Section 5 provides for fuel deferral accounts. It's a new section. What happens currently with fuel deferral accounts? I'm under the impression that there have been some operating. What's happening now? Why is the minister putting fuel deferral accounts into legislation?

Hon. B. Lekstrom: As the member indicated, there were fuel deferral accounts. I think what was happening is we wanted to remove any uncertainty that that practice was there and working. By putting it in, it is putting in and making it very explicit that fuel deferral accounts are usable. They don't have to be; this isn't saying that they have to be in place. But if needed, they have the ability, by what we've put in here under this section.

G. Coons: When we look at the fuel deferral accounts, in

section 41.1(2)(a), I believe, the commissioner is allowing a ferry operator to add a fuel surcharge. Now, what conditions would apply for that fuel surcharge to happen?

The Chair: The member for Nelson-Creston seeks leave to make an introduction.

Leave granted.

Introductions by Members

M. Mungall: It's my great pleasure to introduce students from Creston Homelinks School in my constituency. I think this is the very first time I've had the distinct privilege of introducing children who are attending a school in my area.

They have travelled all the way from Creston, travelling by bus to Sandpoint, and then they got on a train, went all the way to Seattle, hopped on the Clipper and walked themselves all the way here to the Legislature to learn more about the things that we do here on a day-to-day basis.

They are finding it incredibly intriguing. I have given them a little bit of an all-access-pass tour, and I think their most favourite part to this moment, before we get to the library, is watching Hansard Services in progress and seeing that everything that we do here gets recorded. So, Hansard, you are now, I think, the most favourite thing of school children.

Thank you very much for allowing me to make this introduction, and please may the House make them feel very, very welcome.

Debate Continued

An example, Member, I would give you…. This would be in a four-year performance term. There's a price cap set. They have done their best calculations. The commissioner has gone through everything. He may have viewed that fuel prices may stabilize at X dollars. Two years in, for example, there's a significant increase in fuel costs. I think we would all agree that we've seen those kinds of fluctuations right across the country. There may be a need for a fuel surcharge at that time.

[1150]

Likewise, if there is a fuel surcharge in place that they put in and just the opposite happens and there's a significant decrease — something, I think, we would all like to see — it can be adjusted as well.

But I will go back and take the opportunity. We talked about vision earlier, I think. What would be in that? Liquefied natural gas can be a big part, not only of B.C. Ferry's transportation fuel future but, I think, all transportation fuel across this province and country.

Section 5 approved.

section 6.

G. Coons:

Section 6, which is

section 42 out of the

Page 12642

Coastal Ferry Act. The title is "No extraordinary price cap increases without authorization." Now, what is being taken out of here, after comparing the two — the legislation and this — is that "in relation to a route group" is gone as far as an extraordinary price cap. I'm wondering why "in relation to a route group" is removed from the legislation.

Hon. B. Lekstrom: Member, could I get you to restate your question just so I make sure that I give you the proper information in my response?

G. Coons: In

section 42 it's been revamped, where it used to say, "A ferry operator may apply to the commissioner for an extraordinary price cap increase, in relation to a route group, that exceeds any increase…." That is not in the current legislation before us. I'm just wondering whether that means that it's going to be the same fare level at all route groups, or why "in relation to each route group" was removed.

Hon. B. Lekstrom: That was removed to allow the commissioner greater flexibility, Member, in determining this and to enable him to do his job.

G. Coons: In this section,

section 6, I'm just wondering: what does

section 6(a)(2) mean, please?

[1155]

Hon. B. Lekstrom: I believe 6(a)(2) is what you were talking about. Previously it would only refer to a price-cap increase, that section. Not only can the commissioner look at that, but he can also look at a reduction of service, among other things, Member, under that

section now. That's what that is.

Sections 6 and 7 approved.

section 8.

G. Coons: This is a

section that has quite a bit of concern from people. I think it's a

section that is going in the wrong direction. It gives the government a narrow mandate. People are concerned with permanent reductions in service and what circumstances allow the commissioner to permanently reduce service.

I'm just wondering, for the minister: what circumstances does this legislation allow the commissioner to permanently reduce service?

Hon. B. Lekstrom: I think the member probably…. The concern he expressed — hopefully, I can clear it up.

Under what circumstances. He would look at a number of things. We've talked about this, Member, before. In his consideration, for instance, maybe there is a route... We'll use a hypothetical here, because there's a great deal of discussion that's going to take place with the communities. Maybe there are six round trips a day going somewhere. Maybe they are being at 19 or 23 percent capacity only. That doesn't lead to a sustainable system. He could look at that.

The issue here is he cannot go outside of what the Coastal Ferry Act states must be met. So that would hopefully give the member some comfort. I think that was probably the direction of his question.

Section 8 approved on division.

Section 9 approved.

section 10.

G. Coons: Again, this

section that we have before us. It's interesting, because the commissioner….

The Chair: Hon. Member, under time allocation.

Sections 10 to 15 inclusive approved.

Title approved.

Hon. B. Lekstrom: I would move that the committee rise, report the bill complete without amendment.

Motion approved.

The committee rose at 12 noon.

The House resumed; Mr. Speaker in the chair.

Report and

Third Reading of Bills

BILL 47 — COASTAL FERRY

AMENDMENT ACT, 2012

Bill 47, Coastal Ferry Amendment Act, 2012, reported complete without amendment, read a third time and passed.

Committee of the Whole (Section A), having reported progress, was granted leave to sit again.

Committee of Supply (Section C), having reported progress, was granted leave to sit again.

Hon. J. Yap moved adjournment of the House.

Motion approved.

Mr. Speaker: This House stands adjourned until 1:30 this afternoon.

The House adjourned at 12:01 p.m.

Page 12643

PROCEEDINGS IN THE

DOUGLAS FIR ROOM

Committee of the Whole House

BILL 54 — PROVINCIAL SALES TAX ACT

(continued)

The House in Committee of the Whole (Section

A) on Bill 54; L. Reid in the chair.

The committee met at 10:13 a.m.

section 137 (continued) .

B. Ralston: Madam Chair, we're moving to

part 6 on exemptions. I have a couple of questions in this area. Obviously, this is a significant aspect of the bill and the subject of some of the public debate about the bill, in a broader way than many other parts of the bill.

In its submission to the Select Standing Committee on Finance and Government Services last fall, the B.C. Business Council did make comments about re-establishing the PST. One of their recommendations was — and I'm just going to read it: "Clarify the rules for scope of application of the PST and eligibility for exemptions, with a view to minimizing future disputes over

interpretation."

I'm sure the minister will find that hard to disagree with. But I'm wondering what specific steps, in either drafting these sections or the regulations that will follow, the ministry or the minister will undertake to endeavour to meet that objective — which I'm sure is an objective that the minister shares.

[1015]

Hon. K. Falcon: That was a very good recommendation from the Business Council. I've had the opportunity to meet on a number of occasions with the Business Council to ensure that as we were going back to this PST….

The great fear that the business community had was that it would resemble the old act. The most charitable definition would be that it was a frigging disaster to have to deal with, frankly. You were forced to deal with the PST act, the Hotel Room Tax Act and all the regulations, interpretive bulletins and administrative practice. That created an enormous amount of confusion, uncertainty and lack of clarity about what applied and what didn't.

Of course, given the time frame that we had…. We had to work in a very, very tight time frame. What we have done — and one of the great achievements, especially given the tight time frame — is we've brought together everything into, when we've completed, one place so that the rules that are fundamental to the operation of the tax system are located in the statute that we're here discussing today.

There will be regulations that follow, which will be drafted and presented in the fall for the business community to see. All of the tax on designated property is now part of this act. The hotel room accommodation tax is now all part of this, in one place, so that we eliminate the duplication — the duplicate of paperwork and remittance requirements.

We've also, importantly, used updated and clearer language in the new statute that we're discussing today. For example, as the member would know from our previous discussions we've had here, we've used much clearer language on the

definitions of "tangible personal property," "software" and "services." So there is greater clarity.

Also, where there were things that were being done through administrative practice, we've now incorporated that practice into the act — or, subsequently, into the regulations — so that there will be, again, clarity. People will now know what the practices are because they will be either in this statute or subsequently in the regulations.

That in a nutshell is where we've arrived at. You know, the very nature of a retail sales tax, especially in a world where everyone is moving away from these types of taxes to more value-added-type taxes…. I think we've got a dramatically improved — or considerably improved; I don't want to overstate it — PST that will certainly be much simpler and is consistent with the suggestions and direction that we have from the Business Council.

B. Ralston: Again, dealing with

part 6, "Exemptions," and beginning with

section 137. This would appear, I think, to apply particularly to exemptions, because if you fall within an exemption, then you don't pay tax. That's an obvious commercial advantage.

One of the things they spoke of was "lengthy delays in resolution due to changing

interpretations." That's more in the nature of the administrative practice. I know the minister spoke about that upon the introduction of this bill — that while the referendum result wasn't the one he preferred…. I understand, and I acknowledge the somewhat rhetorically overblown position that he's taking here this morning. But I know he feels this deeply, so fair enough.

[1020]

One of the concerns and, I think, one of the areas that can be focused on is the administrative practice, as he's spoken of. I accept it to a certain degree. Obviously, there's a natural point of friction between the tax collector and those who are seeking to avoid payment for legitimate reasons.

The issue about changing

interpretations…. In dealing with the exemptions that we're about to consider, what effort or what thought or what direction has been given to enable those who are asked to administer the act to

Page 12644

be consistent in their

interpretations and not have that challenged, thereby making the system run a bit more smoothly?

Hon. K. Falcon: In fact, what effectively was taking place previously was that the ministry staff were inundated — would probably not be an inappropriate word — with businesses that were trying to understand and interpret the legislation within the multiple acts and all of the regulations to try and understand and appreciate how it applied to them often, as the member opposite would acknowledge, at great cost because you're hiring accountants and tax lawyers to figure out, as best they can, whether or not something is PST applicable. This created, understandably, enormous amounts of headaches.

This is what the business community is most concerned about. That chews up a lot of administrative time on their side and government's side. It resulted in literally thousands and thousands of administrative

interpretations of specific responses to businesses that were trying to understand how it related to their own situation, etc.

Now, what we've done under the new PST is incorporated the practices that were in place through years' worth of all these administrative

interpretations and thousands of responses to different problems that were awakened as a result of having very, very outdated legislation dating back to the 1940s.

[1025]

We've now incorporated those practices into the legislation with more clarity. So we expect that there will be less of such a volume of need for administrative

interpretation and debate over many of these things.

We think that some of the language clarity and taking the administrative practices and incorporating those directly into the statute — and where not present in the statute in the regulations that will follow — should dramatically improve the situation for the business community.

B. Ralston: I do have further questions, but they would probably be more appropriate in

part 9, "Administration and Enforcement," and "Inspections and Audits," division 1, if and when we get to that. I know that in the comments they made, there are a number of recommendations dealing with audits, appeal periods and some other recommendations.

Perhaps that really concludes my questions, at least nominally, on sections 137 and 138, and I'd be pleased to move to

section 139.

Sections 137 and 138 approved.

section 139.

B. Ralston: This is the exemption for food products for human consumption. There is a prescribed opportunity to regulate. Typically, those are pre-prepared foods that fall outside of the definition of food products. As everyone knows, I think, food is GST-exempt, although that's the subject of some debate. Some feel it was a decision made under some pressure, understandably, at the time that the GST was introduced.

Will the PST rules relating to exemptions for food products…? There are a relatively limited number that the tax applies to. Will that parallel in any way the GST rules just for simplicity of

interpretation or not?

Hon. K. Falcon: The short answer is no. Our exemption is much broader than that of the GST. GST exempts food, but basic groceries are effectively what it's exempting. All other foods are generally covered. Some packaged foods are covered. Certainly, restaurant meals are all covered under GST. In our case, you can see that the exemption is all food products for human consumption, which is much broader. That's pretty much everything other than prescribed food products.

In the old regulation, 2.4, it refers to what that exemption is. This is kind of weird language, because I guess it's probably from the '40s: "...does not include spirituous, malt or vinous liquors." I don't even know what that is. Does anyone know what that is?

Interjections.

Hon. K. Falcon: Sherry or port maybe? Okay.

Then it goes on to say: "Where spirituous, malt, vinous liquors or other alcoholic beverages are served with a prepared meal, they shall not be considered as part thereof." Effectively, I think it's saying it's excluding liquor. So it is much broader, and it will be recapturing that in its full form under this new legislation.

[1030]

B. Ralston: The minister has read the previous regulation. Is there an intention to change that particular regulation — I can understand there may be some desire to modernize the language — or to add any other categories specifically to what's described in the

section as prescribed food products?

Hon. K. Falcon: No. The answer is no. As a former Health Minister, I've got this inner voice yelling at me about junk food, but I'm going to let that voice just stay down deep where it belongs and say no.

Section 139 approved.

section 140.

B. Ralston: This is in "Exemption in relation to fuel." Just for those who may be concerned, because the taxation of gasoline is obviously a live topic these days, given

Page 12645

the price of fuel.... The fuel that people would buy at a gas station typically is exempt if it is fuel to which the Motor Fuel Tax Act applies, and that is the tax that is paid at the pump?

Hon. K. Falcon: I'm glad the member raised this, because there was always some confusion with respect to HST applicability. The provincial portion of the HST never applied to fuel either, just for the record. I know there's some confusion. GST still does apply to gasoline and fuel. So that's important for the public to know. The member is correct that the PST will not apply to fuel, as it did not under the HST and as it did not under the old PST. It will not apply under the new PST.

Section 140 approved.

section 141.

B. Ralston: This

section is entitled "Exemptions in relation to industry and commerce." I want to look at subsection (f): "subject to the regulations, prescribed machinery or equipment, other than machinery or equipment used in the provision of a taxable service, purchased or leased by a prescribed manufacturer or other prescribed person for a prescribed use."

The machinery and equipment exemption is an important one. We've discussed it previously. In discussion with the minister's predecessor in debating the introduction of the act or in his estimates at some point, he estimated that the machinery and equipment exemption, which was brought in in 2001, was a tax expenditure of approximately $110 million or $120 million a year. Is the minister in a position to provide an update to that number? That is the first question.

Secondly, the way in which the machinery and equipment exemption was administered before — and this relates again to the administration — was a series of regulations pertaining industry by industry. Is the intention to develop a single regulation if it's possible, or will it be sector by sector? That may be more practical.

I'm not sure what the intention is. Given the goal of increased simplicity of administration — to the degree that that's possible — can the minister explain what his intention is with this important exemption?

Hon. K. Falcon: We just were conferring off line there, but we're not exactly sure of the cost of it. The member may very well be in the ballpark, but it's been a while, and we don't have that information here.

[1035]

In terms of how it's applied, I think the key thing for us is that it must be as clear as we can possibly make it. The scope will be consistent with what was there before. Our hope is that if there are any improvements we can make, we'll be informed by continued discussions with the business community. We will do so to ensure clarity, though — and the member appropriately points out — this is a challenge. You have to define, through the exemption, what is in and what is out. Sometimes that is difficult to do, but our goal is to try and make that as clear as possible.

B. Ralston: Looking at subsection 141(a), there appears to be an element — and I'm not sure how broadly this is interpreted — where tangible personal property that's used in a manufacturing process is exempt. In one reading of it, it has some similarity to an input tax credit. I'm not sure. I doubt it's that expansive. Can the minister explain the circumstances in which this

section would apply?

Hon. K. Falcon: This is somewhat similar to what we talked about before, except that what we're talking about is that all materials incorporated into a manufactured product are exempt. For example, if you're making shirts to sell, all of the fabric, buttons, thread, etc., would be tax-exempt on the PST because you are selling that to someone else. Then that end buyer would be the one that pays the PST.

B. Ralston: To that extent, it exempts inputs into the production of products that are for the purpose of retail sale. Perhaps I could just choose another example and invite the minister's comment. If you're buying lumber of some kind with a view to making it into furniture, would there be tax on the inputted lumber that would be used to make the furniture, which is going to be sold in the province?

Hon. K. Falcon: No, there would not be.

B. Ralston: This

section that we've just discussed. There are a couple of qualifications in subsections (2) through (4). One is, I think, fairly straightforward. The reusable container — we've discussed that.

Can the minister explain subsection (4), which looks to be a little bit more complicated? I think it's the principle that we discussed earlier where if you sell it but retain some interest in it — a right to repossession or some legal tie that remains between the buyer and the seller after the sale — the exemption wouldn't apply. Is that what this is directed to?

Hon. K. Falcon: That is correct. It's consistent with the previous discussions — the exact same principle.

B. Ralston: Because this is a fairly broad section, "Exemptions in relation to industry and commerce," and I know the minister touched on it, I just wanted to refocus on it once again before we leave this section. Obviously, the broad intention is to make the regulations more sim-

Page 12646

ple. The minister referenced a consultation process. Is it intended that the draft regulations would be available for public consideration on some kind of timetable?

[1040]

I appreciate that this is probably a flexible timetable — sometime in the fall or the early part of the new year prior to the act coming into force next April 1. I'm interested in how that might work and who might be notified. Is it simply making the regulations available for those who choose to comment on them, or is there a more active process intended?

Hon. K. Falcon: In this case what we're doing, just to clarify, is we have been meeting with the business community, which obviously has great interest in these areas, frequently. They've been informing us, so as we go forward to draft the proposed final regulations, which will be presented in the fall, it will be on the basis of being fully informed from the business community point of view.

Interestingly, the reality actually is that we have decades' worth of concerns and complaints from the business community that had to deal with the PST before. We actually start from a very good foundation of knowing exactly where the problems are. Really, the constant reinforcement from the business community is generally things that we've been made aware of over many, many years. The good news is that it doesn't require much of an ongoing discussion, because it's already a pretty well established tranche of information and complaints that have built up over the years.

We are taking that information, fully informed, and making sure that we are touching back with them. We will draft the regulations. The final regulations will be presented in the fall for all to see, including the business community and consumers and everyone else. We anticipate that that will, having been fully informed, meet the test of the world out there.

Again, given the timeline we have, to have everything in place for the switchover on April 1, this is one of the challenges we're up against. We have to have all that in place so that the business community, now knowing what the statutory requirements are and what the regulatory requirements are, now have the ability to change over their systems in time for the April 1, 2013, date when the switch gets flicked and we're suddenly back into PST world.

So very tight timelines. I do not want to leave any sense that when we produce the regulations in the fall, that we then go through a several-month period where everyone looks and says: "Just change this; change that." That's not how it happens. Again, we wouldn't have the ability to do that, given the timeline.

What I can assure the members opposite — and the business community already knows this — is that we have been taking their information not just through our regularized meetings and information-sharing that's going back and forth but through decades' worth of the complaints that have built up under the old PST.

B. Ralston: As the minister will be aware, he appointed a special panel to look at taxation policy. They're due to report, I believe, at the end of August of this year. Is that one of the aspects of the report? I don't have the terms of reference in front of me, but I recall it was a fairly broad set of terms of reference that included the ability to comment on all and then make recommendations on the taxation system generally. Does he anticipate that he'll get any advice from this panel on this aspect of the implementation of the bill?

Hon. K. Falcon: The panel that's providing some advice to government on reviewing our overall taxation system did provide some interim advice on the PST. Obviously, they were struck with a mandate that was beyond just looking at the PST but to look more broadly at how do we as a province, given that virtually every credible economist and those in the financial field recognize that we're going back to a tax system that will have more of the drag on economic performance in the province than did the HST….

[1045]

That's not, by the way, a rhetorical thing. Everybody recognizes that the business community, through the use of input tax credits, obviously has a significant benefit.

The counter-argument I already am aware of, that people point out correctly, is that it also applied to a broader range of services. I acknowledge all that. So it's not a rhetorical thing. It's just a reality that what we've asked them to do is, given that there will be more of a drag in the business community as a result of the reintroduction of PST, though in an improved format, what can we…?

Broadly, looking across the tax system, is there anything we could look at differently that might try and counter some of that drag to ensure that British Columbia retains some of the competitive advantage that we had as we merged into HST — especially when the other provinces are now all pretty much going down that path, with PEI being the latest?

The panel, Member, has provided some interim recommendations with respect to the PST. I think it would be safe to say that they largely mirror what we've been hearing from the business community. So in their sort of short go at things, though they're not focused specifically on PST, they did share with us some of the concerns they heard about the PST.

The good news is that it was largely reflected in either information that we already had collected over years of complaints from the business community or, in fact, consistent with the kind of advice we'd had from the business community. So it was very helpful, but it just reinforced

Page 12647

what we had largely already heard.

B. Ralston: Once again dealing with the exemptions in relation to industry and commerce, as the minister will know — and he's made a public commitment on this — the previous exemptions will be returned in the same form. Is the minister of the view that he is precluded from, in the future, adding future exemptions?

Certainly, one of the recommendations of the business council was to rationalize or extend some exemptions for…. I think one example they give in their paper was that "software and IT development costs for systems used within business "were not considered to fall within the definition of production machinery and equipment" — just as an example. So does he view his government, given the commitment that was made in the referendum, as blocked from extending further exemptions in the manner that I've given as an example?

Hon. K. Falcon: Thank you for the question, Member, because I think it's an important question. The short answer is no. But the reality is there are fiscal realities that we have to manage, of course.

It's no secret that as a result of the referendum decision, going back to the PST, we're required to repay the federal government $1.6 billion in transition funding, all of which is, for accounting purposes, booked in the '11-12 fiscal year, which creates a pretty significant challenge. We have a legislated commitment to get back to balanced budget in '13-14.

Given that sort of fiscal framework, I wouldn't extend a great deal of hope out there for those that wish us to broadly extend exemptions into a whole range of other areas, given the fiscal realities. I wouldn't want to preclude it, just in case there were perhaps some small examples of where that might be possible. But again, it would have to be in the context of our fiscal reality — which is very, very disciplined right now.

B. Ralston: Thank you, and I appreciate…. That's why I had inquired about the tax expenditure due to the total machinery and equipment exemption earlier. Is this an area that the minister is expecting or has asked in the broad terms of reference of the expert panel on taxation? Does he expect them to make recommendations in this area or not? I appreciate it's not mandatory, but at least, in the way these terms of reference were drafted, is it open to them to do that?

Hon. K. Falcon: This is an area where I really tried to give them a very broad mandate, because I wanted them to focus just fundamentally on the competitiveness and to benchmark British Columbia against other jurisdictions and to look at competitiveness and to look at everything we're doing, without trying to preclude them from coming up with any suggestions.

[1050]

I think the recommendations, whatever they are, that they bring forward are not necessarily going to be determinative for government. What I wanted to do was to have sort of a fresh set of eyes unencumbered by predispositions or biases that we may have in government. Some of those biases and predispositions, by the way, may be very sensible and fully informed by experiences, etc. But we wanted to make sure that we, and that I, did not try to preclude what they should or should not look at.

So it could very well be that they may look at the machinery and equipment exemption and make some recommendations on that. I'm not aware whether they're doing that or not, but they certainly would have the right to do so.

Section 141 approved.

section 142.

B. Ralston: Just looking briefly at

section 142. This appears to exempt purchases for intermediaries. We've spoken of those in previous sections. I just wanted to confirm that that's the general intent of this section, to exempt intermediaries who are acquiring tangible personal property and then leasing it, in this case, or for other purposes.

Hon. K. Falcon: That is correct.

Section 142 approved.

section 143.

B. Ralston: This is an exemption in relation to the recording of a motion picture audio production. We had some discussion yesterday about the different technological variations by which motion pictures and audio productions are delivered. There are older versions and digital versions, and the statute attempts to incorporate both of them. Can the minister explain this exemption and its breadth?

[M. Coell in the chair.]

Hon. K. Falcon: This is, I'm advised, substantially the same as it was before. Essentially, it's just saying that if you have a recording of a motion picture that is being publicly broadcast by a licensed radio or television broadcaster — in other words, if it's on TV or radio or what have you — it is exempt. Or if you're making copies, which we talked about before, where copies are being made for public broadcast, those would be exempt. Or going down to subsection (c), if you're copying it into another recording of a motion picture production or audio production — we had that discussion earlier about it

Page 12648

forming part of another, larger motion picture that you're working on — then it would be exempt from the PST.

Section 143 approved.

section 144.

B. Ralston: This is described simply as "Limit on exemptions." Is this an anti-avoidance thing that gives something to point to in the event that an exemption is attempted to be extended too far? It would appear to work in conjunction with the other sections in this

section which grant exemptions.

[1055]

This is described as placing limits on exemptions. Is this an aid to

interpretation, in terms of where a line might be drawn to decide if someone is exempt from tax or not?

Hon. K. Falcon: This is just really trying mostly to clarify things. In other words, the tools that you are using to make something are not exempt. So if you are purchasing a hammer that is being used to build a table, for the sake of argument, then the hammer will still not be exempt from the PST. In the second example, if you're using tangible personal property to make that software…. In other words, if you're buying a computer used to develop software, the computer is not going to be exempt.

Section 144 approved.

section 145.

B. Ralston: This refers to the evidence required to claim certain exemptions. It refers to documents that have to be provided to the collector. That would typically be the vendor of the goods. It has to be in a form approved or acceptable to the director.

Is this a question…? In terms of one's eligibility to claim the exemption, is this a self-declaration, in the sense that if you complete the form…? I think people would rarely do this directly, since usually the relationship would be known and established. But would there be a self-declaration by the purchaser? Is there a preapproval required by the director in order to gain the exemption, or is it self-declaration subject to audit?

[D. Black in the chair.]

Hon. K. Falcon: It would depend on the exemption as to what documentation is required. You can see there that it says: "…a declaration in a form acceptable to the director…." We will provide direction and guidance on the type of documentation that would be required, depending on what the exemption is.

B. Ralston: It references

section 141, which is, I think, the broadest category, exemptions in relation to industry and commerce. If you're purchasing anything in that broad area — machinery or equipment — in practical terms, how does that go about? The purchaser self-declares, or do they have to actually produce…? Is there a requirement to produce a certificate before the sale can be entered? What's the obligation of the collector in that circumstance, I suppose is my question.

Hon. K. Falcon: What we used to do and will likely continue to do…. We used to have a government certificate that they would print out, fill out and then present to the vendor. Of course, the declarations made on the certificate would be subject to audit.

B. Ralston: Is it intended, then, to bring back that practice? Or is there some other form, such as registering yourself electronically in a central database and obliging the collector to check or make reference to it? Is there some non-paper-based, electronic registry that is intended to be created?

[1100]

Hon. K. Falcon: That was one example. Depending on the exemption, there will likely be some form of documentation requirement. That may vary, depending on the exemption, but it would be similar in nature to the example that I just gave.

B. Ralston: I don't want to belabour the point. The phrase is "unless the collector obtains from that person, at or before the time the tax is payable." So there is actually a requirement for the collector to physically receive a form that follows the rules set out in the act. It's literally required to be presented before the exemption can be granted by the collector.

Hon. K. Falcon: In many cases you will have to prove that you have a PST registration number to the vendor, and it's as simple as coming forward saying: "I'm purchasing this. It's PST-exempt. Here's my PST registration number." They make note of the number. End of story. There's not documentation required in that case except to produce your PST registration number. In some cases it may require an actual certificate. Again, it depends on what the exemption is.

Section 145 approved.

section 146.

B. Ralston: This part deals with refunds, and division 1 deals with refunds from collectors. This would seem to, at least in

section 146, capture the situation where inadvertently or by error the purchaser pays tax when it's

Page 12649

in fact not due. They can go back to the collector and get a refund from the collector. I note that there's a separate division for refunds from the director.

Given that the obligation is for a typical retail vendor to remit the tax collected in the previous month, I think, by the 15th — or I think it's now going to be at the end of the month to coincide with the GST filing time — they wouldn't actually have that. They would have, in theory, remitted it if they were following the rules.

Are they then rebating or refunding a tax that they've already passed on to the director? I guess that's the question. Given that these sections all flow together, perhaps the minister can briefly explain — although, formally, we're not on sections 152 or 153 — how that would integrate with the obligation to seek repayment from the director.

Hon. K. Falcon: The answer is yes, but they will be able to net it off their next return. They will be constantly receiving PST revenues, remitting revenues. They will have that ability to just net it off their next return.

Section 146 approved.

section 147.

B. Ralston: This would appear to cover the case where a tax is collected and then the person discovers or produces the necessary documentary proof that they were indeed entitled to the exemption that's required to be shown in

section 145, which we just discussed. Is that the circumstance that this

section is intended to apply to?

Hon. K. Falcon: Yes, it is.

Sections 147 and 148 approved.

section 149.

[1105]

B. Ralston: This is a refund if a motor vehicle is returned to a collector. There is a time limit of one year, which appears to be…. For other sections they're 180 days. Is there any particular policy reason why it's that much longer?

Hon. K. Falcon: This is the same as it existed under the old Social Service Tax Act. We're just putting the same provision that was in the old PST into the new PST.

Section 149 approved.

section 150.

B. Ralston: This refers to a refund or credit of the purchase price. There's a timeline of four years of the date the tax is payable under the act. It refers to the obligation of the collector. It's basically that you're entitled to get a credit, in the way that we described a moment ago, on your monthly return, and if that's the case, only for a period of four years. Is that right?

Page 12650

Beyond that, you no longer get credit for the refund?

Hon. K. Falcon: I'm glad the member raised this, because this is an important one. The short answer is no, to the member. I think he's sort of close on characterizing it.

This is actually a change from the old PST. We've provided, based on the input we heard from the business community, a pretty significant change here in that what this is saying in the first

part is that collectors can give refunds of the tax within a four-year period. They can make that decision to return the PST portion to purchasers within the four-year period.

Then the collector can net off that return, or they can apply for a refund for up to four years after the date in which they provided that return to a purchaser. So it is a more expanded time frame for the business community and something that we'd heard as part of the input we received and something that will be well-received by the business community.

B. Ralston: I suppose in theory, then, it could stretch out as long as eight years less a day, which does seem an inordinately long time. The minister references, obviously, some situations in the business world where this would be appreciated. It just seems like a long time horizon to keep records for or account accurately. I'm just wondering: why would it be extended to that number of years? It seems like a very long time.

Even, I think, the reassessment procedure or the audit procedure only entitles the director to go back four years, I believe, in this act and the previous act — which we'll get to, if we get to it — in the "Administration and Enforcement" section. I'm just interested in the rationale.

[1110]

Hon. K. Falcon: The four-year period actually doesn't change to the extent that the customer will still have four years to get back their PST owed that they paid back from the collector. They used to have to come to government directly to try and get that refund,

whereas now they have the ability to go back to the collector for up to four years to receive that refund.

What we wanted to do in the second part was make sure that the collectors weren't going to be out of pocket. They also get four years in which to apply for the refund, therefore, to government, to get their dollars back that they've provided to the customers who received four years.

B. Ralston: Just to clarify, then. It's not a total of eight years; it's two parallel periods of four years. Is that right?

Hon. K. Falcon: In most cases probably running parallel, but depending on the date that the collector provided the refund to the individual, it could extend beyond that. The key here is that we wanted to be able to provide collectors the confidence, because it's much easier for the consumer to go back to where they purchased it to get their refund.

We wanted them to be able to do that with a sense of confidence and not have to come to government directly for that. But at the same time we have to provide the collector the confidence of knowing that when they do that, they will have the ability to apply for the refund to government. In most cases it probably will roughly parallel, but in some cases it won't. That's to ensure that we're being fair so that the collector is not going to be out of pocket.

Sections 150 and 151 approved.

section 152.

B. Ralston: This

section initiates a new division of refunds from the director.

Section 152 gives a general power to remit money either to a purchaser or to a collector. Perhaps the minister could just, given that there are a number of sections in this division, briefly set out the thinking behind this division.

I imagine, although I don't recall in detail, it very much parallels what was in the previous act. Given that I believe you have substantial expertise advising you there, this will be something that they will be very familiar with.

[1115]

Hon. K. Falcon: It generally parallels the old approach, but it has been expanded to be far more clear what our authority is as government to refund the tax. The ability to refund the PST under the old act was very limited and extremely unclear, and this created a huge amount of complaints, I am advised. What this does is lay out much more clearly our ability to make refunds under the PST and will, we believe, deal with a lot of the problems that were created in the past.

B. Ralston: Looking at subsection (2), this appears to be the general power to give the director authority to remit to a collector where the collector has, in error, sent an amount levied as taxes where they weren't required to or they didn't collect the amount as taxes under the act.

I take it from looking at the subsequent sections that that general power is modified according to the circumstance in which the error arose. In other words, there is authority to remit directly to the purchaser as opposed to the collector. This is the general power to remit to the collector in the circumstances where we were just talking about in

section 150, for example. Otherwise, it's very broad and appears to deal with the collector only and not the purchaser.

Hon. K. Falcon: In this example, what the member is speaking to actually comes a little bit later in

section 160. This is actually quite narrow. This is just referring to "If the director is satisfied that a collector, in error, has remitted to the government an amount levied…." They're referring in this case, really, to a mathematical error. The calculation was just wrong. So when we come to 160, I think that will more align with what the member is talking about.

Section 152 approved.

section 153.

B. Ralston: This

section gives the director authority to refund if the person has failed to provide evidence at the time of sale or lease. Can the minister explain the power that's conferred there? Then there is an exemption in subsection (2), which perhaps the minister can explain.

Hon. K. Falcon: Because the collector may refund, in the event that the collector does not refund, this ensures that the individual purchaser would still have the ability to come to government to ask for the refund. That's clarifying that.

The Chair: The committee will take a short recess.

The committee recessed from 11:20 a.m. to 11:21 a.m.

[D. Black in the chair.]

B. Ralston: The minister was going to, I think, before he paused, explain the exemption in subsection (2).

Hon. K. Falcon: This is just ensuring that an individual cannot get two refunds. It's just saying that it does not apply if they've "received a refund or credit under Division 6...or 7...of

Part 3 in respect of the same payment of tax." So it's just ensuring that they don't get to receive it twice.

Section 153 approved.

section 154.

B. Ralston: This refers to a motor vehicle returned to the manufacturer. "Manufacturer" is not a defined term. I would assume that this is relatively rare, if not nonexistent, since there are no manufacturers of automobiles — except, maybe, I think there was a manufacturer of electric cars. What would be the circumstances under which this would apply? Or is "manufacturer" taken more broadly to include representatives of manufactur-

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ers, such as dealers?

Hon. K. Falcon: This is referring to any manufacturer of vehicles. It's the same provision that was in the old Social Service Tax Act, the old PST act. Effectively, it's saying that if there's some sort of design flaw that results in a recall, then there is an ability to have a refund of the tax.

Sections 154 to 156 inclusive approved.

section 157.

B. Ralston: This deals with the circumstance where the director may refund the tax if the collector doesn't provide a refund. I believe the powers granted to the director are fairly wide in the "Administration and Enforcement" part.

But if the collector wasn't entitled to collect the tax, won't remit it to the purchaser and the director refunds it, does that then trigger a right of the director to collect it from the collector through subsequent sections of the act?

[1125]

Hon. K. Falcon: This is quite similar to the other

section referred to, except that it covers a situation where a purchaser purchases a product and subsequently there is a price reduction, or they perhaps said: "We will match any competitor's price." They bring it back and say, "I'd like you to match the price," so there's a price reduction. In the event that, for whatever reason, a collector does not provide the PST portion back, they have the ability to approach the director for a refund.

B. Ralston: I think that's relatively clear. Is there then a right that arises that's granted to the director to go after the collector for the unremitted refund? Presumably, the reason it's due is that the collector is no longer entitled to keep it.

Hon. K. Falcon: I'm advised that the collector would have already remitted or would still have to remit. They have a legal obligation to remit, so there's no way they get to avoid that obligation.

This is just in the circumstance where, for whatever reason, they haven't remitted back to the purchaser and the purchaser applies to the director. We can deal with that and then, presumably, net it off against whatever the collector's account is or what have you.

Interjection.

Hon. K. Falcon: Oh. The collector gets nothing back if they don't give it to their customer, actually.

B. Ralston: On the obligation of the collector to pay to the director, I think the definition of "collector" is that they're an agent of the government or of the director for the purpose of collecting the tax. The obligation to pay the director continues, and then that becomes an issue between the director and the collector. Then that may trigger some of the administrative enforcement powers of the act such as audit or, ultimately, enforcement by way of lien or some of the other powers that are granted in subsequent sections, which we may or may not get to.

Hon. K. Falcon: Yes, that's correct. If they don't remit that tax, then yes, there would be all of the administrative actions that could be undertaken to realize that.

Sections 157 and 158 approved.

section 159.

B. Ralston: This refers to refund or deduction for bad debts. This is presumably where the tax is due, but the payment scheme by the purchaser is not completed for one reason or another. This is the mechanism by which that would be offset. That's at least how I read it. Can the minister explain how this

section works in terms of dealing with tax that has been assessed on what turns out to be a bad debt?

Hon. K. Falcon: This is just making clear that a collector must remit PST as soon as it is levied. That may be before they're actually paid, but as soon as the transaction is made and the tax is levied, they have to remit to us. Government always gets its money, and they will in this circumstance.

[1130]

If in that case the collector subsequently does not receive any payment from the purchaser and writes it off as a bad debt, then in that circumstance they're able to apply to have a refund of the portion of PST that formed part of that bad debt.

B. Ralston: In 159(2)(

e) it refers to four years. Is the operation of that four years, a similar four years that we referred to — I think it was in

section 150 — where that's the limitation period under which this kind of application could be made?

Hon. K. Falcon: This is another area where it was very unclear in the old PST act. It's now very clear in this act that we are providing four years in which the person, the collector, can write off an unrealizable or uncollectible debt owing. As the member would acknowledge, that is a pretty substantial period of time. Generally, you have recognized that if you haven't received something in four years, you're probably not going to get it.

It works the same way as the last discussion we had.

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So from the date at which they do ultimately write off the debt, they then have four years in which to apply for the refund from the government with respect to the amount owing.

B. Ralston: Just as a matter of administrative practice — and this may be governed by regulation — if the government has had the money remitted and has had the benefit of it for a number of years, is there any provision for the person making application to receive any interest on the money that's been held by the government during that period of time?

Hon. K. Falcon: This, again, is an area now that provides a lengthy period for which the collector has the ability to write off a bad debt. They can certainly have the ability to write it off much sooner and probably in many cases would.

Generally speaking, any interest that may apply for amounts to be repaid back to a collector typically is from when they apply for the refund. That's when the interest clock would start ticking. Though there are interest provisions, we're a little uncertain as to whether it would apply in this specific case, so we would have to get back to you with certainty on that.

B. Ralston: I'm looking at subsection (6). As I read it, it seems to apply to a circumstance where a write-off has been made and a refund has been given. Suddenly — I don't know — the person's financial circumstances change drastically and the original obligation is paid, and then there's a resulting obligation to remit again. Is that what this means?

[1135]

Hon. K. Falcon: That's correct.

Section 159 approved.

section 160.

B. Ralston: This is a refund to the collector. We referred to that in relation to

section 152. I think the minister referenced this as the broader power. So can the minister just explain what powers this grants to the director to remit to the collector?

Hon. K. Falcon: This is the very broad power to provide refund to a collector. As long as the collector has levied and remitted the amount in accordance to the act and as long as they've paid a refund or allowed a credit under division 1 — which were the parts of the refund provisions that we've been covering — then they are entitled to a refund. They can either deduct or apply for a refund.

Sections 160 and 161 approved.

section 162.

B. Ralston: This gives the power to the director, if authorized by regulations, to…. Again, a broader power to refund. Can the minister explain under what circumstances the director would be guided by regulations rather than the sections that we've just discussed, which seem very broad and seem to encompass all possibilities?

Is this the case of specific individual cases that don't quite fit, where justice requires that a refund be granted, or is it for specific industries or…? Perhaps he just could specify what the circumstances might be.

Hon. K. Falcon: I'm advised that this is an area where we've strengthened and clarified the authority of the director to authorize refunds. This would be to groups like parent advisory committees, etc. The director would then have the ability to make those authorized refunds.

Sections 162 to 164 inclusive approved.

section 165.

B. Ralston: This

section is entitled "Claim for refund." Obviously, there's a written application required. Can the minister explain the intent in subsection (2), and is that consistent with the obligations of a member of the board of directors under the administration and enforcement section, where I believe there's joint and several liability of directors of a company for the remission of the tax to the branch?

[1140]

Hon. K. Falcon: Again, the same as existed under the old act. This is just saying that if a corporation is claiming refund, then the application must be signed by someone duly authorized — either a member of the board of directors or an authorized employee of the corporation.

The second part that the member is referring to, director's liability issues — it comes up later on in the act.

Section 165 approved.

section 166.

B. Ralston: This talks about refund limits. Again, the period of four years comes into play. Subsection 166(2) refers to "Despite the Limitation Act." Perhaps the minister can explain the policy reason why one wouldn't have the same limits as are in the Limitation Act for, let's say, an ability to litigate and claim an outstanding financial obligation. What are the policy reasons? If the Limitation Act prescribes something briefer, what's the policy reason for having it a more lengthy period of time?

Hon. K. Falcon: In this case we don't have the same

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limits as the Limitation Act. In fact, I think the Limitation Act changes were brought in, in this session. They may have changed it from six to two years, if my memory serves me correctly. I could be wrong, though, so I don't want to be quoted on that. We'd have to check with the Justice Ministry.

Essentially what we're saying here, the approach we're taking here, is that if in the rare circumstance…. It would be quite rare. If someone is actually going to sue government to secure a refund, we're saying here that you have to do so in the same period set out up above — in other words, in that four-year period — for consistency purposes. They get no more rights and no less rights than they had before. I'm advised this is the same provision that we have in other consumption taxes.

B. Ralston: I know that, for example, in the Business Council submission they were suggesting that rather than be subject to audit going back four years, that be reduced to three years. Generally, the rule for reducing limitations is just that it reduces uncertainty. You don't have to make provisions for contingent expenses and carry things forward.

[1145]

Admittedly, this is rare, but I'm just wondering why, for policy reasons, there wasn't a decision to…. Ma