Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)

MONDAY, JULY 7, 1997

Afternoon

Volume 6, Number 14

Part 1

[ Page 5243 ]

The House met at 2:05 p.m.

Prayers.

K. Krueger: I'm pleased this afternoon to introduce two of the most important people in my life: my beloved wife Debbie and our daughter Keturah Krueger. Would the House please make them welcome.

Oral Questions

ACCURACY OF INFORMATION ABOUT

MAVIS FLANDERS CASE

G. Campbell: Hon. Speaker, last week the Minister for Children and Families admitted that she had given the Legislature false and misleading information about the Mavis Flanders case. Can the minister tell the House when exactly it was that she discovered that the information she had put before the House was simply untrue?

Hon. P. Priddy: The first time I discovered that the information I had put before the House -- inadvertently but quite correctly -- was incorrect information was when the report was received from the children's commissioner.

G. Campbell: At least we know that the minister knew before she made her statement last week that the information she had given about Ms. Flanders's case was false and misleading. She knew prior to her statement last week that that was the case. I guess one of the questions that people will ask is: why did the minister fail to correct the information that she had given us when she knew that, more than simply not being the truth, it had a potential to cover up the problems which the ministry was facing in terms of protecting our children?

My question to the minister is: why didn't the minister immediately come before this House to advise us that the information she had provided us with was incorrect, was false and was misleading, and that she would get back to us as quickly as possible with the correct information?

Hon. P. Priddy: As I'm sure the hon. member knows, this was a report that belonged to the Attorney General; that report was released by the Attorney General. I had no ability whatsoever to release that report ahead of time. The reason -- and it can actually be up to a month, although the Attorney General insisted on a shorter period of time, which I would certainly have supported this time had I known that -- was that it allowed time for agencies involved, community agencies, etc., to simply do a fact correction before the Attorney General then officially released the report. There was no opportunity to do that, hon. Speaker.

G. Campbell: Hon. Speaker, I was not asking the minister why she didn't release the report. I was asking her why she didn't come and tell the House that she had misled the House and had provided us with false information with regard to this case, and that she would get back to us as quickly as possible.

It's now clear that the minister is incapable of securing the information necessary to ensure that children are the primary focus of her ministry. The Vaudreuil case, the Elijah Thomas case and now the Mavis Flanders case all show that we cannot count on this ministry telling the truth. It's time for a new initiative to get to the truth, rather than yet another internal cover-up.

My question to the Minister for Children and Families is: will the minister refer this matter to the Select Standing Committee on Health and Social Services, which has the power to subpoena and to hear testimony under oath, so that we can finally correct the cover-up culture which protects the minister first, the ministry second and children last?

Hon. P. Priddy: As I said last week and as I repeat today -- I repeat clearly and loudly and accurately -- there was no attempt to cover up any information. I do not think that I even had the ability to come to the House and say: "Guess what. There was a report out. What was in it was wrong, but I can't tell you what was right -- but stay tuned until the Attorney General releases it." I'm sorry, hon. Speaker; I simply do not think that in any way that is a satisfactory response.

I would suggest, hon. Speaker, that . . . . I don't know about the reference to the Social Services Committee, but we have had a standing committee on Gove in this Legislature for some period of time. It would seem that the Leader of the Opposition, given his current interest, might at some time have attended one of those meetings or have placed himself on the committee to show his interest.

Interjections.

The Speaker: Members, as I've said before, we will not have simultaneous conversation in addition to those asking and answering questions.

G. Plant: There is an urgent need for more facts here. The first internal investigation into the death of Mavis Flanders began March 29, 1997. Now the minister has stated that a second internal investigation into the cover-up of facts being supplied to the minister is being conducted. So my question for the Minister for Children and Families is simple: when did the second investigation begin?

The Speaker: Could I ask the member to please repeat the question?

G. Plant: The question is: when did the second internal investigation into the cover-up of facts being supplied to the minister get underway? When did it begin?

Hon. P. Priddy: There are two additional reports. One is the audit and review division report, which is done after any tragedy that happens in this ministry. That was begun within 24 to 48 hours -- I think within 24 hours. I would have to check that, but I believe it was 24 to 48 hours after the information about the mom and her son was available to us.

The second internal review, which is a different one and is not one that is typical, is one that is to look at . . . . Clearly this was the wrong information. That's not good enough for the family, that was not good enough for the child, and that, quite frankly, is not good enough for the ministry or the minister. That is the second internal investigation. I believe it began about ten days following, but I would have to check the date.

G. Plant: Well, the question is: ten days following what? Could we have a date? Are we talking about the first two weeks of April, or are we talking about some later period than that?

[ Page 5244 ]

Hon. P. Priddy: I will bring this precise date to the House tomorrow. I'm happy to do so. But when the member asks, after what? it was after the death of Ms. Flanders became known to us.

G. Plant: So the question of whether or not the minister was provided with the correct facts at the time that she made the statements in the House early in April was, as I now understand it, a question that was under investigation within the ministry as early as the middle of April, rather than a question that did not come to the minister's attention until the report came to her on June 13. The question is: when did the minister first learn that there was a problem with the facts that she had told this House, in this House, in the first few days of April?

[2:15]

Hon. P. Priddy: The information that is an automatic review . . . . The ARD, or the audit and review division report, begins automatically, regardless of whether someone says: "I wonder if it's right; I wonder if it's wrong." This is an automatic and should be judicial . . . or a review inside the ministry to review the circumstances of the tragedy in the life of a child or a family. So that investigation began, I think, about 48 hours after the mom's death.

The information about whether that information was correct or incorrect and the degree of that -- given, as I say, the full-time children's commissioner with five investigators -- was not available until her report was finished and, quite frankly, has been very disturbing for us, as I'm sure you are aware, and will lead to a number of changes within the ministry.

M. de Jong: Last Thursday, the minister excused the fact that this House had been provided with false and misleading information by stating that she had received false and misleading information from her staff -- specifically field staff, I think she mentioned. It was on the basis of that information that the minister says she made those detailed statements in April of this year about Ms. Flanders's attendance at various ministry programs.

If that was the case, my question to the minister is: will she make public the briefing notes that she used in April when she made her statements to this House about the Flanders case?

Hon. P. Priddy: I would have to admit to having to check about the ability to release information which may include other personal information that the freedom-of-information commissioner would not wish to have out there. But that is correct: I did base my information to this House on briefing information I received from staff in the field. That is correct.

I would have to check about the availability of releasing it. I'm not denying it; I simply don't know.

M. de Jong: Let me try to encourage the minister in this respect. The minister has said that she can't trust her staff, and that is what has led her to these present circumstances. If the minister can't believe her staff, then we are placed in a position where we can't trust any of the information the minister brings to this Legislature. If the minister was misled, then that surely will be reflected in the briefing notes she based her statements upon.

Subject to that very limited qualifier that she mentioned, what we are looking for today is her assurance that all of the relevant material, all of the information, all of the documentation that she had in her possession when she made those statements to this House back in April of this year will come before this House and be made public. Will she give us that assurance?

Hon. P. Priddy: The assurance I will give the member is that any information that the freedom-of-information officer says we can release, we will do so.

G. Farrell-Collins: The minister stood a few moments ago in the House in response to a question by the Leader of the Opposition and said that the first knowledge she had that the information she gave this House was false and misleading was when the report by Cynthia Morton was made public -- or was made available to her ministry. That would have been, I believe, June 16.

Then, in response to a question by the member for Richmond-Steveston, the minister stated that she started an investigation -- her ministry started an internal investigation -- into the incorrect information she received as early as mid-April.

Can the minister tell us when it was that she first became aware that the information she gave to this House was not true -- in mid-April or in mid-June?

Hon. P. Priddy: The information that I said I received that was incorrect . . . . My statement is still the same: it was in mid-June. But this was the first incident, certainly in my time in the ministry, where we had to -- this in particular on a weekend; but that doesn't matter, if it's a weekend, the daytime or an evening -- retrieve information from a variety of people from the field.

We certainly knew the difficulty in doing so, the difficulty in finding people and the difficulty in having people find information for us. It was as a result of that that spoke to us of the incredible difficulty there was simply in getting accurate information that I believed I had a responsibility to account to this Legislature for.

G. Farrell-Collins: The minister is avoiding the question. The question is simple. She stated in this House today two separate items. She stated that she first heard that the information she had given to this House was incorrect in mid-June. Then she stated in response to a question by the member for Richmond-Steveston that, in fact, an internal investigation had started in her ministry about ten days after the audit and review commission started its review, and that second investigation was to determine why the minister's facts were incorrect.

Can the minister tell me which it is? Was it in mid-June that she learned that what she said in this House was in fact false and misleading? Or was it in mid-April that she first learned that the information she gave in this House was false and misleading? Which is it?

Hon. P. Priddy: What I said was that what we discovered was that getting information from the field was difficult. We had to go through more people than we should have had to -- take longer than we should have. I needed to know, and I still need to know, that not only can I get accurate information from the field but I can get it in a timely way which allows me to account to the Legislature. It was not about discovering that "the information was incorrect"; it was about discovering that the process of simply getting it out of the field was not working very well, and hence the investigation.

[ Page 5245 ]

The Speaker: The bell terminates question period.

Petitions

M. Coell: I have a petition from 182 residents of Mayne Island, regarding their dissatisfaction with the B.C. Ferry Corporation schedules and their desire for the minister to review this situation.

Orders of the Day

Hon. J. MacPhail: In Committee A, I call Committee of Supply. For the information of the members, we'll be debating the estimates of the Ministry of Transportation and Highways. In this House, I call Committee of Supply. For the information of the members, we'll be debating the estimates of the Ministry of Forests.

Hon. D. Zirnhelt: I ask leave to make an introduction.

Leave granted.

Hon. D. Zirnhelt: When we have officials here slaving away helping ministers answer questions, it's not often that their families are here. We have in the gallery Shelagh Rae and daughter Katherine Friesen, the family of one of my able advisers here. Please make them welcome.

The House in Committee of Supply B; G. Brewin in the chair.

ESTIMATES: MINISTRY OF FORESTS

(continued)

On vote 37: minister's office, $433,000 (continued).

T. Nebbeling: When we finished our session at 1 o'clock last Friday, we were in the middle of looking at what's happening with the privately owned managed forest land. I have only one or two questions left on that subject, and then one of my colleagues would ask some questions.

Just to recall, one of the reasons I brought this issue to the attention of the minister is that at the time of the introduction of the Forest Practices Code, the private managed forest land owners expressed serious concern about being included in that kind of a code, primarily because of violations of ownership rights that could have been infringed if the private forest land owners had to comply with the Forest Practices Code on a regulatory basis, rather than have that sector work their land in a manner that is environmentally responsible but still with some authority of decision-making left with the private owners.

[2:30]

We talked for about two hours on this particular subject, and in the end I think we came to a situation where the minister was actually asking me what I would do. One of the reasons is that the private owners of managed forest land have indicated that if changes -- in the sense of more regulation -- are to happen as to how they can harvest their timber, they expect that the private forest land owners who do not have the status of managed forest land are also going to be included in the new regulatory system, one way or another.

As I explained to the minister, I believe that over the years the private managed forest land owners have been shown to be very responsible in how they have dealt with their ownership and their self-imposed regulatory system. In a certain sense, I believe the reason that private lands have produced a better return on investment than Crown lands is, in part, because not only do the owners have pride of ownership but they also have the power of making decisions -- for example, when they harvest the timber, how they deal with the riparian and soil needs, and how they deal with other values that we want to see protected. So that's basically where we went until 12:50 p.m., and then we adjourned.

I know that over the last couple of years, and in particular the last couple of months, there has been considerable dialogue between the private managed forest land owners and the government. Can the minister give me an indication when we will see a solution to this debate that has been going on for two or three years, and what kind of . . . ? I won't ask the minister what kinds of recommendations will come forward, because he won't share that with me. But can we expect in the very near future any solutions that private managed forest land owners can also continue to know under what conditions they are working?

Hon. D. Zirnhelt: Yes, we will very soon have a process that will hopefully lead to resolution of differences, but which will lead to some application of the values of the code to private land within six months. So we expect a process to be announced soon.

T. Nebbeling: I appreciate the answer from the minister. I regret to say, however, that I am not a supporter of trying to fix something that is not broken. As I stated earlier, I believe that in the whole forest industry, the one sector that has really shown to be very responsible when it comes to the environment but has still been able to work in such a manner that there is a decent profit for the investors, there's a decent return on the investment . . . . I think that to try to start regulating that part, as well, is unfortunate and unnecessary, and like I said to the minister last week, I wish he would consider leaving things as they are -- remain with the status quo.

Unless the minister has information that I don't have or if the minister wants to share that with me, I don't believe there are any grounds to think that that particular sector of the forest industry -- these private land owners that have agreed to an unmanaged status . . . . I don't believe there are any grounds to justify more regulations on that particular group in the industry.

As I have said in the last week or two from time to time, I'm really bothered by the amount of what I consider overregulation in the forest industry, and overregulation is not only very costly for the people working in the industry but also puts us as a province -- when it comes to the forest industry -- in an incompatible position, compared to some other countries, where the operators in the harvest companies have a system where result is being judged rather than process.

Having said that, again I state that I am not happy to hear that the minister is considering putting new regulations onto a well-oiled machine called the privately owned managed forest lands. If that's the case, is the minister also contemplating imposing the same rules and regulations on private forest land owners that have not at any time been willing to cede their right of ownership of the timber that is on their land and for that reason have worked up to now in a different type of environment and in a different type of working relationship with the government than with the managed private lands?

Is the minister considering imposing these new rules he is contemplating on the non-managed private forest land owners as well?

[ Page 5246 ]

Hon. D. Zirnhelt: Not at this time, with the exception that under the Fish Protection Act we will be discussing riparian management protection with private land owners.

T. Nebbeling: This really troubles me. I believe the province has ownership of 95 percent of all forest land in this province. A small portion of forest land is owned by the private sector.

At one time in past history, the government made arrangements with the owners of privately held land and said: "Okay, if you as a landowner are willing to provide us with certain information on how you intend to harvest your land and if you can provide us with a plan that we can look at and be assured that you are operating in a manner that fits within the strategy that we have in the province, then we will give you a bit of a break in taxation." I think it was something like that. Assessment is not based on stumpage, but it is done by the B.C. Assessment Authority. So it is a cheaper way.

At the same time, there was another group of people who said: "Listen, we're not going to buy into this so-called government interference, even if it is based on -- not lip service -- providing some information so government knows what we are doing." These people continued to work in their own ways. They didn't get the little financial breaks. That's the difference between these two different forms of timber ownership on private land.

If the government is now going to impose further rules and regulations on these so-called managed private land owners, it will make things a little bit more complicated. When you regulate more, you make things more complicated; you demand more paperwork; you have to fill in more forms. If that is now going to be the case, as the minister said, and the other private land owners who were not willing in the first place to come on board and participate in that original attempt to get a little bit of structure in the way private forest land was harvested . . . .

Then the rift between the managed private forest land owners and the non-managed private forest land owners is becoming so substantial that the little gain the managed private forest land owners were getting from being a partner with the government will really dissipate. The cost of continuing to work with these guidelines will increase because of the new regulatory system.

At the same time, the non-managed lands will continue to be harvested without these conditions, without these rules, without these regulations, thereby allowing these non-managed land owners more latitude, more opportunities to create a return on their investment. That disparity between the managed private forest land owners and the non-managed private forest land owners is going to be huge. At the time that the government got the 123 landowners who agreed to this new managed private land structure . . . . I don't think the government indicated at that time that they would change the rules arbitrarily.

I don't think these landowners are very much in favour of seeing further regulations imposed on them, in a sense not only undermining their ownership rights but also making life a little more difficult and a little bit more complicated because of the paperwork.

So imposing it is wrong. That industry has proven to be effective: better managers of the land than we often see on Crown land and getting a better return from the land than we see on Crown land. We're going to regulate them even more. At the same time, the other private forest land owners -- who have a return, as well, but it is better than on Crown land in general -- are still going to have carte blanche.

Does the minister think this is fair or right? Should we maybe reconsider this whole matter and just leave things as they are, so that people can continue to work on the basis that was agreed to a couple of years ago?

Hon. D. Zirnhelt: The government's intent was clear. We intend to apply aspects of the code to private managed forest land. Nothing has changed the fact that over recent history there's been an advantage to being in that class. Yes, there is some evidence that economics have changed, and we are looking at taxation and incentives, along with results-oriented regulations, minimal administration and maximum freedom to manage. Nobody is talking about cut control, which is perhaps the most important freedom to manage that they have.

So I'm saying that we are engaging in a collaborative approach with them, and hopefully we will resolve the differences there may be between the managed private land owners and ourselves.

With respect to your question of fairness, I've said that the reason for our involvement in regulation would be because there is a need to protect public values as much as we can. That's why we would involve ourselves in regulation. We believe that we have a working relationship with the private land owners, and we'll try to work out our differences.

T. Nebbeling: The minister said, "We have a need for," and then I didn't get what that need was. Would the minister repeat that?

Hon. D. Zirnhelt: I believe what I said was that there's a need to protect public values. I have given illustrations of those. Whether it's tax advantages or riparian protection of a public resource . . . . Water and fish are both public resources that do traverse private land.

T. Nebbeling: I appreciate the answer, but it obviously does not solve my concern. The rift between the two groups of private forest land owners is going to be widened.

When the minister said that there will be incentives incorporated in an agreement with the managed private forest land, the minister mentioned that he was considering things like taxation relief or a restructuring of taxation. Right now taxation is done, I believe, by the B.C. Assessment Authority, rather than being done on the product that comes off the land. How would the minister have a route into the B.C. Assessment Authority to somehow get a reduction in the value of the assessment that the B.C. Assessment Authority puts on a piece of land? Are there other taxation mechanisms that the minister can use?

Hon. D. Zirnhelt: It will be pursued as a public policy matter. Were it to become the policy of government, then all agencies of government would have to cooperate and see that it's done. Policy direction can be given to the taxation authority.

T. Nebbeling: I wasn't aware that the Minister of Forests had the authority to dictate to the B.C. Assessment Authority how to assess a piece of property. I thought that if that happened, it had to be done through legislation, just as we saw on Crown land or on B.C. Rail land, where the government indeed changed the assessment of B.C. Rail land from that of a non-paying contributor to a partial payer. I believe it had to go

[ Page 5247 ]

through the House; it was not an arbitrary decision that could be made by the minister. Would the minister agree with that? Maybe I'm wrong, and then I would like to be enlightened, because I don't want to make a mistake on that particular subject.

[2:45]

Hon. D. Zirnhelt: If, in the process of exploring the need for incentives and examining the taxation benefit that is to be there, we find out that there's need for policy or regulation or legislative change, then we can do that. It then becomes a matter of government policy. What I said was not that I as Minister of Forests had direct control over the B.C. Assessment Authority, but that government, if it made a regulation, or the Legislature, if it passed a law, would in fact give direction. But it's very early in that process.

T. Nebbeling: I appreciate the explanation. I have no doubt that this little exchange between the minister and myself is watched by some people who may have to live with the consequences of this new policy that may be introduced in the near future. I want to make sure of what we say here: what I say, and if I hear something from the minister, that I know exactly what the answer is.

So if there is a tax break that still has to be part of negotiations, if there's a policy change that makes life a little bit easier and that's still part of negotiations, if further regulations get imposed on the managed private forest land sector, then that, again, is still up for negotiation. The reason I'm saying that is that the industry -- the private managed forest land group -- has strongly opposed any further imposition of control by the government through regulations, through changing policy -- whatever they come up with.

They have opposed it, and at this point I have not heard anybody saying: "Well, we could accept new regulations, making our lives a little bit more miserable -- although we don't have a track record that deserves seeing our lives made a little bit more miserable -- as private land owners." There is going to be something opposite, then, to soften the kick -- if that's the right expression.

I'd like to get away from the managed private lands, then. Can the minister give me a quick rundown on how he, through his ministry, imposes rules, regulations and requirements on the unmanaged private forest lands?

Hon. D. Zirnhelt: This application of the Fish Protection Act to private land in municipalities and outside municipalities is the responsibility of the Minister of Environment. But from what I know, the Water Act,

section 7, and the Fish Protection Act are the two pieces of legislation that are being discussed by government with the stakeholders.

T. Nebbeling: I'm happy the minister has brought the Ministry of Environment into the estimates debate, because I have some questions related to the working relationship between the Ministry of Forests and the Ministry of Environment.

Before I do that, I would like to illustrate my concern about the so-called unmanaged private forest land operators -- not concern about the sector as a whole, but about some of the situations that I have been aware of. One in particular, funnily enough, is because of last week's little debate that we had on this subject.

A lady from 100 Mile House called me this morning. She had an illustration of why she can't understand how it makes any sense that we impose rules, regulations and demands on one sector of the private forest lands and not on another. She illustrated her concern by telling me about a piece of land -- 700 acres -- in the 100 Mile House area that was bought by a company from outside the area. The lady said it was a foreign company, but I don't know if that is true. I should say that this was a discussion over the phone. I have no paper on it, and I'm just telling you what this lady told me, to illustrate why there is a concern.

Anyhow, this company from outside the area bought this 700 acres. This year they clearcut the 700 acres in a matter of four or five months -- according to this lady -- left a large amount of timber on the land, and the company left. How, if this is a true story . . . ?

Well, first of all, let me ask a question. Could this kind of scenario happen? Could somebody buy a piece of land, harvest the timber, take it out, not comply with the rules and regulations of how much timber you can leave on the ground, and disappear again, because it's not a B.C. company? Is that a possible scenario?

Hon. D. Zirnhelt: Yes, that can happen and does happen on unmanaged forest land.

T. Nebbeling: So here is a scenario where somebody can come in and clearly rape the land. But nobody, regardless of whether it is private land or Crown land, wants to see that kind of rape happen to the land, and certainly nobody wants to see the land being devastated and just left, the perpetrators of the devastation gone.

How is it, then, that the minister can justify -- say, "Yes, that can happen" -- that type of forest activity? At the same time, people who own their land and have been shown to be responsible have agreed to work within certain terms. How is it justified to make that group's lives more miserable and let the other group just go on, as the minister just said? I don't see the rationale for it.

If there is indeed a need for some policing and some regulations, I put it to the minister that it is much more in the area of the non- or unmanaged forest land and that some proper litigation or legislation may be appropriate in that area. But to go after the group that has proven beyond a shadow of a doubt that they are responsible harvest companies, that they actually make money compared to most companies that work on Crown land and don't . . . . Why not? Because of the overregulation. Now you're going to make the life of that responsible harvester miserable, and at the same time you let perpetrators of scandalous practices on private land go on. And you say: "Yes, that's the way it is."

I think the priority of the minister on this issue is right. I hope, considering the tone in which we speak now, that he may reconsider which group to go after. Don't go after good corporate citizens. Go after violators of all the environmental principles we believe in here in this province, which we have been trying to introduce over the last ten, 15 years -- and successfully, I may say, to a large extent.

Can the minister explain why he would not feel the need -- or does he have the authority -- to go after the second group who, I believe, are violators of our principles, rather than try to overregulate another group that is already practising many of the regulations on a voluntary basis?

Hon. D. Zirnhelt: A simple answer to the member is that the legislation only allows us to deal with managed private forest land. What the member is talking about is extending . . . he seems to be supporting the idea of

extend-

[ Page 5248 ]

ing the attack to unmanaged land -- in his words, putting regulations on the unmanaged land.

Let me just explain that there has been an advantage, a financial advantage, for people being in the managed forest land classification. Those lands were purportedly being managed as forests, and we said we would include some measure of the code applying to those lands.

We did not say -- as the member suggests to private forest land owners and, by inference, himself -- that we would go after the unmanaged land. In my view, there is a lot of land that has been put in the farmland classification that is not touched and that we wouldn't propose to touch. You could make the argument of somebody who clears land and leaves it in a semi-cleared state that there's virtually no difference between rough pasture and clearcut-logged, unstumped forest land. We have set a limited extension of the code to private managed forest lands. That's the policy issue.

T. Nebbeling: I'll try to get a twist around what the minister just said. He's comparing it with farmland, where you leave some of the material that could have been harvested and nobody would think of going after that -- and I agree with him. If there were rules and regulations today on farmlands -- how wide the gullies had to be between rows of beans, that these gullies had to be free of grass or any other material and that all kinds of herbicides could not be used -- then maybe that comparison would make sense. You don't do that.

It doesn't make sense at all to me, when there is a provincial system of regulation in place that is there to protect fish habitats -- which will be taken care of through Bill 19, as the minister said. But all the other values, like devastating land by leaving timber on the land . . . . This has proven to be devastating for the land in the long run. It may become habitat for beetles and may become a source of other infestations that can happen on the land, thereby making the land worthless.

We have a regulated industry. I believe that on private forest land, you cannot impose the same rules and regulations that you would impose on Crown land. I can understand that; you own that land, so you impose the rules. But at the same time, I would not think, at this time in the nineties, that any individual who happens to have a piece of land which has a forest that is harvestable can just continue to practise the practices of the forties, the fifties and the sixties.

I believe that goes against the common good, and as long as it goes against the common good, then I think the government has a way of dealing with that -- or should have a way of dealing with that. However, saying we do not have that, and, at the same time, people who have been shown to be responsible corporate citizens on these so-called managed private forest lands . . . . To make demands on these lands even more stringent and more complicated doesn't make sense to me, either.

I think there is something fundamentally wrong with putting more financial pressure and more rules and regulations on the people who, in the past, have said: "Hey, we will manage our lands in a responsible manner." At the same time government turns around and says: "Yes, sure, we abhor the practices of the sixties when it came to the forest industry; we abhor the practices of the fifties and the sixties when it came to land-based management; but at the same time we're going to allow certain landowners to do exactly what they want." It just doesn't make sense to me, minister.

I think that is where the real problem lies, rather than trying to make life more difficult for a group of people that have been responsible.

I don't know if you want to respond to that. My colleague from the Okanagan would like to ask some questions on the private lands, as well.

Hon. D. Zirnhelt: Just a quick response. Yes, the bad actors of the private managed forest land . . . . The good ones get judged by the bad. There are two notable examples: the Beaumont lands and the San Juan Islands -- large pieces of managed private land where people did conduct unacceptable practices. It can happen and could happen, and therefore there is a need for some regulation. I just suggest that before we make a judgment about how onerous any regulation is, we wait and see the results of the negotiation.

[3:00]

A. Sanders: I think that the minister has brought up a very important aspect of forest management. In my riding of Okanagan-Vernon, this will especially become more important as areas of logging and areas of residential settings become integrated.

One of the things the minister mentioned that I think needs to be clarified . . . . Both of us being farmers, I think we can enter into this debate. He mentioned the difference between rough pasture and areas of logging and timber left on the ground. There is one very critical difference, and that is the difference of slope. In terms of looking at management practices for pastures left in a rough form, people who are doing an agricultural practice are not going to be doing it on a 35-degree slope most of the time,

whereas people who are logging may be. I think that is the critical difference that I want to point out.

I want to bring up an issue in my riding which is directly the result of a privately owned area that was logged by the owner. I've been dealing with this problem over the last year and a bit as MLA, but I was also involved in it before. The incident started in 1994. As the MLA for the area, specifically what I have learned from this particular incident is that I have some concerns that there aren't policies for private logging that are comprehensive and that promote safety for residential property in my community. That's a very large concern in my area.

The second one is the concern of slope restriction and whether or not slope restriction, where residences are located below, should be a factor in terms of people logging on private land.

The third is strict regulation with respect to channelling and restorative work, and the need on private land for that kind of work to be done when, again, there are residential areas below the areas being logged.

The fourth one is whether or not government should be looking at some kind of legislation to control clearcutting on private land, especially when it integrates and interdigitates with the residential property of people below.

For the benefit of the minister, I'd just like to give a little bit of a rundown about this particular incident in the Okanagan-Vernon riding. In the fall of 1994, a logging site owned by a private individual was destined to be logged, and it was situated directly above a residential group of homes in an area called Lavington. Basically, there was quite a controversy over the plans to log this area. It was felt by the residents who lived there and by people who were in the forest industry that the slope was too great for it to be logged and that it should be left.

Below the area that was to be logged are about 50 residents, and they occupy private residences in a subdivision called Brewer Road. Basically, one of our local logging companies, Riverside Forest Products, agreed to take over the operation and log the property in accordance with the Forest

[ Page 5249 ]

Practices Code. At that time, because a bona fide logging group, in accordance with the Forest Practices Code, was going to log this private land on behalf of the owner, all parties were satisfied and the land was selectively logged. Waterways were rechannelled, and roadbeds were put to rest. So in 1994, this was the scenario on the land above the Brewer Road subdivision.

The following fall, in 1995, the private owner decided that he would relog the property, and he removed all of the available timber from that piece of property -- against numerous protests from the citizens who resided in the Brewer Road subdivision. There was no rechannelling of waterways and there was no stabilization of roadbeds, and the neighbours in that neighbourhood were very fearful that they were going to have some problems with fallout from what was a very tenuous situation on a very steep slope above their residential property. What happened, very soon after the residents -- who are not foresters -- had predicted it, was a very significant mud slide into the subdivision.

One of those affected was the Richardson family, and I did visit their home. There was a very large mud slide that came up to the level of the second floor in their home, took out their balcony, their patio and several of the freestanding beams that were holding the patio up. Their children were in the basement in their bedrooms. Now, if that window had broken or had been open at the time, those children, I can guarantee you, would not be here -- and that is a very professional opinion, not my own.

These people did qualify for the provincial emergency program. But for those of us who have become familiar with that program by having to activate it, what we find is that we are liable for 20 percent of the total costs. What will happen if you have $2 million worth of repairs needed in rechannelling of waterways, etc., is that a typical family in a residence will have a very significant bill for an event that they were completely not responsible for and had in fact predicted would occur.

Basically, what happened in this area was a very significant mud slide due to logging on private land above a subdivision. The loss of home value for all of the residents who live in this subdivision . . . . There were none of these people . . . . Many of them sort of break between being young families with the first home that they built and older people who have built retirement homes there. They are now basically in a circumstance where their property value is next to nothing.

This year we had more problems, as probably could have been expected, because of the increased groundwater. What has been found in the area this year, although there has not been any slip this year, is that there is no stabilization in the slope. There are cracks on the logging roads, mud slippage, accumulation of water and all the potential for a disaster. According to Forestry personnel, when the root systems die, as they are going to over the next year or two, this will be an even more precarious time, because the root systems are now holding the area from slipping.

Once we do not have any root system -- around two years after the logging -- then these people could potentially be in an even more precarious circumstance -- from the point of view of personal safety, let alone the financial ruin that many of them feel they have been subjected to.

What I am interested in are a couple of things from the minister. First of all, has the minister, either through the Ministry of Environment or through other inquiries, been aware of or ever heard of the Brewer Road subdivision and the problems in Okanagan-Vernon with respect to this particular logging on private land?

Hon. D. Zirnhelt: I have no detailed recollection. If it was brought to my attention, I think it probably preceded my term as Minister of Forests. But similar situations have been brought to my attention in the past. I am well aware of the dilemma around what happens when a subdivision is approved next to another piece of land on which the rules, local and provincial, could allow for logging. I'm well aware of the dilemma that puts us in. I'm also aware of how difficult it is, and how expensive and complicated it would be, to regulate many, many small parcels of private land.

A. Sanders: We had Mr. Ted Fuller from the Ministry of Environment out this year to look at the Brewer Road subdivision and the slope that was logged above it. He spent two weeks visiting the sites, and photos were taken of the overall condition of the hillside. There was a major increase in the width of the cracks along the roadbeds; these cracks have gone from inches wide last year to feet wide this year. Water was collecting in the landing site, and large boulders were poised to come down on the subdivision if the roadbed does give way.

His instruction to us in the area was that there was very little the ministry or government could do to enforce the fixing up of the logging sites because of the conundrum of private land and the implications therein. He also said that they could do an evaluation of slope stability. But again, he could not give these individuals much promise as to what responsibility we as government have. I understand the implications of cost in the repair of such sites, and I was interested in the one that we had looked at as a model for what had occurred in Vernon -- the Chase Creek area.

Forest Renewal had done some restoration of private land that had been clearcut there, and my interest here is: is this something that has been done elsewhere or could be applied to areas such as this, where we really are making private citizens face a tremendous responsibility that I think is government's? Somehow, in a moral or intuitive way, it doesn't feel right that there isn't something we can do for these people. I'm just interested in whether the minister is aware of the Chase Creek site and maybe what the difference is between the Vernon location and the slides at the Chase Creek site.

Is there any comparison there?

Hon. D. Zirnhelt: Well, I don't know the difference between the Chase Creek situation and the one that you're referring to, but I can look at it and see. There may be something in the Chase Creek model that would inform a more global approach to this. But we would have to work with municipalities, because this is not just a forestry issue. It really does deal with zoning and buffers between residential land and rural uses.

Suffice it to say that where someone is negligent, it's my understanding that the law allows people to take actions against a negligent party where there is some major catastrophe like a slide. Government's role is always difficult to figure out -- where we are between private parties. I would just say that my own personal concern is that a lot more work needs to be done to empower local government to control logging practices on private land, as well, where it is in the interests of the civilized and inhabited area.

A. Sanders: Is there any will in the ministry to work with municipalities to advise them on how they could be directed

[ Page 5250 ]

to have this power or to work with the Ministry of Forests? Is there any will or interest in the ministry at this time to look at these kinds of issues?

Hon. D. Zirnhelt: It would take will from the municipalities, as well, to get involved in that. There is certainly an interest. The amount of work that has been done on this . . . . There has been some in the past, and every time a situation comes up, a little more work is done on it. But it is a huge field. If there is an inkling of interest by the municipalities, then we would like to see it expressed in terms of some resolution or something from UBCM.

I'm not aware that they have indicated an interest in being involved in the dialogue, but I think it's something we need to look at, bearing in mind all the caveats that need to be there -- that to administer some kind of regulation on all private land is problematic. It's a big, big administrative chore and has a big price tag on it.

[3:15]

A. Sanders: In talking with the municipalities, my understanding has been that they don't have, within their Municipal Act, the authority to make stringent enough legislation that could provide them with protection in this circumstance. Now, whether that is a complete . . . . That's my

interpretation of what they've told me, and I'd be very interested in the minister's response to that.

I think that what is concerning me with respect to this particular issue is that we in fact put individual citizens so much at risk in the circumstance that I've described, not just from a personal tragedy point of view but also from a financial disaster point of view. To me, it seems so ironic that we have a code several metres high in paper outlining what can be done in logging Crown land, yet people can log within ten kilometres of a major town or city, right above a subdivision that has been there for quite some time.

These people have absolutely no protection from us as government to really provide them with the security that they can build a house there. Notwithstanding natural disaster, government does not protect them in some way from fallout in terms of things that can occur because of land that's adjacent to them.

I would be interested to know from the minister if he would, on my behalf, look into the Brewer Road incident and see if he feels that things were appropriately handled by the various ministries in terms of the advice given to these people.

Hon. D. Zirnhelt: I would be pleased to look into it and identify problems that are there that stop agencies -- local or provincial -- from acting to prevent this sort of thing.

A. Sanders: One thing is very important, and I just want to bring it up because the minister had mentioned it. When we're looking at either class action or individual litigation against private land owners who have clearcut and caused subsequent problems to property -- I've been involved with a number of these in the Vernon area -- what I'm finding, very unfortunately, is that if the loss is not over several hundred thousands of dollars in terms of the damage done, it is so difficult to prove that it wasn't the excessive groundwater resulting from heavy snowpack or some other climatic factor but was truly the clearcut logging only.

Many of the individuals who have been in these circumstances do not proceed forward, because they are basically one- or two-income families and often would not have the financial ability to move forward on a suit of this magnitude against the private land owner who has logged the land. So although in our system we do have the ability to legitimately sue such an individual, my experience with this -- which is getting to be quite significant because of the number of cases -- is that in order to prove it, it's very difficult. These people, because of that, are often again at a loss and therefore left incapable of any kind of settlement in terms of their circumstance.

If the minister would look into this on behalf of my constituency and ascertain that things have been done to the best of the ability for these individuals, I would be most appreciative.

Again, from my point of view and from what I have certainly seen in the Vernon area, I have some concerns that government at the provincial level -- either by facilitating municipalities or by strengthening provincial legislation -- needs to look into and really think carefully about the slope restrictions, the regulations for channelling and restorative work, the ability to clearcut on private land and some kind of comprehensive plan that would promote safety in residential property that would be affected by logging on private land.

I'll turn this back over to my colleague from West Vancouver-Garibaldi.

Hon. D. Zirnhelt: I think we've been debating and discussing a very complex subject area. There does need to be greater consensus amongst the population. But it is quite possible that government could contemplate enabling municipalities to do that if they feel the Municipal Act isn't strong enough. But it would require that they then, in effect, say that the land would have to be zoned for managed forest land. Then we would need a regulatory regime that's being resisted somewhat by private managed forest owners.

But I believe, when we're talking about quarter-sections or sections of land, that it's well within the person's ability to afford to manage it right by putting in the proper kind of management. It's an area where there are some powers in the Municipal Act, although they feel it isn't strong enough. But we would like to see some initiative from the local level of government. So I just suggest to you that you may communicate with them. Even in the absence of the provincial organization making a suggestion, perhaps they can.

T. Nebbeling: Two quick points. I would like to make sure it is on record that I'm not in support of putting more regulation onto the managed private forest land owners in order to have justification to come up with some new direction for how we can deal with the mismanagement, from time to time, on so-called unmanaged private forest land. I say this because the way the minister was closing could have been interpreted that I was actually supporting his intent. But I'm not.

So, that being on the record, I'd like to go into another area. That is the stumpage issue. Last week I asked the minister, considering that there's so much turmoil in this province because of cost to the industry -- to small operators, big operators, it doesn't matter . . . . We look, for example, at the situation in Terrace, where the pulp mill pays stumpage fees that are considerably out of line with the product that it brings in. They pay stumpage as if it's a high-grade log; at the same time, 60 percent of that log may well disappear into the pulp mill.

At the time that I brought this up, the minister responded to my question as to whether there was any discussion on how we could deal with this by the following statement: "I would argue that only a fool would ask for an overhaul of the stumpage system, when we just got an agreement with the

[ Page 5251 ]

U.S. Only a fool would ask for it. And I'm not a fool, so I wouldn't re-evaluate the system." I'm really surprised to hear the minister say that. I was quite taken aback by his statement. But, you know, I have to give him not credit but the benefit of the doubt, because I didn't have that particular file with me.

But this weekend I went to my papers and here it is -- March 20, 1997, transaction-based timber pricing. The whole principle of the transaction-based timber pricing is to "implement new interior market-based log rates, change rates to reflect market value, construct database and pricing models using auction data for the Crown corporation sales, incorporate chips into the system," and all kinds of elements to refuse stumpage system . . . using either option 1 or 2 . . . .

So for the minister to say only a fool would be looking at that whole system . . . . It's quite surprising to be described as a fool and then to find out that the minister is very much involved, in his ministry, in trying to come up with a stumpage system that will indeed allow companies to stay in business rather than being run out of business, as is happening in Terrace and near Rupert.

Now that I have talked to him about this draft that I have here from March 20, 1997, will the minister agree that it was not just such a foolish question to ask what the government is doing right now to bring some common sense to the stumpage system?

Hon. D. Zirnhelt: I was not about to be foolish enough to suggest that a major overhaul of the stumpage system, which implied that we would return to the days of implied subsidy, was at all on. There is continuing . . . .

The example you led with was the Terrace area, where there have been some technical adjustments to the stumpage system to reflect the reality of price and the cost of logging. The stumpage system can accommodate those kinds of technical fixes. There's a process for doing that: the interior and coast appraisal system. There are committees that advise the government on that.

I wanted to lay to rest any suggestion that a major overhaul could be accomplished without taking some time to do it carefully and do it in a way that was mindful of the fact that the Americans will look upon any change that reduces costs to the point of subsidizing and challenge it. We would not want to expose the industry to that. It would be foolish to expose industry and the people in British Columbia to that kind of possible challenge.

T. Nebbeling: My words were: "Is the minister at this time working on a re-evaluation of the stumpage system?" There was no talk about a major overhaul, no dramatic changes, no going back to the old style. It was a simple question. The only response I got from the minister was -- and he took the words back later: "I would argue that only a fool would ask this question."

Now that I've got my file here, I'd like to ask some questions on this so-called new approach. Knowing that throughout this province -- and it doesn't matter if I'm on the coast, in the northwest, in the interior, the Kootenays, or Boundary -- when you talk to the industry people there, and that includes the workers, there's a tremendous amount of uncertainty about if indeed these people will be in business or will have a job in the near future because of the excessive cost that the government has imposed on the forest industry through their system.

Whenever questions are being asked, like "Is there any way we can do something about this . . . ? " Why let whole regions go under and see thousands of people out of work because the stumpage is too high, because the Forest Practices Code is excessive? The answer is always: "Sorry, but we can't touch that. We have the softwood lumber deal and countervail, and if we touch the stumpage, there is no way that we will get away with it." And we start all over again, just as the minister said.

It should be noted that the Premier has from time to time been speaking to groups, where he, as the Premier, certainly didn't hesitate to say that there may be -- never a guarantee, but there may be -- some way of dealing with it. The Premier has from time to time said that in order to make the jobs and timber accord work, there may be a way of getting around stumpage in certain areas.

I believe that prior to the jobs and timber accord, a delegation was sent to Washington to talk to the parties over there, to inform them that there may be something in the jobs and timber accord that could be construed as a subsidy, and as a consequence, the countervail softwood lumber deal would potentially be under attack again. So the club of the softwood lumber deal is the real evil. It is the Americans. They're the evil ones because they make us do it.

[3:30]

I don't believe this particular argument anymore. Furthermore, I believe that a company in Terrace, West Fraser Mills, was actually promised, in order for them to open again -- after they closed down because they had a losing operation -- that that mill was going to be given some relief on stumpage. The mill did open again. If I have to go by the statement made by the minister on Friday, that commitment would never be honoured -- although I think it will be honoured. Can the minister maybe, now that the cat is out of the bag -- and that is that the government is trying to find a way; and I compliment them for that, by the way -- to get around this whole problem . . . ?

In this draft there are a number of statements that show that it can be done. Is the minister considering some changes at this point -- maybe not to be implemented tomorrow but in the very near future -- in order to see the forest industry indeed come back on a healthy footing, in part because of the stumpage being realistic and based on the market?

Hon. D. Zirnhelt: In the case of West Fraser, in the Kispiox and Kalum areas, there were technical changes that recognized the value of pulp logs, transportation conditions and points of manufacturing, but it was not a change in the system.

Any changes we've contemplated are consistent with the current system. When a delegation went to the United States, it was not for the purposes of saying that something in the jobs and timber accord might be construed as subsidy -- quite the contrary. We said that there would be nothing in the jobs and timber accord that would be a subsidy. What we are able to do is deal with marginal changes in the stumpage that make it more sensitive to market conditions. We are prepared to do that. We have done that and will continue to do that. Aspects of the stumpage calculations are always under review.

Anything more major than that would probably be the subject of the next five-year softwood lumber agreement with the United States, and at some point negotiations would have to be undertaken along that line. We're not into that at the moment, so the answer to your question is that we are always considering changes that make the system more reflective of the market insofar as that system can do that.

[ Page 5252 ]

T. Nebbeling: Could the minister, then, tell me what changes are currently used to find that relief for some companies that have not been able to operate in the past because of the stumpage?

Hon. D. Zirnhelt: Two of the mechanisms would be internal work that the ministry does in the revenue branch, where we become aware of irregularities in the stumpage system and we may introduce some changes. Those changes, for the most part, go through the normal mechanism, which is the interior and coastal appraisal advisory committees. Parties who feel that they have not been dealt with fairly and that the system has not been operated in a consistent manner can take those changes to those committees.

T. Nebbeling: When West Fraser opened again, were they not given some of these changes or given notice of what these changes were going to be in order to feel that they could operate their mill in a financial manner that was not going to cost them? They would not necessarily make a profit, but at least they would not have to put money into the operation on a monthly basis. I would like to hear from the minister that these are the changes that have been introduced into the system.

Hon. D. Zirnhelt: When that particular situation happened, there had been a long dialogue between government, West Fraser and other companies. The Job Protection Commission was involved with respect to the cut control issue. They wanted to increase employment in some of their southern licences in exchange for some relief in northern licences. They knew at the time they opened that we were looking at the manufacturing zone and selling price zone issues in those two timber supply areas. On the basis of that, they were satisfied that government was addressing the issue; they were prepared to open. As it has turned out, due process took place, and everything worked out fine.

T. Nebbeling: When the minister says that everything worked out fine, no financial concessions were made as far as stumpage is concerned, and the company is back in a good operating position and no longer has the loss that drove them to shut down in the first place.

Hon. D. Zirnhelt: What happened was that there were technical changes made which don't constitute any concession to the company. They were changes that were acceptable to the industry through the stumpage appraisal committees. We have no information at the moment about the financial situation of the company. But they are operating and undertook to operate, based on some of those technical adjustments.

T. Nebbeling: Could the minister explain what the system is today that established the stumpage rates for the coast and for the interior through the value assessment? I believe that is the term for the system. Could you give me a brief overview of what the difference is on the coast compared to the interior?

Hon. D. Zirnhelt: In both cases, Statistics Canada lumber price indices drive the prices. In the case of the interior, it's lumber prices that generate the stumpage. At the coast, there is some log market information -- a relative price of logs -- that can be calculated in, because there is a market that can be monitored.

T. Nebbeling: When the minister says that Canadian lumber prices determine the stumpage, I understand that the price of that lumber is used to come to a base assessment. But under the comparative-value pricing, there are other elements, I believe, that come into play. I really do not have a good hold, a good understanding of how that system works. I would like to ask the minister to give me the formula that has been used up to now, based on lumber prices and log prices in other areas. What is the formula that established what, today, the industry faces as stumpage assessment?

Hon. D. Zirnhelt: Well, I was hoping that there would be some easy but more complicated explanation than the one that we give, but we can offer the member a detailed explanation. The information is all public in the appraisal manuals, but it is complicated, and there are hundreds of pages involved in it. We can offer you a detailed technical briefing on it.

The mechanics of setting the stumpage rate is fairly simple. We do an average based on lumber prices, and as you know, it's measured by Stats Canada. Then the stumpage rate for each cutting permit is determined, and that is set at the average, if the permit has average timber. The rate for specific timber is higher or lower than the average, if the timber in the permit is more or less valuable than the average. Then there are mechanics for that, but they're quite complex. We could table the details with you, but there is no easily digestible explanation or

summary of all the many appraisal manuals that are out there.

T. Nebbeling: I agree with the minister that it is not an easy concept to comprehend, because I've tried it, and that's the reason I'm asking if there is some simple definition that says: "Well, this is what we do. We set a target based on certain numbers, and then we can come up with an amount."

The reason I'm asking is that I think it is important for me to understand this. I am obviously very much concerned about what's happening in this province in the forest industry and about the unfair burden put on communities because of the many job losses in communities, in part because of companies not being willing to go on. They shut down, which puts people out of work, which puts families out of income.

I really believe, now that I have seen a draft of a document by this government, that they are considering some changes to accommodate the lack of the role of the market today . . . to play a role in determining what stumpage fees should really reflect. When I talk about the market, I'm talking about the global market and the value of the product that gets produced out of the timber that goes into the mill.

So it is important for me to get at least some comprehension of what, indeed, the factors are and how they are used to come to those stumpage fees, which I believe are set every three months. There must be some fairly simple basis to say: "Well, we take this, we take this and we take this. These three components together make up so much, which we spread over the annual allowable cut." I don't know, maybe it's over the production of a company. I don't know where you find that data. But if something of that nature is in place, I would like the minister to at least try to share that with me.

Then and only then will I be able to look at some of the other directions that may be up for consideration, and if they make sense and if they can indeed make the difference between what we see happening today and what we can't afford to see go on much longer -- and that is the undermining of the economic viability of the industry and the people working in that industry.

Hon. D. Zirnhelt: I would suggest that if the member wanted the system to go to market logs, then we would create

[ Page 5253 ]

an era of instability where logs would flow to and from and in and out of communities in massive form and create chaos. That's why we've opted for a calculated stumpage system, a tenure system that allows for logs to be assigned to communities, for the most part, in manufacturing.

But let me tell you that the way of figuring stumpage on the coast is by taking log value and subtracting logging costs and transport costs. In the interior, we take the lumber in chip value and subtract the sawmilling costs, logging costs and transport costs, and get average figures. If their costs are lower than average, then their stumpage might be a little bit higher, or vice versa.

[3:45]

T. Nebbeling: Let me first of all state clearly that I am not making any suggestions to the minister as to how we can tackle that whole issue on stumpage. The minister just stated that if we went with a certain direction it would create uncertainty and instability. I think what we see happening today has created uncertainty and instability with the existing system. What I'm looking for is a remedial type of process that will get certainty back into the lives of people that work in the forest industry and whose livelihood depends on an income from that forest industry. So stability and certainty is what I'm looking for.

Having said that, I also believe that if we cannot ultimately come up with a concept -- and I'm not giving you the elements of the concept -- that is based on a fair assessment, an assessment that truly will reflect what that harvested log can accommodate in government costs . . . . Add to that salaries, transportation and the treatment of the log, and at the end of that process, once it is out of the mill, the product produced must have a positive financial consequence rather than a negative one, as we see now. How we're going to find that concept, I don't know.

However, I think there was some talk in the provincial government, in the Ministry of Forests. It may well have been the stumpage committee that worked on the jobs and timber accord working group strategy. In that particular committee there has been a dialogue taking place, where people are looking at options for how we can change the system in such a manner that the Americans will not have an excuse to start all over again with a countervail. That's what I'm after. I'm after some information from the minister about what has been discussed within the ministry.

There has been a dialogue happening, because that's the reason there was a report on March 20, 1997, specifically and exclusively on stumpage.

I will pursue this one a little bit longer, because I think the minister must have some idea of where it is going. I think it is imperative for the people in this province who live off the forest industry right now to know that there is a little bit of light at the end of the tunnel. Up to now, it has been a very bleak, bleak summer. That bleak summer is in part because people do not have a job; it's in part because they don't know whether they will have a job tomorrow. It is up to us to make sure that if there are changes possible, we dare to talk about it and not try to keep it behind closed doors or let people suffer even more.

The people in the northwest . . . . Just think what they're going through there right now: 650 people were laid off last week in the pulp mill. In Terrace, Smithers, Hazelton, Carnaby and Stewart, they expect layoffs this week, next week and the following week. That is a total of well over 2,400 people. Why? If you talk to the companies, it's the Forest Practices Code, but the government is trying to deal with that. It is stumpage. It doesn't work.

It doesn't make any sense to me to say: "You may be going under. You may be going broke. You may be going bankrupt. You may be out of a job. You may not be able to pay your mortgage. You better bring the key to your car back to the bank." It doesn't make sense to me if the only reason is that the Americans dictate stumpage. It doesn't make sense to me. If there are answers to it, and I believe there are answers to it, I would like to see the minister start sharing that with me and, by doing that, sharing it with everybody in the province.

Could the minister give me any direction on how his stumpage group -- if it was the stumpage group that worked for a while under the umbrella of preparing the jobs and timber accord -- has been discussing new ways of how stumpage in the future can be assessed without doing the damage it is doing today, and how that process will happen to get to there?

Hon. D. Zirnhelt: I think it's fair to say that there were a number of options examined. It was agreed that something called transaction-based methods couldn't be implemented in the short term, and so it was rejected at this time.

T. Nebbeling: If it was rejected, then I don't understand why there is a short-term action plan here, from zero to 12 months, starting on March 20, 1997. Can the minister explain why there's an action plan when he says nothing came out of the discussions?

Hon. D. Zirnhelt: It seems to me that if you're suggesting some options and you look at the actions necessary, then you find out what the reactions are. Maybe based on the reactions to the actions, you don't do it.

T. Nebbeling: Who has made the decision, then, not to do it -- whatever "it" means? Here is a group that comes together and says: "Right now we have a stumpage system that's killing this province; it's killing its well-being, its people, its opportunities. It creates a lack of future for youth." We've got a system of comparative-value pricing. That's what we've got now. This group gets together -- and I take it that these are experts . . . . Maybe the first question I should ask the minister is: who were the people on the stumpage group? I would like that answered.

That group says: "Listen, there's another way of doing it. There is what we call a transaction-based timber-pricing approach. That transaction-based timber-pricing approach will give us the following" -- and there's a number of possibilities. There are some notes with it on how it will work. Because of that, the short-term plan goes on well after the 12 months. We go into the 12 to 24 months, and we achieve the following goals.

I think the minister is not giving me or the people in this province the true goods when it comes to the changes that are being contemplated. I think the people of this province deserve that. So for the minister now to say, "Well, we wrote the plan, and it doesn't work, so we don't talk about it anymore . . . . "

Interjection.

T. Nebbeling: I'm happy the minister got instructions from the House Leader. I hope the instructions were to just put it on the table. After all, had the minister not called me a fool last week, which I asked him to take back, because asking if there was something of an overview in place . . . .

[ Page 5254 ]

Hon. D. Zirnhelt: Point of order, hon. Chair. The minister didn't call you a fool. If you examine the record today, you will find out that he didn't want to be called a fool by someone else, either.

The Chair: I'm sure that the member appreciates the comments made by the minister. The minister did retract his use of phrases if there were any implication taken by the hon. member. If the member reads the Blues , that's there.

T. Nebbeling: Thank you, Madam Chair.

Interjection.

T. Nebbeling: He tried to fool me.

Anyhow, the point is that when I asked if there was anything happening in that very serious component of the forest industry: "Only a fool would ask a question like that." Now I can translate it my way. The minister indeed expressed afterwards that he had no intention of calling me a fool, and I really appreciated that. Nor did I call the minister a fool, and I want that to be on the record, as well, because I would not unjustifiably name people that.

Having said that, I still come back to the fact that the minister is working together with a group trying to change the system. He has a plan, and I'm asking him if he will at least share with the people of this province, for their consideration, through this estimate, what this plan has done. What are the components? Maybe, rather than say that there's a plan, what are the elements that the stumpage group has looked at and rejected? If I can believe the minister, because of his statement, they looked at it and it didn't do anything, so it is not there. Can the minister give us these elements that were rejected?

Hon. D. Zirnhelt: The committee that the member is referring to was a committee that looked at a number of options. We have not decided on implementing any of the options that they have recommended.

I have to say that when the member prefaces his comments before he reads from a document and suggests that the document says, "Stumpage is killing the province," or is somehow making it . . . .

Interjection.

Hon. D. Zirnhelt: Well, those were words that were said. I don't want the record to read in any way that a document that came out of any timber jobs discussions would have language like that in it. I think it's overstatement. There are parts of the industry that are in the black. There are adjustments. There are difficulties with the softwood lumber quotas, and that's creating problems. We are, as a government, responsibly addressing costs associated with the code. We are in the process of fine-tuning the stumpage system through appropriate processes. There's nothing more complicated than that.

To say there is something of a major overhaul of the stumpage system is wrong; I want to lay that to rest. I said it would be foolish to do that. I don't think I should have to repeat that. But we are looking at technical adjustments on a continuing basis. The intent of that would be to reflect where the stumpage value can take into account the market value of the products that are produced from our trees.

T. Nebbeling: I'm going to stick to stumpage rather than what has been said, how it has been said, where it was said and so on. One of the problems that really caused mills to close down in the northwest -- and the minister knows this -- was the fact that the type of timber that was harvested in that area was extremely decadent, containing a lot of inferior wood. As a consequence, it was not suitable for the sawmills. The price of stumpage that was charged against that wood was based on the assumption that the log that came into the yard was indeed a sawmill log, which means of a much higher value.

Once it was determined that 40, 50 and up to 60 percent of the sawlog was pulp product, the cost of that log was still assessed as a whole log, with a high-grade sawmill stumpage.

Can the minister tell me if there is any consideration given right now to pulp logs or logs that come in that have more than, say, 50 percent of their contents in the form of pulp -- if there is indeed a different type of scaling opportunity available today to give these mills the opportunity right now to get the benefit rather than having to wait until some committee looks at this whole issue from zero to 24 months?

[4:00]

Hon. D. Zirnhelt: We are considering a proposal called the Repap proposal, which would consider whole logs as though they were brought in and chipped and not run through a sawmill. We're considering that; that is a technical adjustment.

But in case people get the wrong idea, about 20 to 25 percent of the fibre in the interior comes in at minimum stumpage, at 25 cents; there's a large number of those logs that come in at minimum stumpage. So to suggest that we're overcharging for pulp logs, I think, would be misleading. Some people would suggest that the industry would be more profitable and more viable if we gave away or subsidized the cost of the logs, so they can then turn them into jobs. I think you have to be careful, when you start leading in this direction, that we're not undermining the value of the public resource to the point of it being a negative.

T. Nebbeling: Obviously, I'm not in any way, shape or form indicating that we would work towards a negative system. But the minister is saying right now that 22 percent of the timber that comes to a pulp mill comes in a salvage grade. I believe that's the point you're trying to make.

But when West Fraser gets its logs from its licensed areas, is the minister saying that 22 percent of the lumber that comes from their own licence is considered to be salvage? What would then, in return, mean a 25 cents stumpage charge?

Hon. D. Zirnhelt: I'm not sure what your question was, but let me rephrase what I said: 20 to 25 percent, between a fifth and a quarter of the logs in the interior, come in at 25 cents, which is the minimum statutory price for logs. I didn't say they were salvage logs. I said they were pulp logs. I said pulp logs are valued at 25 cents a cubic metre.

T. Nebbeling: I shouldn't have said salvage; it is pulp logs. But it is a log that is inferior and for that reason only usable for . . . . But at the same time, in that same operation up to 75 percent of logs come in that are scaled according to sawmill logs. Portions of a particular log will not be used as a sawmill log. They will be used as pulp logs, because they have to cut 8-, 6-, 4- or 12-foot sections out of that log because it is rotten. They still get charged at that high grade.

So that's part of the problems, I believe, that have been caused in the northwest, at least -- serious problems with West Fraser and other operators -- because that's the type of timber they get out of their timber licences.

[ Page 5255 ]

So is the minister looking, then, at a way to increase the percentage of pulp log that comes in, by re-evaluating the existing stands that get harvested, whereby a percentage of the logs that come in are indeed not suitable for saw purposes? Is the minister looking at a system where the so-called rotten part of a log . . . ? A 30-foot log may have 12 feet of good sawlog material. It will be graded as a 30-foot sawlog, and then the rest of the log will go and disappear in the pulp mill. Is there a way to now say we will take that 30-foot log, and 12 feet will be for the sawmill, so that it gets the high grade, and the rest gets treated as the 25-cent category?

Hon. D. Zirnhelt: You really would be talking about the grading system. We do make changes to the grading system from time to time. But basically, in general terms, what you describe is the Repap proposal as I understand it. That's under active consideration right now. It isn't to change the stumpage system, but it is a technical change. I mean, it's assuming that the pulp logs come in and are chipped, as opposed to being run through the sawmill. That would make a significant change up there. But the reason it goes through committees is because what you do in one area may affect what happens in another area. So there has to be some degree of industry consensus on any change.

T. Nebbeling: I'm happy to hear that indeed the solution is in grading, and I understand. But the bottom line for me is that there will be less stumpage charged for a product that has never justified the amount collected up to now. If this is indeed part of the Repap solution, would that mean that, if this system is going to be used for Repap, it will apply to the other operators as well? Or will this just be exclusively for Repap? Or do we see a real change in the whole way grading happens in this province?

Hon. D. Zirnhelt: I named the system or the proposal because it was then Repap, now Skeena Cellulose. When we talk about the Repap proposal, any proposal . . . . That was just the origin of the proposal. Any change to the system would apply, based on the timber type. It wouldn't be targeted at any particular corporate organization.

T. Nebbeling: The reason I'm asking this is that traditionally the coast has seen different ways of assessment than in the interior. If this indeed is going to be a solution for some of the financial problems that companies in the interior are in, would this also imply that the coast would have this re-evaluation of their logs? If they have a product that is similar to what is going to be changed in assessment in the interior, would it apply to the coastal areas as well, which I think would be a great relief?

[R. Kasper in the chair.]

Hon. D. Zirnhelt: The Repap proposal we were talking about was one made to the Interior Appraisal Advisory Committee. There is a coastal one as well, and similar proposals have been made and are under consideration. Many proposals come in throughout the year, and these committees meet dozens of times to consider them. So there are always proposals underway, but it's fair enough to say that there's no one proposal on the coast that you could identify which is equivalent to the Repap proposal.

T. Nebbeling: I think it is important that we get a kind of understanding on that issue, because there is tremendous suffering on the coast as well. Indeed, this is a technical change; it's not a reduction of stumpage, but it's a technical change on how you create certain types of timber. It is based on how much of the timber is used for a valuable production line and how much of the timber that comes out of the forest is going right into the pulp mill to produce paper or other products. That same situation is creating financial hardship on the coast as well -- the lack of . . . not having that recognition.

For that reason, I am asking if the coast would get that kind of scaling approach done as well. I ask that because I know there is an interior scaling system and a coastal scaling system, but there are problems.

Once that system is in place -- and it will be used at Skeena Cellulose, the former Repap operation -- there will be considerably less revenue coming from the timber compared to what there used to be. Part of the reason that Skeena Cellulose, Repap, got in trouble -- I say only part; I'm not blaming stumpage alone -- was because of stumpage fees that just didn't merit the value of the product. There will be a serious reduction in financial contribution, then, from Skeena Cellulose because of this technical change.

Still, at the same time, you have a stumpage system in place that is target-driven: you want X amount of money from an area in a three-month period. If Skeena, because of the technical change, will pay considerably less -- and we're talking about millions and millions of dollars over the three-month period -- will there be a reduction in the target? Or are you going to be looking for a cost upgrade in other areas so that it still is revenue-neutral for the Ministry of Finance?

Hon. D. Zirnhelt: First of all, since we were talking about Skeena Cellulose, it's worth noting that for a large company, they paid one of the lowest stumpage bills in the province last year, and they were paying in the order of $15 million a year. Compare that to the effect of the drop in pulp prices, which took $200 million out of the company. So in orders of magnitude, stumpage is minor.

The changes on July 1, the technical changes we were talking about that benefited West Fraser and Skeena Cellulose, amongst others, were revenue-neutral to the province. Those changes were waterbedded and had a minor effect throughout the interior.

T. Nebbeling: This must be the first term I haven't heard before: "waterbedded." Can the minister explain what it means? I think it means that the savings for these two companies were spread over the other companies. Is that waterbedding?

Hon. D. Zirnhelt: There was an average stumpage set, and the average has to be maintained. That's the way we set the system: we start with an average and then average it. So if it goes up in one area, then it goes down in other areas. That was the nature of these changes. Just to remind you, it did go through the Interior Appraisal Advisory Committee.

T. Nebbeling: I hope the minister didn't take offence at that particular question, because his response was a little bit like: "Let me remind you . . . . " It was just a question.

It is revenue-neutral; it means the cost has to be picked up by other parties. If that is the case, then that is the case. I am sure that the impact -- because of the minuscule amount that it represented for that period, up to now at least -- could be picked up. I don't know if the other companies feel the same way, but how will that work in the long run, whenever . . . ?

Let me rephrase that. As I was looking for a more general approach to the restructuring, so to speak, of the scaling

[ Page 5256 ]

assessment . . . . It will obviously benefit most companies that have inferior timber. Is this not going to cause a problem, if that indeed becomes a general practice from now on? We have to do something for the companies. Would that not have a negative impact on other operators who then have to pick up the slack so that we still have that target of income from stumpage in a certain area over a period of time?

[4:15]

Hon. D. Zirnhelt: As a result of the changes of July 1, there will be slight increases in other parts of the interior. That's the nature of stumpage changes: if they go down in one area, they can go up in other areas. It's a question of then trying to make sure that the method of calculation is fair within and between regions of the province.

T. Nebbeling: Can the minister share with me, then, what the reaction has been of the industry component that is picking up the slack? Even companies that work with different product, be it sawmill operators . . . . We have seen some pretty serious situations when it comes to the financial status of these companies. We are going to now burden them with extra stumpage costs. These companies are fighting just as hard. The only thing is that they haven't closed the door yet -- most of the time.

How are we going to continue to justify a system, then, that says: "Okay, he or she who has gone under, we will come to the rescue. We believe that the reason you are in trouble is that the market price for the product that comes out of the timber is not justifying the amount of stumpage, so we will change it. The rest of the world will pick it up in that area?" What has been the reaction from the companies that do have to pick up the slack? That's the number one question.

The second question, of course, is: would the people that pick up the slack now not have a good case to make once pulp prices go up again -- say to $500, $600, $700, $800 a tonne? Then suddenly, that stumpage becomes more affordable -- not acceptable, necessarily, for these companies, but affordable. Will there then be an adjustment made again at that time so that the companies that are in different types of milling get a bit of a break?

I'm asking this in particular because the companies that will pick up the extra cost in order to give a break to the pulp mills in this case are going to be asked to bear other burdens, including creating new jobs. They are the people that will be part of the jobs and timber accord that will provide more jobs over the next five years. There's a burden there. They will be looking at change or conversion in the mills. They will be looking at upgrading their mills. It's going to be dollars.

If we now start severing these profit dollars -- if there is profit; many of them don't even make profit -- if we now start taking more dollars out of these mills, they will in a sense be forced to invest, because they're going to need conversions to accommodate the value-added objectives and the jobs objectives. Are they not going to now put one sector in trouble in order to save another?

Hon. D. Zirnhelt: As I understand it, if pulp prices go up now, that doesn't take any more money in stumpage out of the pulp companies. Their profitability would be restored. But there's nothing in the accord that takes anything away from industry. There is no additional cost burden to industry in the accord.

T. Nebbeling: The point I'm trying to make is that now, because companies have come close to bankruptcy, gone and shut down operations and put people out on the street for a period of time, the government has come to the rescue and said: "Okay, here is a way that we can give you a little bit of financial relief." If that financial relief will indeed make them kind of viable, at least to the point that they can operate again, then that's a good move. But the reason they are not financially viable right now is the fact that pulp prices are very low.

It was a year or two years ago when the pulp price was a thousand dollars. At that time, I don't think for a second that government would have considered giving these companies a financial break, and taking that financial break or the consequences of that financial break -- the millions of dollars -- and putting it into another sector in that area, the sawmill operators. Today we face the situation of low prices, financial disparity and people almost out of work, so we're going to give them a break and the other companies are going to pick up the tab.

Considering that the situation is so bad with these two companies -- Repap and Skeena, and maybe more in the future -- the other companies are supposed to and they're going to take that extra financial hit because you want to be revenue-neutral. So if the call was to take $600 million out of that area in the next three months, even if some of the operators would not pay, the others would have to bring in that $600 million. I believe that is now the case -- what the minister said.

What happens when the pulp prices go back again to a thousand dollars? Is there then going to be another adjustment made, and are the pulp mills that will make a considerable profit going to somehow put something back into the kitty so that the other companies -- the sawmill operators -- can see a readjustment, as well?

Hon. D. Zirnhelt: No decision has been taken along the line of making adjustments to the stumpage system that would take into account the ups and downs of the pulp value. All I can say is that at this time there are proposals to that effect which can be considered, but we weren't able to come to any ready conclusion about that, so more work needs to be done.

T. Nebbeling: Before I hand it over to my colleague from Cariboo North, I just feel that this restructuring . . . . I'm a strong believer that restructuring is needed. Don't get me wrong. I believe that we need restructuring. We have to have a dose of reality on how much the forest industry can contribute to the provincial coffers. Whatever it's going to take, that's fine with me.

What I fear is happening now with this solution as it is presented . . . . Yes, sure, we're going to give the people that are down a break, because prices are low; that is the new routine. That break will still be there even when the prices are very high again. So now the profitability of that operation is really good. At the same time, the people in the other mills that are in a different type of product have taken on that financial liability in order for the government to still receive the same amount of dollars.

What happens if lumber prices go down and these mills can no longer afford the high stumpage prices that are now higher than they would have been if the pulp mills had somehow had a variation in how they were going to pay as well? What happens when lumber comes down? Are we then not going to see the same situation, where the lumber mills are going to shut down, and they're going to hold out until the government says, "Okay, what we're going to do is give you a break," and now we've put it back on the pulp. This is going to be a reactional thing, a yo-yo way of dealing with it.

[ Page 5257 ]

I'm asking the minister: considering that this is a reality that can happen, what is the minister contemplating to avoid that? Is there going to be a further analysis to avoid these kinds of situations? Then that would just lead to an opportunity to manipulate the government.

Hon. D. Zirnhelt: I think you've identified one of the problems if you tied stumpage to the price of pulp. It is tied primarily to the price of lumber, and if lumber prices go down, stumpage will go down. So there is a corrective mechanism on the lumber side.

T. Nebbeling: If, at the same time that lumber prices go down, the government still sets targets of dollars that they want to receive, it doesn't work. That's the problem with the system, I believe. The government says: "We're going to take so many dollars out of the industry in that area; regardless of how much timber comes out, that's our target amount." If the government is not willing to get away from that one way or another, then even if lumber prices come down and you still set your targets at that level, who's going to be safe?

I think the resolution has to lie in a different approach: government collection that is more market-driven and certainly more in line with what the product can afford. If at times pulp or lumber prices are low, you as government receive less money; but when they're high, you get considerably more. As a government, you just have to balance that a little bit, but at least you're going to keep the pulp mills open, you're going to keep the sawlog mills open, you're going to keep the remanufacturers open, and you're going to keep people working. Ultimately that is the objective that I pursue when we talk about stumpage and what we take out of the industry on an annual basis.

Hon. D. Zirnhelt: I think there's an answer to the member's query. Government sets an average stumpage rate, not an average revenue. So if prices fall, the amount government gets will also fall. In the interior over the last two years, it has changed approximately a third. Lumber prices have been very buoyant. If lumber prices are reduced, then the overall amount that government collects will go down. It's not a revenue target; it's a rate target. We've agreed on that system with the Americans. A basket of sawn wood has a rate to it, and then we have to calculate a rate based on the price. It does fluctuate, and government revenues do fluctuate dramatically with lumber prices.

T. Nebbeling: I appreciate that explanation, because that is one of the little mysteries I've been trying to get around. But that doesn't apply, I believe, to pulp prices.

My last question before I hand it over to my colleague from Cariboo North: when it comes to the small business forest enterprise program, does that mean they comply with that one as well, or do they have different forms of stumpage? Is there additional stumpage? How does that work? Maybe we should get into that later.

Hon. D. Zirnhelt: There is an upset stumpage, which is calculated on the same basis as all other licensees are calculated. The small business program has an upset stumpage, which is calculated by the same formula as any other licensee. But then it is put out to bid, and there is a provision there for a bonus bid. To tell you what happens in the 16.1 sales, the value-added sales, there are often no bonus bids. There are value-added factors that are used to base the award on, but with the log-sale type of small business sale, there usually is a significant bonus bid on top.

[4:30]

J. Wilson: What I gather from listening to this debate is that in an instance like Skeena Cellulose, the mill there is dependent on whole logs rather than on the chip market supplying them with fibre. Is this the case?

Hon. D. Zirnhelt: In the case of Skeena Cellulose, there's a very complex network of chip suppliers, including their own three sawmills and other operations to the east.

J. Wilson: If there's a problem with stumpage in this region, the problem is with the sawmills rather than with the pulp industry. The way it is designed now, the sawmills supply chips to the pulp mills, and there's really no stumpage factor tied to it.

Hon. D. Zirnhelt: There are some whole-log chippers, one in the New Hazelton area in particular. But the issue up there is one of Skeena Cellulose and others suggesting that we should value pulp logs -- logs that are essentially pulp in content -- as though they are all used for chips, as opposed to assuming that there's some lumber recovery. For the most part, that's true. So it depends: as you move into more and more stands with a high pulp log component, they want that full calculation to help average the price of the whole stand.

J. Wilson: Is that not the case at present? Is there not a percentage that goes into a grade 3 stratum, as in most regions? You factor that in, and that wood comes in at 25 cents a metre. Does that not exist out there at present?

Hon. D. Zirnhelt: Perhaps I can focus this. Right now whole-log chipping would be done at a loss, because pulp chips are so low. Now they pay 25 cents. They want a recognition that there is a negative value to be averaged over positive values on the sawlogs in the stand.

J. Wilson: That does make it a little clearer. If the industry there is asking for a subsidy to harvest this wood and chip it at a cost to some other operation, perhaps in another region, the cost of chipping must be fairly high. Otherwise, if you give them the wood, then you'd think that they could at least put it into a mill and come out ahead and not be in the red.

I'd like to ask the minister: with the stumpage that is being charged to this whole-log chipping, at this point in time is there stumpage now that is owed to the province? I guess what I'm looking for is: is the company in arrears and, if so, by how much?

Hon. D. Zirnhelt: Yes, they owe the government about $13 million in arrears, and of course, that's something that the job protection commissioner has to take into account when he goes through a restructuring. Because they haven't been forced to pay the stumpage, and therefore they're not paying the stumpage at the moment, that's precisely why we're saying that it then can't be a problem for them. Yes, repayment is something different, but they still have financial problems, so it's a much larger issue than the stumpage issue.

J. Wilson: Hon. Chair, $13 million might be a small amount . . . . Is this going to be written off, and has it been included in the calculation of income for the present year?

[ Page 5258 ]

Hon. D. Zirnhelt: There are two options, and one is that the company enter into a repayment scheme as part of restructuring. Or, if there's a transfer of the company's assets and licences, it would be payable upon transfer.

J. Wilson: But at this point in time, has no decision been made as to which avenue to pursue to collect this?

Hon. D. Zirnhelt: That's correct. The job protection commissioner is still in discussion with the banks and other stakeholders.

J. Wilson: When a company owes the government money on stumpage, what is the time frame before they are considered to be in arrears?

Hon. D. Zirnhelt: A statement is given in a short period of time after the scaling has been done, and 21 days after the statement, interest starts to kick in.

J. Wilson: At present, how many companies in the province are in a similar situation with regard to stumpage that is in arrears?

Hon. D. Zirnhelt: I'm just getting the precise amount. At June 3, 1997, the overdue accounts receivable were $67 million. For comparison reasons, last year, in May 1996, it was $38 million. There are 70 companies that are in arrears of over $100,000.

J. Wilson: Does the minister have a second list that would indicate companies that are at present in arrears but that are high-risk companies?

I realize that some of these will be paid up in the next little bit, in the next month or two or three. They are low-risk, and they are fairly stable, but there are a number that are high-risk. Do we have that list?

Hon. D. Zirnhelt: No, we don't keep a list of high-risk accounts. What we do is look at each account on its own. We may go into collection action, or we may negotiate a repayment scheme, depending on the individual circumstances.

J. Wilson: At present, then, how many companies are you considering a repayment scheme with or negotiating some form of an agreement with?

Hon. D. Zirnhelt: I'm informed that to the best of our knowledge, we would be negotiating with half a dozen companies. We can provide a list of the status of their stumpage. I could provide that list tomorrow. But suffice it to say that we are in negotiations with very few companies at this point.

J. Wilson: I would appreciate that information if I could get it.

The stumpage that is owing . . . . I would assume that this is part of the projected revenue for the government for the current year.

Hon. D. Zirnhelt: Yes. The stumpage is accrued, and then we have an assumption of a bad-debt provision, which for the end of '96-97 was $18.9 million.

[4:45]

J. Wilson: When the finances are adjusted at the end of the year, is the bad-debt provision subtracted from the projected revenue to give you your actual revenue?

Hon. D. Zirnhelt: The amount that's there as a bad-debt provision is, I believe, the same this year, and we don't believe that there will be any more trouble or any need at this point to adjust that. We can adjust the bad-debt provision if our information indicates to us that there will be a greater problem. But for now, we're confident that what we have as a bad-debt provision is sufficient.

Interjection.

Hon. D. Zirnhelt: Just to make it clear, I'd like to continue, hon. Chair. The bad-debt provision is taken off the projected revenue.

J. Wilson: Getting back to Skeena Cellulose, is the reduction in the rate that has been requested in place now? Or is it something that you're just considering at the moment?

Hon. D. Zirnhelt: Yes, the technical change occurred July 1, and that technical change, by itself, will not result in any overall decrease in government revenues.

J. Wilson: In this process of levelling the income to the government -- I believe "waterbedding" is the term used to describe it . . . . Which area has now been hit with an additional stumpage increase because of the reduction in this one?

Hon. D. Zirnhelt: Well, the benefits accrue to all the licensees in the Kalum and Kispiox timber supply areas. All the rest of the interior timber supply areas will notice some effect over time.

J. Wilson: Would the minister give me the figure per metre of reduction in the area in question and the overall increase that will be applied to the rest of the interior?

Hon. D. Zirnhelt: The effect of the benefit to the Skeena Cellulose operation is probably in the order of a $4 reduction per cubic metre -- from $8 down to $4 -- and it's in the order of a 25-to-30-cent increase in other areas.

J. Wilson: A 25-or-30-cent increase in other areas seems to be relatively harmless, although when it comes to dealing with a few million metres of wood, it adds up to a considerable bill. Is there anything underway at present in these other regions to change the requirements of wood that will, say, affect the stratum in No. 3 wood, this type of thing? Are there any changes underway to increase the level of 3, 4 and 5 in the stratum so that that increase is possibly not going to materialize?

Hon. D. Zirnhelt: No, there's nothing in any of the technical adjustments that have been made to this point, or that are contemplated, that will mitigate the effect of that waterbedding of those changes in the Kalum and Kispiox region.

T. Nebbeling: Before I asked my colleague to jump in quickly, I had to pick up some papers. I was trying to come away from the interior, where we have seen some action to deal with companies that were indeed in dire financial straits. We have seen some serious situations arising on the coast. We have seen job losses. We see mills that are, to say the least -- I don't want to give it the wrong label -- inadequate in relating to what the market is doing right now when it comes to the type of lumber that comes into the mill. They have very little

[ Page 5259 ]

opportunity to convert the mills to accommodate other types of lumber that they have traditionally been using. Because of that, I don't think many of the mills are having the productivity that they should have. Many of the mills are not willing to give up their operation, because they know the moment they do, they will lose their timber allocation. There's clearly dire straits there, and there is need for financial support on the north coast.

Has the minister considered looking at this state at the coast to see if some of these remedial elements that are now being created in the interior could be transferred to the coast -- especially places like Gold River, where they still have to deal with the Avenor mill, which may well close because of financial consequences? Has the minister indicated to any parties that there may be ways of keeping the Avenor mill in Gold River open, considering some of the steps that have been done with stumpage?

B. Goodacre: I just want to take advantage of this opportunity to talk a little bit about the Skeena Cellulose situation in my riding. The last few weekends that I've been home, the matter of Skeena Cellulose, of course, was on everybody's mind. As we're going through the estimates of the ministry, it's a pretty appropriate time for us to reflect on how serious this matter is in our ridings and also to bring to people's attention that the opportunities we have up there are being wasted right now because of the huge market failure for what is an extremely large company in a small market.

This company controls 37 percent of the cut in our area. When Skeena Cellulose decided to close their doors, they started telling contractors to quit bringing stuff in. As the logs stopped coming into the log yard, of course, the scalers were the next people to be sent home. As it ripples its way through, many of us, many of our friends and many of our family members are getting notification that the company is going down.

One of the more interesting things is that people up there have an abiding faith in the forest industry. They realize that at the end of the day, we will rearrange matters so that we can get back into the woods and start reviving the sawmills. Hopefully, the pulp mill itself will again be up and running so that we will have an opportunity to once again see this industry thriving in our areas. The town that I come from, Smithers, is pretty fortunate in that we've got one of the lower-impact things happening where we are.

I see the minister is back now, so I'll relinquish my position to him.

Hon. D. Zirnhelt: I thank the members for indulging me some time to prepare my answer. I would like to . . . . As in the case of the Repap proposal, which we talked about at some length, we have received various proposals from coastal operators, and many of them are under consideration.

But with respect to the Avenor pulp mill in Gold River, we're not aware of any imminent closure. All we are aware of is that they would like to reduce their workforce as a way of reducing their operating costs and making the mill more profitable.

[5:00]

T. Nebbeling: Let me first of all say to the minister and his colleague from Bulkley Valley-Stikine that I appreciate, although it was very short, the few words that he spoke on what's been happening in his riding, and not only in the member's riding but also in the riding of the member for Skeena where the Terrace mills -- I believe Carnaby is also in the Skeena riding -- are under serious threat if something doesn't happen. That threat will lead to further closure and indeed to tremendous hardship on the people living in that area.

The member correctly stated that contractors have stopped shipping. That means the truck drivers are staying home, the scalers don't have to work, and the suppliers -- be it the suppliers of tires or suppliers of repair material -- are all out of a job. When I started to talk earlier on about my chagrin, if I can use that word, with not having seen much proactive action taken by the government, knowing that this type of an issue was lurking under the surface for a long, long time . . . . This is not just the last three or four months; this has been going on for a long, long time.

The problems were lurking under the surface; they only needed a very little touch to surface, to explode. Knowing this, because the industry has been throwing up the warning signs left, right and centre -- warning signs which have often been dismissed as just whining . . . . That we know what we're doing, and things are going in the right direction . . . . It's a sad thing to see that it had to come to this. We now see some steps taken that will hopefully still make a difference for many people. I regret to say that it will not make a difference for everybody -- we know this now.

But hopefully, some people will be able to pick up and go on -- just in case there's a loss there, they can accommodate that.

Having the member speaking to that is, I think, very important, because it also justifies me speaking at length on this issue. It means a lot to me. I have been going to the member's riding, I've been going to the Skeena riding, and I've met with almost every group that has been impacted by what's happening there. It's the only way you truly learn what a shutdown does mean and how it does impact on everybody. We don't think about the person who works in the 7-Eleven store, but his or her life will be impacted by it.

We don't think about the lady who sells homemade jewellery in a little store, but she will be impacted. One lady in Golden, at the time that the Evans situation arose, was interviewed on TV. She sold women's clothing and jewellery, and her total sales in that three-month period were $3.80. That's impact; that means something.

So when I see these kinds of situations arise, I quite often get not emotional about it but angry and determined to push for some change, and it is these people that I have in mind. So hearing the member for Bulkley Valley-Stikine speaking in that tone about the people who he represents pleases me tremendously.

Having said that, I'm not going to spend much more time on this. I think we've gone through it. I had to come back with it today because of not being able to get an answer on Friday as to whether there is anything happening. I'm pleased to hear that indeed there are some moves towards finding a solution that I think . . . . If we inject a dose of reality into what's happening in the industry and how much costs can be imposed on the industry, I hope that we indeed will come up with a solution that will help the industry to stay vibrant. And that's ultimately what this is all about -- nothing else.

It has nothing to do with the ministers, and it has nothing to do with me. It is about the people who are in the industry and the contribution that this industry makes to this province -- the enormous wealth that it creates for this province and the enormous security that it has always created in the past for hundreds of thousands of people. So when we get back to that, then, we have done our job in whatever form -- the minister and I as the Forests critic.

[ Page 5260 ]

What I would like to do is move over into a new area that we have not been talking about. That is the small business forest enterprise program. The small business forest enterprise program has become an extremely important component of the forest industry as a whole, primarily because it has created so many tremendous opportunities for so many small business people -- be they loggers, be they small mills, be they market loggers, be they contract loggers. The small business forest enterprise program certainly is one of the elements in the forest industry that accommodates, let's say, the little guy -- or the little girl, to be gender-neutral.

I have a series of questions on the small business forest enterprise program, based on the fact that the jobs and timber accord is going to expect something to come out of that component of the industry as far as new jobs are concerned. I don't know -- well, of course I have the figures -- how many new workers are supposed to be created by the components of the small business . . . . Maybe, for the sake of debate, I can just say the small business component, rather than having to say "small business forest enterprise program" every time.

The small business component of the industry will be responsible for a number of jobs in the area of 3,000 or 4,000, and that means that there will be some changes to be accommodated in that segment of the forest industry.

What I would like to ask the minister, as there is a specific role for this sector, is: can the minister tell me exactly how many jobs have to be created by that sector? Furthermore, which component of that sector will be responsible for that?

Hon. D. Zirnhelt: The 6,500 jobs that we have targeted under the jobs and timber accord is broken down into 1,500 jobs by getting out the full cut and the accumulated undercut, and that will include some primary breakdown jobs. In addition, there are the 5,000 jobs that we expect to come essentially from the fibre transfer program, and they will be value-added jobs.

T. Nebbeling: We can talk first for a little while about the 1,500 jobs, and most likely after the recess we can continue. Since I've been in the Legislature, I have been exposed to many people who, in the past, have been able to work with the small business program -- people who were able to give themselves some financial security. Just like the big boys, many of these people have, over time -- especially over the last 12 or 13 months -- been in a position where they basically had to walk away from what they were supposed to have harvested, for which they had made a bid and for which they had put down a deposit.

Especially in the lower mainland, we have seen a number of examples where just because of the cost that was imposed on their particular bid, people couldn't fulfil the obligation and they walked, thereby losing the money that they had to put down.

I do not know a lot about that particular

section of the small business program, but maybe the minister can tell me . . . . Could the minister briefly explain how the process that these small loggers go through works? How do they get hold of a parcel and under what conditions, and what is the payment they have to make -- the deposit or the guaranty price? I don't know what the phrasing is for that. Why is it that these people, in spite of having put money on the table as a deposit, still have to walk away? Is it the system, or are there other reasons?

Hon. D. Zirnhelt: Small loggers usually acquire their rights to cut by bidding on a sale. They know the upset price, and they will bid a bonus bid. The competitive tender process should make the rules equal for everybody. We require a deposit to ensure compliance and to ensure that people don't just acquire and speculate -- hold and speculate. There is some onus on them to get some cash flow out of selling the timber.

T. Nebbeling: Maybe the minister can explain to me who can then bid. How do people get into the system? And when it comes to the deposit, is it the percentage of the timber that they are suppos