Resource Committee — department of natural resources — 24 April 2018

2018-04-24

Newfoundland and Labrador — Committees

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April 24, 2018

RESOURCE COMMITTEE

Pursuant to

Standing Order 68, Keith Hutchings, MHA for Ferryland, substitutes for Tracey

Perry, MHA for Fortune Bay - Cape La Hune.

The Committee met

at 9:05 a.m. in the Assembly Chamber.

CHAIR (Warr):

Good morning, everybody.

Beautiful spring

morning, and a great morning to get started with our Estimates on Natural

Resources. My name is Brian Warr and I'm the MHA for Baie Verte - Green Bay and

it'll be my pleasure to chair your meeting this morning.

Before we start,

I'd like to ask the Resource Committee to introduce themselves, please.

MR. HUTCHINGS :

Keith Hutchings, MHA, District of Ferryland.

MS. DRODGE:

Megan Drodge, Researcher with the Official Opposition Caucus.

MS. MICHAEL:

Lorraine Michael, MHA, St. John's East - Quidi Vidi.

MR. MORGAN:

Ivan Morgan, Researcher, NDP Caucus.

MR. LANE:

Paul Lane, MHA, Mount Pearl - Southlands.

MR. FINN:

John Finn, MHA, Stephenville - Port au Port.

MR. BRAGG:

Derrick Bragg, MHA, Fogo Island - Cape Freels.

MS. PARSONS:

Pam Parsons, MHA for Harbour Grace - Port de Grave.

MR. DEAN:

Jerry Dean, MHA, Exploits.

CHAIR:

Thank you very much.

Minister, we'll start off

with you with some comments and perhaps your staff can introduce themselves as

well.

MS. COADY:

Thank you, Mr. Chair.

And thank you all for

being here on such a lovely day. My name is Siobhan Coady. I'm the MHA for St.

John's West, Minister of Natural Resources, and it's our pleasure to be here

this morning. I've brought our full team for whatever questions you may have

this morning, but most importantly I have the parliamentary secretary.

Perhaps what I'd like to

do is turn to the parliamentary secretary and then let our team introduce

ourselves for the Broadcast Centre to hear their voices.

MR. LETTO:

Graham Letto, Parliamentary Secretary, Natural Resources.

MR. MCINTOSH:

Gordon McIntosh, Deputy Minister of Natural Resources.

MR. CANNING:

Good morning.

Perry Canning, ADM, Mines.

MR. COWAN:

John Cowan, ADM, Energy Policy.

MR. TRASK:

Doug Trask, ADM, Royalties and Benefits.

MR. IVIMEY:

Philip Ivimey, Departmental Controller.

MS. NOSEWORTHY:

Tanya Noseworthy, Executive Director of Planning and Policy Coordination.

MR. WHITE:

Keith White, Executive Assistant to Minister Coady.

MS. QUINTON:

Diana Quinton, Director of Communications.

MS. COADY:

Thank you very much and welcome everyone this morning, and thank you to my team

for being here. It's an exceptional team; responsible for approximately a

billion dollars in revenue to the provincial government each year, this

department is. I thank all the officials here for their efforts and their

continuing efforts on behalf of the people of the province of Newfoundland and

Labrador.

Really, the Department of

Natural Resources is focused on three main areas: oil and gas development and

prospects; we also have a division responsible for mines and the geological

survey, and work around the mining industry; and we also have a full division

responsible for electricity, including Muskrat Falls Project, as well as

renewable energies.

As you know this year

we've worked very, very diligently on

Advance 2030 , which is a process to see the development of oil and gas in

the province of Newfoundland and Labrador. We're really focused on maximizing

our efforts for the development of oil and gas. The

Advance 2030 spells out a very good

plan, I think, that really will focus on exploration as well as project

development.

I think what you've seen

with Advance 2030 , we've had about

150 stakeholders involved in the development of that plan and we've also had a

tremendous response from the community all over Newfoundland and Labrador in

terms of making sure that we develop our offshore oil and gas, and we're very

pleased about that. You also see through Nalcor Energy, the oil and gas

division, we're talking about moving that to a stand-alone Crown corporation

this year and really utilizing this Crown corporation to help us drive the

developments under Advance 2030 .

Of course, we work

directly with the Department of Natural Resources to accelerate the growth and

opportunity of our petroleum industry, returning significant value to the people

and economy of Newfoundland and Labrador. These efforts will also result in

greater transparency and accountability for the oil and gas division as well. It

won't be a subsidiary. It will focus directly on achieving

Advance 2030 .

Budget 2018

is committing $60 million over 10 years to the Innovation and Business

Development Fund, which is focused on strategic investments for growth in the

Newfoundland and Labrador oil and gas industry. This will support actions

outlined in Advance 2030 .

Budget 2018

is supporting mineral

exploration and growth in the mining industry, a major contributor to the

economy particularly in rural areas of the province. Commitments include $1.7

million for the Mineral Incentive Program, including the Junior Exploration

Assistance Program, to encourage mineral exploration and to the support the

mining industry. We've seen great growth in the mining industry, specifically

around prospecting in the last number of years. We've had about 21,000 claims

staked over the last couple of years which is more than the last five years

combined.

We have

approximately $4.5 million allocated for the geological survey which maps our

diverse geology and provides sophisticated geoscience to help position the

province globally as an exciting prospect for commodities including iron ore,

gold, nickel, copper, zinc and industrial minerals. Cobalt is also an important

mineral for us as well.

Budget 2018

is focused on completing the Muskrat Falls Project through an equity investment

of $723.9 million in Nalcor, and of course we are working diligently for

electricity rate management. Government is also exploring other renewable energy

opportunities to provide the province with a potential for use here at home by

residents, business and industry, as well as exporting to satisfy the clean

energy demands of the North American market. You would've seen in

Advance 2030 some reference to

offshore wind opportunities and how we may be able to work with some of our oil

and gas partners in developing that opportunity, much like what we are seeing in

some other locations around the world.

I'd

like to note that if you exclude the funding from Nalcor, the

Canada-Newfoundland and Labrador Offshore Petroleum Board and the Business

Development Fund and other items outside the direct department's control, the

department's core operating budget is approximately $3 million. So that's what

we really use for activities within the Department of Natural Resources. So it's

a very small – when I say a small department, it's a small, effective department

that is very cost effective.

There

are approximately 154 employees in the department. Our current staffing levels

are the same as they were a decade ago, so we haven't had that kind of massive

increase you've seen in other departments. For 2018, salaries are $13.1 million.

We have

a great team at the Department of Natural Resources who are committed to moving

very forward on continuing to develop our economy and continuing to develop the

opportunities that we have in the province to the benefit of Newfoundlanders and

Labradorians.

I want

to thank them on behalf of government and on behalf of the people of the

Province of Newfoundland and Labrador for their continued hard work, their extra

efforts and the great success that they've had. I can tell you there is a lot of

energy – no pun intended – in the department focused on the areas that I think

are very important to the people of the province.

This

year, I would like to note as well, as you know, we are situated on Elizabeth

Avenue in the Natural Resources Building. We have now, as you're well aware

through the Estimates process, a number of departments that have come together.

We have welcomed three new divisions within the Department of Natural Resources

– within the building. I shouldn't say the department, within the building.

We've welcomed Labour Relations, Human Rights and Fines Administration, they are

now housed within the building of Natural Resources. We welcome them there.

They're a great addition to us.

We are,

I think, completely filled now in the building, or very close on completely

filled, every square inch is completely filled, which I think is a very good

thing for cost measures for government.

Having

said that, I'll leave it at that, and welcome any questions that you may have

about the budget or about anything that we're doing at the Department of Natural

Resources.

CHAIR:

Thank you, Minister.

I just

remind the department, these people should know, but if you're asked to answer a

question, just say your name, look for your tally light and go ahead and answer

the question.

I'd ask

the Clerk to call the first subhead.

CLERK (Hawley George):

1.1. 01.

CHAIR:

Shall 1.1. 01 carry?

Mr.

Hutchings.

MR. HUTCHINGS:

Thank you, Mr. Chair.

Good

morning. I don't have anything, Minister, on 1.1.01, Minister's Office. I'm sure

things are going well there.

MS. COADY:

Very streamlined. As you can

see we're continuing to fine tune the Minister's Office and bring costs down.

You'll see a decrease again this year.

MR. HUTCHINGS:

Okay, thank you.

1.2.01,

Executive Support, last year, Minister, in

Budget 2017 ,

Salaries were reduced $1,689,800 to $1,427,900. When we asked about that in

Estimates last year, you indicated there was an elimination of associate deputy

minister position and the elimination of the executive director of iron ore.

recognition of that reduction last year, the salary line for '17-'18 went over

$147,300. I'm just wondering: Was there a position added back or the result of

that increase was a severance payments or exactly what it was?

MS. COADY:

Thank you for the question.

You're

exactly correct, it is severance and leave payouts required for the former ADM

of Petroleum Development who retired during the year. A big loss to the

department, I can tell you he had a wealth of knowledge, but that exactly is

what it was, it was severance and payout. As you can see in 2018-2019 Estimates,

we're back down to $1,458,000, which really the variance there is due to step

costs for the current executive staff.

Last

year's budget was $1,427,000, this year's budget will be $1,458,000 and that's

just step increases.

MR. HUTCHINGS:

Okay.

When I

look at Salaries I can see the increase, so that would be basically due to step

increases?

MS. COADY:

Correct.

MR. HUTCHINGS:

Okay, thank you.

Transportation and Communications, under the same heading, 1.2.01, Executive

Support. Last year, $83,000 was budgeted, $100,000 was spent. Just wondering

what caused the line to go over budget in regard to that. What would that be

about?

MS. COADY:

Certainly. Increased travel

by the new deputy minister, making sure that we are maximizing efforts,

specifically, around oil and gas. We also have a new ADM of Royalties and

Benefits. We're glad to have both of them with us. There was additional travel

to support that position and making sure that he had the supports and the

information and knowledge that was required.

Certainly, I can give you kind of where we are in travel. We do take in a

significant amount of travel in the Executive branch of Natural Resources, in

support of both mining activities and oil and gas activities and even in the

electricity sector.

Just

for example, the World Energy Cities Partnership AGM, the Offshore Technical

Conference, which is coming up now shortly, Offshore Europe, the Baie Verte

Mining Conference, the Expo Labrador, the Energy Mines and Ministers' Conference

and the Labrador West Iron Ore conference. So really making sure that we have a

good executive presence at some of these opportunities to really promote both

the mining and minerals as well as the oil and gas and the electricity sectors.

MR. HUTCHINGS:

So some of these events,

Minister, executive would attend, would we be involved in having booths and

those type of things for marketing and all those types of things?

MS. COADY:

Certainly, and that will

come in a different Estimate, but absolutely.

For

example, at the Offshore Technical Conference, which is coming up shortly, as

you're very familiar with that conference, there would be a booth from

Newfoundland and Labrador. We do have a prominent position on the floor there

attracting people specifically around the oil and gas that one is. I'll use PDAC

in Toronto, we were there in February, I believe.

OFFICIAL:

March.

MS. COADY: In

early March, we were there

in early March and, again, Newfoundland and Labrador would have a prominent

location on the floor of that convention centre as well.

Very

important for us to continue to promote both oil and gas and the mining sectors.

I can tell you that we have ongoing dialogue with a number of companies, both

from supply and services as well as operators, producers and developers who will

visit the booth to gain more information. It is a valuable investment, I

believe.

MR. HUTCHINGS:

So just on that note, it may

not be this section, but have we seen an increase or decrease in those

expenditures for the past few years in terms of – or is it stable?

MS. COADY:

Very stable. Certainly,

within this fiscal climate we haven't been able to increase that. What we've

done is fine tuned it, making sure that we're choosing the right locations at

the right time to be partner in, but, no, there's a promotions plan within the

department, we're sticking to that plan. As we move forward, if we identify

other opportunities, we'll do so, but, at this point, it's pretty stable.

MR. HUTCHINGS:

Okay.

Minister, in preparatory work for Budget

2018 , would you have gone and done a zero-based budgeting process for the

department again this year?

MS. COADY:

Absolutely. Each line – and

you'll see they're all very fine tuned, you'll see even $100 changes sometimes

and that is the fine tuning that we do.

Under

Transportation and Communications, as you can see, there was a $100 reduction

from budget 2017-18 to this year, and that really is looking at very

specifically how much the cost will be. We don't anticipate the overage that we

had in '17-'18 because positions are now established within the department and

we'll be making sure we hold to that budget.

MR. HUTCHINGS:

Would Nalcor be required to

do zero-based budgeting process as well?

MS. COADY:

Correct.

MR. HUTCHINGS:

Okay. That's it for me on

that particular section, 1.2.01.

Just

another question I had, in your opening comments you mentioned

Advance 2030 . The Executive Support

speaks to the establishment and evaluation of policies and objectives.

Who's

the lead in regard to Advance 2030

and oversight and execution of that particular plan through your department?

MS. COADY:

The Royalties and Benefits

division of the department. The DM of Royalties and Benefits really does have

the Industry Council and the responsibility for the Industry Council, therefore

the responsibility for Advance 2030 .

MR. HUTCHINGS:

Okay.

MS. COADY:

And doing a great job of it,

by the way.

MR. HUTCHINGS:

Yeah.

Forgive

me, I know I read through it, but is there a reporting process with

Advance 2030 in regard of goals and

milestones and hitting those targets?

MS. COADY:

Yes, certainly. As you know,

we have an Industry Council that was developed last year –

MR. HUTCHINGS:

Yes.

MS. COADY:

– and they're really helping

us with the oversight and making sure we're moving through the implementation

plan for Advance 2030 and, of course,

I am the chair of the committee. So that reports back to us and we report back

to Cabinet.

MR. HUTCHINGS:

Okay, thank you.

Mr.

Chair, I'll move to 1.2.02 Administrative Support. Last year under Salaries

there was only $835,000 budgeted and $985,600 was used. I'm just wondering what

the issue was in regard to that difference?

MS. COADY:

Budget $985,600. This is

under 1.2.02?

MR. HUTCHINGS:

1.2.02, the first line,

Salaries.

MS. COADY:

Yeah.

Last

year's budget was $985,600, the actual spend was $835,000. The savings were a

result of a vacant clerk position in the Information Management Division during

the year, as well as a vacant account and budget analyst position in the Finance

Division.

As you

can see from the Estimates this year, the variance is going to be – the estimate

is $922,600 and the difference between the budget last year and the estimate of

this year is there is planned attrition management in the department.

MR. HUTCHINGS:

Two of those positions, are

they vacated because of attrition or are they kept, or –?

MS. COADY:

I'm turning to the person

responsible to make sure they are kept.

MS. NOSEWORTHY:

The clerk position has since been filled. The accountant budget analyst position

is under review for attrition.

MR. HUTCHINGS:

I'm sorry; the accountant

budget –

MS. NOSEWORTHY:

Position.

MR. HUTCHINGS:

Is under review?

MS. NOSEWORTHY:

There are two positions there. The accountant and budget analyst position.

Budget analyst will be filled, the accountant position won't. The clerk II has

been filled since.

MR. HUTCHINGS:

Okay.

The

accountant position would be eliminated through attrition. Okay.

MS. NOSEWORTHY:

Yes.

MR. HUTCHINGS:

Okay.

The

Finance Minister, too, spoke of an attrition plan and reducing the public

service through that means. The attrition plan for your department, Minister,

could you just give me a little rundown on that and what it is. Are there

targets set or progress made to date? Just give me a general overview, if you

could.

MS. COADY:

Certainly. I'm just getting

my notes out here because – just one moment, I want to make sure I have the

correct notes.

MR. HUTCHINGS:

Sure, no problem. Yeah.

MS. COADY:

I had hoped to have them all

written on one piece of paper. Unfortunately, I do not. There is a 1 per cent

attrition target for the department.

MR. HUTCHINGS:

Okay.

MS. COADY:

So we're working through and

looking at it on an individual by individual position basis. As a position

becomes vacant – as we know, people are retiring and we're considering the tasks

performed by that person and that job, and moving forward with meeting those

attrition targets.

MR. HUTCHINGS:

Okay, and that's 1 per cent.

That 1

per cent, is that related to actual positions or people? Because we know there

are often positions that are left vacant. Is it 1 per cent of actual all

positions?

MS. COADY:

One per cent of all

positions.

MR. HUTCHINGS:

Okay. Thank you.

Do we

have any idea of how many vacant positions are in your department today?

MS. COADY:

Yes; that I have.

MR. HUTCHINGS:

Okay.

MS. COADY:

There are 21 vacant

positions that we have currently.

MR. HUTCHINGS:

Okay. Would they be moving

forward through the public service to fill those positions, all of them?

MR. NOSEWORTHY:

Yes, there are a number of positions with the Public Service Commission right

now up for recruitment and some are working through the process.

MR. HUTCHINGS:

Okay.

final question on that one. So the intent is to fill these 21 positions?

MR. NOSEWORTHY:

Yes.

MR. HUTCHINGS:

Okay.

MS. COADY:

Just if I may, we have a

number of new hires as well to existing positions. We've just, over the year,

hired about 11 new people. These are hires to existing positions and they were

public hires, I'll call them, through the Public Service Commission.

MR. HUTCHINGS:

Okay.

Was

there any that would not have gone through the Public Service Commission?

MS. COADY:

No. We have one 13-week

position. That would be the only one that would not go through. That was a

position we required for the Muskrat Falls inquiry. We had to go through a

number of boxes and that type of thing.

MR. HUTCHINGS:

Mm-hmm.

MS. COADY:

As we move those materials

over to the public inquiry, that position will no longer be required.

MR. HUTCHINGS:

Okay.

That

would've been for the past fiscal year, would it, the 13-weeker?

MS. COADY:

Correct.

MR. HUTCHINGS:

Yes, correct.

Okay.

Thank you.

MS. COADY:

And I think that person is

going to remain for some part of this, what I'm going to call this fiscal year,

because of course we're still moving through, making sure everything is at the

public inquiry.

MR. HUTCHINGS:

MS. COADY:

For example, in Deer Lake.

Where else do we have them, Perry?

MR. CANNING:

There are six core storage

facilities across the province. I think we have 1.4 million metres of core; many

of these are 12- to 15-feet high. In Buchans, we understood that a number of the

shelving was constructed of wood and started to shift, so we had to have an

engineering review and manage required repairs.

MR. HUTCHINGS:

have vacancies at the moment?

MS. COADY:

Yes, we do. I just have to

look them up.

I'm

just going to go through some – we do have a number of positions vacant in the

Geological Survey: a geologist II position, a geologist III position, another

geologist II in the Mineral Lands for example. Some of these positions are with

the Public Service Commission at present, some people are temporarily positioned

elsewhere and we're waiting to backfill them.

There

are a number of positions that are available. I can add them up at present: One,

the interview has been conducted and we're waiting on the board to report;

another is now with Executive for approval; there's another position that is

temporarily relocated.

MS. MICHAEL:

Thank you very much,

Minister.

Under

Transportation and Communications, there's a variation this year downwards. Last

year both the budget and revision lines were $557,700 and this year it's down to

$468,600. Could you give us an explanation of why?

MS. COADY:

As you know, each year we

look to see where the Geological Survey will be located in the province; we have

to allocate certain monies of helicopters, for example, if they're in remote

areas. What we've done here is looked at a reduction in the Transportation and

Communications really for that very purpose.

There's

been some moving around in the way that we can conduct our work during this

year. What that is denoting is that there has been a change in the allocations

and movement around the province this year.

MS. MICHAEL:

And it's part of the

zero-based budgeting?

MS. COADY:

Correct.

MS. MICHAEL:

Okay, thank you very much.

One

other question, Professional Services – again, last year the budget was $33,500,

but $55,400 was the revision. Can you explain what the extra cost was, that you

hadn't anticipated?

MS. COADY:

Absolutely.

This is

an unanticipated requirement to update field data collection processes. We

actually had to – the Department built an app so that we can have it on a

hand-held device and that's really for data collection in the field. We made

sure because that was a requirement to collect field data, which is important

for our prospectivity and for prospecting as we go forward, we made sure that

was allocated.

That's

the difference and now we've rightsized it again this year and we don't

anticipate that to happen.

MS. MICHAEL:

Okay, thank you very much.

MS. COADY:

If I may I will note, as you

know, there's been a move within Transportation and Works. We're moving a lot of

our vehicles into Transportation and Works and we'll be leasing them. There's

Certainly.

The

Grants and Subsidies line includes $352,500 in funding for Defence Research and

Development Canada proposal related to disaster-risk reduction in communities.

The objective is to identify high-risk residential areas and present strategies

for cost-effective avoidance and mitigation techniques to prevent slope

stability failures from occurring.

C-CORE

– this is all for C-CORE – has submitted a proposal to the Defence Research and

Development Canada for the project; however, to obtain the funding, C-CORE

requires a provincial government department to be the signatory. So it's a flow

through.

MS. MICHAEL:

Okay.

MS. COADY:

But I think it's a really

interesting project because all it talks about are the mitigation techniques for

slope stability, and of course that would fit under what we do in the geology

department. I think it fits there very, very well. We'll receive 100 per cent

offsetting federal revenue for it, but it is an important project. It's erosion,

really.

MS. MICHAEL:

Right. Okay, well there are

probably many things in the province that could gain from that. Would that

information from Defence be information that they're going to be able to share

with the province?

MS. COADY:

That's a very good question,

I'm sure that they will be sharing their information. I'm getting an indication

that, yes, we're sharing in that information. I have to say through the

Geological Survey, we do co-operate very closely with other provinces and, of

course, the national Geological Survey, the sharing of this type of information

is incredibly important.

MS. MICHAEL:

Good.

What is

the deadline? Do you know that they hope to have that finished in this fiscal

year or …?

MS. COADY:

It's a three-year project.

MS. MICHAEL:

Okay, thank you very much.

Just a

couple of general questions: Last November, you issued a release on new research

for potential gold resources in Central Newfoundland. Is there any uptake yet on

that information?

MS. COADY:

Certainly, we've had a

tremendous increase – I was going to say boom, but a tremendous increase in the

interest in Central Newfoundland. It really is based a lot on what the

Geological Survey has been finding. So if you overlay a map of where some of the

staking has taken place in the last year and overlay where the geological survey

was, you'll see that they are very closely aligned.

Twenty-one thousand claims staked in 2016 and 2017. A very high interest in

gold. We do have Marathon Gold who is doing a lot of research and a lot of

exploration. They're moving very, very well forward. We have others that are

doing a lot of work in that area as well. So a high level of interest in gold in

Central Newfoundland.

MS. MICHAEL:

Minister, I know

environmental studies isn't part of your department, but we do know that gold

mining is one of the most unfriendly environmental mining processes.

Do you

have concerns about that? Is your department involved in any way in looking at

what can be done with gold mining that would cause less endangerment to the

environment?

MS. COADY:

Well, certainly, we work

with companies that are involved in gold mining, companies that are involved in

any of our work with mines and minerals to make sure that they have remediation

plans, to make sure they have the funding for remediation plans. So one the most

important things, I think, that the department has to ensure is making sure that

they can fund the remediation.

We also

work with companies on an ongoing basis to make sure that they're using the

latest techniques, that they're doing some innovations to try and reduce the

harm to the environment. We have a number of people within the department that

work hand over hand with companies to make sure that they're doing as little

disruption as possible.

I don't

know if the ADM would like to make a comment on that because I think it's an

important point?

MR. CANNING:

It is an important point. Thank you for raising it.

I would

say that, currently, we're in the exploration phases and any development

proposal from a proponent would go through a significant and deep environmental

assessment. That's where those matters about how they're going to process their

gold, what will the tailings look like and all that stuff, that's where that

would really come under a pretty glaring light to understand what the impact

will be and how to mitigate such impacts.

MS. MICHAEL:

Thank you very much.

Obviously, the environmental assessment process will be the most important step.

So during the exploration stage, the actual exploring doesn't have any effect,

I'm aware of that because it's the process, rather, that causes the

environmental damage.

MS. COADY:

An important distinction, of

course, is prospecting versus a mine under development, but I will say that I

think we all want responsible development and we want to ensure that those that

are involved in mining activities or any of the natural resources extraction

activities are doing so responsibly and working with companies to ensure that

they are using the most innovative techniques.

Again,

as I said, the department is very focused on remediation so that we can – once

the mine is complete, there is remediation and there are funds available to

remediate, I think, is critically important.

MS. MICHAEL:

Right.

CHAIR:

Ms. Michael, I have to remind you your time is expired.

MS. MICHAEL:

Okay, thank you very much.

CHAIR:

Thank you.

Mr.

Hutchings, from 2.1.01 to 2.1.03.

MR. HUTCHINGS:

Thank you, Mr. Chair.

Minister, just to reference comments you made in regard to Purchased Services

and going from a leasing process as opposed to purchasing. Could you just

explain that again or a few more details on that?

MS. COADY:

Certainly.

As you

know, there will be a centralized point within government in Transportation and

Works responsible for vehicles. So they'll maintain them, they have the

inventory of them and they replace them. It's really to maximize the

availability and use of vehicles within government so you don't have, for

example, a vehicle sitting parked in a parking lot – and I'll use Natural

Resources – in Natural Resources that could be utilized by another department if

there was a centralized pool.

So some

of the monies that were in various divisions within Natural Resources and with

other divisions around government are now being pooled and put towards one

central agency. So it will be like leasing. We would go and we would say to

Transportation and Works that we would need a vehicle for this particular period

of time, this type of vehicle, and they'll make sure that we have it, but it

maximizes the use of vehicles all across government.

MR. HUTCHINGS:

So you're leasing within your pool. When you say leasing, you're not meaning you

stopped purchasing vehicles and you're leasing from agencies?

MS. COADY:

No, sorry. I should clarify that.

MR. HUTCHINGS:

Yeah.

MS. COADY:

No, it's that we would be utilizing the centralized service within government to

have our vehicles.

MR. HUTCHINGS:

Across all boundaries.

MS. COADY:

Correct.

Sure.

So who

would have been doing that piece of work and what's the estimated cost?

MR. IVIMEY:

That I'm going to have to

get back to you on.

MR. HUTCHINGS:

Okay.

MS. COADY:

If I may, it wouldn't have

been a tremendous amount because you can see the difference is $33,000 to

$55,000.

MR. HUTCHINGS:

Sure.

MS. COADY:

I'll make a good stab and

say probably $20,000 only because I see the change in the estimate there.

I think

it's really crucial for us to understand that having this on a handheld device

allows us to have real-time data in the field. Certainly, if you go back in

time, it would have been by handwritten notes and those would have had been

transcribed over. This gives us real-time data in the field.

MR. HUTCHINGS:

Right.

MS. COADY:

So it's a great tool and a

great use of funds to make sure that we have that real-time data.

MR. HUTCHINGS:

there from last year to this year would show up, I guess, in TW?

MR. IVIMEY:

Correct, exactly. You would

see the exact opposite of those numbers in TW.

MR. HUTCHINGS:

Right, okay.

I won't

ask you about Purchased Services because, I guess, that covers it off as well.

Just a

broader question in regard to the role that Research Development Corporation had

played, which evolved, I understand in the last budget, into InnovateNL, and the

RDC would have interaction with the mining sector and different opportunities

that would exist.

Is that

still a critical

part in some of the things you've talked about recently in

regard to promotion, Advance 2030 ? Is

there still a connection, or would we say opportunities to innovate and drive

that sector through InnovateNL? How does that work today? Is there any

difference from RDC, and what is it?

MS. COADY:

Thank you. An important

question.

The

promotions and Geological Survey and all of that remains with the Department of

Natural Resources. Funding for companies or organizations who wish to do

innovations would still be under InnovateNL. Companies would go to InnovateNL as

they did to RDC previously for that funding pool.

MR. HUTCHINGS:

Okay.

In your

opening statement I asked about the oversight of

Advance 2030 . No doubt, under the

auspices of InnovateNL that would be a mechanism to drive that opportunity that

you outlined in Advance 2030 .

Those

that oversee Advance 2030 in the

department, they must be in contact with InnovateNL to see exactly what's

happening to make sure that this component or InnovateNL is being used to drive

the Advance 2030 . I'm just thinking

about the synergies and the interconnection, they can't be doing it in

isolation, I would suggest.

MS. COADY:

Okay.

Well,

Advance 2030 is for the oil and gas

industry, and you're correct –

MR. HUTCHINGS:

Yeah, okay, but I mean in

terms of overall mineral and development.

MS. COADY:

Yeah.

Advance 2030 ,

the department liaises with TCII on a regular basis, obviously, to ensure that

we are working together. I think that's very, very important. We are talking to

the folks at TCII about Advance 2030

in how we move the oil and gas industry.

We are

in the early stages of developing a new minerals strategy for the province.

We've announced that we will be working with industry and the communities to

develop – similar to what we've done with

Advance 2030 we're going to do in the minerals industry.

MR. HUTCHINGS:

Okay.

MS. COADY:

We will be working with

TCII, of course, on that plan and looking to have synergies with that

department.

TCII

does hold the responsibility for InnovateNL, and they do look to the mining

industry, they do look to the oil and gas industry for potential projects as

well.

MR. HUTCHINGS:

Okay. Thank you very much.

I just

wonder, Geological Survey, can we get maybe what projects are planned for this

year?

MR. CANNING:

There are a number of projects. In the Labrador Trough we are looking at some

regional mapping. If you look at the map, this is a part of the Labrador Trough

that's kind of north of Lab West.

MR. HUTCHINGS:

Yes.

MR. CANNING:

They are there looking for iron, nickel, copper, platinum group, some uranium

and gold formations in those sediments up there.

On the

Island – I don't know if you can see this map but it's kind of spotted across.

Central Newfoundland base metals focused on the Buchans-Robert's Arm group of

rocks. Newfoundland industrial minerals, we're focused here on fluorite

mineralization in the St. Lawrence area. Regional gold projects in Newfoundland

and Labrador: Gander Bay to Beaver Brook and the Hopedale area.

MR. HUTCHINGS:

you to understand, because I think this is an important point, Quebec also does

a geological survey. Newfoundland and Labrador does a geological survey. You

know that the Labrador Trough is mostly on the Labrador side but a lot also on

the Quebec side. So sharing information and data so we can help advance

opportunities in that area I think is important.

MR. HUTCHINGS:

Okay.

Thank

you.

CHAIR :

Thank you, Mr. Hutchings.

Ms.

Michael.

MS. MICHAEL:

Thank you very much, Mr. Chair.

I'm

moving on to 2.1.02, Minister, Mineral Lands under Salaries. Can you explain

what's happened there? Because we've gone from the budget of $1,290,700 down to

$1,254,900.

MS. COADY:

Certainly. The revised budget for 2016-17 is due to vacancies within the

division during the year. As I said, we have vacancies occur and by the time you

recruit for them you have a little bit of shortfall there.

Coming

to 2018-2019, you'll see there's a slight decrease, lower salary costs for 2018,

that's because we're planning less overtime.

MS. MICHAEL:

$34,000 and the $12,000 was lower than anticipated supply expenditures for

vehicles. Things like tires and bedliners, as well as the cold storage supplies,

trays and things of that nature. We didn't need them. The anticipated

expenditure wasn't there. So that's the difference between budget and the

revised budget.

The

$25,400 is really zero-based budgeting, right-sizing, making the reductions as

we see required.

MS. MICHAEL:

Okay, thank you.

Under

Professional Services, last year the budget was just $1,300 but $18,000, looks

like, was expended, and this year it's gone up. The estimate has gone up to

$8,600 from last year's estimate. So just an explanation, please.

MS. COADY:

Certainly. The difference

last year, which is fairly significant I guess between the budget and the

revised. We had to have the Mineral Rights Adjudication Board do a hearing last

year that we didn't anticipate, as there was a grievance filed under the

Mineral Act . It was between two

parties that shared a boundary from a mining and minerals perspective. So the

Mineral Rights Adjudication Board was assembled to make a ruling, and they did

do that, and we don't anticipate that occurring in this year as well.

If you

look at this year, we've put in $8,600 again. That's right-sizing. It's an

increase, just looking at where we think the requirements will be under

zero-based budgeting.

MS. MICHAEL:

Would the $18,000 have been

the expense of the actual hearing, or would there have been legal costs in there

as well?

MS. COADY:

I'm not sure about legal

costs. I'm going to turn to my – no, no legal costs. It's just the expense of

the hearing.

So as

you know, we go the Independent Appointments Commission to get the adjudicators,

which we did last year, pulled them together, and that hearing did take place

and resolve the issue that was required to be resolved.

MS. MICHAEL:

Thank you very much.

Coming

down to Purchased Services, again, the revision was quite higher than the

budget. The budget was $55,000 and the revision was actually twice as much:

$110,000. This year, it's down to $69,600. If we could have an explanation,

especially of the revision last year.

MS. COADY:

Certainly.

mentioned earlier about the core storage facility and we did the inspections.

MS. MICHAEL:

Uh-huh.

MS. COADY:

That's the expenditure for

those core storage facility inspections that were required. We also had higher

than anticipated Moneris fees associated with departments online claim-staking

system. The combination of the two increased the budget.

As I

mentioned to you, we had quite a lot of staking happening in '16 and '17 because

of the gold, I think, in Central Newfoundland, but that kind of drove a lot of

the staking that took place, so the Moneris fees were up. I think the majority

of it would have been with the core storage facility inspections that we carried

out.

MS. MICHAEL:

Okay, thank you.

With

the increase this year over last year's budget line, what are you anticipating

in your budgeting there?

MS. COADY:

Well, certainly that is

again for zero-based – when they went out and they looked at their budget and

looked at what the requirements were, it felt that $69,600 was a better

reflection than the $55,000. I don't know if I turned to the ADM if there's

anything in particular there that drove that price or that cost.

OFFICIAL:

It's Moneris.

MS. COADY:

The Moneris fees.

MS. MICHAEL:

The Moneris fees, okay.

MS. COADY:

Yeah, they're anticipating

that there will continue to be more Moneris fees because of the interest in the

mining industry.

MS. MICHAEL:

Okay, thank you very much.

Going

on to 2.1.03, here there's a big increase under Purchased Services. The budget

was $656,800, the revision was slightly up $665,800, so we need an explanation

there. This year in your zero-based budgeting, you've gone up to $1,153,800. If

we could have an explanation of that line.

MS. COADY:

Certainly.

That

was anticipated expenditures under orphaned and abandoned mines.

MS. MICHAEL:

Yes.

MS. COADY:

If you recall even last year

that we had a plan, we started in 2016-2017, we budgeted an additional $300,000

last year –sorry, '16-'17 we put in an additional $300,000; '17-'18 is an

additional $690,000. In '18-'19 it's $1.152 million, and that is all around the

requirements and commitments to ensure that we address the concerns around

orphaned and abandoned mines.

When we

came into government, I understood that there was a requirement to do a lot of

work around orphaned and abandoned mines. So we set out on a plan to do just

that because it is so essential to the environment. We don't want any risk, or

we want to eliminate as much risk as we possibly can on those.

MS. MICHAEL:

Are any of these orphaned and abandoned mines at a stable point or will there

always be expenses involved with them?

MS. COADY:

They're stable in that we're not anticipating any major disruption. But there is

a continuance. We set out a four-year plan, just to remind you, under this

orphaned and abandoned mines. Next year we're going to allocate another amount

of money to bring these up to a point where we think that we've addressed some

of the issues.

I'm

going to turn to the ADM because I think this is again one of those important

issues that we've got to continue to address.

MR. CANNING:

Thank you, Minister.

Thank

you for the question. One of the things we're doing with respect to the orphaned

and abandoned mines is developing a risk registry. We didn't have a risk

registry. We did not have a risk matrix. So we're working with our colleagues in

Environment to develop a risk matrix and then assess each one of these

facilities to understand what mitigations we require over a period of time and

how we hold ourselves accountable to achieve those mitigations.

For the

last number of months the teams have been developing – it's important to get the

process down to develop a risk matrix and all the questions that get you to what

risk you might feel is appropriate for each line item associated with these dams

and orphaned and abandoned sites.

We're

going to be doing that, and that would give us an overview and a clear picture

and we'd be able to go in then to our risk registry and say, if these are our

mitigations that we had planned upon are we doing the appropriate measures to

achieve that. So this would give clarity and I think some transparency to that

whole process.

The

other thing that we're doing is ensuring that when we have development

agreements, folks have to ensure that they have the funds available for

reclamation and closure so that the people of the province are not held

accountable for the financial costs associated with mining development. All the

great benefits that come from mining, and clearly there are many, the one thing

we want to make sure is that we are not assuming the risk.

MS. COADY:

I think, if I may, that is

critical as we move forward, and I think that the Province of Newfoundland and

Labrador, and I don't know under which administration, but the Province of

Newfoundland and Labrador in the Mining

Act has ensured that any mines that now operate in the province have to have

the funds to remediate, and the funds available to make sure that we are not, in

the future, facing some of these orphaned and abandoned mines issues.

So if

you're operating a mine in the Province of Newfoundland and Labrador, you have

to be able to remediate. You have to have the funds available to remediate.

These are orphaned, abandon mines from mines long gone, long history that the

people are no longer there to make sure those are remediated.

MS. MICHAEL:

If I can just make one

point, please.

I know

from the environmental assessment process that federally – so it sounds like

it's also provincial – that reclamation now is an essential part of any

approval.

MS. COADY:

Absolutely.

MS. MICHAEL:

Okay, and that's provincial as well.

Thank

you very much.

CHAIR:

Thank you, Ms. Michael.

Understanding that we only have three hours for Estimates this morning, and out

of respect for the time, with leave, I'd like to ask Mr. Lane if he had any

comments at this particular point in time.

Do we

have leave?

AN HON. MEMBER:

(Inaudible.)

CHAIR:

Ten minutes.

Ms.

Michael.

Mr.

Lane.

MR. LANE:

Thank you to my colleague

for that.

Minister, I'm not going to do the line-by-line thing, but I have some general

questions, I guess. I believe you said you have an attrition plan of 1 per cent

for the department. Is that just with your department, or is that consistent

across the board, do you know?

MS. COADY:

You'd have to check with

every department. I know in our department that is the requirement. I couldn't

answer your question for other departments, but I can say what it is for our

department. We don't have a tremendous number of people working in our

department. As I said, it's only 154 people. So we work very diligently to make

sure that we have the skill sets and the requirements that we need, but still

addressing some of the requirements to make sure that we're rightsized.

MR. LANE:

Okay.

I guess

it's not across the board, per se – and I can understand you don't have a lot of

As I say, we have vacancies.

We have current vacancies in the department now. We're looking to recruit and

we're making sure that every time – things are evolving in our industries and

things are evolving in the way we do business. We examine every position as it

becomes available to ensure that it is still required and whether or not it can

be reallocated.

MR. LANE:

Okay, thank you.

Minister, the flatter, leaner approach, I guess, the core management review, the

zero-based budget – I think, actually, you answered the zero-based budgeting –

attrition and so on, strategies that are being used in your department and used

across all departments. Is this same strategy being employed at Nalcor? Have you

given direction to Nalcor, for example, to do that same core management review,

to do that same flatter, leaner and so on, attrition? Do they have the same

mandate?

MS. COADY:

Yes, we've met on many

occasions with the senior executive of Nalcor and the board to ensure that they

understand – and they do, quite strongly, they're all entrepreneurs themselves,

they're all business people themselves – the requirements of zero-based

budgeting, which they have to do.

You

will understand, I guess, because they've helped me to understand, that there is

a transition taking place now at Nalcor, from the development of a project into

the operations of a project. So you're going to see over the next couple of

years, and you're starting to see it now with the Nalcor convergence of people

who are going to operate the project – and I'm turning to my ADM – and the

construction stopping. So there will be a changeover in some of the people and

the skillsets required within Nalcor.

there will be a convergence over the next couple of years, but they do

understand and are working diligently and have rightsized where they actually

have impacts and controls as well, to try and manage that convergence.

MR. LANE:

So have you provided them

with any targets, for example, or have you basically said try to become as

efficient as possible and so on, or have you said I want to see a certain

percentage cut in costs to Nalcor?

MS. COADY:

I'm going to say it's a

combination of the two.

So when

we sit down with Nalcor, we start with the conversation with zero-based

budgeting, rightsizing, the costs going up, and then sometime if they come

looking for a particular ask, we may have to say: We just can't fund that ask,

you'll have to fund it internally. They'll have to go in and make adjustments

within their budgeting.

MR. LANE:

Okay. Thank you.

Minister, I have a couple of questions now – I have several actually but I only

have so much time – about this division that's going to take place, which was

contained in the budget, dividing the oil and gas, creating it's own separate

corporation and so on.

You

indicated, I believe, that you said the rationale for this would be so that we

could focus more on oil and gas, I believe, was to some degree what you said, a

greater focus and so on.

I'm

just wondering if you can explain, whether somebody is in a separate building

under a separate name, I could be in this building – we already had a

vice-president of oil and gas development or whatever it's called, some title

like that, at Nalcor. So whether that person is in this building with Nalcor on

the shingle or he's in a different building under oil and gas division or

whatever, how does that really change anything in terms of, he has a job to do,

I assume he's focused now, I would hope he would be and all the people under

him. What's the rationale for making that change, if you will?

MS. COADY:

Over the last number of

years we've been putting a tremendous focus on: How do we increase the

exploration and development of our offshore? As you know, in 2016 I believe it

was, we started an Industry Development Council, we've worked through, in the

last while, developing what I think is a stellar plan for developing our

offshore, doubling it even more so than that, increasing, really increasing our

exploration.

I've

heard from operators around the world that talk about they feel that this is a

great place to invest because of the types of work that we're trying to achieve

in the province and the support of the

Advance 2030.

Nalcor

Oil and Gas is within the, what I'm going to call – it's a subsidiary of Nalcor

Energy. Nalcor Energy is very focused on electricity and the development of the

Muskrat Falls Project, energy marketing and the provision of energy to the

Province of Newfoundland and Labrador. They're really focused on that

electricity side of things.

Yes,

there's a division under that auspices called the Oil and Gas department, Oil

and Gas subsidiary and they have their own board of directors. They operate

within that corporate structure. We felt that to really – I hate to use the word

advance now – move on the Advance 2030 ,

to really focus on that, we wanted to take that division out from underneath the

work that's being done under the electricity sector of Nalcor and let it stand

alone.

physically stands alone at this point in time. It has a different office. It has

its own board of directors. We don't anticipate any costs of so doing. They're

already standalone, but this helps with transparency and accountability. The

reporting structures now don't go from their board to the board of Nalcor. It

goes from their board, direct to the province and we'll be working hand over

hand. There's only one focus of oil and gas and that is the development of the

oil and gas industry and management of the equity that we have under it.

that's kind of the thinking of it. We don't anticipate – and I'll say this again

– any major costs here at all, save for maybe a name change that we could

brainstorm and make a name change on, we don't anticipate any cost to this, but

it does give us that standalone Crown corporation that reports directly to

government, has its own accountability structures to the government and to the

people of the Province of Newfoundland and Labrador, instead of underneath the

auspices of Nalcor. Nalcor will then be very focused on electricity provision

and the sale of electricity in the province as well as outside.

MR. LANE:

Thank you, Minister.

I guess

it's a matter of opinion on whether it'll be any more focused, but anyway we'll

move on.

Minister, on the accountability piece that you just spoke to. This will be my

last question, my time is running out for now. What about the

Energy Corporation Act ? You talked

about accountability and transparency. So given that statement, will this new

division fall under the Energy

Corporation Act or will you be removing them from that and simply place them

under ATIPPA, or have you thought about that?

MS. COADY:

Thank you for the question.

we've indicated when we announced that we will be making this move, we're going

to take some time now to look and see how that will be done. So, Justice and

Natural Resources and Finance and others are coming together to determine – I

mean the deputy minister is heavily involved in this – what the best avenues and

ways and means of doing these things are.

So that

is why we're taking our time to make sure that we do this correctly.

MR. LANE:

Thank you, Minister. I'm out of time.

CHAIR:

Thank you, Mr. Lane.

Thank

you, Minister.

Mr.

Hutchings, you can continue on.

MR. HUTCHINGS:

Thank you, Mr. Chair.

I just

want to go back and comment on or ask a question. Ms. Michael, or I'm not sure

who it was, the issue came up of the Labrador Trough and Geological Survey.

think, Minister, you mentioned in regard to a recent announcement by the Premier

of our province and the Premier of Quebec related to, I guess shared or a mutual

agreement in regard to exploration of the Labrador Trough and things that could

be mutually done together. I guess if you could just give me a general overview

from your perspective, from the Minister of Natural Resources, how you've seen

that and what exactly was agreed to.

The

second question I have, there was reference to sharing of data from the work we

do and some of the Geological Survey and some of things maybe Quebec has done in

their mining industry. How would that work in regard to sharing of that data and

those types of things?

MS. COADY:

Thank you. A most important

question I think.

The

memorandum of understanding with Quebec, that the Premier most recently signed,

I think is a good step forward with regard to – you know we share a border – how

do we maximize the opportunity of the Labrador Trough, especially as the

commodities are rising and we have more interest in the Labrador Trough.

commodities prices rise, you're seeing the reboot of Alderon. You're seeing

Tacora coming in and taking over the Wabush mine. You're seeing the expansion of

Tata, as well as IOC's expansion. Unfortunately, they're on strike at the

moment. You're seeing this, I guess, focus on the Labrador Trough.

What

we've done with the Province of Quebec is we're looking at a few areas that we

may be able to have some further dialogue on. One would be the information

around the Labrador Trough. Both the Province of Newfoundland and Labrador and

the Province of Quebec do their own independent geological surveys.

I'm

sure geologists would love to have a conversation as to what information you're

seeing on both sides of things. So we're going to allow the geologists to have

those kinds of conversations, and really looking at: where is Quebec looking?

You heard earlier the ADM talk about we're looking at the Northern part of the

Labrador Trough this year and perhaps – and I can't tell you where they are

looking, but Quebec is doing further work in another area I'm sure.

Also,

and I'll use infrastructure, in the Quebec side of things is where the port is,

where a lot of the railway is. How do we work together on those types of things

ensuring access, ensuring availability, ensuring growth of the opportunities in

the Labrador Trough? Things like skills and training of workers. We share a lot

of the workforce. They go back and forth between projects.

skills training, we're going to be talking about that. We're going to be talking

about telecommunications. How do we – items that are of mutual best interest.

That's what we're going to be working on.

I don't

know if the parliamentary secretary – you just walked in, sorry. You had to step

out for a moment, but we're talking about the Labrador Trough and the memorandum

of understanding between Quebec and Newfoundland and Labrador about things like

the geological survey, the infrastructure, skills training. Conversations about

how do maximize and leverage our best opportunities there.

MR. HUTCHINGS:

So in the second part, too,

just in terms of sharing of data: how would that work, and what sharing of data

would occur?

MS. COADY:

At this point, we haven't

moved to that level.

MR. HUTCHINGS:

Okay.

MS. COADY:

We are, I think, going to

see how our geological teams can come together and discuss what they're seeing

on both sides of this from an information gathering perspective. We would

probably share with them some of the information we put out publicly and early

so that they have it. Again, bringing geologists together to have those mutual

conversations is probably what we'll look at, at this point.

MR. HUTCHINGS:

Yeah. I'd ask for a comment;

I understand the rationale behind that, between sharing information between two

provinces. The other challenge is we each try to attract investments, and

investments from around the world, to develop and exploit what we have in our

jurisdiction.

How

does that fit with – I get the sharing of information, that piece, but we're

competitive in trying to attract to our jurisdiction particular industries and

investment. How do we balance that in terms of our relationship?

MS. COADY:

Most certainly. Anything

that is developed in the Labrador Trough, it would depend on where the resource

is itself.

You can

see, for example – and I'll use Tata. As an example, you can see Tata, the

resource is actually on the Labrador side. A lot of development has occurred on

the Labrador side, but you've seen the Government of Quebec, through Plan Nord,

actually make an investment in Tata.

MR. HUTCHINGS:

Mm-mmm.

MS. COADY:

So you can see because the

border is so close and because the development – and you have a lot of workers

from Quebec who actually go to Tata to work, and they go back and forth.

you're absolutely right. We'll continue to do a lot of our own investment

strategies, a lot of our own development with regard to promotion, but where

possible and where practical and where it is in our best interest from the

Province of Newfoundland and Labrador's perspective, we'll work together with

Quebec.

MR. HUTCHINGS:

Okay. Thanks very much.

2.1.03,

Mineral Development – I think you may have referenced, I'm not sure if we

covered it – under Purchased Services.

Last

year we asked about projected expenditures related to safety and dam

maintenance. I think you spoke to some of that a little earlier in regard to

questions. For '18-'19, last year I think there was $740,000 you had forecasted

to use. This year that's increased, but I think you referenced the point that

you want to look at meeting your plans that you had in regard to dealing with

some of these issues. I guess that's an increase to deal with additional dams or

safety that's required, and basically you just upped the budget to deal with

some of the capacity you need there to do a (inaudible).

MS. COADY:

Absolutely.

I'll

just look at '17-'18, the budget was $656,800 and we actually spent $665,000, a

slight increase of $10,000. That was the contract for dam repair that we did at

the old Rambler mine. So you can see that sometimes we hope to get it at the

price that we're getting and you see a bit of an increase, much the same – we

have a four-year plan and a commitment on orphaned and abandoned mines. We've

had to put some additional monies there because of some of the changes that are

required under that.

MR. HUTCHINGS:

Okay. Thank you.

Under

2.1.03, the same one, Grants and Subsidies, that's consistent at $1.7 million.

Last year we were told that's related to prospector assistance, junior

exploration, and I think there was some monies for the creation of the Matty

Mitchell room at the Department of Natural Resources. I think it's about

$50,000.

Is that

consistent in terms of the breakdown of that amount for Grants and Subsidies and

where that will be allocated this fiscal year?

MS. COADY:

You are correct.

MR. HUTCHINGS:

Okay.

MS. COADY:

Yes.

MR. HUTCHINGS:

The other issue – your

official mentioned earlier in regard to orphaned and abandoned mines, and I just

talked about safety and dam maintenance program. There's a four-year spending

forecast for that. Is everything on target with regard to dealing with those

that have been identified, in that four year-period? Just a comment I guess, in

terms of that plan, it's laid out, and are you meeting your targets.

MR. CANNING:

This year we're asking for

additional funds to manage the Consolidated Rambler site.

MR. HUTCHINGS:

Yeah.

MR. CANNING :

That's what that whole risk registry is about, really understanding more deeply

and more granularly about the future requirements of those sites.

So I

would say that our big focus this year is to deal with Consolidated Rambler, and

to continue, really, pursuing this whole notion of risk registry so we can

really identify every key component that we need to assess at these sites.

MR. HUTCHINGS:

Okay, if I just ask one more

to clue up.

So the

registry, I'm sorry – is that new, the registry?

MR. CANNING:

meeting those mitigations, and what additional costs – because these things have

a way of coming back at you in the future.

Thank you, Minister.

Ms.

Michael.

MS. MICHAEL:

Thank you very much, Mr.

Chair.

– to copy it all down and

get it all. Thank you.

Just a

few more questions with regard to mining. Again, this has to do more with

updates on some of the different mining projects. Where are things with Vale and

the beginning of the underground mining operation?

MS. COADY:

Thank you for the question.

This is a very important topic, of course, for Newfoundland and Labrador. As you

know Vale Global, which is headquartered in Brazil, has done a global review of

their whole minerals division. Vale in Labrador certainly was part of that.

We have

had a number of discussions with Vale to encourage them to continue to go

underground; it is a good economic value. Vale has continued to review whether

or not they will be able to – it's a fairly significant investment on their

behalf to go underground; I think in the billions of dollars area for them to

maximize that.

We are

cautiously optimistic. They are looking to stream cobalt and that would be

helpful in the development of that underground mine. We're continuing to

encourage them to go underground and we're looking for their support to do so

hopefully in the near future.

MS. MICHAEL:

Sounds like it's not quite

as sure as it was about a year and a half ago.

MS. COADY:

Well certainly, there's been

change in the commodities pricing over that last year. What we are seeing,

though, is an increase in cobalt which is making that even more economic again.

That's a positive thing. We do know the economic value, we do know that there's

a huge cost to go underground, so we're continuing to work with Vale to

encourage them to do just that.

Over

the last year, you've seen a decline in the overall commodity pricing for Vale,

and that's problematic and that's why they've done a global review and they've

actually shut down some areas – not here. But things are continuing as they are

in Vale. Of course, in Labrador, really what we're talking about now is going

underground and we want to encourage them to do just that.

MS. MICHAEL:

As you know, I have a

special interest in this, having sat on the joint panel. I haven't read the

report in a while but I do remember one of our major points being that the thing

that would really make it of benefit to the people of Labrador would be going

into the underground mine. That was a very serious consideration that we made.

MS. COADY:

Absolutely.

MS. MICHAEL:

Knowing the fluctuation in commodity prices, I'm going to hope that this is a

temporary slowdown.

MS. COADY:

It is encouraging to see the increase in cobalt, I have to say, and the fact

that Vale has gone out to start streaming I see that as very positive, but we'll

see as they move forward.

MS. MICHAEL:

Right.

I can't

remember, and I should, but if the underground doesn't happen, when is the end

date for the open pit?

MS. COADY:

2022. I was going to say '21-'22.

MS. MICHAEL:

It's pretty soon. Great. Thank you.

MS. COADY:

That's why it's important for us to continue to encourage it.

MS. MICHAEL:

Yes, absolutely, for the people of the Labrador because we all know how many are

employed there, especially from the North Coast.

Can we

get an update on the fluorspar mining project in St. Lawrence, please?

MS. COADY:

Certainly.

As you

know, we were pleased to see the fluorspar mine reactivate. They are moving

through I think very diligently and well in their processes of developing, and

I'm going to turn to the ADM to see – their latest shipment has gone. So maybe

you can just give them a quick update on where they are today.

MR. CANNING:

Thank you, Minister.

The

facility is moving forward. They went through their commissioning and start-up

and all the time during commissioning – and I've done a little bit of that – you

find issues of a technical nature, you work your way through and they did a good

job on that and kept us informed. We really believe this is a strong opportunity

for the long term for that region and we're just delighted to see this moving

along as well as it is.

MS. MICHAEL:

Thank you.

Minister, you did speak a lot when responding to Mr. Hutchings with regard to

Lab West, but there were some projects that you didn't mention such as the

Julienne Lake iron ore deposit, the Quest Rare Minerals and the Strange Lake

rare earth project, not really a project I guess, and also the Scully Mine.

Could

you give us some details on those projects?

MS. COADY:

Let me start with Scully Mine.

As you

know, last year Tacora purchased the assets of Wabush Mines.

MS. MICHAEL:

Yes.

MS. COADY:

We saw that as a positive

thing, going forward. They have done their feasibility study and are out raising

funds to restart the mine. I can't tell you the day when that is anticipated.

They're out raising funds at the present time but they've moved through the

processes quite diligently, so we're cautiously optimistic that they will be

able to raise the funds there.

Quest

is now out raising money for another tranche and, I believe, they have put in

their environmental assessment. I'm turning to my assistant deputy minister to

see if I'm correct there.

MR. CANNING:

I'm not so sure they've put in their environmental assessment papers, just yet.

MS. COADY:

Okay, so –

MR. CANNING:

That's Search.

MS. COADY:

That's Search, sorry. I said

Quest, it's Search.

MR. CANNING:

This Sunday, Search is on the lower coast of Labrador.

MS. COADY:

Correct. I got my names mixed up, so Search has done that, Quest has not, at

this point.

You

asked about Julienne Lake, I have nothing new to report.

MS. MICHAEL:

Okay.

MS. COADY:

I don't know if you – I'm looking around to see if there's anything new to

report on Julienne Lake, at this point.

MR. CANNING:

It's interesting, there has been questions about Julienne Lake at some of our

conferences when we have gone there to talk to folks. We continue assessing that

opportunity and, obviously, iron ore is a higher value; the commodity prices has

shifted upwards, so that's good.

You see

it in Labrador West with respect to Tacora, Alderon and IOC has increased their

Okay, thank you very much.

MS. COADY:

It's hard when you lose corporate memory out of your department.

MS. MICHAEL:

It is.

MS. COADY:

It is challenging, but people are – they work very hard to bring their knowledge

up, very quickly.

MS. MICHAEL:

Right. Since you've mention

that, do you have a lot of that happening, because it is a concern, the loss of

corporate memory?

MS. COADY:

Well, certainly, as people

retire, you're seeing that, and we have seen quite a lot of change in the

Department of Natural Resources, but you're seeing that in society.

MS. MICHAEL:

Right.

MS. COADY:

As the baby boomer generation now is starting to move into retirement, you're

seeing some major changes.

So,

yes, we're seeing loss of corporate memory and that's difficult, but we're also

very focused on attrition management so that people who report to more senior

people within the department are trying to gain that knowledge before people go

out the door. So we're really working to manage that transition.

MS. MICHAEL:

Okay, thank you.

CHAIR:

Ms. Michael, I just wonder

if I could ask you to hold your thoughts here, and I'll turn it over to Mr.

Hutchings.

MS. MICHAEL:

Sure.

MS. COADY:

My deputy minister just

pointed out, I'm going to just draw your attention to – the eligible numbers of

retirements in the Department of Natural Resources – and I told you we have 154

people – is 36. So it is significant.

MS. MICHAEL:

Yes.

MS. COADY:

But it is a lot of people who are just eligible for retirement, moving through

their life cycle. So it is something that we manage almost every day.

MS. MICHAEL:

Thank you.

CHAIR:

Thank you, Minister.

Mr.

Hutchings.

MR. HUTCHINGS:

Thank you, Mr. Chair.

If I

could, Minister, I just want to go back, your official mentioned the Fluorspar

mine. So is the commissioning all completed on the mine itself, in terms of

operations?

MR. CANNING:

My understanding is yes.

MR. HUTCHINGS:

Okay.

MR. CANNING:

They had some issues with a filter and I think they resolved that. That's my

you advised us that there were some issues in regard to engineering and

procurement and they wanted to get a handle on that. Then I think there was

maybe a business assessment or analysis being done by Vale and would be

concluded in the fall of 2017, if I remember correctly.

When we

look at some of the other discussions that have gone on, iron ore has started to

bounce back a little bit, we got the cobalt issue and the significant price

that's garnering around the world and what it's needed for.

So at

this point in time, can you give us some insight into what exactly the holdup is

because there was an amendment done to this agreement to have them go

underground? Is there a timeline here? Are there penalties that we're looking at

here? Where are we and where are we going, I guess, in a broader sense?

MS. COADY:

Thank you for the question,

it's an important one.

I know

over the last number of years you've asked some very good questions about Vale

and where their future lies. They did originally do a really – I think it's to

the positive benefit for our future – tremendous task of making sure they

aligned what they were doing, their engineering and procurement stages, which

will help secure costs. They did that originally and then they moved into Vale

Global with a new CEO, did a worldwide review of their minerals division and

that took place, and now Vale is assessing whether or not they can move

underground.

I feel,

again I'll say, with the value of cobalt being so high, I think it works in our

favour that they are out there streaming cobalt, so they'll have to supply that

cobalt. That's a positive development.

Global

pricing on copper is still a challenge. The commodity pricing is quite low so

that is a concern.

With

regard to the development agreement, at this point until we know exactly how and

when Vale will move forward with their underground mine, I'll leave that to the

time in which they move forward. I'm not anticipating any changes at this point,

but we haven't gotten clearance – Vale hasn't made any public statements that

they will be moving forward at this point, so we'd have to wait until that.

continue to work to ensure that they understand the value of the mine,

understand the impacts and we'll continue to do that.

As you

know, under the previous administration there was some changes to the milestones

that were given and that were allowed, some milestone changes and that was done

previously. So we'll wait and see how Vale moves forward, but I am, as I've

said, cautiously optimistic because of the streaming of the cobalt, the value of

the cobalt and the economic value of the underground mine.

MR. HUTCHINGS:

Thank you.

final question on that: When asked in the House of Assembly, you indicated there

was no desire or consideration of making any changes to the amendment. Has Vale

made any offers or requested any changes? Are you still –

MS. COADY:

To the Development Agreement?

MR. HUTCHINGS:

point – the remedies that are available under that Development Agreement. Should

things not progress, we do know there are remedies available to us and we'll

keep that in mind as this moves forward. Right now we are encouraging the

underground mine development.

MR. HUTCHINGS:

Okay. Thank you.

I'll

move on to 3.1.01. I wonder if you could just comment. I know it was mentioned

earlier in regard to the Oil and Gas division being removed from Nalcor and

stand alone. Do you foresee any transfer of employees from the line department

– what they're tasked with is doing, really, two things; one is managing the

equity that we have in our offshore. The second thing that they really do is a

lot around prospectivity, the seismic, the geology around the prospectivity and

the promotion side of that.

That

will remain. That's the consideration at this point, so no transference of

skills.

MR. HUTCHINGS:

No, that's what I was

suggesting, if it was required.

MS. COADY:

No.

MR. HUTCHINGS:

Okay.

Under

Professional Services, the Estimate was $181,200, the revised was $86,200 and

now it's gone back up again from what the original Estimate was. I'm just

wondering about that change there and the Estimate back up to $191,200.

MS. COADY:

Certainly.

Last

year some of the planned studies that we wanted to do didn't take place. We went

from $181,000, which is what I'm going to call the normalized budget, down to

$86,000 because there were other things happening.

This

year we plan to do a number of market analyses on capacity markets. We have to

do peak demand reduction strategies and mandatory reliability standards. We've

got some money there for some offshore for some work on FORRI, which is the –

help me out here, Gordon, what does FORRI stand for – Frontier and Offshore

regulations. I staggered it but it was there.

There's

some additional funding available for Professional Services. The $191,000, the

$10,000 increase, is the zero-based budget review.

MR. HUTCHINGS:

Okay.

You

said the term “peak demand.” Is that related to electricity in general in the

province?

MS. COADY:

Correct.

MR. HUTCHINGS:

So you'd be doing something

separate than Nalcor would be doing under peak demand.

MS. COADY:

Correct.

The

province, obviously, from a policy perspective and the policy of the

requirements under electricity, would be looking at some of these peak demand

reduction strategies. I don't know if the ADM wants to add anything to that?

MR. COWAN:

The first study the minister mentioned was capacity market. The province is

interested in understanding how we can maximize our market opportunities. If we

have some further insight in capacity markets, that would be very beneficial in

terms of revenue streams. If we look at our peak and our load, then we can

understand how people use their power.

already have some insight, but if there are opportunities there as well to shave

that peak, that also presents a marketing opportunity related to capacity

markets because that's a capacity product that we could use. Again, that would

provide us with the ability to generate additional revenue.

MS. COADY:

Just on that, the department

is really tasked with the policies.

MR. HUTCHINGS:

Sure.

MS. COADY:

Doing your own studies and

making sure you have the information you require for policy development is

critical. The budget is rightsized at $191,000 but it is pretty much equivalent

to the budget that is normalized over the years.

MR. HUTCHINGS:

Yeah, so the capacity market

and the peak demand, as examples, would you have done those in the last two

years? When were they last done departmentally?

MR. COWAN:

I'm not aware of those studies being in the past. They would be new areas that

we would use, as the minister said, to support policy development within

government.

MR. HUTCHINGS:

Okay. Thank you.

CHAIR:

Thank you, Mr. Hutchings.

Ms.

Michael.

MS. MICHAEL:

Thank you very much.

Thank

you, Mr. Chair.

Coming

back to 3.1.01, Minister, under Professional Services, last year the budget was

$181,200, but only $86,200 was spent. I'd like an explanation of what didn't

happen that was expected. This year, the rightsizing has gone up from the budget

of last year by $10,000. What is the expectation there as well?

MS. COADY:

We've had some vacancies in

that division and some of the studies that we had hoped to undertake didn't go

forward. Now they will go forward. It's a timing issue I guess.

MS. MICHAEL:

Okay.

MS. COADY:

We've had a number of

vacancies in that division so we're now pretty much, I think, on track again.

I'm looking at my ADM to make sure nothing has happened in the last little short

while. We have a full complement and we'll be moving forward in some of these

studies.

When we

do zero-based budgeting we really have to go out and look at everything that

you're doing again. For the $181,000, it was felt that the $191,000 was

required, that additional $10,000, to help fund some of those studies and some

of that work that we're doing. That's why zero-based budgeting sometimes goes up

and lots of times it goes down.

MS. MICHAEL:

Yes. Thank you.

Coming

down to the Grants and Subsidies, last year the budget was $2,900,000 and it was

revised downwards by $500,000. This year it's even below that revised number as

well, so now we're down to $2,300,000.

Could

we get an idea of these grants and subsidies? Why the variance? I think we do

know some of them.

MS. COADY:

Certainly.

$2.9

million was budgeted and we spent $2.4 million. It was because we had a

lower-than-anticipated cost associated with the NSP diesel subsidy program last

year. That was a $500,000 savings right there; $1.8 million versus $2.3 million.

MS. MICHAEL:

answered another question I had written here.

This of

course does bring up once again, which we do every year, the Ramea project

because obviously we all have the hope that eventually what's happening down

there could end up replacing the use of diesel on the coastline in Labrador. Can

we have an update on what's happening with the fuel-cell technology?

MS. COADY:

There have been some

challenges, unfortunately, with the conversion – and I'll turn this over to the

assistant deputy minister who will be more fulsome in his reply. There have been

some challenges in the Ramea project with that conversion, the fuel-cell

conversion.

Just

for those who may be listening, there was a source of wind power being converted

into hydrogen, to be used and stored, and there was some proprietary technology

that Nalcor was developing, but there have been technical difficulties, I'll use

that. So it hasn't moved as smoothly as one would hope.

On the

bigger issue – and I think this is a huge issue for Canada, not just for

Newfoundland and Labrador, and I speak to my colleagues and to the federal

government about this regularly – we have 20 communities in the Province of

Newfoundland and Labrador that use diesel as a source of electricity. They're

off the main grid, they're stand alone and they use diesel.

really think there's an opportunity to move to some type of renewable

technology; we have to have backup, obviously, and that may be diesel because

that is most cost effective. But we're trying to find a solution and we're

working very much with our colleagues across the country, because I think this

is a national issue, for remote and rural communities. We're also looking at

maybe there is some wind or solar or hydrogen technology, or whatever type of

technology we can use.

So we

have a person who is really working towards that; I think you'll hear some more

things coming. We certainly want to move forward. We have a team of people that

are really working on this issue because if we can get 20 communities in the

Province of Newfoundland and Labrador off diesel, it would be a very good thing

from two perspectives. One, from greenhouse gas perspective – and I think this

is important to the federal government, it's important to the people of the

Province of Newfoundland and Labrador, so there should be some funding available

from the federal government to help us do that.

Secondly, we want to move to a system that gives a good robust opportunity for

electricity in these besides diesel, right. Diesel's very expensive.

MS. MICHAEL:

Yes, and the greenhouse gas

issue is a serious one, and you're right. I mean, I think if this technology can

be made to work, it's important not just for us here in this province.

And you

may not have this figure, Minister – if not we can seek it from Environment.

What is the percentage of our greenhouse gas emissions that comes from the 20

communities using diesel?

MS. COADY:

I don't have that specifically from diesel, but I can tell you it would have to

be significant; 20 communities, all in rural and remote communities. I think

it's an opportunity – and I speak regularly to my federal colleagues and

provincial colleagues to ensure this. As a matter of fact, at the federal,

provincial and territorial meetings this is a key issue and we'll be having

another meeting this summer and again looking for solutions and opportunity and

sharing information back and forth as to what's happening in other

jurisdictions.

But I

think this is the one place the country could really drive forward.

MS. MICHAEL:

ADM?

MR. COWAN:

The numbers are fairly small. We did meet with Newfoundland Power a number of

weeks ago to ask where they were, and they had I think it was two or three, so

it's a fairly small number of applications in the queue right now. I believe

Newfoundland and Labrador Hydro had maybe one.

MS. COADY:

If memory serves me, I think there were five and they were approved, but we're

looking for more take-up on that program for people to be able to use and

supplement wind or solar in their own homes and –

MICHAEL:

And would those applications

be residential or commercial?

MS. COADY:

I think they're all residential if memory serves, yeah.

MS. MICHAEL:

Okay.

There's

really not a lot of advertising being done about it, though, for people to know

about it.

MS. COADY:

Good point.

MS. MICHAEL:

I'll make that point.

MS. COADY:

So noted.

MS. MICHAEL:

Okay, thank you very much.

I only

have 35 seconds, so I'll stop at the moment because (inaudible) –

CHAIR:

Thank you.

Mr.

Lane, I'm just trying to gauge the time so I'm just going to have to go back to

Mr. Hutchings and we'll see where we go.

MR. LANE:

Yes, fine.

CHAIR:

Mr. Hutchings.

MR. HUTCHINGS:

Thank you, Mr. Chair.

Just a

follow-up to Ms. Michael's question with regard to those 20 communities and the

greenhouse gas emissions, you said it was less than 5 per cent. Is that 5 per

cent of the provincial greenhouse gas emission?

MS. COADY:

Correct.

MR. HUTCHINGS:

I think us as a province in

regard to the percentage of the national amount, we're a bit under 2 per cent,

is that correct, somewhere around there?

MS. COADY:

I wouldn't comment.

MR. COWAN:

(Inaudible) Climate Change

when I go back.

MR. HUTCHINGS:

Okay.

MS. COADY:

Climate Change would be able

to assist you with that.

MR. HUTCHINGS:

Sure. Thank you.

We know

we discussed legislation here in regard to the Newfoundland system operator and

the open-access piece, just give us a rundown on – I know that will be a

separate entity that's going to be set up. Is there money budgeted for that, or

do we know what the annual operating budget would be?

MS. COADY:

Thank you.

Just

for those that are listening, the Member opposite is referring to the

independent system operator that will be housed within Hydro and ring-fenced,

and the question is: What's the budget for that? That's within the Hydro budget,

and I don't have that figure off the top of my head. I don't know if you do,

ADM.

MR. COWAN:

No, Minister. Largely, the

staff that form the system operator, as the minister has indicated, is

ring-fenced, so those people would have already existed at Hydro.

MR. HUTCHINGS:

Yeah.

MR. COWAN:

So that operation centre is now part of the system operators. The only

additional position that I would see, and I'm not sure, would be the actual

Newfoundland and Labrador system operator, the person who is in that position.

MR. HUTCHINGS:

So we wouldn't see a huge

cost to that, as we've talked about before because most resources are already

there.

MS. COADY:

Correct; they are

ring-fenced within Hydro itself.

MR. HUTCHINGS:

Okay, good.

MS. COADY:

That is the difference

between – going back to the legislation, there was a question as to whether or

not we'd have an independent, stand-alone organization –

MR. HUTCHINGS:

Right.

MS. COADY:

– or one within Hydro, and

really the consideration was the cost and the usage. We are at the end of the

line, we'll say, so we don't anticipate a whole lot of usage of our transmission

assets by outside entities.

MR. HUTCHINGS:

Right, yes, indeed. Thank

you.

I'll

move to 3.1.02, Petroleum Development. I just want to ask a question in regard

to Salaries. Under 3.1.02, there was a salary savings there last year of

$83,200. I'm just wondering, was that a vacant position or what exactly that

was?

MS. COADY:

That is correct. The

variance is due to vacancies within the division during the year and for parts

of the year. We had a director's position and a marketing and promotion position

that was vacant.

If you

look at 2018-19, it was $1,216,000 last year and $1,209,000 this year. Small

variances because a lower step again. Somebody came in at a lower step than the

person that left.

MR. HUTCHINGS:

Okay, thank you.

If we

drop down to Revenue - Provincial, there's a line item of $81,000. Can you just

explain to me what that would be?

MS. COADY:

Yes, that's the delegate

fees for the Offshore Technology Conference.

MR. HUTCHINGS:

Okay.

Maybe

here would be a good time to just give me an overview of the upcoming seismic

program for this year. I think last year it was two 3D vessels and one 2D vessel

– I think, if I remember correctly, from some of the things you talked about.

What can we expect this year?

I know

we had some discussion in regard to the budget, and some of that would be used

to correlate or review the data that already exists and then there would be a

portion that would be looked at for further seismic work. Could you give me an

idea of the future seismic work, what's going to happen this year?

MS. COADY:

Certainly. Seismic work usually correlates to upcoming license rounds.

MR. HUTCHINGS:

Yeah.

MS. COADY:

I don't have, off the top of my head, exactly the locations. I'll search the

memory banks as I'm speaking.

This

year we're going to spend approximately $28 million; $20 million of it which

will be new exploration, which is normalized to say '16-'17 year expenditures.

Last

year there was a big bump because of the 3D. As you noted, last year there was a

big emphasis on 3D in one particular area that was being done and that's because

those license rounds were underway and there are indications of great

prospectivity in those areas.

This

year there will be the $20 million new, $8 million in looking at and analyzing

past data, which is normalized amount. A big investment $28 million, probably

one of the largest investments in 2D and 3D seismic, but it's more tied to the

license round.

I don't

know if you want to comment, Gordon, at all.

MR. MCINTOSH:

In terms of the discussions going forward, the final program isn't in place, but

Yeah.

I just

want to go back to the budget issue, and we talked about it before here in

regard to the $28 million.

From

your direction to Nalcor, did you ask them to reduce their budget by a certain

figure? Was it $20 million, or what actually transpired there? What was your

expectation for Nalcor going into Budget

2018 in reducing cost? Was it a figure? Was it, you know, have a look and

see what you could do? What was that direction?

MS. COADY:

Certainly, the budget this year for Nalcor – I can grab it for you in a moment.

I just got to find the right piece of paper.

Nalcor

capital this year is $723,900,000 which is the amount of money that is required

for the Muskrat Falls Project and energy marketing and so on. The direction to

Nalcor, as the direction to every agency, board and commission and every entity

within government, is to keep your costs as low as you possibly can.

When we

had the conversation, the board of directors obviously is responsible for the

development with the senior executive of Nalcor. They came forward with a budget

that they required. We asked them to ensure that everything they're doing is as

cost effective and as low cost as possible, because the people of the province –

we are borrowing a tremendous amount of money and our fiscal situation in the

province continues to be quite problematic.

We did

ask the board and we did ask senior management to come forward with a budget as

low as they possibly could make it. They came forward with their budgets. They

were fine-tuning. They were looking at where they could find savings. They did

zero-based budgeting. They knew where some of the costs – there were some

convergence costs, what I'm going to call this transition.

I think

this is a key point; this transition from construction to operations is starting

to happen. Especially where you see, for example, the transmission lines are now

completed. Nalcor is still working, of course, on the building of the Muskrat

Falls dam.

So no,

there was no specific dollar amount given to Nalcor to find. It was more, make

sure your budget is as fine-tuned, as low, as reviewed – they did come in

with their zero-based budgeting. We did review that. We asked for, to make sure

they fine-tuned absolutely everything they possibly can to make it as low as

they possibly can.

MR. HUTCHINGS:

Okay, thank you.

Just a final question on that. The board and the CEO came

forward with – my understanding – a $20 million reduction, and that would be in

the seismic program or the exploration program. Subsequent to that, I think it

was on the day of the budget, there was an OC that directed $20 million back as

a grant to Nalcor to replace that $20 million suggestion.

At the end of the day, were there any savings from Nalcor?

Did they cut any in their administration costs, because that $20 million was put

back in?

MS. COADY:

Nalcor, basically, I think

their core budget is flat to last year, which is a decrease considering this

transition. There have been a lot of what I'm going to call budget reviews and

analysis within Nalcor to get their budget as low as they possibly can.

So to

answer your question on the $20 million, the board of directors took a decision,

they felt they could pause the exploration program this year; do the analysis,

but pause new exploration. We felt, because of

Advance 2030 , it was very important

for that to continue. We said we wanted that to continue, and that's what the

direction to the board has been.

How

that will be funded; we believe there will be some extra revenues through the

Oil and Gas division of Nalcor to help offset that increased cost – sorry, not

increased cost, that $20 million investment in new exploration. If we have to

supplement that, then we'll have to do that, but we believe there will be some

additional revenues through the Oil and Gas division this year that will help

offset that $20 million investment in new exploration. We felt that it's very

important that we continue to do new exploration.

MR. HUTCHINGS:

Sure. I just have a final

comment, if I could.

Just on

that note; the $20 million is not in the overall budget of the province or in

your department. Your expectation is that $20 million grant will be replaced to

Nalcor based on revenue increases in oil production or other areas that during

the year you can transfer over to them. Is that the general –?

OFFICIAL:

Michael.

MS. MICHAEL:

Thank you very much, Mr.

Chair.

Coming

to 3.1.03, Minister; this covers the money that goes from the provincial

government to the C-NLOPB to cover the provincial share of their operating costs

I understand.

This

year the money is going up. The Grants and Subsidies, the money that will go

from the provincial government to them is going up. What is the reason for that?

Has the federal government share gone up as well?

MS. COADY:

Thank you for that.

I will

let you know that C-NLOPB is at no cost to government. While their budget line

item is here, it is at no cost to government. It is completely recovered. It's

100 per cent cost recovered.

MS. MICHAEL:

By government? The

government receives the money back or …?

MS. COADY:

It's 100 per cent cost

recovered from the industry.

MS. MICHAEL:

Right.

MS. COADY:

There's no cost to

government at all. While there is a Grants and Subsidies line to be voted on

here it is completely cost recoverable.

MS. MICHAEL:

Okay.

MS. COADY:

Let me just explain why

there are increases in their operating budget, because I think it's important

that they be held accountable nonetheless. They have some personnel costs, they

have step increases that have gone up and their premises have gone up. They have

investments in computer hardware and software and they also have a number of

consultants that are required. What you're seeing is there is an increase from

last year to this year due to those reasons.

MS. MICHAEL:

Okay.

I'm

trying to get a handle, then, on how things do work. We probably have asked

different questions before.

When it

comes, for example, to the sale of parcels of land in the offshore by C-NLOPB –

and there is revenue from that; you also have revenue from penalties for time

extensions, that kind of thing – does that money go to C-NLOPB or does it come

to the Provincial Treasury?

MS. COADY:

On the land tenure – and

correct me if I'm wrong here – that is more a commitment for exploration, it's

not revenue. If someone bids – and I will use a million dollars – on a

particular piece of our offshore, they commit to making a million dollars

investment.

MS. MICHAEL:

and staff complement really help. If you look at the Professional Services, the

variance from $170,000 last year to $115,000 is really related to royalties and

having to hire external audit services.

This year, because we had a

full staff complement, because we had expanded software, we didn't have to hire

those consultants which we would normally have had to do. That's a benefit

there. When they considered Professional Services for 2018-19, because of the

zero-based budgeting that we've done, we were able to see some cost reductions

there over last year.

MS. MICHAEL:

Okay. Thank you.

Coming up to the Salaries in

the same section, there's a slight variation in salary from last year's budget

to this year's Estimate. There was a revision downwards as well there last year.

MS. COADY:

Last year was because we had

vacancies within the division. This year, the difference is lower salary costs

because a temporary position is no longer required; there was a temporary clerk

position. We're moving through the temporaries and either making them permanent

or – temporary should be by nature temporary.

MS. MICHAEL:

Right.

MS. COADY:

A temporary position is no

longer required there in that department.

MS. MICHAEL:

Okay. Thank you very much.

Coming over to 3.1.05,

Innovation and Business Development Fund, “appropriations provide for

expenditures under the Innovation and Business Development Fund, which focuses

on strategic investments for the future growth and development of the oil and

gas industry in the Province.” It's a $6-million grant or subsidy.

Could you explain this? I

think this is a new section, actually.

MS. COADY:

It is a whole new section.

You recall when Husky was moving forward with the White Rose expansion project,

the West White Rose?

MS. MICHAEL:

Yes.

MS. COADY:

We were able to negotiate

with them the opportunity to have a $60-million fund over 10 years. They will be

giving government $6 million for government to work with industry to develop the

supply and service development, if we have any infrastructure requirements;

really, the development of the industry. That was all part of the West White

Rose development project. Over the next 10 years you'll see the growth of a

fund, $6 million every year, to really develop the industry.

MS. MICHAEL:

But the $6 million is not

coming from government per se.

MS. COADY:

No, it's 100 per cent from

Husky as part of the benefits under that project.

MS. MICHAEL:

Okay.

This is

the second time now, in C-NLOPB, for example. Where else in government's

bookkeeping really does it show that money really doesn't come out of

government, it's cost recoverable because it's coming from outside?

MS. COADY:

I'm going to turn that over

to the very capable accounting department.

MR. IVIMEY:

You would see it reflected

right here underneath. You see the vote of $6 million in the Grants and

Subsidies subhead.

MS. MICHAEL:

Yes.

MR. IVIMEY:

Then you see just down below

the provincial revenue that would come in for $6 million, we see the net cost of

the fund being zero. The provincial revenue is reflected right here. As we

receive the money from Husky, it goes into the Department of Natural Resources

and goes into our provincial accounts. As we spend the money from here, the two

of them are offset. At the end of the day it's zero within our budget.

MS. MICHAEL:

Okay. Good enough. Thank you

very much.

I'm not

a bookkeeper and the person who does my taxes – it's not a big deal to do my

taxes, but I still have to get somebody to do it.

I have

a couple of more questions, more general ones I guess. I know this has been

asked by Mr. Hutchings and I try not to repeat questions, but I'm still trying

to get a handle on how you're going to do the division of the Oil and Gas

division into its own separate entity.

The

question attached to that, because your mandate letter still has you – they have

to be responsible to the minister, I would assume. Can you just give us a little

bit more detail? Maybe there's no more to give but ….

MS. COADY:

Certainly, all these details

are being worked out as we speak. Things are evolving and that's why we said

we're going to study it and make sure this is done correctly. Nalcor Oil and Gas

will be reporting into the Department of Natural Resources directly. So they'll

have their separate board of directors. That board of directors will report to

the Department of Natural Resources, much like Nalcor reports to the Department

of Natural Resources now so we have oversight. That'll be the same.

MS. MICHAEL:

Right.

MS. COADY:

Your

mandate letter also tasks you with pursuing options for the exploration and

development of offshore natural gas.

Is this

something that's high on the agenda or where are things with that?

MS. COADY:

It certainly is part of Advance 2030 .

So, as

you know, natural gas at the present time, the price is very, very low, so a

whole lot of development is unlikely, but if we're not prepared for a resurgence

in gas, if we're not prepared to utilize our gas, then we never will be. So in

Advance 2030 it clearly outlines a

plan and a process for us to be prepared for the development.

MS. MICHAEL:

Yes.

MS. COADY:

In fact, it certainly even goes bold enough to say that in 12 years we would

have natural gas development offshore Newfoundland and Labrador.

certainly are seeing some gas opportunities in the prospectivity and the

exploration that's being done offshore Newfoundland and Labrador. There is

already discoveries of gas and we think there is an opportunity for development

as we move forward, but, of course, that is dependent on pricing and that.

MS. MICHAEL:

Yeah.

MS. COADY:

But if we are not

prepared to encourage development, then we'll miss the opportunity when it

becomes available.

MS. MICHAEL:

Thank you. I think my time is up.

CHAIR :

Thank you, Ms. Michael.

Mr.

Hutchings.

MR. HUTCHINGS:

Thank you.

Minister, could you just give me an update on the incident, Husky and the

SeaRose and the near collision with an iceberg about a year ago?

questioning in the House, I asked you about it and there was an indication that

there was an investigation ongoing and at the conclusion, some decisions may be

made from a provincial perspective and what the expectations would be on Husky

going forward.

I'm

just wondering if you could give me an update on that, please.

MS. COADY:

Certainly.

As you

know, C-NLOPB is tasked with the requirements of ensuring safety in our

offshore. They take that very seriously and that's why they've made some of the

moves they have. I understand that they are still finalizing the report into the

investigation that occurred in that incident. That has not been finalized. I

don't think it's been made public at this point in time. I don't think it's been

finalized, I haven't seen a final copy for sure.

As you

know, they did do an interim step of saying that Husky had to, once they had the

interim report, they did make Husky – they did shut down Husky, made Husky come

forward with new plans. I understand that Husky has done that. They've made

significant changes at their management level and significant changes to their

processes to ensure compliance.

We've

been reassured, I

Document details

Collection	Newfoundland and Labrador — Committees
Citation	2018-04-24
Type	committee
Volume / chapter	committees standingcommittees resource ga48 18-04-24rcdepartmentofnaturalresources
Language	en
Format	html
Source	PROVINCIAL
Identifier	e84b8968174921ff799b7fe0b0a6a9fd1d1bd7be

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