1974 Legislative Session: 4th Session, 30th Parliament

HANSARD

The following electronic version is for informational purposes

only.

The printed version remains the official version.

Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)

TUESDAY, JUNE 18, 1974

Night Sitting

[ Page

4215 ]

CONTENTS

Routine proceedings

Mineral Royalties Act (Bill 31). Committee stage.

section 1.

Mr. Gibson — 4215

Hon. Mr. Nimsick — 4215

Mr. Gibson — 4215

Mr. Wallace — 4217

Hon. Mr. Nimsick — 4219

Mr. McGeer — 4219

Mr. Chabot — 4221

Hon. Mr. Nimsick — 4222

Mr. Gibson — 4223

Mr. Chabot — 4223

section 2.

Mr. Gibson — 4224

Hon. Mr. Nimsick — 4225

Mr. Wallace — 4225

Mr. Gibson — 4226

Hon. Mr. Nimsick — 4227

Division on

section 2 — 4227

section 3.

Mr. Richter — 4228

Mr. Wallace — 4229

Mr. Fraser — 4232

Hon. Mr. Hartley — 4233

On amendment to

section 3.

Mr. Richter — 4235

Hon. Mr. Nimsick — 4235

Division on amendment — 4235

Hon. Mr. Nimsick — 4235

Mr. Smith — 4236

Mr. Phillips — 4237

Mr. Gibson — 4238

Mr.Chabot — 4239

Mr. Gibson — 4240

Hon. Mr. Nimsick — 4241

The House met at 8 p.m.

Orders of the day.

HON. D. BARRETT (Premier): Mr. Speaker, I move we proceed to

committee stage on bills.

Motion approved.

HON. MR. BARRETT: Committee on Bill 31, Mr. Speaker.

MINERAL ROYALTIES ACT

The House in committee on Bill 31; Mr. Dent in the

chair.

section 1.

HON. L.T. NIMSICK (Minister of Mines and Petroleum

Resources): Mr. Chairman, I move the amendment standing in my

name on the order paper (See appendix.)

Amendment approved.

section 1 as amended.

MR. G.F. GIBSON (North Vancouver-Capilano): Mr. Chairman, we

have had second reading of this disastrous bill; nevertheless I

think we have to consider in committee how it can be made more

workable, and the impact lessened in some areas and explained

in others. Accordingly, I have a number of questions for the

Minister.

Starting off in

section 1 and working through the definition

section, and this being a brand new Act there is much to do in

the definition section, I would ask the Minister, first of all,

if he might explain to the House what the term "designated

minerals" means in his understanding. In other words, which

minerals is he going to designate? I would refer to his most

recent report for the year ended December 31, 1972, in which

there are some 20 metals described, and another 20 or so

industrial minerals and some structural materials and then

fuels.

Now, I assume that fuels, with the exception of coal, are

excluded from his idea of designated minerals. But I wonder if

he could tell the committee, with some particularity, just

which minerals he proposes to designate.

HON. MR. NIMSICK: Mr. Chairman, the minerals that we are proposing at

the moment for designation are copper, gold, molybdenum and silver. The proposal

that we are making by order-in-council will be: copper at a basic rate of 58

cents; gold the basic value of gold now…. First I had better remark that

in regard to copper it is expected to be 58 cents. This figure represents the

true five-year average to January 1974 of a net smelter return to the producers

in the province, plus an adjustment of 10 per cent to account for cost of increases

in 1974.

Gold is expected to be set at $82.50 per ounce. This figure

represents the five-year average to January 1974 of returns to

producers in the province, plus an adjustment of 50 per cent to

account for the previous price restrictions and cost increases

in 1974.

Molybdenum: they have experienced no significant price

fluctuations in the last five years. Hence basic values are

expected to be the same as the corresponding five-year

averages. Molybdenum concentrates at $1.60 per pound and

molybdic oxide $1.85 per pound, and feral molybdenum at $2.21

per pound.

The basic value of silver is expected to be set at $3 per

ounce. This figure represents the five-year average to January

1974 of returns to producers in the province, plus an

adjustment of 50 per cent to account for previous price

restrictions and cost increases.

Zinc will not be designated immediately because zinc comes

mostly under Crown-granted mineral claims under the Mineral

Land Tax Act . Lead the same way. They are restricted to Crown

granters, so I haven't any proposals for them at the present

time.

MR. GIBSON: Mr. Chairman, I thank the Minister very much for

his forthcoming remarks on that. Perhaps he might confirm that

he has no plans at the moment to designate any of the

industrial minerals. I would ask him in particular about

asbestos, which has a value of some $21 million production in

the most recent reported year. Also the structural materials.

At the same time, perhaps, he could be good enough to say,

though it is not quite on target, whether or not assessment

notices have been sent out under the Mineral Land Tax Act on

the lead and zinc. Is it your intention to cover that?

HON. MR. NIMSICK: The assessment notices on lead and zinc

have been sent out, I understand. The asbestos comes under the

same requisite as lead and zinc, Crown-granted claims.

MR. GIBSON: My next question of the Minister — and I do

appreciate his responsiveness this evening — is on the question

of gross value. As I read the definition of gross value, and

the Minister may have something else in mind — I would hope he

would clarify it if that is the case — the gross value would

seem to be a value that doesn't vary from mine to mine, but

rather is fixed by the international price.

Now, there is some doubt here, because gross value

[ Page 4216 ]

as defined means the international price, but it also means

the international price paid or credited to the producer.

Therefore I would ask the Minister if his understanding and the

interpretation that will be given by his department and the

administrators is that gross value relates to what I would call

net mine receipts — the actual money received.

Let me give some of the problems that might arise. If a

producer is selling on an international contract, which might

be LME less some particular percentage, say it is 90 per cent

of LME, then the royalty would be calculated on the 90 per cent

of LME rather than on 100 per cent of LME.

I go on to a couple more complex problems. There may in many

ores as shipped be contaminants which to some extent may tend

to raise the price of the ore as paid for by the smelter. There

might, for example, be a percentage of gold therein. Or it

might tend to depress the price of the ore, if, for example, it

was copper concentrate with a significant lead

contamination.

Let us take that second case. Would the producer be charged

royalty on the gross value of, not simply the copper, but of

the lead? That seems to me somewhat unfair if that were the

case, because the lead actually lowers the value of the

concentrate. That is a bundle of questions to throw at you, but

perhaps I might ask about that at the same time.

HON. MR. NIMSICK: Well, it depends. If it is a copper

concentrate, the gross value means the international price or a

combination of international prices paid or credited to a

producer on the sale, disposition or use by him of a unit of a

designated mineral produced by him, less such reasonable costs

of and incidental to smelting or otherwise refining, as are

paid or payable to the producer, and are approved by the

administrator in accordance with the regulations.

Of course, if they were getting quite a return on other

items in the ore besides the predominant ore that is in there,

they would then come under the other definition. But in the

case of copper, the price that the actual producer receives is

all international. It is all shipped out of the country. The

gross value is the international price less the smelting and

refining costs.

MR. GIBSON: Just to follow that along a little bit, Mr.

Chairman, the international price at the moment, if I

understand rightly, again talking of copper, is something like

$1.15 a pound. The U.S. domestic price, I think, is something

like 85 cents, and the Canadian consumer price is something

like 80 to 85 cents. We sell substantially all our copper at

international price right now, but if the day comes, hopefully,

when we do have a copper smelter in British Columbia, that

copper smelter in British Columbia will presumably be required to supply at least

British Columbian and perhaps western Canadian requirements for

copper. At that point it would seem to me that any reference to

the international price might cause a certain difficulty, so in

a spirit of helpfulness I would ask the Minister if he would

consider gross value being defined as net mill and mine

receipts per unit of mineral, plus the transportation costs.

This seems to be the kind of thing he is getting at, but

doesn't have this reference to international price which seems

to me unnecessary. The reference should be to amount received,

without any particular reference to the level of international

price.

HON. MR. NIMSICK: It is the net receipts that they receive

for the mineral. At the present time I don't see any reason why

the international price shouldn't be in there. If it were

smelted in our own province then it would be the net receipts

that they would receive in our own province. Of course if it

were smelted in our own province they get 1 per cent off on the

royalties.

MR. GIBSON: At the moment though, with respect, Mr.

Minister, they would still have to reflect the international

price rather than the domestic price, even if it were smelted

and consumed here — at least as I read the particular

definitions.

HON. MR. NIMSICK: I think you are exercising in words more

than anything else really, at the present time. At the present

time it means the international price or a combination of

prices that may be received by the producer. I see no reason

why we should change that international price when we handle

that within our own province, if we smelted in our own province

at any time in the future.

I don't see where the international price there would have

any effect on what we do within our own province.

MR. GIBSON: Perhaps moving on to a later portion in the

definition section, Mr. Chairman, the Minister, I think, has

given us pretty clear indication that what he means by gross

value is actual receipts.

Interjections.

MR. GIBSON: Welcome back to the Hon. Leader of the

Opposition (Mr. Bennett) after an absence of some two

weeks.

Interjections.

MR. GIBSON: Moving on to the definition of mineral, Mr.

Chairman, it seems to me that it would be more useful to have

some kind of homogeneity of

[ Page 4217 ]

definition between one statute and another. The Minister in

another amendment Act, the Mineral Amendment Act, 1974 , which,

of course, we aren't discussing, redefines the word mineral,

which has been the standard definition of mineral over the

years. It is, both the original definition in the Mineral Act

and the new definition which is being moved….

MR. D.E. LEWIS (Shuswap): Point of privilege, Mr.

Chairman.

MR. CHAIRMAN: Order! Would the Hon. Member for Shuswap state

his point of privilege?

MR. LEWIS: I see we have a stranger in the House.

(Laughter.)

MR. CHAIRMAN: That is not a matter of privilege. The Hon.

Member for Columbia River on a point of order.

MR. J.R. CHABOT (Columbia River): On a point of order, I

want to assure you that the Member for Shuswap will be a great

stranger after the next election to this House.

MR. GIBSON: Mr. Chairman, as I was suggesting, the different

definition of mineral in all of these Acts is bound, it seems

to me, to cause a good deal of confusion. Therefore, I would

move, and hope that the Hon. Minister might accept this

amendment, that "mineral" means mineral as defined in the

Mineral Act .

I would go on to say that that, of course, would not include

coal, but the Minister can catch coal through the separate Coal

Act . Therefore, it seems to me that this amendment would not

only be in order but a helpful one for standardization of our

statutes.

Interjection.

MR. CHAIRMAN: Order, please. We'll just have a look at the

amendment first before we recognize any other speaker.

Is it the intention of the Hon. Member to strike out the

existing definition for mineral and substitute?

MR, GIBSON: Yes, Mr. Chairman. Thank you.

On the amendment.

HON. MR. NIMSICK: Mr. Chairman, the definition of mineral here covers

a greater scope than the definition in the Mineral Act for the simple reason

that we do hope to take over all underground working. Some of the minerals that

might not be called mineral but are constructional minerals will come under

this Act. Also coal. The Coal Act at the present time has a minimum of $1 per

ton. But if the price of coal climbs, then the royalty Act would take over.

That's why we have the definition in this Act different to what it is in the

Mineral Act .

Amendment negatived.

MR. GIBSON: Just two more questions under

section 1. First

of all, why does the Minister have millsite in the definition?

I haven't been able to find the word used anywhere in the Act.

Much more importantly, what is his

interpretation of transport?

Transporting, according to the definition section, includes

handling, stockpiling, loading and other costs incidental to

transporting.

But I would ask the Minister: transporting from where to

where? Is it his intention, for example, to include

transportation costs from the mine site to the mill? Or is it

from the mill to the smelter or wherever it might be, including

the ocean freight if the smelter is abroad and so on? Could he

confirm from where to where the transportation costs

include?

HON. MR. NIMSICK: Transport costs from the millsite to where

it's being smelted.

MR. G.S. WALLACE (Oak Bay): Mr. Chairman, my comments will

be brief. I just want to say that it's really distressing to

me, in something as basic as the definition of the terms under

which such far-reaching legislation is written, that this bill

should have caused such enormous confusion, misinterpretation,

public argument and debate by the people in the mining

industry. I don't say this necessarily in criticism of the

Minister himself.

I just would like to make a comment on this very contentious

bill. I don't know who on earth advised you, Mr. Minister, but

as a layman who knows not very much about the mining industry,

to have gone through the contortions and the changes and the

public confusion and the very severe anxiety as a mining

industry because of this bill and in turn to find out that, as

far as I can see, the new definition presents a rather less

serious light to the mining industry in this bill…. In other

words, it is now quite clear that the royalty will not be

applied against the cost of transportation. The original

definitions in Bill 31 did not at all make that plain.

The royalty was to be applied on the difference between the

gross value and the basic value. I hope that if I'm

misunderstanding this, the Minister will correct me, but it's

now my understanding that the royalty will actually be applied

after the cost of transportation and costs incidental to

smelting or otherwise refining.

This, of course, Mr. Chairman, makes a substantial

difference to the actual method in which the royalty

[ Page 4218 ]

is applied and the actual cost to mining companies of the

royalty.

I just think that it's hardly fair that this House and the

public and the mining industry and everybody concerned have

gone through a period of several weeks of discussion and

debate, both publicly and privately, in trying to determine

what on earth this bill really means in terms of royalties to

the mining industry.

We may argue all we will — and we will (Laughter) — on

section 3 regarding royalties. But seriously, Mr. Chairman,

regardless of whether we agree or disagree with the principle

of a royalty, the very misleading way and confusing way in

which this bill up until a few days ago had been presented to

the mining industry, really is very distressing and in no way

leads to any sense of confidence in your department, Mr.

Minister.

I don't know who wrote the bill in the first instance. Maybe

the Minister of Labour (Hon. Mr. King) has raised his hand.

Frankly, I think it's been written by somebody who knows as

much about mining as he does, and that's not very much.

But the fact is, Mr. Chairman, that the reaction of the

mining industry, regardless of the principle of royalties, has

been based on their great difficulty in trying to interpret

what in effect the bill actually says and does. That confusion

in turn is based on a very inadequate

section 1 giving

definitions of the various terms being used in the bill.

I certainly would give the Minister at least credit that the

amendments which he's brought in to

section 1 make it quite

plain that the royalty will be applied after certain costs have

been allowed, such as the cost of transportation and other

costs often incidental to smelting or otherwise refining.

I just feel that a great deal of the tremendous concern

which has been expressed by the mining industry has been based

on the fact — and it's a pretty serious fact, Mr. Chairman — that they would be paying royalties on costs which they were

incurring in the actual production and refining or otherwise or

transporting of the mineral.

It seems to me that it is not reasonable to apply any form

of taxation — and it certainly isn't done in other areas of

industry — where you are even taxed on your overhead costs

which, in effect, is what transportation and degrees of

refining are in the mining industry. Certainly there's no

income tax applied to the private individual in business or to

the corporations until they at least have deducted their

overhead costs.

AN HON. MEMBER: But they are individuals.

MR. WALLACE: Not in business, my friend. An individual in business,

my friend, deducts his overhead costs and then he pays the tax. Don't tax him

on the cost of running his vehicle or washing his business windows or buying

supplies or paying his secretary. For goodness' sake, let's be reasonable.

HON. G.R. LEA (Minister of Highways): But they do charge him

for the supplies, don't they?

MR. WALLACE: If the supplies are used….

MR. CHAIRMAN: Order, please! The Hon. Member for Oak Bay has

the floor.

MR. WALLACE: I don't want to get into a lot of detail and

harangue on this, Mr. Chairman. I've said that I welcome the

amendments, but I think that part of the problem with this bill

has been the very sloppy and inadequate and inefficient way in

which the bill was written in

section 1, whereby even men and

others who have spent a lifetime in the mining industry

couldn't figure out what the bill was exactly going to do to

the mining industry.

You can smile, Mr. Minister, but it's caused a tremendous

amount of heartburn in the mining industry and real anxiety

that they were going to be penalized to a degree which I think

is less now than appeared to be the case when this bill was

first presented.

I'm sorry, but I have to say that I think the Minister was

very derelict in his duty in not correcting that very clear

misunderstanding right off the bat. When it became clear in

public exchanges and exchanges of public opinion that the

mining industry were not clearly aware of what the royalty was

to be applied to, the Minister said in public: "Yes, I'll be

bringing in amendments." But I submit that the time to clarify

any misunderstanding was right there and then. Probably we

wouldn't have all the bitterness and rancour and all the

misunderstanding which we are now faced with.

But I certainly feel that it's better late than never. The

amendments which have been brought in describing the

definitions certainly make it much clearer just exactly to what

amount the royalty will be applied — namely, the difference

between what really is net value after the deduction of

transportation and refining costs and the basic value.

There are many other things about the bill I would like to

comment on later, but I think it would not be right to let that

very central issue pass — namely, that the very inefficient and

sloppy way in which

section 1 was written has caused a great

deal of the problems for the Minister and for the mining

industry. I'd be interested to have the Minister tell us

whether since the new

definitions have been brought in he has

had any response from the mining industry to the conclusion

that the financial penalty of this bill is less than the

industry had calculated, let us say, two or three weeks ago.

We've all got clippings coming out of

[ Page

4219 ]

our ears which show the many millions of dollars of revenue

which the mining industry feels will be lost as a result of

their calculations based on the former

definitions in Bill 31.

Now with the new

definitions can the Minister tell us if the

mining industry has reviewed the actual specific amount of

financial penalty which will be exacted, against the copper

industry in particular, by the new

definitions in Bill 31?

HON. MR. NIMSICK: Well, Mr. Chairman, the mining industry

knew quite a while ago. The

definitions that were in the bill

originally were interpreted by some correctly and by some

incorrectly. The law society interpreted it correctly and the

first writing went through our legal men and all the rest of

it. If you get three lawyers you'll get three different

interpretations of almost anything that you want to place in a

bill.

MR. WALLACE: Well, are you sure that this one is the right

one?

HON. MR. NIMSICK: The industry was opposed to royalties in

principle, and I don't think that the clarification — and I did

make a clarification in moving second reading of the bill….

I explained that it would be on the net amount of returns. Now

don't forget that the basic royalty is on the net smelter

returns less transportation costs. The incremental royalty is

on the net smelter returns. Whether I should have brought in

the amendment right away…. But you don't bring in amendments

right away. You've got to put the bill out. You've got to have

it debated, and then you bring in your amendments.

I did state that there would be clarifications of the

definitions, but some of them would still insist that it was on

the London metal market or on the gross — that the gross meant

the whole thing. I'm sure that the mining industry, those who

interpreted it the other way, now will feel a lot better. Those

who interpreted it correctly probably will still be opposed to

the bill, but the idea of bringing in these clarifications was

to make it quite clear to them in the bill exactly what the

definitions were.

MR. P.L. McGEER (Vancouver–Point Grey): I think that the

Minister has given us some valuable information this evening.

But I read the definition here of international price, for

example, listed in

section 1 and I think, by analogy, if I

could ask the Minister this question: how would he establish

what the international price of a ton of pulp would be? There's

a price that….

HON. MR. NIMSICK: A ton of pulp?

MR. McGEER: Yes, to take a natural resource commodity that's

sold on international markets.

Interjection.

MR. McGEER: Yes, I understand that, but international price

is whatever price is paid internationally; and B.C. pulp from

Ocean Falls — we don't know what it's being sold at. We guess

that it might be $450 a ton; it might be $600. The Minister

won't tell us. We know that some mills are selling for

$200-plus; other mills are selling for $180, according to what

their long-term contracts are. It's pretty clear to me that the

international price is something which is determined by a buyer

and it will vary from mill to mill. If you buy from Gottesman

International the price is $450 a ton if it's pulp, but if

you're buying in California, it may be a third of that.

MR. CHAIRMAN: Order, please! I would ask the Hon. Member to

confine his remarks to the

section as amended, and there is a

definition in the amended section.

MR. McGEER: Yes, but the definition says "the price of a

unit of a designated mineral established." In the case of the

Minister he's thinking of copper, but I'm doing it by analogy

so that people can see the problem. We haven't yet got to

applying taxes to copper. But if that commodity were pulp, Mr.

Chairman, and if you were Gottesman International, you'd be

selling that for three times….

MR. CHAIRMAN: Order, please. Order!

MR. McGEER: Mr. Chairman, what I am getting at, if you'll

listen for a moment….

MR. CHAIRMAN: Would the Hon. Member be seated? I would ask

the Hon. Member again to relate his remarks strictly to the

amendment before us. Would the Hon. Member continue?

MR. McGEER: Well, Mr. Chairman, I don't know how to get

across the point better that the international price is not

something which is fixed by the World Bank or Canada or Chile

or the Minister. The international price is what a buyer will

pay; if you are selling pulp on the grey market, you will get

three times the price or double the price what you get if you

have a long-term contract.

We may be selling copper concentrates to Japan on a

long-term basis, which is considerably below the spot copper

price on the London Stock Exchange, but this definition makes

no attempt to resolve that sort of difficulty. What I am

saying, Mr. Chairman, is that this definition of international

price is absolute and utter nonsense. There is no such thing as

[ Page 4220 ]

international price of any commodity because there is no

world body that establishes prices for everyone in the

world.

It may be that the price of copper will only vary from maybe

80 cents a pound to $1.20. In the case of pulp on the

international market, as the Minister of Lands, Forests and

Water Resources (Hon. R.A. Williams) well knows, the price

variation is far more than 50 per cent.

If you put your pulp up for sale through an international

manipulator, as the Government of British Columbia has done,

then the price can be triple what it is if you put it up

through legitimate channels on the basis of long-term

contracts. The price of copper has gone up and down in

spectacular fashion based on world supply. When Allende, the

Chilean dictator….

AN HON. MEMBER: Dictator? He was elected.

MR. McGEER: Well, he confiscated legitimate business

interests in the country of Chile, including their copper

mines. In so doing he created an international shortage which

resulted in a spectacular increase in world copper prices. I

submit, Mr. Chairman, that this is the basis of this particular

bill which is being introduced.

If you really want to trace the origins of it, it is in the

dictatorship of Allende. Chile was the major world copper

supplier, and when that government confiscated the copper

interests in their country it resulted in a world shortage of

copper and increases in the copper price which varied

tremendously according to whether or not you had a long-term

contract. If there was a long-term contract for copper then, of

course, you continued to supply the buyer at whatever the

agreed selling price was through the term of your contract. If

you didn't have a long-term contract then you sold at whatever

the market would bear.

We are doing the same kind of thing with pulp here in

British Columbia. In the case of those….

MR. CHAIRMAN: Order, please. I would just ask the Hon.

Members to be a little quieter while the Hon. Member is

speaking. Would the Hon. Member continue?

MR. McGEER: Thank you, Mr. Chairman. I'm very pleased, Mr.

Chairman, that the Minister is listening intently. I wish I

could say the same for the Minister of Lands, Forests and Water

Resources (Hon. R.A. Williams), and some of this chatter or

static in the back. It just happens to be a fact of life that

when there is a short supply of any commodity, in this

particular case we are discussing copper….

Interjections.

MR. CHAIRMAN: Order, please. The Hon. Member for

Vancouver–Point Grey has the floor.

MR. McGEER: Thank you, Mr. Chairman. When a commodity is in

short supply, as copper is in short supply, there is one price

for people who are on long-term contracts, and there is another

price for those who have to scramble to get what is left

over.

Internationally, whether the British Columbia government

likes it or not, the laws of supply and demand hold sway.

Because the laws of supply and demand hold sway, the price that

any given mine may get for the mineral it offers for sale

depends on whether it has a long-term contract or whether it

happens to be taking advantage of the world situation in times

of short supply, or whether it suffers from the world situation

in times of oversupply. So we've got international price set

forth as a definition in this Act when international price is

nothing but balderdash and nonsense.

What I would like to have from the Minister is how, in

practice, he intends to resolve this fairly obvious market

situation. It becomes critical, not just for the producing

mines in British Columbia, but as to whether anybody might wish

to develop a mine, no matter how long term a contract they may

be able to win, because of the uncertainty in the economics of

their operation.

We have no command on the world supply of copper. That is

fairly obvious. Our copper basically is low grade; it is

leftover copper. It is the kind of copper that is mined only

when the richer sources of supply in the world are for one

reason or another, usually political reasons, prevented from

reaching the market.

Mr. Chairman, we need to have far more sensible answers from

the Minister than he has given to date before the industry will

have any confidence at all of the wisdom of the government in

applying this particular Act they are introducing.

HON. MR. NIMSICK: The first thing I would like to say in

regard to Allende of Chile is that he was democratically

elected as President of Chile.

MR. McGEER: Hitler was the democratically elected Chancellor

of Germany, and you know what happened when he took over.

HON. MR. NIMSICK: He wasn't a democratically elected

Chancellor of Germany.

MR. McGEER: He certainly was.

HON. MR. NIMSICK: No. He was appointed as Chancellor by the

President of Germany.

AN HON. MEMBER: He got more votes than

[ Page 4221 ]

anyone else in the 1933 election.

HON. MR. NIMSICK: In Chile they were trying to get back for

the Chilean people some of the moneys that were going out of

the country on the copper trade. Following Allende's taking

over the copper industry the copper price went down to around

45 cents if you remember. It wasn't until after that copper

went sky high, not due to what Allende did in Chile.

It definitely states here that this gross value and the

price is paid or credited to a producer. That's what you are

talking about.

The Hon. Member was not in the House at the start of the

sitting tonight when I explained to the Hon. Member for North

Vancouver-Capilano (Mr. Gibson) exactly what gross value meant

and what international price meant. It is the price that the

producer receives, less the smelting costs. In the case of the

basic royalty it will be the smelting costs plus

transportation.

AN HON. MEMBER: It doesn't say that, Leo.

HON. MR. NIMSICK: It certainly does.

MR. McGEER: Mr. Chairman, may I read "international price"

as I read what is in this bill? If international price on page

1 said what the Minister said, we wouldn't be asking the

question — if international price said "the price that the

producer receives." International price, it says, means "the

price of a unit of a designated mineral established for the

purposes of international trade by one or more persons or

commodity exchange institutions approved by the

Lieutenant-Governor-in-Council."

We are going to check Hansard Mr. Chairman, after the

evening session, but that statement which appears in the bill

is quite different from what the Minister just stood up and

said international price meant. We are not going by Hansard

definitions. After the Lieutenant-Governor appears and somebody

nods and the thing becomes a law, we must go by what is said on

the piece of paper — not what appears in Hansard .

HON. MR. NIMSICK: Read it over again.

MR. McGEER: Mr. Chairman, if the Minister wishes to say that

this definition is wrong and he is going to bring in an amendment, then

I am sure that

section 1 would pass without difficulty. But he is

saying one thing and something else is said on this piece of paper.

HON. MR. NIMSICK: Mr. Chairman, it says "for the purpose of international

trade." If you look up the definition of "gross value," it means the international

price or a combination of international prices paid or credited to a producer

on the sale. Then we went to the extent of defining international price. It

means the price of a unit or of a designated mineral established for the purpose

of international trade. This is the price that the producer gets. Now, some

of them don't get the same as others. Some of them are under contract, and they

get a different type than another company. This is the price that we are following.

That is the reason that it is in there.

MR. McGEER: Mr. Chairman, I hope that when the time comes

for

interpretation of this Act we will be able to hold the

Minister to the remarks he made and be able to quote Hansard as

the definitive authority as to what the provincial government

will be obliged to follow in the application of this particular

section.

MR. CHABOT: Mr. Chairman, just a brief question. The

Minister clarified for me on what basis the royalties will be

charge — that it will be based on the smelter value.

HON. MR. NIMSICK: Net smelter returns.

MR. CHABOT: Net smelter returns, certainly.

I wonder if the Minister could tell me what kind of a

bureaucracy this is going to generate within the Department of

Mines and Petroleum Resources. Each and every carload of

concentrate shipped out of the province to a smelter has a

different value. Each and every carload has a different value.

It varies, sometimes only two or three cents a ton, but it all

varies. I'm wondering just how many hundreds of public servants

are going to be involved. What kind of expenditures are going

to be involved in recording the kind of assays that are

generated through the various smelters in the United States and

in Canada as well?

The next question that comes to mind is: is there a royalty

on high-grade ore that comes into British Columbia for

concentrating purposes? We've seen it happen in the past — ore

coming from the Northwest Territories, from Pine Point, into

Kimberley primarily. They shipped ore in abundance there at the

initial outset during the three-year period. I'm wondering

whether there is a royalty application to ore coming from

either Pine Point or Pyramid or be it from the Northwest

Territories or from the Yukon — when it comes into British

Columbia for concentration purposes or for smelting purposes as

well. Is there a tax on that?

HON. MR. NIMSICK: This royalty bill only applies to the

Crown-owned mineral resources of the Province of British

Columbia.

MR. CHABOT: Mr. Chairman, isn't there a fear that

organizations such as Cominco, for instance,

[ Page 4222 ]

which has an abundance of ore in the North West Territories,

owning Pine Point Mines and owning formerly Pyramid Mines,

could possibly or conceivably ship ore to Kimberley to be

concentrated there? They could close down their existing

Sullivan Mine, in turn jeopardizing many jobs in the community

of Kimberley. It's a very serious concern. There's the strong

possibility that ore could come from the North West Territories

as it has come in the past at the original outset.

HON. MR. NIMSICK: You're creating a supposition now.

MR. CHABOT: No, I'm not. It has happened. I have seen

thousands of carloads come from Pine Point.

HON. MR. NIMSICK: I worked in Kimberley and I know the

carloads that come in and all that. But this does not apply to

that ore that is shipped in from Pine Point or from outside the

province. This royalty only applies to ore produced in the

Province of British Columbia.

When you say there is a different value, this is the reason

we take the net smelter return. If they ship 50 tons of ore to

a smelter and they get back so much money, that's the net

smelter return…

MR. CHABOT: I know that.

HON. MR. NIMSICK: …they receive back after the ore has

been smelted.

MR. CHABOT: Yes, Mr. Chairman, on that very point. Certainly

they high-grade at Pine Point. Pine Point is a rich ore body.

It's quite conceivable that they will continue to operate the

concentrator in Kimberley. The Cominco concentrator there could

continue to operate with ore generated from the North West

Territories. In other words, mining could come to a standstill,

conceivably at the Sullivan Mine in Kimberley.

I asked the question regarding the kind of bureaucracy you

will be establishing within your department to keep track of

all this ore and all these assay returns you're getting from

the various smelters all over the United States primarily and

from some in Canada. I would think the bulk of it is shipped

down into the States. I'm wondering how many people are

involved and what costs are involved in keeping and recording

the various assays, and not only the assays but the billing of

the various mines in British Columbia on the royalty charge

here in your legislation. How much of it will you lose by the

application of the royalty charge?

HON. MR. NIMSICK: Mr. Chairman, the companies themselves will make their

reports on the amount of ore they ship and the amount of returns they receive.

It will have nothing to do with the bureaucracy in the department.

MR. CHABOT: How big will that be?

HON. MR. NIMSICK: There will be no need of a bureaucracy in

the department because we will accept the reports from the

companies. Undoubtedly, if we find they're not living up to the

Act, then we may make a check on them. But otherwise, they will

be doing the reporting as to how much they received. They've

got to issue their bills to us.

MR. CHABOT: Mr. Chairman, no doubt that will involve quite a

bureaucracy in your department. The Minister fails to

understand that freight rates are based on smelter weight and

value. It takes some considerable time for smelters to give

their assays back to the railway company who, in turn,

interchanges it back to the original carrier. It takes

months.

The Minister shakes his head. Listen, I'm very familiar with

this particular subject, Mr. Minister.

HON. MR. NIMSICK: So am 1.

MR. CHABOT: I know for a fact that we've seen carloads of

lead and zinc — primarily concentrate — in which the smelter

weight and value affects the freight weight. It's all based on

the values per ton of those concentrates.

HON. MR. NIMSICK: Not the value of the concentrates.

MR. CHABOT: Oh, yes.

HON. MR. NIMSICK: On the weight.

MR. CHABOT: Sorry, smelter weight and value per ton and

on the weight. Logically, because a lot of it blows off as it

goes down to the smelter. But I've seen instances where it has

taken two and three years before a final billing is made to the

mine on the adjustment of the freight rate based on the assay

at the smelter.

Under those circumstances, I want to assure you that there

is a strong possibility that that mine could be closed down

before that billing ever reaches or the assay or the final

result — that is, the application. You've talked about the fact

that consideration is given to the transportation costs of

concentrates from the mill site to the smelter. If it's going

to take two or three years, I want to assure you, there's much

revenue that you're going to be losing. How are you going to

overcome this two- and three-year delay in

[ Page 4223 ]

which instances many of the smaller mines could be closed

down? How will you possibly ever collect the money which you

are attempting to collect under this legislation?

HON. MR. NIMSICK: I don't know what railroad the Hon. Member

worked for, Mr. Chairman, but when I worked in Kimberley and

they were shipping ore in from Pine Point, we received the

weight bills with the carloads of ore. The cost of

transportation was right on those weight bills.

MR. CHABOT: Different proposition.

AN HON. MEMBER: How long since you worked there?

HON. MR. NIMSICK: Not a bit different than that.

The railroad issues their weight bills with the carloads of

ore. So don't try and cloud the issue by something that has

nothing to do with it at all. At the time that the shipment is

made, the railroad has the weight bills there and the price and

everything is right on the weight bill. I've issued hundreds of

them through the plant in Kimberley.

MR. CHABOT: Mr. Chairman, just another short question. The

Minister apparently doesn't realize there's a difference in the

freight-rate structure. Railways have thousands of different

freight rates and different freight-rate structures — thousands

of them. You can't start comparing the freight rate, which is a

firm thing in most instances on ore, and comparing it with

concentrates because concentrates in most instances are based

on assays, smelter weight and value, then, in turn, the

destination carrier.

I'm thinking back on many instances I've seen. The Great

Northern, for instance, has been extremely lax in billing back

to Canadian Pacific the results of the assay and the weight as

well. I've seen delays of upwards of two years in returning

those figures back to the railway — to the Canadian Pacific,

the original carrier. Canadian Pacific sometimes has been a

little slow in billing the mine. I've seen minds close

down.

I assure you that when you're dealing with the whole mining

industry in British Columbia and you're dealing with a lot of

little mines, you're going to lose a lot of revenue because

you're not going to be able to collect it. Before you get that

return from the destination carrier back to the original

carrier, you're going to find the mine has closed down.

MR. GIBSON: After listening carefully to the Minister on this critical

question of gross value, I think I understand what he's saying. But what bothers

me is that when the time comes for

interpretation, possibly by a court, of the

legislation we're passing now, the court has to deal with what is written in

the bill rather than what is said in Hansard .

As I read this definition, there seems to me a good chance

that a court could find that what is to be the subject of a

royalty is the deemed income according to international price

of a producer as opposed to the realized income.

Subsequently, I would, in a helpful spirit, move the

following amendment: that in

section 1, line 9, delete the

existing definition and replace it with, "gross value means net

mine and mill receipts per unit of mineral plus transportation

cost."

That would, it seems to me, make it perfectly clear that

it's receipts we're talking about and nothing in particular to

do with the international price levels.

HON. MR. NIMSICK: Mr. Chairman, I can't accept the amendment

because the definition is quite clear. I made quite clear what

it means. We have to have that international price there. It

states definitely, "paid or credited to a producer on a sale."

I can't make it any plainer than that. That's what it

means.

Amendment negatived.

MR. CHABOT: I've asked a question. I realize I can't insist

on an answer. But will the Minister give me some idea as to how

many additional civil servants will be necessary to keep track

of the royalties in and out and the reports that are submitted

to the department? How many?

Interjection.

MR. CHABOT: I wish that Minister for pulp and newsprint from

Ocean Falls and Gottesman fame would stop giving the Minister

the answer because I'm sure the Minister can answer himself.

You think that Minister is that incompetent that you have to

give him the answers.

MR. CHAIRMAN: Order, please.

MR. CHABOT: I'm just asking a reasonable question of the

Minister. I don't think the Minister of Lands, Forests and Water

Resources (Hon. R.A. Williams) can sit in the background and say, "Oh, a modest amount."

The Minister must have some projections if he's administering his

department. He must have some projections as to how many additional

staff will be required to administer the provisions of this

legislation. If he'll give me the number of the people involved, I'm

sure without difficulty I can project the cost involved.

HON. MR. NIMSICK: The present staff we have in the revenue

division at the present time will handle

[ Page 4224 ]

the whole situation. They're very competent and I feel quite

confident that they'll look after the interests of the Province

of British Columbia in this regard.

MR. A.V. FRASER (Cariboo): Well, I'd like to ask the

Minister a question. He mentioned personnel in the revenue

section — how many personnel have they got there since he

became Minister?

HON. MR. NIMSICK: I had that through the estimates. I

couldn't relate exactly the number right now unless I went back

to the estimate book. You've got the estimate book there, you

could look it up yourself.

MR. CHAIRMAN: Order, please. I believe the question is out

of order in that it's not relevant, strictly speaking, to this

section.

Section 1 as amended approved.

section 2.

HON. MR. NIMSICK: Mr. Chairman, I move the amendment

standing under my name on the order paper. (See appendix.)

Amendment approved.

section 2 as amended.

MR. GIBSON:

Section 2 is one of the five or six sections in

this bill that I have to very strongly oppose if it is not

satisfactorily amended. And I will say why.

Section 2 is one of

the very important discretionary sections in this legislation.

It's one of the two or three that led the taxation

section of

the Canadian Bar Association to say as follows:

"The most important provisions of the bill involve

discretionary powers. And most, if not all the discretionary

decisions are not subject to any appeal to the ordinary court.

Liability for a tax or an equivalent charge should be explicit

and ascertainable, and based upon a judicial

interpretation of

the will of the Legislature rather than an administrative

discretion not subject to appeal."

And that, Mr. Chairman, is exactly what we have in

section

2. The bar later on said:

"The bill as drawn in embodies an unprecedented abdication

of responsibility by the Legislature in favour of the

administration."

That, Mr. Chairman, is exactly what this

section 2 does because it gives the

Minister and Lieutenant-Governor-in-Council, through his power to determine

basic value, complete power to decide what tax any given company and any given

mineral will pay in any given year. That, I believe, is: (1) a power that should

not be delegated by this Legislature; (2) a taxation power that should not be

subject to Ministerial discretion.

Even the brief submitted to the Minister and the government

by the United Steel Workers was quite explicit on this point

that it should be possible in advance to have a predetermined

idea of the tax liability. The idea that that should be subject

to the whim of the Minister of the day, is, to me, completely

unacceptable.

The particularly offensive

section here, I would say, is

section 2(3), and I would therefore move that that be amended

by deleting subsection (3) and replacing with the

following:

"The basic value shall be the average of the gross values of

mineral in the province in the two years immediately preceding

the royalty year, plus any change necessary to reflect a change

in the international value of the Canadian dollar and its

effect on net mine receipts, and any change necessary to

reflect inflation or deflation in mining costs."

The concept of that amendment, Mr. Chairman, is that it takes the

discretion away from the Minister.

It sets forward a firm and definite formula for the establishment of

tax liability. It relates that tax liability more precisely to the

economic circumstances of the day rather than using the five-year

average jumping-off point proposed by the Minister which is not too

closely related to the economic circumstances of the day, given the

rate of inflation we've had and the tremendous swings in commodity

markets. It seems to me it is more proper to relate that to the

two-year segment, and it seems to me that changes in mining costs

should be explicitly recognized. Accordingly, I move that amendment.

I HON. MR. NIMSICK: Mr. Chairman, while I think the amendment is really

out of order….

MR. CHAIRMAN: On the point of order, we'll consider that

point.

AN HON. MEMBER: It's up to the Chairman to decide that, not

you.

HON. MR. NIMSICK: I didn't say it was out of order, I said I

think….

MR. CHAIRMAN: In regard to the point of order raised by the

Hon. Minister in regard to the proposed amendment from the

Member for North Vancouver-Capilano (Mr. Gibson), I would rule

the amendment out of order on the grounds that it interferes

with the Crown prerogatives as contained in

[ Page 4225 ]

this

section of the Act. It alters this, and this is not

something that can be done by the amendment in the hands of a

private Member. It must be with the consent of the Crown, or

introduced by a cabinet Minister. Therefore I rule it out of

order.

HON. MR. NIMSICK: Mr. Chairman, I'd like to answer the Hon.

Member though, just to quiet his fears a little bit. I'm rather

surprised that he would question the Minister's discretionary

powers. When you passed the bill a few days ago in regard to

forestry, they gave all the discretionary powers, and it had no

figures in it at all…

MR. GIBSON: We opposed that.

HON. MR. NIMSICK: …to the Minister in forestry, and its

been always that way.

MR. GIBSON: We were against that.

HON. MR. NIMSICK: In this bill I've been very careful to

tell you that the first-designated price would be on the

five-year average. There's a flexibility there for the

first-designated price, and from then on you take into

consideration the changing conditions, the costs of operation

and the value of the Canadian dollar. And when you take it five

years, I think it gives them a better chance. But in your

amendment it would take it every two years and this wouldn't

work at all. So, just to quiet your fears, I think you will

agree that the five-year average is the fairest and the best

way to handle this situation.

MR. WALLACE: Mr. Chairman, the Minister is obviously

concerned and trying to quieten fears, as he says. I can tell

him there are lots of fears in the mining industry, and these

amendments are not enough to quieten the fears. We have

numerous communications from people in the mining industry. I

simply quote one; this man says:

"The discretionary clause contained in Bill 31 is much too

vague for any precise financial planning and should be

eliminated in favour of legislation which specifies the limits

of the government's authority to tax."

HON. MR. NIMSICK: This is not a tax.

MR. WALLACE: Oh, come on now, let's not get into semantics. It's a form

of taxation against the mining industry. You can waffle around and decide what

you think of taxes and what I think of taxes, but a tax is a payment of money

by an individual or a corporation to the state. Now whether you do it in the

form of royalty or a tax on profits or any other way, it is a tax. So let's

not drag the debate down to that level and contest the fact that this is not

a tax.

MR. CHAIRMAN: Order, please. I would point out to the Hon.

Member that I think the more appropriate place to discuss that

particular point would be under

section 3.

MR. WALLACE: Well that may be, Mr. Chairman. I didn't raise

the point as to determining what a tax means. The Minister did.

So call him to order.

HON. MR. NIMSICK: I'm not saying anything. I'm just….

MR. WALLACE: You just opened your mouth and said this wasn't

a tax.

HON. MR. NIMSICK: I'm just answering you, and I'm ruled out

of order.

MR. CHAIRMAN: Order, please. The Hon. Member for Oak Bay has

the floor.

MR. WALLACE: Let's have some fair play in here — the same

for both sides of the House, Mr. Chairman.

Interjection.

MR. WALLACE: Yes, my ears are red and there's more than my

ears red. My temper's getting a little red in this House. We

want some fair play for both sides.

MR. CHAIRMAN: Order, please. I was merely pointing out to

the Hon. Member who has the floor that we will be discussing

this under

section 3.

MR. WALLACE: Mr. Chairman,

section 2 gives the kind of

discretion to the cabinet which makes it impossible for the

mining industry to know where they're at. And if an industry so

dependent on risk capital doesn't know where it's at

financially then its planning has to be somewhat chaotic or

they turn their back on British Columbia and put their money

elsewhere. Now, does that not make sense? Simply because under

the terms of

section 2 and the wide discretion given to the

Minister to designate what these different terms are, or his

scope to designate a mineral, to designate gross value, to

designate basic value, indeed his discretion to decide the

whole formula…. You needn't shake your head, if that's not

the case what have you got it in here for?

All I'm trying to say is that the mining industry in no

uncertain terms has made it clear to the people of British

Columbia, and they're tried to make it clear to this

government, that there is real danger in this degree of

discretion to the cabinet in

section 2 on the

[ Page 4226 ]

basis that it does not give any very clear, precise way in

which the mining industry can calculate the kind of royalties

it might be liable to pay.

Mr. Chairman, the Manitoba bill, which had many similarities

to this bill, had a great deal more flexibility than this bill

has. They had mechanisms of appeal, for example, which this

bill doesn't have. Even in the socialist province of Manitoba

they withheld or withdrew that bill and did not proceed with

it.

Now why can't this Minister realize that wasn't done without

a great deal of consideration and reconsideration? We had the

great expert, Eric Kierans, who wrote pages and pages — volumes. I have a copy here and I can read it all to the

Minister if he'd like to hear it. It would only take a few

hours.

Eric Kierans wrote volumes on this question of royalties and

the fair return to the province from value of mineral

resources. The bill in Manitoba was based on Eric Kierans'

considerations, and contained many similar provisions to the

Bill 31 we have in British Columbia. And what happened to the

Manitoba bill?

When it was finally considered and reconsidered, the

government decided to withdraw it. Now I think that there is a

message there for any person who is willing to look at some of

the defects in Bill 31. One of the defects is the very great

degree of discretion given to cabinet in

section 2 and in other

sections — but certainly as much in

section 2 as any other.

I wonder if the Minister wouldn't reconsider and agree that

this could be amended. Or perhaps he could tell the House on

what basis he feels that this creates no difficulty to the

mining industry to budget for the years ahead. We have got all

kinds of clippings which I would like to refer to in

section 3.

But really 2 and 3 have a close relationship, because 3

establishes the principle of royalties, and 2 establishes the

formula based on certain terms.

So, while on a strict definition of the rules of debate we

can't debate

section 3 at the moment, I wonder if the Minister

would not reconsider the real dangers which exist from this

rather extensive and yet poorly defined degree of discretion

which is given to the cabinet.

HON. MR. NIMSICK: Mr. Chairman, after listening to the Hon.

Member for Oak Bay telling me that there is no flexibility in

this

section here, and that we don't tell the industry where

they are at, I don't quite….

MR. WALLACE: I didn't talk about the flexibility in your

bill; I was talking about the Manitoba bill.

HON. MR. NIMSICK: I don't quite understand that at all. You

said that the Manitoba bill was more flexible.

MR. WALLACE: That's right.

HON. MR. NIMSICK: We tell them the net smelter returns. We

tell them the net value. We can't change that by

order-in-council or anything else. Now the only thing is the

basic value, which is….

MR. WALLACE: That is the whole point; that is what I was

talking about. You decide that.

HON. MR. NIMSICK: Yes, but by five-year average plus an

extra cost as the inflation goes on. Next year we will take

into consideration the other increasing costs.

MR. WALLACE: And you decide on these costs.

HON. MR. NIMSICK: Now if you want to box that in and put the

exact figures down here, then the industry is boxed in

completely — so is the cabinet and so is the government — and

they cannot manoeuvre at all. I would like to be able to

manoeuvre it enough so that we can make sure that the industry

can carry on in a good way. That is all that is in this

section

here. I think that this

section is one of the sections where

the Minister has the least discretion of all.

[Mr. Liden in the chair.]

Interjection.

HON. MR. NIMSICK: This is setting the basic value.

MR. WALLACE: That is right, and you decide what it is. You

are the referee, you are the rules maker and you are the whole

works.

HON. MR. NIMSICK: We have defined exactly here how we arrive

at the basic value. Well, what better person could you have

than me to do it? (Laughter.)

MR. GIBSON: The Minister has just made it clear that this is

just more "trust us" legislation. "We are going to do a good

job. Trust us; give us that blank cheque. " I just can't agree

with it.

There is the Minister over there saying "aye." He has no

idea of the impact of this bill on this province. He is trying

to hurry the thing up. We'll just take time for proper

examination, Mr. Minister. You stand up and make your own

speech when you are ready.

MR. CHAIRMAN: Order! Address the Chair.

MR. GIBSON: Thank you, Mr. Chairman; and could you ask that Minister

just to keep quiet?

[ Page

4227 ]

Interjections.

MR. CHAIRMAN: Order! The Member for North Vancouver-Capilano

has the floor.

MR. GIBSON: That Minister who is supposed to be in charge of

Industrial Development (Hon. Mr. Lauk) just has no respect.

Mr. Chairman, before going on with this section, and some

improvements that might be made, I would like to ask the

Minister about his

interpretation of the phrase "the value of

the Canadian dollar." You could interpret it two ways. You

could interpret it as the value of the Canadian dollar on the

international currency market, or the value of the Canadian

dollar in terms of purchasing power. I wonder if the Minister

would clarify for us which is his intent.

HON. MR. NIMSICK: It would be definitely in terms of

internal purchasing power.

MR. GIBSON: In that case, then, it seems to me that there is

some ambiguity in that meaning. Since there are other things

later on in this

section that need to be patched up. I am going

to move an amendment.

I will just say what the other things that need patching up

are. There is a provision in

section 3(

b) to take into account

province-wide changes in the cost of labour. It seems to me

that this should be related to labour in the mining industry,

because if it is not it will penalize labour in the mining

industry from being able to fight as hard as it should be able

to for a larger share of the mineral revenue, if the royalty

cannot be adjusted to take into account their greater gains

from the provincial average. It seems to me that that should be

taken account of.

Furthermore, since well over half of the costs of mining

companies relate to the purchasing of supplies and equipment,

it seems to me that that should be specifically noted as one of

the cost factors that should be taken into account in this

discretionary determination — which I shall, in any event,

continue to oppose. Therefore, I would move that

section 2 be

amended in line 12 by deleting "value" and replacing that with

"purchasing power," in line 17 by inserting after the

word "labour" the words "in the mining industry," and in

line 21 by inserting a new

section (c): "and province-wide

change in the price of mining supplies and equipment."

HON. MR. NIMSICK: Well, Mr. Chairman, to hurry up matters

here — I know that everybody is in a rush and they are getting

a little bit edgy, since we're coming near the end of the

session….

Interjections.

HON. MR. NIMSICK: I'll take my time. The changing value of

the dollar takes care of the purchasing of supplies. When you

just use the mining industry — the word "labour" in the mining

industry — don't forget that the mining industry is not the

highest paid industry in the province.

MR. GIBSON: We want it to advance.

HON. MR. NIMSICK: I think that they are underpaid to a great

extent.

MR. GIBSON: But we want it to advance.

HON. MR. NIMSICK: But in the mining industry you have got

electricians, you have got machinists, you have got the whole

scope of labour. If you are just going to restrict us to the

mining industry, maybe the industry would have a shortfall in

this regard. So I think that we are more generous by leaving it

open this way.

MR. GIBSON: How about purchasing power?

MR. D.M. PHILLIPS (South Peace River): I wonder, before we

pass over this section, if the Minister would mind advising me

what….

MR. CHAIRMAN: I would like to remind the Member that we have

some amendments here that we should be dealing with.

MR. PHILLIPS: Oh, I'm sorry.

Amendments negatived.

MR. CHAIRMAN: We are now back to

section 2 as amended

earlier.

MR. PHILLIPS: I wonder if the Minister would advise me what

minerals he plans to designate, say within the next two or

three months.

HON. MR. NIMSICK: I already went over that subject when you

were not in here. You weren't here at the start, and I went

over the four designations that we were proposing to the

cabinet after this bill gets through.

Section 2 as amended approved on the following division:

YEAS — 31

Hall

Sanford

Nicolson

Macdonald

D'Arcy

Skelly

Barrett

Cummings

Gorst

Dailly

Dent

Rolston

[ Page 4228 ]

Strachan

Williams, R.A.

Anderson, G.H.

Nimsick

Cocke

Barnes

Hartley

King

Steves

Calder

Lea

Kelly

Nunweiler

Young

Webster

Brown

Radford

Lewis

Lauk

NAYS — 16

Chabot

Phillips

Anderson, D.A.

Bennett

Richter

Williams, L.A.

Smith

McClelland

Gardom

Jordan

Morrison

Gibson

Fraser

Schroeder

Wallace

McGeer

MR. GIBSON: Mr. Chairman, I ask that the vote be

recorded.

section 3.

HON. MR. NIMSICK: I move the amendment standing in my name

on the order paper. (See appendix.)

Amendment approved.

section 3 as amended.

MR. F.X. RICHTER (Boundary-Similkameen): Mr. Chairman, this

particular

section is the real main core of the whole bill. All

the mechanics that are built around it really wouldn't mean

anything without

section 3, the royalty section. The amended

bill is as provocative and objectionable a type of legislation

as I have ever seen come into this House, and certainly

amendments haven't made it any more palatable. The spirit and

concept of the original bill is still with this much amended

bill.

Certainly it is a most unacceptable formula which the

government has brought in to attempt to get a greater

extraction of return from the minerals. There are other ways

and methods which I have discussed earlier in this session,

during the course of debate, which would have virtually given

more revenue to the government by way of the Mining Tax Act and

its revision, which would have been a very simple method of

accomplishing their objectives.

Interjection.

MR. RICHTER: Well, it's a peculiar thing, Mr. Attorney-General. Already

there's 15 per cent there and certainly if you could have had the first 15 per

cent which was obtained through the provincial government, by negotiation, you

could have done the balance with the federal government. You're going to have

to do it anyway eventually after our new government is elected.

AN HON. MEMBER: Would we have to go cap in hand?

MR. RICHTER: Now, wouldn't that be too bad? We have to come

cap in hand and so do all the miners to this government, and

that's just as objectionable or more objectionable than going

to Ottawa. However, let's get back to the

section on

royalties.

The passing of this bill will not bring about the end of

resistance to the measures contained in the legislation. For

the foreseeable future, we can see a great decline through this

royalty

section and its imposition on the industry. We'll see a

great decline in further development and exploration for

minerals in this province. Certainly the world needs minerals

today and we need them ourselves. The mining industry was

developing in such a fashion that it's argumentative today as

to whether, if you calculate all the income tax and that that

is generated through mining wages and it is credited to the

mining industry, it could virtually outstrip the forest

industry.

We have a great potential in this particular field of

resource. Certainly what we have here before us in this

royalties bill is not going to engender any great enthusiasm

for discovery. We know this for a fact. Certainly there will be

a great amount of resistance to this and there's going to be a

great administration problem when it comes to running down all

those factors such as the Minister has mentioned.

Transportation means from the origin to the destination. I

would like to know how the Minister intends to calculate other

than taking the law of averages or the mill run of it when

delivered at the ship. Is he going to follow this on when it

gets to Oita, Japan or the various other Japanese ports where

the smelting takes place?

I assume — and I hope that I am not wrong — that he's going

to take the figures of the mining industry. I'm quite sure the

mining industry will certainly give the authentic figures. But

I can't help but see that the other provisions — for scrutiny

and the main thrust of inspection by way of his particular

force in applying and administering this Act through his

administrator, there they can go in and pick up the books and

things of this nature — could be very detrimental. It could be

a very sad situation as far as relationship between the Mines

department and the industry if you become over exuberant in

employing these tactics.

I'm sure that the mining industry certainly intends to stay

in this province. I would hope they would stay in this

province. I hate to see the capital that is going out at this

particular time because of this piece of legislation. In light

of these viewpoints I'm certainly not in a position to support

this legislation

[ Page 4229 ]

but I will oppose it.

MR. WALLACE:

Section 3 as amended we oppose for some very

fundamental reasons. One is that we can't buy this false

argument that a royalty is not a tax. That's number one. Maybe

we can agree to have a difference of opinion but I want the

reasons for our opposition to be unmistakably clear in this

debate. We believe that it is a tax and that the basic

principle of taxation is the ability to pay.

Interjection.

MR. WALLACE: Now we have this chirp, chirp, chirp from

Shuswap saying that it's a payment on a commodity.

I hope you won't rule me out of order because I'm only

responding to the comments of well-intentioned critics, who I

notice haven't got up and got into the debate themselves. They

always just chirp when the opposition Members are debating the

bill. But that kind of comment just shows a complete lack of

appreciation of the kind of constructive criticism that we are

trying to bring to this bill — that it's a payment on a

commodity.

Another argument that we hear is: "Of course, it has been done before," or:

"It is in existence now." There are a lot of mistakes that civilization goes

on making all the time. We fight wars that have been fought before. But does

that make today's war any more sensible than the wars in the last 15, 16, 19

centuries? No, of course not. This argument that a royalty such as we are imposing

section 3 is all right because we've had royalties in the past, I think,

is a very weak argument. If that's the best argument the Minister can put up,

then I think that this government really is in trouble.

MR. LEWIS: That's wishful thinking.

MR. WALLACE: Oh, it's not wishful thinking, my friend. The

Minister has more troubles than he realizes. The only thing is,

of course, Mr. Chairman, that in the mining industry it is a

cyclical industry and risk capital just doesn't vanish

overnight. It will perhaps be two or three or four years before

the real impact of Bill 31 comes home to this province. That's

really the tragedy of this debate we're having right now.

We of the opposition try to point out what this

section will

do to the mining industry, but we cannot prove it. We can't

really come close in time to proving it because the kind of

effect of

section 3 on the mining industry will probably not be

reflected for some time — two years or three years.

We have mines in production that for sheer economic reasons will continue producing

almost regardless of what the royalty is. But that again is part of our argument

against the bill, that perhaps in the short run — and I do emphasize short run

— the Minister perhaps next year or the year after will be able to demonstrate

that the government revenues through

section 3 royalties have increased.

MR. CHAIRMAN: Mr. Member, I want to bring to your attention

that you are discussing the principle of the bill. You should

be discussing the detail of

section 3. The principle has

already been approved in this House.

MR. WALLACE: The detail, Mr. Chairman, of

section 3 is

essentially the guts of this bill.

MR. CHAIRMAN: The amount of royalty and things like

that.

MR. WALLACE: That's right.

MR. CHAIRMAN: The principle of royalty has been dealt

with.

MR. WALLACE: All right, Mr. Chairman. But the heart and soul

section 3 is, as you have so correctly pointed out, Mr.

Chairman, the amount of the royalty and the manner in which it

is applied. I'm saying that that amount of royalty….

For example, Mr. Chairman, since you raise it, I'd just like

to quote from The Vancouver Sun of June 12, where a mining

executive says that one of his company's mines in British

Columbia may have to pay more in taxes than it makes if the

price of copper continues to rise.

"George Albino, vice-president and chief operating officer

of Rio Algom Mines, told the Canadian Nuclear Association

annual meeting: 'The ridiculous situation is the result of a

tax squeeze play by the federal and provincial governments on

the mining industry, and if the price of copper goes above

$1.50 a pound from its present level of $1.30, the company's

open-pit copper mine at Lornex, B.C. may have to pay more in

taxes than its net income.'"

That, Mr. Chairman, is because of the application of the

amount of royalties in

section 3.

The fact is that with this kind of taxation….

Again, I recognize that the Minister doesn't agree that it

is a tax, but we believe it is; and if you read any newspaper

in the country, everybody who writes in the newspapers seems to

think it's a tax too.

AN HON. MEMBER: It's a penalty.

MR. WALLACE: The fact is that

section 3, as applied in the

amounts which are described, will have a very serious effect on

the degree to which investors are willing to invest capital

because of these

[ Page 4230 ]

predetermined kinds of royalties under

section 3.

I think that in the debate on second reading, Mr. Chairman,

it was pointed out that it is an industry intimately dependent

on risk capital. Here we have royalties in

section 3 which make

it even more of a risk for the investor to invest his

capital.

There was a very interesting seminar held here in Victoria

the other day. One of the key speakers was John Whitehead of

New York, who is chairman of the governing council of the

Securities Industry Association in the United States. He says

that the North American continent, Mr. Chairman, is in the

early stages of a severe capital shortage. The nations' needs

have simply outstripped our people's ability and willingness to

invest. In addition, our capital markets have been called upon

to supply funds for investments in a vast array of new types of

projects and facilities.

He goes on to talk about a drop in the rate of savings. We

find that such savings as there are flow into safe havens like

guaranteed savings accounts, life insurance, corporate pension

funds — but not into risk securities.

MR. P.C. ROLSTON (Dewdney): People are buying gold and

coins.

MR. WALLACE: The Member for Dewdney (Mr. Rolston) interjects

that people are buying gold. That just confirms totally the

point I'm making: that you buy tangible, valuable things you

can see, feel and capitalize on, Mr. Chairman.

Here we are talking about people putting money into

exploration in possible ore bodies, which might have a possible

value, where the risk is that they might lose their shirt.

We've already had debate in this House on second reading which

shows that on the average one in 1,000 of these various

enterprises for exploration and development of ore bodies is

successful. We've had examples, and I won't go over the debate

again, of the kind of very minimal return which often the

investor realizes.

So as for this interjection that people are buying gold, I

know why they are buying gold. There's very little risk in

buying gold. It has been valuable for 10,000 years. But there's

very questionable value in the money that I or any other

investor might put into a potential ore body in the ground.

The impact of

section 3 with this kind of royalty, we

believe most sincerely, holds such tremendously serious

potential for the industry as a whole. We are all agreed that

it is the second most important industry in British Columbia,

that there are many thousands of people involved directly or

indirectly, and that the well-intentioned motive of the

government to obtain some return from the resource through the

royalties in

section 3 is reasonable….

We accept that some formula should be found. We don't agree that it should

be a royalty. We oppose this

section very strongly because we believe in a graded

tax on profits. This government and this Minister have given no valid reason

why that isn't an eminently sensible alternative.

MR. CHAIRMAN: Once again, Mr. Member, the principle has been

adopted.

MR. WALLACE: Yes, Mr. Chairman. But we are talking about….

MR. CHAIRMAN: You should be talking about the amount and the

manner —

section 3.

MR. WALLACE: Certainly, Mr. Chairman. Well, the amount of

the royalty has caused the mining industry in British Columbia

to express extreme alarm. I've already quoted regarding Lornex

Mines where the vice-president and the manager of operations

has said that the company may finish up paying more in forms of

taxation than its profit.

We have another quotation here from Mr. Whist, a mining

executive who was speaking in Kamloops. He said….

Interjection.

MR. WALLACE: Don't confuse the issue, Mr. Minister. It's a

free country. You can be affiliated with any organization you

like. You're always preaching discrimination. Don't

discriminate against a professional because he happens to be

associated with some group. Now don't give us that kind of

discrimination.

Interjections.

MR. CHAIRMAN: Order! The Member for Oak Bay has the floor.

You know the rules.

MR. WALLACE: The gentleman I am about to quote is a mining

executive; and I see that it has little effect what particular

political interest he has. He's the president of TCL

Exploration Group Limited. He said: "It is almost certain that

a project such as Valley Copper Mines could not be contemplated

under the proposed legislation.

Section 3 opposing this amount

of royalty in this manner…." — and we could go on. I've

got all kinds of clippings here. "Bill 31 Pushes Firm out of

B.C. Activity."

"A mining corporation of Canada announced it would not

undertake any further mineral exploration in B.C. If the

provincial government goes ahead and implements its mining

royalties under

section 3. In a prepared statement the company

said that royalties in Bill 31, in addition to the many forms

[ Page 4231 ]

taxation already imposed on the mining industry, eliminate any

incentive to find or develop mineral deposits."

All I am saying, Mr. Chairman — and I'm trying to move along

quickly — is that we could quote until the cows come home

tonight that kind of reaction by the mining industry in direct

relation to the essential content of

section 3, which is the

heart and soul of this bill.

It creates a penalty against the mining industry which, when

you take into consideration many of the factors which were

debated under the principle of the bill, means that this is a

very negative effect on capital in the first place. Without

capital the industry goes nowhere, and there are all the other

consequences — exploration, development, employment,

development of communities, you-name-it.

What we have against

section 3, furthermore, Mr. Chairman,

is that this government wants to share in the good times — yes,

let's cream off the top when the industry is doing well — but

under this bill mining companies can pay taxes when they are

losing money. How can you call that justice in the

marketplace?

MR. R.T. CUMMINGS (Vancouver–Little Mountain): They do it to

everyone that way.

MR. WALLACE: There again, you know, we get this kind of

ridiculous justification. Because you do it to some people it

is okay to do it to someone else. What ridiculous logic we hear

in this House at times. Just because mistakes are made in the

past do we go on making them again and again in new

legislation? That just doesn't make sense. If your ice-cream

cones didn't work out by one formula surely you wouldn't go on

using the same formula, Little Mountain.

Interjections.

MR. CHAIRMAN: Order! The Member for Oak Bay (Mr. Wallace)

has the floor. Please address the Chair.

MR. WALLACE: I keep being interrupted, Mr. Chairman. It is

most distressing.

MR. CHAIRMAN: I'll do my best to help you out.

MR. WALLACE: Thank you, Mr. Chairman.

That is another element, Mr. Chairman, of the basic reason why we oppose

section

3. Not only do we believe that its effects on the mining industry will be very

severe, but we just feel that in the first place it applies regardless of the

financial success or otherwise of the company. We don't feel that this is the

kind of fair approach to taxation which would serve both purposes — namely to

obtain for the province a fair return on the revenue from its resources and

secondly, the very vital goal of maintaining incentives in the industry. If

you get hammered by this kind of tax, regardless of how well or how badly the

company is flourishing, we think that this is just a most depressing effect

on the industry.

We have been over the other reasons in second reading of

this bill. The royalty rate in itself is excessive in terms of

a super royalty. I certainly recognize that under the new

definition the degree to which the super royalty applies is a

little better than some of the figures that first crossed my

desk when the bill was first introduced. But we certainly have

to re-emphasize the fact that because of these royalties, the

way they are applied, the effect on the companies and these

other consequences that I have mentioned of diminished

exploration and development, we must inevitably look to the

loss of jobs in the mining industry in British Columbia. It has

got to be a clear-cut consequence of

section 3.

Again, we are past the debate in principle, but in terms of

practical consequences from the application of

section 3 we

have already got quotations, letters and clippings from the

newsprint where people are stating that geologists and skilled

professional people are already leaving British Columbia to

seek employment elsewhere. This just didn't happen because of

the weather, Mr. Minister. This happened because of the clear

consequences which are already developing from the central

thrust of

section 3 in the from of royalties.

One of the tragic things to me seems to be that the mining

industry is not an industry with a long history in this

province. It has been built up over 12 or 15 years or something

of this nature. Because it has been not penalized by this kind

of royalty, it has attracted all the ingredients for a

successful industry. These ingredients, as I say again, are

risk capital, skilled personnel and the climate which

encourages people to feel that their endeavours in the mining

field will be rewarded and not unfairly or excessively

penalized.

I've done a little bit of research on the question of

geologists, prospectors and fieldmen. There already seems to be

a return to the conditions of 1958, before the mining industry

really got going in the province. It has taken 10 to 15 years

to build up the exploration industry. It is apparent now that

from this body of perhaps 1,000 geologists and skilled people

we are going to be down to 300 or 400. These people, of course,

obviously depend on continuing exploration. That, in turn,

depends on the investment of risk capital.

So we keep coming back to point 1, step 1, which is

section

3 of this bill. The mining companies cannot see their future

being anything but difficult under the kind of penalty — namely

a royalty, the amount of penalty and the manner in which it is

applied.

[ Page 4232 ]

I'm sure we don't want to go on repeating ad nauseam these

points but I have repeated them on this section, Mr. Chairman,

because it is quite obvious that up until now the government is

quite unrealistic and unheeding of what is, I think, a

legitimate concern of the people in the second most important

industry in this province.

You can argue all you like that it is purely self-interest

but it isn't just self-interest. These people are employed in

an industry which, in their view, can be severely damaged by

the application of royalties described under

section 3.

First of all we in this opposition and the public concerned

failed to have the bill hoisted. Now we are saying that surely

there should be some delay or some mechanism whereby the very

many people who are coming to the Legislative buildings later

this week in good faith to try and express their concern — surely there must be some way in which the Minister can heed

that anxiety, even if only to the point of giving them their

day in court. That is all they are asking, I think. We haven't

hoisted the bill for six months but surely there could be some

mechanism — if the House is only to adjourn for example this

week and not to prorogue. There must be some way in which

further consideration of this bill could be given to the

standing committee on mining.

MR. CHAIRMAN: I would like to remind the Member that he is

repeating the arguments of second reading and the arguments on

the principle. You're not dealing with the detail of

section 3

as you should be.

MR. WALLACE: The need for some further consideration is

based on the very dramatic and serious ramifications of

section

MR. CHAIRMAN: Those are the arguments of second reading.

They shouldn't be in the arguments of committee.

MR. WALLACE: I'm trying to point out, Mr. Chairman, that the

fundamental reasons why I am opposed to

section 3 are because

of the very serious consequences which I believe will follow

from

section 3. I think the time is still available to the

Minister to give it that 12th hour reappraisal or

reconsideration. I'm almost finished, I promise you, Mr.

Chairman.

I really believe that all these thousands of people in the

industry are not necessarily anti-NDP per se but they are

concerned about their livelihood and the serious damage that

section 3 will bring about to the mining industry, their jobs,

their communities and their futures in this province. I beg the

Minister to reconsider.

MR. FRASER: I can't help but think that this is all caused by a ball-point

pen. I refer to the 1969 election when the now-Minister was in a squeaker in

the election and, because of the validity of a ball-point pen declared by a

judge, he was elected and then, of course, re-elected and now is the Minister

of Mines and Petroleum Resources. He is now bringing so much consternation to

the Province of British Columbia with Bill 31.

Specifically we are dealing with

section 3 — the royalties

section. Mr. Chairman, it certainly is having an impact all

over this province. I'm not sure and I don't think even the

Minister knows the concern throughout the province and the

worry that is engendered. He keeps on playing down the fact

that the mining industry doesn't employ too many people. That

might be right in a way but I don't think that 50,000 people

are a small amount of people. He never says how many are

indirectly employed in the mining industry….

MR. CHAIRMAN: I would like to remind the Member that he is

dealing with the principle of the bill which has been adopted.

You should be dealing with

section 3 and the detail of it.

MR. FRASER: I realize that, Mr. Chairman.

MR. CHAIRMAN: You're dealing with the arguments on principle

and they have been dealt with.

MR. FRASER: I'm dealing with royalty and the effect the

royalty is having, Mr. Chairman.

MR. CHAIRMAN: That's not part of the argument on

section 3.

That is part of the argument on principle and that has been

dealt with. Deal with the amounts or the manner in which

section 3 is written and you will be in order. If you start

dealing with principle you will be out of order.

MR. FRASER: We don't agree with royalty as such at all.

MR. CHAIRMAN: You know that it is out of order to discuss

that on this section. That is discussed under the principle of

the bill in second reading.

Interjection.

MR. CHAIRMAN: Order! The Member for Cariboo has the

floor.

MR. FRASER: The royalty

section is the whole guts of the

bill, Mr. Chairman.

MR. CHAIRMAN: I would remind you once again that you deal

with

section 3 in detail. The principle

[ Page 4233 ]

has been dealt with.

MR. FRASER: You are going to get rough here, and keep me in

order and all that, but the royalties are the thing that is

concerning the whole province. I would like to say to you, Mr.

Chairman, that what the people of this province will gain from

royalties and super royalties that are mentioned here will

never make up for the loss of income, the loss of jobs and

stagnation of communities and secondary industries.

MR. CHAIRMAN: You are out of order when you are dealing with

the principle of the bill. You will deal with

section 3 in

detail, and not the principle of the bill.

MR. FRASER: That's fine. I'll try again, Mr. Chairman, but you are being extremely rough, 1 would

think.

You are dealing here with a 2.5 per cent royalty this year,

going to 5 per cent and then a super royalty after. That is

what is concerning not only the mining industry but the people

working in the mines. I say that this is all wrong. It should

be in the form of tax, and there are too many things left in

doubt.

I would just say to you, Mr. Chairman, that the other thing

that is left in doubt is the mining industry. I think they will

stay where they are, at the production level, with this

royalty. I really think they can live with it. But the point is

that we will have no expansion of the industry and that is my

concern. Certainly in two or three years' time they might take

a look at how the royalty is working, and the world price and

so on, how the royalty applies, but in no way are we going to

see any expansion, and this concerns me.

A lot of exploration has stopped now, but I'm thinking of

the producing mines that have future ore bodies that were

planning on expansion, and they are not going to….

MR. CHAIRMAN: I would remind you again, Mr. Member, that you

are dealing with the principle of the bill.

MR. FRASER: Well, rightfully so, but also I thought I was

dealing with the effects of royalties.

MR. CHAIRMAN: You are supposed to be dealing with

section 3

in detail in committee, not the principle of the bill. You know

that.

MR. FRASER: I've already mentioned that 2.5 and 5 per cent in the super

royalty, and now I'm trying to relate the effect it's having. I'm telling you

it's having a great effect. We would have had a copper smelter going in this

province right now if it hadn't been for Bill 31, and I certainly don't like

that. That's again jobs created.

I would just say that in conclusion, Mr. Chairman, you've

been so rough that I can't say what I would like to say, but I

would like to see the Minister consider delaying bringing in

Bill 31 and the royalty

section of it until it can be further

analyzed and replace it with some form of taxation which

everybody can understand. This way the concern of the mining

companies is such that they are just going to freeze up. I

don't think this is good for our province or our people in the

province.

HON. W.L. HARTLEY (Minister of Public Works):

Section 3 has

to deal with possibly the difference in political philosophies

over there and here. We are arguing that a royalty is fair; you

are arguing that it should be income tax. I think it boils down

to that. We've had the Liberals, Conservatives….

MR. CHAIRMAN: I would remind the Member that you are not

dealing with the principle of the bill. You are supposed to be

dealing with the detail of

section 3.

HON. MR. HARTLEY: I'm discussing and advocating a royalty as

compared to the income tax that the Member for Oak Bay (Mr.

Wallace) pleaded for.

MR. CHAIRMAN: I would remind you that that's the kind of

debate that took place under second reading.

HON. MR. HARTLEY: Very good.

MR. CHAIRMAN: And those arguments have been made, for and

against royalties. The question now is to discuss the detail of

it.

HON. MR. HARTLEY: Just as we collect a royalty when a young

man or a young woman or a person goes out into the hills and

cuts a Christmas tree, there's a charge for that resource. My

friend from the Cariboo (Mr. Fraser) should discuss with his

rancher friends the basis that the ranchers go into business,

and that is that they have a range lease that allows the cattle

to go into the hills and graze. Those ranchers pay royalty for

each blade of grass that their cattle eat.

MR. CHAIRMAN: I want to remind the Member that you're

dealing with the principle of the bill, and that has been dealt

with in second reading. You are supposed to be dealing with the

detail of

section 3.

HON. MR. HARTLEY: Mr. Chairman, I'm discussing royalties.

[ Page 4234 ]

MR. CHAIRMAN: Well, you are not going to be allowed to

discuss royalties in principle in committee stage here. You're

supposed to be discussing

section 3, and not the principle of

the bill.

HON. MR. HARTLEY: Mr. Chairman,

section 3 relates to

royalties.

MR. CHAIRMAN: Yes, and that's what you should be discussing — the amounts, not the principle of it.

MR. CHABOT: Challenge him if you don't agree with him.

(Laughter.)

HON. MR. HARTLEY: As far as challenges, you're doing that

across the way. But the challenge of this, Mr. Chairman, will

come at the next election.

Interjections.

HON. MR. HARTLEY: Yes, Mr. Member for Cariboo (Mr. Fraser),

if you would like to come and run in Yale-Lillooet next

election, this will be the issue. I have discussed royalties….

MR. CHAIRMAN: Order!

MR. CHAIRMAN: Order! I don't think that we'll benefit the

discussion on

section 3 by having a debate across the floor of

the House between two Members.

Interjection.

MR. CHAIRMAN: Order! Member for Yale-Lillooet has the

floor.

HON. MR. HARTLEY: I'm answering it right now.

MR. CHAIRMAN: Deal with

section 3 of Bill 31 right now,

please.

HON. MR. HARTLEY: Very good. Mr. Chairman, the group across

there places no objection to one mining company charging a

royalty to another, but when this government attempts to

collect a royalty, and there are many cases of that….

MR. CHAIRMAN: Order! Those are the arguments of second

reading that have been made, well made in this House on both

sides.

HON. MR. HARTLEY: I haven't made them.

MR. CHAIRMAN: You can't be repetitious or tedious even on

another Member's argument.

HON. MR. HARTLEY: Where we have the Similkameen Copper Mine in Princeton,

that will be paying these royalties as outlined in

section 3, before they could

go into business in any fashion they paid Newmont Mines $11 million to buy out

the old worked-over claims. Kaiser paid Crowsnest Coal $51 million. That was

one corporation to the other. You are objecting to this graduating scale here

that we should be collecting this for the people of the province. We feel this

is eminently fair and that the basic way to go into business is to sell out

basic raw materials as outlined in

section 3 instead of giving it away. It has

been given away for over 100 years; we say sell it.

As far as my friend from Oak Bay (Mr. Wallace) quoting

Lornex, I would like to read here what Lornex says with regard

to Bill 31 and royalties.

MR. CHAIRMAN: I hope it has something to do with

section

HON. MR. HARTLEY: It was before

section 3 was…. No, it

relates to

section 3, Mr. Chairman.

"Profits Triple Despite Royalty. Lornex Mines Take a

Leap.

"Despite setting aside nearly eight times as much money for

tax purposes, including the new and as yet unapproved B.C.

mining and royalties levies, Lornex Mining Corporation has

nearly tripled its net earnings in the first quarter of

1974."

Good for Lornex, yet our Member for Oak Bay was quoting

someone in Lornex saying that they were going to have to go out

of business. They are not going to have to go out of

business.

MR. FRASER: You know full well that the Member for Oak Bay

doesn't even know where Lornex is.

HON. MR. HARTLEY: Right, but you and I know where it is.

MR. FRASER: My brother works there. He votes for you — unfortunately. (Laughter.)

HON. MR. HARTLEY: He's a pretty smart fellow.

Basically, Mr. Chairman, I believe that if anything the royalties, as set out

section 3 of this bill, are all too little and all too late. I believe the

mining industry and their friends across the way would have been listened to

with far more respect and taken much more seriously if they had come in with

amendments like this instead of crying: "Withdraw Bill 31."

[ Page

4235 ]

MR. RICHTER: Mr. Chairman, when one compares

section 3 with

the original bill you find that this whole

section of the bill

has been amended. While this is spelled out in subsection

(1) right down to (9) it has laid out the definitive implications

of the bill.

Mr. Chairman, in light of this fact and in studying the

various subsections, I believe that there is one subsection

missing. That is subsection (10). I have a proposed amendment

which I wish to move at this time. That will be

section

3(10).

"Notwithstanding the provisions of

section 5, no producer is

liable to pay any royalty under subsection 5 in respect to a

designated mineral produced from a mineral location before the

time when there has been recovered out of the net operating

revenue from production of such designated minerals from such

mineral location, calculated after allowing for the payment of

royalty under subsection 4, an amount at least equal to the

aggregate of the amounts expended on the exploration and

development of such mineral location, including an amount

representing a reasonable return on the invested capital, an

amount representing a reasonable provision for administrative

expenses, the determination of any amount in this subsection to

be approved by the Administrator in accordance with the

regulation."

I so move.

HON. MR. NIMSICK: Mr. Chairman, while this copy is out of

order, I would like to make the comment that the cost of

putting a mine into production is already allowed for deduction

from income tax under the income tax regulations. You're trying

to give them a double deduction in this regard.

Interjection.

Amendment negatived on the following division:

YEAS — 16

Chabot

Phillips

Anderson, D.A.

Bennett

Richter

Williams, L.A.

Smith

McClelland

Gardom

Fraser

Schroeder

Wallace

Jordan

McGeer

Gibson

Morrison

NAYS — 31

Hall

Sanford

Nicolson

Macdonald

D'Arcy

Skelly

Barrett

Cummings

Gorst

Dailly

Dent

Rolston

Strachan

Williams, R.A.

Anderson, G.H.

Nimsick

Cocke

Barnes

Hartley

King

Steves

Calder

Lea

Kelly

Nunweiler

Young

Webster

Brown

Radford

Lewis

Lauk

section 3 as amended.

HON. MR. NIMSICK: Maybe I should just give you a slight

explanation on this

section here — a little lesson. I think

maybe, after listening to some of the speeches, the Premier was

right when he said that I should be reprimanded for not being

tougher. Maybe it's very lucky, in the close election 1 had in

1969, that I made it in order that I am the Minister of Mines

today.

[Mr. Dent in the chair.]

When we look at this

section 3 and see the amount of royalties that are charged,

it's very small compared to what the private sector does among themselves. I'm

sure, when anybody states that a mining company is going to close down because

of this small royalty, that they're talking with their tongue in their cheek.

When you take a $1 copper and you subtract…. Presume the smelting cost

is 20 cents and the transportation cost is 3 cents, we'll say; that makes 77

cents. So 2.5 per cent of that is 2 cents for the first year and 5 per cent

is 4 cents a pound for the second year. That is on the basic royalty. On the

incremental royalty, if you take 58 cents — as I announced tonight that we were

proposing for the basic price….

Interjection.

HON. MR. NIMSICK: That's the actual figure that I gave you

tonight; 58 cents will be proposed to the…

Interjections.

MR. CHAIRMAN: Order, please.

HON. MR. NIMSICK: …cabinet for this year. No, it's solid

for this year. Then the 20 per cent above that is 70 cents. You

subtract 70 from 80 and it makes 10 cents, and you take 50

cents of that. So the first year we would get 7 cents a pound

on copper from the producers.

When you look at the total price and what they pay for other

commodities they use in the production of the mineral, they pay

for every commodity they use and this is just a charge on the

main commodity in the production. I don't think anybody

should

[ Page 4236 ]

object to that charge. I'm sure that no mine would close

down if the price of copper came down two cents or four cents.

I'm sure that that would not stop them, because the price

varies that much all the time.

MR. CHAIRMAN: Order, please! I would point out to the Hon.

Minister that in discussing this particular

section we should

not stray into the debate on the principle of the bill, but

should confine our remarks to the….

HON. MR. NIMSICK: Mr. Chairman, I'm just explaining the

section as to how it applies to a mine. So I'm sure that I'm

fully in order in explaining the

section this way. I want to

make it crystal clear to the Members of this House how it is

going to be applied and how it will affect the mining industry

in the Province of British Columbia. When you think of that, I

am sure that you couldn't make it much less. If you smelt it in

your own province, there is 1 per cent less. If the price goes

10 per cent below the basic price, you get .5 per cent less,

and if it goes over that, you get 1 per cent off the

royalty.

Interjection.

HON. MR. NIMSICK: If they didn't have to spend that kind of

money in getting the mine, the royalty would be a lot higher.

But seeing that they have to spend money to develop a mine,

that is the reason I made the royalty so low. I'm surprised

that there is any objection here at all. I thought it would

just whip right through.

MR. D.E. SMITH (North Peace River): Mr. Chairman, after

listening to a dissertation like that from the Minister, I

can't help but rise to my feet in this debate, because it is

obvious that the Minister is talking with his tongue in his

check.

You know, either he does not understand the economics of

resource industries such as mining in the Province of British

Columbia, or he's decided to completely disregard what the

people who are involved in the industry are telling him

concerning the impact of the royalty

schedule that he suggested — on the strict basis that the best and the surest way to take

over the mining industry in the Province of British Columbia in

the name of the Crown is to proceed down these lines.

Now if that is your intention, Mr. Minister, declare it.

Declare it not only to the mining companies but to all the

shareholders who hold shares in mining companies.

MR. CHAIRMAN: Order, please. I believe that the Hon. Member….

MR. SMITH: I'm not going to canvass that any further, but I want to

make that as a very definitive statement, because the type of royalty that is

proposed under this

section isn't a matter of disagreement between yourself

and the large mining companies. It's a matter of disagreement between yourself

and everybody from the large mining companies down to the individual prospector,

who couldn't care less about the problems of production of a large mining company.

All he's out there to do is find a mineral discovery.

But it affects all of them, Mr. Minister. When you talk

about a base price of copper of 58 cents, and beyond that you

allow 120 per cent before you get into the super royalty, you

knew before you set that price that it was discounted at least

four cents a pound, that the five-year average is more like 62

cents, not 58 cents, and then at your sole discretion — probably

on a yearly basis or more often if you so desire — you are

going to change that, not only for copper but for every other

metal that is produced in the Province of British Columbia….

At your sole discretion you could decide to change that every

month or six weeks. But I wouldn't say that you're going to do

that. You're going to look at it on a yearly basis and go back

five years.

Well, in the mining industry that's equivalent to changing

your mind almost as often as you change your shirt, because

there is no stability for any company. There's no assurance

that the money they invest in exploration and discovery and

bringing a new mine into production will ever be returned.

Now who are the people you are penalizing when you use this

approach on royalties? You are not penalizing the president,

the vice-president, the people in a large mining corporation.

You are really penalizing the little investors in the Province

of British Columbia and the average everyday citizen who, by

choice, works in the industry in the province and hopes to make

a living doing it.

It is inconceivable to me that you do not understand the

economics that are involved, that you refused to accept the

arguments put before you by the people who are most informed

about mining in the Province of British Columbia before you

came up with the type of setup you have on royalties.

It has been said time and again by the industry that they do

not mind paying a fair tax. They feel that they should do that

on behalf of the people of the province as a result of the fact

that they are reaping a non-renewable resource.

MR. CHAIRMAN: Order, please. I would point out to the Hon.

Member that the concept of the bill, which is the concept of a

royalty in principle, has already been accepted by the House.

We are now considering the details of

section 3.

MR. SMITH: We are considering the details of

[ Page 4237 ]

section 3.

MR. CHAIRMAN: I would say to the Hon. Member that when he

compares taxes and royalties, he is turning again to the

discussion of the principle of the bill. I would ask him to

confine his remarks to the section.

MR. SMITH: Well, I'm trying very much to do so, Mr.

Chairman. But if the concept and the impact of royalty as it is

proposed in

section 3 is of no consequence to the Minister, it

certainly is to many people in the Province of British

Columbia.

The Minister has indicated the values that he is prepared

to set at the present time — 58 cents, I believe it is, for

copper. I've already indicated to the Minister that 62 cents is

closer to a realistic price, and that if the price you set — I

don't care what mineral you are dealing with, Mr. Minister — is

substantially or even to a very lesser degree under the

five-year average, then you penalize and double-jeopardize the

mining industry in the Province of British Columbia. If it is

at least equal to what your figures in there show, then at

least you are at a saw-off with the mining industry. If it is

above that, there would be a bit of a credit in their ledgers

over and above what they had anticipated.

But I'm convinced that the Minister, whether it's from poor

advice or whatever, is determined to set that base under what

should realistically be considered as the average so that the

super royalty comes into effect quicker than it would, and as a

result dissipates all the money into the provincial coffers

that would be used for exploration in the Province of British

Columbia.

If you can't understand that, Mr. Minister, obviously you do

not understand the responsibilities of your department. That is

what the mining industry has tried to tell you ever since this

bill was introduced — that there is no future for potential

mines in the Province of British Columbia or no future for new

exploration in this province if you continue along these

lines.

Surely that must relate to a government who believes in

benefits for people, because the resource industry is something

that we all depend on in the Province of British Columbia. Be

thankful we have them here. It's just inconceivable to me that

the Minister cannot understand the logic of that argument.

If it was a facetious argument, I wouldn't even be on my feet this evening.

I believe that they made some very logical statements and points in respect

to their particular position — not only from all segments of the mining industry,

but including the associations that represent them. Surely to goodness, Mr.

Minister, you can analyse what will happen and, as a result of that, withdraw

the bill, or at least reduce the impact of

section 3 on the industry in this

province.

I predict that if you continue along the path you have

chosen to travel, it will be catastrophic for the mining

industry and, as a result of that, the people who are employed

in the industry and, as a result of that, the taxpayers of the

Province of British Columbia.

MR. PHILLIPS: Mr. Chairman, I just want to ask the Minister

a question on a particular mine. I have before me the

Consolidated Churchill Copper Corporation report to the

shareholders. As you know, when Churchill Copper started up

some years ago it was a very marginal mine. As a matter of

fact, because it's in the area I live I bought some shares in

it, just to sort of give it a little boost. I didn't buy that

many, but everybody in that area was buying some shares…

AN HON. MEMBER: To help it out.

MR. PHILLIPS: …to help it out. I didn't make any money on

them. I sold. I didn't lose any but I didn't make any.

That mine was closed down two years ago due to the depressed

price of copper. As the Minister well knows, it started up in

January 1, 1974. There is an investment by the small

shareholders in this mine of approximately $14,500,000. And in

the first three months of this year they would have made a

profit of a $1,074,720; which, after having this S14 million

invested for the amount of time they got, would hardly be what

you would call even a fair return.

Now, they estimate, and they are the experts that the

mineral royalties under your Act would be $890,593, leaving an

operating profit after estimated B.C. mineral royalties of

$184,127. Now, when you take off depreciation, amortization of

preproduction costs, and interests, et cetera, they show a net

loss of $169,091.

Now, are the people who put out this report to the

shareholders wrong? What does the Minister intend to do? How

would you keep a marginal mind like that open?

MR. CHAIRMAN: Order, please! I've waited a moment for the

Hon. Member to make his point. Would he relate it to the

details of

section 3? The royalty concept generally outlined in

this

section has already been approved by this House. I would

ask the Hon. Member to relate his remarks to the details.

MR. PHILLIPS: Are we still not on

section 3?

MR. CHAIRMAN:

section 3.

[ Page 4238 ]

MR. PHILLIPS: Well, it's

section 3; the royalties, the

details.

MR. CHAIRMAN: Order, please! I would point out again that

the royalty concept as generally outlined in

section 3 has

already been approved by the House.

MR. PHILLIPS: I'm not talking about the concept, Mr.

Chairman; I'm talking about the details of the royalty. Was it

applied wrongly to this particular financial statement? That's

all I'm asking the Minister. I know we've agreed to the

concept; I haven't agreed to it but the House has agreed to the

concept of royalty. I'm asking him: did they work out the

details wrongly in this report to the shareholders?

Under this

section 3, how would that mine ever open up? And

there's another mine just across the mountain, Davis-Keays

Mines, which was going to be opened up in April of this year,

which, because of the details of this bill and the royalty

section, is now not going to be opened up, and not going to

provide employment. Maybe the copper will stay in the ground

forever, I don't know. I'm asking you: how are you going to

deal with a marginal mine like this?

HON. MR. NIMSICK: In answer to the Member, Mr. Chairman.

Churchill Copper went back into operation. They knew full well

then that there was going to be a royalty. I don't know what

statements you have; I haven't got it here so I can't comment

on it. It would be impossible for me to comment without seeing

it and applying it to the whole deal.

But, nevertheless, there is a

section in here, if a mine is

having financial trouble, that they can make application for

deferment of taxes from year to year, if necessary, if we feel

they have a just cause for deferment of taxes.

MR. PHILLIPS: …taxes are going to have to be paid. You

are just deferring them for the time being. Both of these

mines, as I say, are very marginal mines. If you wait another

seven years, as I said during the estimates and on the

amendment to the main motion, when they start producing copper

from the ocean floor these mines will never be operated.

Here's the Minister of Industrial Development, Trade and

Commerce (Hon. Mr. Lauk), running around, trying to seek an

economic base for the northeastern portion of British

Columbia.

MR. CHAIRMAN: Order!

MR. PHILLIPS: Trying to bring up something. All he has to do is say

to the Minister of Mines "Forgo a

section in this royalty or change the Act

and you've got employment for several hundred people right there, plus all of

the people who would be employed in the service industry."

MR. CHAIRMAN: Order, please! The Hon. Member is asking the

Hon. Minister to examine the statement of the mine to see

whether the figures were correct in terms of the details of

this section. I think that's an appropriate question under this

section. I think it would therefore be appropriate to let the

Minister examine them before he comments.

However, he may discuss other matters in this section. But

to speculate about what may happen in the industry I think

would be out of order until he has had an opportunity to

examine the details.

MR. GIBSON: Just one or two questions for the Minister. This

section describes how the royalty is determinable but not when.

I wonder if the Minister could tell us how far in advance of

the beginning of each calendar year he will be in a position to

set all the parameters relevant to the payment of the royalty,

particularly the basic value, and whether within any given

calendar year he might change that basic value.

HON. MR. NIMSICK: Once the basic value is set, it will be

set for the year.

MR. GIBSON: Could the Minister say how far in advance of the

beginning of the year he will attempt to fix that?

HON. MR. NIMSICK: We hope to have that in the first two

months of the year.

MR. GIBSON: But not before the beginning of the year.

HON. MR. NIMSICK: Well, we might right at the beginning of

the year. We can do it once we find out the increasing costs of

production and that. We can set the royalties….

MR. CHABOT: I want to ask a question to the Minister. At the

outset, when the bill was introduced, the Minister suggested

that the new royalty measures under

section 3 would generate

approximately $20 million in revenue to the provincial

government. This figure was certainly not supported by the

mining industry. They suggested it would be somewhere in the

neighbourhood of seven times your projection of revenue under

section 3. I am wondering if your projection of $20 million

dollars is still relevant today. Are they lower or are they

higher? What is your anticipation as far as revenue is

concerned regarding

section 3?

[ Page 4239 ]

One other point, Mr. Chairman, dealing with the royalties. I

think the royalty has certainly made many mines reassess their

position in the province. I think the Granduc Mines has

suggested because of the royalty that they are going to look at

the possibility of recovering as quickly as possible the $140

million of investment they have made in the Stewart area. Not

only have they invested in the construction of a tunnel and

development of their copper ore but they've also subsidized

housing for the workers as well.

I wonder if the Minister will tell us just how he can relate

this kind of a royalty structure against the mines, such as

Granduc Mines, which have a unique cost factor built in. What I

mean by unique is that it's an underground mine and it's in a

tunnel. The men have to be transported through the tunnel to

get to the mining face. The extraction costs are substantially

higher than open-pit mines. In fact, I understand the

extraction costs and the costs of production by Granduc is

somewhere in the neighbourhood of five times as much as any

other mine.

How can you possibly have a uniform royalty structure

against copper when some mines costs of production are

substantially and, in this particular case five times higher?

I'm not going to mention the fact that Granduc and its

subsidiary companies are going to pull out and we're going to

lose tens of millions of dollars of exploration up in that

Stikine area and the Stewart area where the government is

attempting to build the railroad and where they talk about the

development of the northwest. The development of the northwest

appears to be one of the priorities of the government. How can

you get development in the northwest, which is primarily a

resource-oriented type of area, especially when you introduce

these kind of royalties?

MR. CHAIRMAN: Order, please! The Hon. Member is straying

away from the details of

section 3. I would ask him to return

to the details of

section 3.

MR. CHABOT: It's going to discourage development up in the Pacific northwest.

Now, it hasn't been established yet that it is economic to

mine under water on the sea bed. But this royalty structure

under

section 3 will certainly destroy the copper industry in

British Columbia if it ever does become economic to mine the

sea. There is a thousand years of copper under the sea it has

been established. It's just a matter of the economics.

The economics of mining, once they've overcome the cost factors of mining under

the sea, will kill the mining on land. Has the Minister taken into consideration

on the environment the applications these royalties will have? Where you high-grade

an ore body, you leave a lot of gutted land and so forth. This royalty structure

you are establishing is going to be environmentally damaging to British Columbia.

It's not in the best interests of this province.

MR. CHAIRMAN: Order, please. I would point out to the Hon.

Member that the arguments he's been putting forward have

already been canvassed at some length, and especially in the

debate on the principle of the bill. I would ask him to confine

his remarks more to the details of

section 3.

MR. CHABOT: I know it's a difficult question to ask the

Minister but if the Department of Mines and the Minister of

Mines — the government in fact — is concerned about the

viability of the mining industry, they must have looked at the

various ore bodies that exist, the various mines that exist in

British Columbia and come to some conclusion as to where it's

profitable and not profitable to mine, based on the kind of

royalties you are establishing here under

section 3.

There must be some cut-off areas as far as, for instance,

copper percentage. It would vary from mine to mine because of

the fact that costs are higher in some mines than others. The

Minister must have some projection as to how much of the

projected copper ore reserves we have established in British

Columbia at this time will become waste rock.

It is suggested that in many instances, because of these

royalties, 50 per cent of the copper ore will become waste

rock.

MR. CHAIRMAN: Order, please. I would again point out to the

Hon. Member that the arguments he's marshalling at length have

already been dealt with or mentioned several times in the

principle of the bill. I would ask him to keep his remarks more

relevant to the details of

section 3.

MR. CHABOT: Mr. Chairman, I'm keeping my remarks relevant to

section 3, dealing with the royalty and the establishing of the

royalty of the various mines in British Columbia, and the

destruction of future mines in British Columbia.

Mr. Chairman, I listened to the latitude that was allowed to

the Minister of Public Works (Hon. Mr. Hartley) where he talked

about political philosophy. He talked about ranches; he talked

specifically about Newmont Mines. He talked about Crowsnest

Coal Company being purchased by Kaiser Resources. He was

allowed a lot of latitude. Is it because he's a Minister and I

just happen to be a Member of the opposition?

The Minister of Health (Hon. Mr. Cocke) suggests that

there's a phone call for me at this time, Mr. Chairman. If the

Minister is not concerned about the well-being and the future

of the mining industry in

[ Page 4240 ]

this province, he can leave — and leave right now, if you're

not interested.

What we are discussing is the future viability of a mining

industry. We feel that

section 3, with its royalties being

imposed on mining