Resource Committee — Department of Tourism, Culture, Industry and Innovation — 18 June 2019

2019-06-18

Newfoundland and Labrador — Committees

PROVINCE OF NEWFOUNDLAND AND LABRADOR HOUSE OF ASSEMBLY First Session Forty-Ninth General Assembly Proceedings of the Standing Committee on Resources June 18, 2019 - Issue 2 Department of Tourism, Culture, Industry and Innovation Published under the authority of the Speaker of the House of Assembly Honourable Perry Trimper, MHA

RESOURCE COMMITTEE Department of Tourism, Culture, Industry and Innovation Chair: Scott Reid, MHA Members: Derrick Bragg, MHA Alison Coffin, MHA Elvis Loveless, MHA Lloyd Parrott, MHA Kevin Parsons, MHA Pam Parsons, MHA Sarah Stoodley, MHA Clerk of the Committee: Sandra Barnes Appearing: Department of Tourism, Culture, Industry and Innovation Hon.

Christopher Mitchelmore, MHA, Minister Charles Bown, Deputy Minister Bradley George, Executive Assistant Robyn Hayes, Departmental Controller Judith Hearn, Assistant Deputy Minister, Business Carmela Murphy, Assistant Deputy Minister, Tourism and Culture Tansy Mundon, Director of Communications Gillian Skinner, Assistant Deputy Minister, Regional Development and Diversification Renee Williams, Director, Corporate Services Also Present Hon. Lisa Dempster, MHA, Minister of Children, Seniors and Social Development Hon.

Andrew Parsons, MHA, Minister of Justice and Public Safety Derek Bennett, MHA Paul Dinn, MHA Paul Lane, MHA Malcolm Coady, Researcher, Official Opposition Office Angelica Hill, Researcher, Government Members Office Ivan Morgan, Researcher, Third Party Office

June 18, 2019 RESOURCE COMMITTEE 53 Pursuant to Standing Order 68, Lisa Dempster, MHA for Cartwright - L’Anse au Clair, substitutes for Pam Parsons, MHA for Harbour Grace - Port de Grave for subhead 1.1.01 to 1.2.03. Pursuant to Standing Order 68, Derek Bennett, MHA for Lewisporte - Twillingate, substitutes for Pam Parsons, MHA for Harbour Grace - Port de Grave for subhead 2.1.01 to 4.3.02. Pursuant to Standing Order 68, Paul Dinn, MHA for Topsail - Paradise, substitutes for Kevin Parsons, MHA for Cape St. Francis for subhead 1.1.01 to 1.2.03.

Pursuant to Standing Order 68, Andrew Parsons, MHA for Burgeo - La Poile, substitutes for Elvis Loveless, MHA for Fortune Bay - Cape La Hune. The Committee met at 6:10 p.m. in the Assembly Chamber. CHAIR (Reid): We’re going to get started now. The first thing we have to do is we have some minutes from the – introductions first? Okay. Okay, we’ll do a round of introductions first. We’ll start with the minister. MR. MITCHELMORE: Minister Christopher Mitchelmore, Tourism, Culture, Industry and Innovation, here with my team. MR. BOWN: Charles Bown, Deputy Minister. MS. HAYES: Robyn Hayes, Departmental Controller. MS.

MURPHY: Carmela Murphy, Assistant Deputy Minister of Tourism, Culture and Parks. MS. HEARN: Judith Hearn, Assistant Deputy Minister of Business. MS. SKINNER: Gillian Skinner, Assistant Deputy Minister of Regional Development and Diversification. MS. MUNDON: Tansy Mundon, Director of Communications. MR. GEORGE: Bradley George, Executive Assistant to the Minister. MS. STOODLEY: Sarah Stoodley, Parliamentary Secretary for Tourism, Culture, Industry and Innovation. MS. WILLIAMS: Renee Williams, Director of Corporate Services, Tourism, Culture, Industry and Innovation. MR. P.

DINN: Paul Dinn, MHA for Topsail - Paradise. I’ll say upfront that I got to beat it out of here in about 20 minutes, so it’s nothing you said, but it gives you a chance to start the meeting anyway. MR. COADY: Malcolm Coady, Researcher, Official Opposition. MR. PARROTT: Lloyd Parrott, MHA for Terra Nova, critic for Tourism, Culture, Industry and Innovation. MR. LANE: Paul Lane, MHA for Mount Pearl - Southlands, critic for all departments. MS. COFFIN: Alison Coffin, St. John’s East - Quidi Vidi. MR. MORGAN: Ivan Morgan, Researcher, NDP Caucus. MS. HILL: Angelica Hill, Researcher, Government Members’ Office. MR.

BRAGG: Derrick Bragg, MHA, Fogo Island - Cape Feels. MR. A. PARSONS: Andrew Parsons, MHA, Burgeo - La Poile. MS. DEMPSTER: Lisa Dempster, MHA, Cartwright - L’Anse au Clair. CHAIR: I’m Scott Reid, Member for St. George’s - Humber. I’m going to chair the meeting tonight. We have some minutes here from the June 13 meeting that we need to have approved. Can I have a motion?

June 18, 2019 RESOURCE COMMITTEE 54 MR. BRAGG: Moved. CHAIR: Moved by Derrick Bragg. All in favour, ‘aye.’ SOME HON. MEMBERS: Aye. CHAIR: Carried. On motion, minutes adopted as circulated. CHAIR: We’re going to call the first heading and then we’ll have a few opening comments from the minister. I’m going to call the head 1.1.01. CLERK (Barnes): Executive and Support Services, 1.1.01 through 1.2.03 inclusive. MR. MITCHELMORE: Thank you, Mr. Chair. It’s good to be back here and be joined with my colleagues from the Department of Tourism, Culture, Industry and Innovation.

I typically don’t bring opening remarks in Estimates, but given that there are several new Members here, I just wanted to give a broad overview of the department and some of the initiatives that have taken place to provide some context for the Estimates here this evening. The Department of TCII is the lead for innovation, economic development and diversification; tourism, culture and provincial parks.

It’s responsible for strengthening and diversifying the economy on a provincial and regional basis, supporting economic growth and employment in the tourism industry, cultivating contemporary arts and persevering the province’s cultural heritage. The department focuses on the creation of a competitive environment to support private sector investment and business growth through promoting innovation in industry and business development, research and development, internationalization, sector diversification, informed by sector search, business development and community economic development.

Guided by The Way Forward, TCII offers programs and services that ensure entrepreneurship and innovation are able to flourish, supporting economic prosperity and growth in the province. The department is also the province’s largest operator of tourism, culture and heritage facilities, including arts and culture centres, provincial historic sites, provincial parks and visitor information centres. TCII provides insight, intelligence, innovation support and investment services for business, non-profit enterprises and community groups.

The department markets the province as a designation of choice, working with a wide range of partners and stakeholders to identify opportunities, provide support and leverage investments critical for sector, industry and firm growth. TCII encompasses three branches: Tourism, Culture and Parks; Business and Regional Development; and Diversification, and is supported by two corporate divisions: Communications and Corporate Services. Leadership is provided by Deputy Minister Charles Bown and our three assistant deputy ministers: Carmela Murphy, Gillian Skinner and Judith Hearn.

TCII is regionally responsive with regional outreach throughout 18 field offices provided by front-line service delivery staff for all TCII economic development programs and services. Besides St. John’s, we have two other corporate offices, one located in Marystown, which is responsible for portfolio management and the other in Corner Brook, which is responsible for the provincial parks. Departmental staff are also located throughout our provincial information centres, visitor information centres, provincial historic sites, provincial parks and arts and culture centres throughout the province.

I commend staff for their collaborative efforts and continued commitment to fostering a culture of innovation, productivity and creativity in Newfoundland and Labrador. Newfoundland and Labrador is a destination of choice for people around the world. Travellers are drawn to our people, our culture and our way of life. TCII continues to grow and support the provincial tourism industry and it’s over 20,000

June 18, 2019 RESOURCE COMMITTEE 55 jobs by enhancing market readiness, designation development and marketing support in partnership with Hospitality Newfoundland and Labrador, the Newfoundland and Labrador Tourism Board, regional Destination Management Organizations and tourism operators. Newfoundland and Labrador’s non-resident visitation has grown at an average rate of 3 per cent a year since 2009. In 2018 residents made 3.6 million trips in the province spending nearly $570 million. The combined resident and non- resident tourism spending in Newfoundland and Labrador reached $1.14 billion last year.

Travel media; nearly 700 articles were written about Come From Away in 2018 reaching an impressive audience of over 110 million. Tour operators are also expanding their tours and packaging offerings in the province and, just recently, we hosted two promotional events aligned with the opening of Come From Away in London. We keep hearing from visitors who come here that they love what they experience and they tell us that our province is a unique and special place. We’ve also maintained our support for tourism marketing and our tourism campaign Find Yourself.

It continues to be one of the most successful and recognized in the country receiving 329 awards. This marketing investment has tremendous value in attracting visitors to Newfoundland and Labrador. The role of the provincial tourism marketing is to inspire, to generate awareness and to motivate travellers to action. The feedback we receive is incredible and it’s pushing people to book their travel here in our province. The outlook is positive for this year’s tourism season.

In 2018 we hosted a record 111 van tours, including media from all over North America representing 51 outlets and we welcomed 44 travel trade representing over 180 clients from North America, Europe and Asia. When we launched the Provincial Tourism Product Development Plan in 2017 we did so to increase the number of high-quality Newfoundland and Labrador tourism experiences to attract more visitors, to encourage them to stay longer and to experience more.

Through the destination development implementation process we hosted 24 opportunities, experienced development sessions with over 900 tourism operators, potential entrepreneurs, municipalities and other stakeholders in attendance. One of the key aspects of the provincial Development Plan is to improve the sense of arrival in our province and throughout key touch points along the visitor journey. We have already made investment through comprehensive signage and way finding for the City of St. John’s and the Town of Placentia so their communities can offer clear and concise directional information.

VICs we support throughout the province. The sites also provide advice and direction on local festivals and events, attractions and experience; the hidden gems that are throughout our province. Sites are located in Port aux Basques, Notre Dame, Clarenville, Whitbourne and Argentia, as well as airports at Deer Lake and St. John’s. Government provides support to the protection, development, promotion and celebration of Newfoundland and Labrador’s vibrant culture.

This includes legislative protection and management under the Historic Resources Act, the Rooms Act, the Arts Council Act and Status of the Artist Act; is a sector liaison in development for creation and trade; and maintaining and operating our Provincial Historic Sites. We operate six Arts and Culture Centres, provide regulatory protection and oversight of the province’s archaeological and palaeontological resources through the Provincial Archaeological Office.

We provide support for our non-profit cultural facilities and organizations and associated activities through funding programs and advisory expertise; funding support for community cultural activities and events; funding support for Indigenous cultural heritage; operational funding support to The Rooms, the Art Procurement Program; support for professional artists and community arts through ArtsNL; support for the provincial film industry through the Newfoundland and Labrador Film Development Corporation; protection and oversight of the province’s built heritage; and safeguarding and celebration of the province’s intangible cultural heritage through the Heritage Foundation of Newfoundland and Labrador.

June 18, 2019 RESOURCE COMMITTEE 56 The new Cultural Action Plan, launched in April 2019, will guide our investment and support our culture in the coming years. The department provides $3.656 million to arts and heritage events and organizations under the Cultural Economic Development Program. The department certainly recognizes the critical role our artists play in representing Newfoundland and Labrador on the world stage. That is why we continue to support what is a vital sector throughout various avenues.

TCII also provides over $2.9 million to the ArtsNL grant program, thanks to an additional $1 million investment in Budget 2019. From contemporary to traditional landscape to seascape, visual and performing arts are a true reflection of our province’s culture, our heritage and our people. A $4 million equity investment in the Newfoundland and Labrador Film Development Corporation; the provincial film and television industry is a generator of well-paid skilled jobs, leveraging with it new investment from sources outside our province.

Beyond direct hires, it creates economic spinoffs through spending on construction supplies, car rentals, gas, hotels, food and a wide variety of items necessary to make a film or television show. The provincial film and television industry is a generator of well-paid skilled jobs, leveraging with it new investment from sources outside the province and creating 640 full-time job equivalencies and $50 million in production work last year, which was an historic record. TCII also provides $398,000 in support to the Heritage Foundation.

They’re involved in helping communities map their tangible and intangible cultural heritage assets in order to preserve them and realize their potential for community economic development. Our Provincial Historic Sites are found in St. John’s, Cupids, Heart’s Content, Bonavista, Trinity, Boyd’s Cove and Point Amour. These sites offer a wide variety of regular and special programming for all ages and celebrate the culture and heritage of our province. We had a record-breaking year last year with over 100,000 visitors.

The Provincial Parks are the lead department for 32 Provincial Parks throughout Newfoundland and Labrador: 13 camping parks, 10 park reserves, seven-day-use parks, the T’Railway Provincial Park and the Main River Waterway Provincial Park. The Provincial Park network across Newfoundland and Labrador really highlights the natural beauty of our province and is a great way to discover and explore what we have to offer. We have remained committed to initiatives found in The Way Forward. Part of this is our lead role in launching the Technology Sector Work Plan.

Through the Cabinet Committee on Jobs we developed collaboratively, with a steering committee comprised of industry, government and academia stakeholders, to outline a work plan with 27 recommendations to drive economic growth and development in the tech sector. Once the plan is launched, in order to ensure effective coordination of the work plan activities, TCII formed a working group of the main industry associations and government departments that meet quarterly, provide updates, share information and set future directions regarding work plan activities.

Through the provincial high-growth firms’ initiatives, as part of the Technology Sector Work plan, we are pursuing initiatives and investments focused on dynamic, high-growth- potential companies with specific targets supporting for 40 established growth-oriented firms. The aim is to ensure that high-growth- potential companies with complex needs receive the right service at the right time, supporting crucial transition periods with financing solutions, advisory services and export and innovation opportunities.

Since the inception, 23 Newfoundland and Labrador companies have signed on for tailor-made business growth supports, with just over $10 million invested to date to accelerate their growth. Empowered Homes is a particularly good example of how our support for high-growth firms are making a difference. This technology company incorporated in late 2014 to develop a programmable thermostat for lowering residential energy consumption, known as Mysa.

In 2017, a $499,000 working capital loan was approved to support the development of Mysa to complete final product testing, CSA certification and initial manufacturing through an Ontario-

June 18, 2019 RESOURCE COMMITTEE 57 based company, Microart. This working capital loan has been fully repaid. In 2018, following a strong sales performance, a second term loan was approved in the amount of $454,000. This term loan assisted with working capital for product inventory to see it manufactured by a newly selected China-based company, Seveco, a productivity enhancement that realized a 30 per cent improvement to the company’s gross profit margin.

TCII investments in the company have leveraged significant capital investment; approximately $2 million from private investors, including Pelorus, Killick Capital and others, along with investments from ACOA, BDC and the NRC. Just last week, the company closed a $2.3 million equity funding round, largely funded from Vancouver and Quebec-based investors, which it plans to use to launch new products and expand sales. I am proud to say that Empowered Homes currently employs 40 highly qualified people.

Via the Business Innovation Agenda, TCII provides robust financial and non-financial supports to business in critical areas that enable firm-level innovation and remove barriers to growth. We’ve made investments, grants, term loans and equity financing in support of R&D, commercialization, productivity improvement, innovation enhancement, knowledge development and export market development.

An initiative in The Way Forward, identified TCII implement and collaborate five regional innovation systems pilot projects, and they’re guided by industry-led steering committee and include various levels of academic institutions and government. We’ve been able to look at strategic partnerships. In addition to regional innovation, we’ve connected to global opportunities where we’ve advanced provincially focused trade development, efforts in markets like Guyana, an English-speaking Commonwealth country, currently developing its oil and gas resources.

This is aligned with the province’s Advance 2030, The Way Forward on oil and gas. This has attracted the interest of in-market activity of over 20 Newfoundland and Labrador supply and service sector companies, including Cahill Instrumentation and Technical Services, NSB Energy, C & W Industrial Fabrication, Atlantic Maintenance Services, Coastal Safety Management and Labrador Rewinding. Last year, our provincial exports comprised approximately 50 per cent of our GDP. We know that the value and volume of our province’s trade and investment activity.

As it grows, so too does the number of well-paying jobs that are created in our province, which in turn helps to strengthen our economy and the quality of life. We lead Newfoundland and Labrador’s participation in the five-year Atlantic Trade and Investment Growth Agreement, or ATIGA, which began on April 1, 2017 and runs to 2022, a total budget of $20 million. Our contribution is $1 million over the five-year term, or $200,000 per year. This federal-provincial agreement involves unprecedented collaboration between our four Atlantic provinces and the Government of Canada.

Since ATIGA’s inception, 33 Newfoundland and Labrador companies have participated in 30 international business development projects, focused on opportunities in the Asian, Caribbean, European and American markets. As a result, our firms identified short-term sales estimates of $28.1 million and longer-term sales of $49.1 million.

We’re partnering with industry and investing in opportunities that leverage private-sector growth, driven to strategic trade development plans to grow exports in knowledge-based and value-added resource industries, including aerospace and defence, agrifood, seafood, biosciences, clean tech, ICT, infrastructure, ocean tech and extractive industries. By pooling off these resources, we can increase a broader range and enter more diverse markets.

I see that my time is winding down, and there are certainly a number of other areas in the department that I’ve not had the opportunity to touch on including Internet, cellular service, our investment in start-ups, the various MOUs and industry investment that we’ve started, our Social Enterprise Action Plan, our co-op development, the craft industry, productivity improvements and opportunities management

June 18, 2019 RESOURCE COMMITTEE 58 sessions that we’ve had, but I feel that I’ve had the opportunity to highlight a small sample of activity happening within TCII. I look forward to answering your questions tonight in the Estimates. Thank you. CHAIR: Okay, before we proceed to questions, I just want to remind all Members and the officials, as well, to state their name before they ask or answer a question and speak clearly into the mic. Okay, questions? MR. PARROTT: Before we get to the line items, can we get a copy of the minister’s briefing binder and a copy of the transcript you just read out? MR.

MITCHELMORE: Yes. MR. PARROTT: Thank you. From 1.1.01, can the minister explain how the $1,600 in savings was found in Transportation and Communications and the revised numbers for ’18-’19? MR. MITCHELMORE: There was a decrease of $1,600 in transportation in the 2018-19 budget. The 2018-2019 budget, revised, reflects lower travel costs required in the fiscal year. We decreased the amount in this year’s budget by $100 from 2018-19 – the budget that was proposed for 2020. Just less travelling required determined through the zero-based budgeting process.

In particular, from the Minister’s Office, there are a number of federal-provincial-territorial meetings that are held in this particular department. There is one for tourism. There’s the culture and heritage. There’s economic development and innovation. There’s a parks FPT. Also, Francophone Affairs would have an FPT. With a parliamentary secretary and the immense amount of events, it’s a very robust department for travel.

Given the geographic location in which I live, on the Great Northern Peninsula, it’s quite a distance, so we are very cognizant of ministerial travel and communication and we try and find savings where possible. MR. PARROTT: From line 1.2.01, Executive Support, what explains the Salaries going over budget by $53,200 in ’18-’19? MR. MITCHELMORE: The 2018-19 revised reflects $957,000, which is a net increase of $53,200 from the budget. It reflects annual leave paid to one departing employee of $40,100. As well as $13,100 for step variances.

The current budget of 2019-20, reflects adjustments required for the 2019-2020 salary plan variance and steps for several staff members that would be in Executive Support. MR. PARROTT: So the leave would be accrued leave? Is that correct? MR. MITCHELMORE: The leave in last year’s budget, revised, it was annual leave paid to a departing employee – MR. PARROTT: Okay. MR. MITCHELMORE: – $40,100, which would account for the bulk of the expenditure pertaining to Salaries. MR. PARROTT: Can you just go back and explain the $16,600 increase for ’19-’20? MR.

MITCHELMORE: Well, the increase reflects adjustments required to the salary plan, variances and steps for several staff members. MR. PARROTT: Okay. 1.2.02, in both the ’17 -’18 budget and ’18-’19, Salaries were marked to decrease but went over budget last year by $304,400. How did this occur? MR. MITCHELMORE: So the net increase of $304,400 from budget 2018-19 and the 2018-19 revised reflects a salary continuance and retirement cost of $346,800 paid to departing employees, partially offset by savings realized during the recruitment period for various positions during the fiscal year.

June 18, 2019 RESOURCE COMMITTEE 59 MR. PARROTT: So are there any steps being taken this year to ensure that you’re not going over budget again? MR. MITCHELMORE: Well, this year there’s actually a net decrease of $81,000 between the 2019 budget and the 2018-19 budget, it’s the requirements within the salary plan. We also transferred $40,000 from TCII to assist with salary shortfall for a trade position in Intergovernmental Affairs. The Department of TCII was also responsible for trade policy during a period of time.

So this would be an action that would be taken to ensure that the IGA has the appropriate level of trade staff. MR. PARROTT: Okay. Can you explain how the Employee Benefits went over budget by $16,000 in ’18-’19? MR. MITCHELMORE: In ’18-’19 revised, the increase of $16,000 from the initial amount of budget 2018-19 reflects workers’ compensation buildings this fiscal. MR. PARROTT: And next line item, Transportation and Communications, can you explain how it went over by $7,300? MR. MITCHELMORE: The increase of $7,300 reflects higher than anticipated postage cost for the year. MR.

PARROTT: Is there anything being done about that? This year I see a decrease, actually, in your line item. MR. MITCHELMORE: So we’ve actually taken proactive measures within the department to find ways to mitigate postage and reduce cost. And we’ve been implementing EFTs, electronic fund transfers, so we wouldn’t have to do particular mail-outs in this particular situation, and this can help with some of those savings. We do anticipate that we will be able to fall in line of maintaining a budget of $39,700. MR. PARROTT: There’s $5,500 in savings in Supplies seen in ’18-’19.

Is there any reason why it hasn’t been carried over into ’19-’20? MR. MITCHELMORE: So the decrease of $5,500 basically reflected a lower requirement for that particular year in terms of Supplies. We have decreased Supplies this year by $500, through zero-based budgeting, to $15,000. Primarily, as you can see, the Salaries line is lower in Corporate Services. So we are looking at finding means to reduce Supplies that we would not need to be purchasing.

We feel that $15,000 is an adequate amount and if we are able to incur less expenditure, then it will become a dropped balance and we can look at that in future years under zero-based budgeting. MR. PARROTT: Okay. Under Purchased Services, there’s $12,200 in savings located in ’18-’19, and actual increase in 2019-20. Can you explain? MR. MITCHELMORE: Under Purchased Services, there’s a decrease of $12,200 from the 2018-19 budget and the 2018-19 budget revised, and that’s lower than anticipated spending on collateral materials and logistics, as well as fewer events, as determined through zero-based budgeting.

This year, we see that number increase by $4,600, and that’s reflecting higher off-site storage costs in the 2018-19 year, determined through zero-based budgeting. MR. PARROTT: Just under the Property, Furnishings and Equipment, the $2,500? MR. MITCHELMORE: That reflects the purchase of an iPad for the deputy minister. MR. PARROTT: One iPad? MR. MITCHELMORE: Yes. It would have been purchased through standing offer and would have a keyboard and other material associated with it. That wouldn’t just be an iPad. That is purchased to provide technology for the deputy minister to carry out the work that he would do.

MR. PARROTT: And provincial revenue, $8,800. Where does that money come from? MR. MITCHELMORE: In terms of provincial revenue, that’s repayment of prior-year employee impress, so floats and petty cash. We have a number of entities where they would

June 18, 2019 RESOURCE COMMITTEE 60 potentially have money – like the provincial historic sites that we operate and other entities would have small sums of money. So this is the repayment that’s captured throughout the fiscal year. MR. PARROTT: Okay. Subhead 1.2.03, Administrative Support, what accounts for Property, Furnishings and Equipment going over budget by $26,100? MR.

MITCHELMORE: This is an area that we used for Property, Furnishings and Equipment, which typically dealt with tangible purchases, like fleet management and of that nature, so if we needed a departmental vehicle, all of that spending has been transferred to the Department of Transportation and Works to administer their fleet management. We did have an allocation in the budget to purchase generators in the past for the park, but this particular matter is actually a payment for the cost of land expropriation in Ferryland for the Colony of Avalon. MR.

PARROTT: Is there any reason why nothing has been budgeted for ’19-’20? MR. MITCHELMORE: Well, there’s no further determination that there – MR. PARROTT: That’s what’s going to Transportation and Works? MR. MITCHELMORE: – would be any other expropriation or requirement. This really is a matter that $33,087 was made payable to Moores and Collins in trust for the Costello estate land expropriation in Ferryland. MR. PARROTT: I assume we move on to line item 2.1.01 or do we stay at 1. How does that work? CHAIR: You don’t have to use your full time. MR. LANE: What did we call? MR.

PARROTT: The last I called was 1.2.03. MR. LANE: Okay. CHAIR: Further questions? MS. COFFIN: Thank you everyone for coming and thank you for the hard work and dedication and the time you’ve put into putting together the Estimates and the briefing booklets and I look forward to seeing those. I appreciate you taking your evening. I know many of you have small children as well, so I really appreciate that. I know at least three of the children. Thank you. I think we’ve done a very thorough discussion of some of the numbers in here. Let’s talk about a more nebulous concept here. What about attrition plans?

How’s that going in the department? I notice that the numbers here, at least in this first section, don’t suggest there’s much in the way of attrition. Have you met your attrition targets? MR. MITCHELMORE: Nine positions were eliminated through attrition since 2015-16, and eight positions have been abolished through the department. We are certainly managing our Attrition Management Plan that we have in place. There was a set target. But there are some challenges within the department given, how I highlighted, we operate a number of entities throughout.

So if you look at the Visitor Information Centres, if somebody retires at a Visitor Information Centre that is certainly a job we must fill. It’s a front- line service that is absolutely critical. The same way with the Arts and Culture Centres. If somebody is a technician or a technical service, then those positions would have to be filled. So not always would somebody who is retiring be a necessary position in which we must fill. The same way we have provincial parks where we must have park rangers and the managers and others to make sure that we have the appropriate allocation of staff.

So we do have attrition targets, a total attrition target of $2.3 million, basically, to have met. We are working through our attrition management plan through the department and finding ways of which we ensure that we can continue the level of services that we have without having to – we may leave some positions that we have to, vacant or positions that are funded, so that we

June 18, 2019 RESOURCE COMMITTEE 61 can meet some attrition targets in the salary details. MS. COFFIN: So you haven’t met the attrition targets this year? MR. MITCHELMORE: We are meeting our dollar value. In terms of actual positions that were put in place through the 2015 attrition management plan, we have not reduced the actual positions that would’ve been allocated, but we are meeting the salary targets that are required. MS. COFFIN: Okay, thank you. I think that’s the only question I have for this section. Thank you very much. CHAIR: Further questions? MR. LANE: Mr. Chair, with leave of my colleagues. AN HON.

MEMBER: Leave. MR. LANE: Thank you. I won’t be asking any questions about any of the line items, per se. My colleagues are doing a great job at that. I have some general questions though. Minister, I’m wondering about national parks; in particular, Gros Morne specifically right now but I guess it would be any national park. When decisions are made about changes, enhancements and so on to the national parks – they’re in our province, we’re promoting them – is the department advised or is there any consultation, or does the federal government basically go in and do whatever they feel like doing without consulting?

MR. MITCHELMORE: The two national parks – we have national parks within our province and the one you reference, Gros Morne National Park, is managed by the federal government through Parks Canada. They would have other sites that they would manage, as well, throughout the province.

The federal government does consultation, they do invite stakeholders and community to be part of their strategic planning process and engagement, but the Department of Tourism, Culture, Industry and our Parks Division would not be responsible for the activities, management or oversight of Gros Morne National Park or Terra Nova National Park. Those investments would be made by the federal government, as well as Torngat Mountains and Mealy Mountains National Park. MR. LANE: Sure. I understand that it’s under their jurisdiction; they manage it, they pay for it and all that stuff.

I guess I was just wondering more of consultation. Specifically, the one I’m getting at is the issue, of course, in Gros Morne and what a lot of people would say is the absolute destruction of what was an absolutely beautiful gem of a trail that went in there. That was, of course, all in the media and now it’s turned into a big, old gravel road. I’m just wondering.

I understand it may be part of a national park and they’re responsible, but just in general, it just triggered in my mind, when they’re making decisions about some of these things, while it may fall under their jurisdiction, it’s actually physically in our province and we depend on those sites for tourism and everything else. Making decisions like that, I think we should’ve been consulted. I’m just wondering: Would we be consulted when they’re making changes or anything significant? MR.

MITCHELMORE: The parks would open up a management plan to allow anybody – yourself included could participate and provide feedback in their process. They do open up consultation in community for anybody to contribute to their strategic planning. They do consultation with communities. I think in terms of – there is legislation, there is ownership; when they make investments in the physical infrastructure, like the roads. They’ve announced tens of millions of dollars for road improvements in Gros Morne National Park. There was additional federal dollars announced recently for improvements to campsites.

We’ve seen in Terra Nova National Park there was significant road infrastructure

June 18, 2019 RESOURCE COMMITTEE 62 improvements made for passing lanes, pull-off areas as well, made by the federal government. I’d have to seek out some direction to get more information to see what towns were consulted in this process. Was Charlottetown, for example, consulted? Did adjacent towns, like Eastport and others in and around that area of Terra Nova Park, when that investment was made – what consultation would happen? If it’s road infrastructure, the Department of Transportation and Works would heavily be involved in that particular process.

In this province, we do have a very strong partnership with the hospitality industry of Newfoundland and Labrador. We work with Destination Canada. We also have our Tourism Board, we have our Destination Management Organizations from each area of the province and government. We all sit together, we work collaboratively. This is a really positive way of which we can deal with issues and we can engage with the federal government. As concerns are raised to us, we certainly can raise them with federal counterparts, as well, and encourage more consultation in community. That’s certainly something that I would say.

In my own district there’s a UNESCO World Heritage site that’s owned and managed by Parks Canada in L’Anse aux Meadows national park. The communities in the region like to be engaged, they want to participate. There are landowners there. There are all kinds of concerns and it’s important. These are very important economic enablers to the region, as well as cultural assets and historic assets to the province. Gros Morne National Park is one of the pillars and the key reasons why people come to Newfoundland and Labrador. It gets easily more than 150,000 visitors. MR. LANE: Thank you, Minister. I do agree with you.

It is an absolute gem in our province, there’s no doubt. That’s why so many people were very upset with what was done there, myself included. I think they totally destroyed what was an absolute, beautiful tourist attraction. I understand what you’re saying. They do their strategic plans, I get that. They’re putting in roads, they consult with communities.

I get that as well, but the point I’m trying to make is if they’re going to go into a sensitive area that is very, very important to us as a site – that would be something I would imagine is probably on our website and in tourist magazines and whatever to actually go and view that beautiful site. For them to go in and totally destroy it and not consult with the province to let them know what they were planning on doing, I just see a problem with that. I was just wondering if there was such a process and, if not, I think there should be. MR.

MITCHELMORE: The fjord itself and the viewpoint is certainly something that we promote. It’s pristine, the adventure tourism. It fits with everything that we do as a province to market the unique landscapes, the area and the region. The particular trail that you’re speaking about would have access to a private boat tour operator, I believe. I would encourage you, if you haven’t done so already, to either write the department or Parks Canada to raise your concerns with it.

That’s certainly something as well with the Member of Parliament that would represent the Long Range Mountains to engage and have that dialogue. MR. LANE: Thank you, Minister. MR. MITCHELMORE: I know there was some commentary from the Member of Parliament on that particular matter and what Parks Canada had done and the engagement. I can endeavour to get information for you to see what level of engagement with the Parks Division. Their headquarters would be in Corner Brook. I would not have any information on hand about a general question around something that is a federal responsibility. MR. LANE: Sure. MR.

MITCHELMORE: But I’m more than happy, if you want to meet with me further, to discuss, we could set up a particular meeting. MR. LANE: Well, unfortunately, the damage is done now, so I guess there’s not much point in talking about what’s been done. I guess on a go- forward basis, though, we have many, many

June 18, 2019 RESOURCE COMMITTEE 63 beautiful sites and tourist attractions that we promote, I would hope that in the future, I don’t care whose jurisdiction it is, I would think they would work together and consult before they make any changes that’s going to destroy, like they did up there. I’m running out of time, so I will ask one more quick question. I had a meeting with Bicycle Newfoundland and Labrador, I’m sure other Members may have as well, I don’t know if you have.

I’m just wondering, is there any thought around making any areas of the province more accessible and bicycle-friendly as part of the tourism experience. I understand that we don’t have endless pots of money to create biking trails across the entire province, but one of the things I had suggested, or thought about, is maybe something on a pilot project. I’m just thinking the Bonavista area is a real nice spot, or somewhere like that – it doesn’t have to be there – where we could work with that organization to try to promote more biking and that type of tourism.

I’m just wondering if there’s anything you – did you discuss it with them at all, or what your thoughts are? MR. MITCHELMORE: Well, we’ve taken steps, as a government, to improve bicycling safety by implementing a one-metre law in the Highway Traffic Act that was well received with Bicycle Newfoundland and Labrador. We see opportunity; we’ve supported initiatives around the White Hills ski resort to look at a study for fat biking. We’ve worked with the Pippy Park Commission around their trails and development to make them more bike-friendly.

When I travel around the province, it’s really exciting when you do see a number of people bicycling, and they are, certainly, a tourist or visitor that would come. It is an opportunity for our province, given our unique nature. I see a number of them come up the Great Northern Peninsula every year. I know that in other jurisdictions bicycling is extremely popular, particularly in Europe, given that outside of Canada and the US, the UK and Germany are big markets for tourists. So, there will be some opportunities, certainly, to engage and work with operators.

We see on the Bonavista Peninsula where there is actually a business that was started up where they do bicycle tours, and they have picnics as well. So there are natural avenues there. Our highways are built, especially the Trans- Canada Highway, there are large shoulders on the roads so it’s actually quite safer than some other areas of Europe where people are bicycling along very narrow roadways. I only have to look at Ireland and other places. MR. LANE: Yeah. MR.

MITCHELMORE: We just have to be very cognisant of the rules of the road and the new Highway Traffic Act that the one-metre law does exist and we need to more over. I believe you were a big – MR. LANE: Yes. Absolutely. MR. MITCHELMORE: – supporter of the move over legislation for other emergency responders, but for bicyclists as well. It is an economic opportunity and a potential for tourism. I’m certainly willing to have more conversations with Bicycle Newfoundland and Labrador. MR. LANE: Thank you. CHAIR: Before I call the head, are there any other questions there? MR. PARROTT: Can I ask another question?

CHAIR: Yeah. MR. PARROTT: I’d just like to go back to Gros Morne, just based on what he said there, just something I picked up. We obviously advertise, we obviously gain tourist money from it, as does the federal government. You indicated that a federal MP has spoken out against it.

June 18, 2019 RESOURCE COMMITTEE 64 Has your department spoken out against that trail or is that something that’s left to Members like MHA Lane? MR. MITCHELMORE: No, I said that the MP had made commentary about it. I didn’t say she spoke against the development. MR. PARROTT: But have we addressed it as a government? We advertised that and the advertisement is still a much different picture than what it is right now. MR. MITCHELMORE: Well, when the investment was made and the trail development had taken place, the response has been, after the fact, that this investment was done. MR. PARROTT: Okay. MR.

MITCHELMORE: This was done by Parks Canada. They had let the contracts. They have the responsibility for all of that landmass whether it’s the roads, the infrastructure and the land around that area. They did consultation. They had public matters of which people could provide input, but as the MHA for Mount Pearl - Southlands had highlighted, Parks have highlighted that there was a significant amount of public feedback around this particular issue, and it’s certainly something that they would have to take into account as they do more work in and around that area when it comes to trails.

We have outdoor product development specialists in our department. We focus on building trail networks throughout Newfoundland and Labrador. Walking and hiking is – by our exit survey feedback – one of the number one things that our visitors want to do and experience. We look at the East Coast Trail and the 320 kilometres that it has. It’s pristine. It’s natural. It’s a walking trail. It has immense beauty on the Avalon Peninsula, and it’s certainly something that we promote as well. It not only leads to tourism investment, but it’s an economic enabler.

We’ve seen – and I’ve heard stories where people have come and they’ve seen that. They love this place. They fall in love with the natural beauty. They see it as a good place to conduct business and to invest. I was in Eastport, in your district, just a week or so ago, for the ArtsNL awards, and talking to one of the development committees, because we invested in the trails and the Roads to the Beaches, and as you’re adjacent to a natural park, as our department, we’re looking at working with the communities and the groups to foster economic development.

We work with the community to make sure that trails are either natural and they’re in a way that they’re accessible as well, that’s certainly something that is important. The same way as we look at building destination trails throughout our province and the federal Parks Canada site and what has been done for access as to what they have said that changed the landscape. I have walked into the site myself on numerous occasions, into the fjord and I’ve taken the boat tour there. It is absolutely incredible, and it’s truly an experience for anyone.

I would still say that it is a place that everyone who comes to Newfoundland and Labrador and visits Gros Morne National Park should go and see – should see that fjord, and have that experience. Not everybody is going to get that picture of the fjord unless they’re willing to do the hike or do that overnight experience, but everything that we promote in Newfoundland and Labrador, we deliver and we offer and we hear that feedback from our visitors, that this is just like your ads, this is just like the natural landscape, you’re not trying to sell something that you are not. So I think that’s really important.

We’re very focused on what’s in our responsibility within our department and what we have control over in terms of being able to pull those levers and create economic opportunity there. CHAIR: Okay, seeing no further questions, I’m going to call the head. Shall the headings 1.1.01 to 1.2.03 inclusive carry? AN HON. MEMBER: Aye. CHAIR: Carried. On motion, subheads 1.1.01 through 1.2.03 carried.

June 18, 2019 RESOURCE COMMITTEE 65 CLERK: 2.1.01 through 2.3.01 inclusive. CHAIR: Okay, shall they carry? MR. PARROTT: How many cannabis operators in the province received a licence from Health Canada over the last year? MR. MITCHELMORE: The number of companies that have licences from Health Canada, I don’t have that information directly with me right now, but I can certainly provide that. We have two supply and production agreements right now in this province. We have an additional company that has a licence and I believe there is another company that would have a licence as well.

I can defer to Judith, if she has some additional information. MS. HEARN: Yes, there are two local firms who have production licences through Health Canada. We’ve been also dealing with other firms that are partnering with producers who have licences from Health Canada, but their main companies are other places. They’re partnering locally. MR. PARROTT: Okay. Government has provided a reduction in tax remittances to cannabis companies. Have Newfoundlanders and Labradorians been the primary beneficiaries for these remittances, and what documentation can the minister provide to show this? MR.

MITCHELMORE: In Newfoundland and Labrador, we were the only jurisdiction in Canada that had not had a licensed producer. Given that Canada’s recreational cannabis was becoming legal, we had to take action to secure supply. But we made a decision that not only did we want to secure supply, because we could’ve looked at the least-beneficial option for Newfoundland and Labrador and that would be importation – some other Members suggest it may have been a better option. I certainly do not believe so.

I think it’s important that we develop an industry here that investments be made in our province, that we see jobs that are created and long-term benefits. So if you look at the agreements that we’ve put in place, one on the West Coast of this province that’s going to lead to significant job creation in St. George’s - Humber, Mr. Chair – in St.

George’s, in particular, it’s quite significant where the average salary in rural communities would be $54,000 and there’s going to be retail and there’s a lot of spin-off that’s going to take place by having construction jobs, there’s going to be investment for purchases for materials and the building, the specialists and the contracting, and then the production workers and the training. So we’re still somewhat in the early days of the benefits that are accruing because the facilities are being built. They’re being scaled up on the West Coast and in St. John’s. Talking to the City of St.

John’s, they had highlighted that there will be significant benefits for the city, upwards of $1 million in taxation every single year. We entered into a 20-year agreement. The company is putting tens of millions of dollars into this capital asset and to get into production. In doing so, there will be 145 jobs that will be created, the retail jobs as well, so there are over 460 jobs associated with those two supply and production agreements once they reach their ability to produce here in this province.

Right now, we’re seeing where we have a network of retail outlets that are being supplied through the Newfoundland and Labrador Liquor Corporation, and that was competitively bid through an RFQ where there are a number of suppliers that would be providing the product and that would be distributed throughout Newfoundland and Labrador to these retail outlets.

Given the fact that we did not have any producer in this province to supply initially when this became legal, and given that the consumption reports have shown that sales on a per capita basis, where Newfoundland and Labrador is, we fared quite well in the implementation of cannabis retail and supply as this matter progressed across Canada. Other jurisdictions like New Brunswick and Quebec have either had to see their stores close for a period of time or reduce their operations.

We’ve been able to understand that where this is a new industry, we knew that there would be supply issues early on and that there would be some challenges, but we continue to work through those and we’re pretty excited about the interest and the investment that other companies

June 18, 2019 RESOURCE COMMITTEE 66 are looking at wanting to partner, as Judith had just highlighted, that two more local companies have secured production licences here. We look forward to engaging and having dialogue to provide performance-based contracts. We’ve not turned down anybody who’s come to us looking to enter into a supplier-production agreement here, and the important piece of this is that there has not been any upfront money or grant from taxpayers. In order for a company to receive a benefit, they actually have to sell product in Newfoundland and Labrador.

So the more they sell, the more they can accrue back on the benefit. But the more they sell, the more Newfoundland and Labrador also benefits as well. So the answer is yes. We are the primary beneficiary. The Newfoundland and Labrador Liquor Corporation would receive maximum benefits through this stream. Long term, there will be other benefits in terms of the additional jobs, city taxation, the taxation from jobs and the spin-offs that will happen through the payroll that happens. Those people who are paying taxes, they’re going to spend money into the economy and there will be a ripple effect there.

But we also provided where there needs to be investment in R & D in these particular contracts so that we can also stimulate growth in being a leader in research and development, so that we can look at other opportunities. Because that’s something that our province has been focused on: how we diversify and how we’d be more innovative in the field of research. And given Memorial University or the College of the North Atlantic, or private companies, there’s a potential for significant research and development to happen.

It’s a relatively new industry, and we’ve seen where other jurisdictions have been focused on research as well, and the educational institutions. So whether it’s focusing on things like soils, and the unique soil that Newfoundland and Labrador would have, or doing further work, those are the types of things that we’ll see unfold. And the edible market would be coming on stream later this year. The federal regulations were announced earlier this week, I believe, or late last week. And that will present other opportunities for which R & D would happen when it comes to the cannabis industry. MR.

PARROTT: How many total Newfoundlanders and Labradorians are currently employed – just the number, please – in the cannabis industry? MR. MITCHELMORE: Well, when it comes to the day-to-day statistics of who are Newfoundlanders and who would be employed in private business, there are more than 20 retailers that are out there.

We would anticipate that all the people that are in the retail industry would be Newfoundlanders or Labradorians, or would be those who would want to be permanent residents or would be working through, depending on how they would be hired – if they’re on an immigration stream, depending on the employer. I mean, small business exists in every single community and we don’t have specific stats on every single retail store as to, is somebody a Newfoundlander or a Labradorian or is somebody looking to become a Newfoundlander and Labradorian, are they on a particular work visa, et cetera. MR.

PARROTT: How many current people are employed? MR. MITCHELMORE: Well, I don’t have the specific statistics as to how many people are currently employed in retail or in the on-site construction. Once the facility is complete, there would be 145 jobs at that particular facility and there’s over 100 in the St. George’s facility, but they are building those in phases. We have performance targets and we will work with the company throughout their agreements to make sure that they are meeting their targets. MR. PARROTT: Has there been any assistance given to BeeHighVE Incorporated? MR.

MITCHELMORE: No, but I will say that, as I said earlier, any company and any particular supply and production agreement that we have in Newfoundland and Labrador, we have provided that information publicly, we’ve made that available. We have not said no to any particular company that’s looking for a supply or production agreement.

June 18, 2019 RESOURCE COMMITTEE 67 We welcome investment, we welcome growth here, we welcome local growers and we see it as a positive step that there are now locally owned companies, like BeeHighVE and others, that would have a production licence. That would give us the ability, should these companies wish to enter into a supply and production agreement with the Province of Newfoundland and Labrador through CannabisNL and the department. We would be actively involved in those negotiations and if we are able to conclude a deal with any particular company, we will make that known publicly as we have previously.

MR. PARROTT: Are the local growers getting the same tax breaks as Canopy? CHAIR: I’m sorry, the Member’s time has expired. MR. MITCHELMORE: I have no problem to answer the question though. CHAIR: Maybe we can continue on and then come back at the end – MR. MITCHELMORE: Okay. CHAIR: – for another round. The Member for St. John’s East - Quidi Vidi. MS. COFFIN: Thank you very much. Let’s carry on with that train of thought now.

When you were considering the supplier – and when the allowances were given to Canopy Growth and Biome and whomever else has received those – was there any consideration to setting up a co-operative system whereby the people of Newfoundland and Labrador would be the owners of that corporation, so any money that we spend in that corporation would then be returned as profits, much like a credit union. As I understand it, Canopy Growth and Biome both have their headquarters elsewhere in Canada, which means that after people are paid and after they get their wages, that money will circulate.

You are right, that multiplier effect does happen throughout the economy, but if that’s associated with lower paying jobs or if they’re part-time jobs or seasonal positions, that really constrains that multiplier effect. Then, of course, if the profits are being moved outside of the province, we’re not going to see that money circulating as well. I think the co-operative approach might be a better approach to that, especially given that the selling of marijuana is pretty much a profitable industry. MR.

MITCHELMORE: When it comes to setting up a particular business and the new industry that we have here, as I said previously, government would not dictate a location or these types of matters; these would be business decisions that would be made. Certainly we support the co-operative movement, we support credit unions here in our province and we support social enterprise. It would be a novel approach, as you mentioned, if there was a group that wanted to create a co-operative to start a production facility in Newfoundland and Labrador – MS.

COFFIN: I was thinking more along the lines of we knew this was coming, we knew we had a supply issue, we knew we wanted local production. Wouldn’t it have been a reasonable initiative of government to consider that co- operative approach and keeping that money here in the province? MR. MITCHELMORE: There are certain measures that can be done in terms of how you would either establish a co-op or if a company would incorporate here.

We have companies that have either holding companies or they’re registered in Newfoundland and Labrador, so they file taxes here and they would make payments based on their performance here in Newfoundland and Labrador. One of the conversations that was had in the House of Assembly in the fall was around giving these particular companies EDGE status, which would give them exceptional tax breaks at the federal level, the provincial level and the municipal level, potentially; you would see all sorts of payments.

The risk then and that burden of risk goes towards the provincial government, depending on how well a company performs. For example, if you attracted Google to come here and set up their headquarters, and if you gave them EDGE status, you could pay an unlimited amount of money and there would be

June 18, 2019 RESOURCE COMMITTEE 68 no benefit to the economy; it would have a significant downfall. I understand your point of looking at a co- operative model, but we’re talking about a publicly traded company here in one instance and in another instance, as well, in terms of Biome. These are two companies that saw an opportunity to come to Newfoundland and Labrador, to make investment here, to put up tens of millions of dollars to build facilities here.

If you look at the type of product that we’re talking about – and we’re seeing very large-scale operations in various jurisdictions where a number of companies or the competitors would just want to look at importation – there is very little benefit, then, if you’re just importing the product. MS. COFFIN: That’s why I asked about the co- operative program. Do we know all of the shareholders of the companies to which we offer loans, loan forgiveness and also tax breaks?

Do we know all of the companies involved – or all of the shareholders involved – in any government spending or a tax expenditure, which is essentially offering a tax break? Do we know all of the names of all of the shareholders of those companies? MR. MITCHELMORE: In terms of any deal that government is involved with, if we are providing financial support directly, then we would be able to provide information of ownership or directors in a particular company.

When it comes to a publicly traded company, though, there are rules that they would follow as part of the stock exchange and the regulators that would be involved in that particular matter, because any person could buy a share and be an owner of a publicly traded company. That changes on a day-to-day basis if you’re looking at particular shareholders – MS. COFFIN: Yeah, I am very familiar with how the stock market works.

I’m wondering, though, if we are offering tax breaks or loan forgiveness or grants to businesses to whom we do not know the shareholders – or, let’s say, for example, the main shareholders, not necessarily the board of directors, which is a very different beast. I want to know where the profits are going. MR. MITCHELMORE: We would be able to have access to that information or get it. MS. COFFIN: So you do know where all of the money is going. MR. MITCHELMORE: If we are dealing with a particular company.

In the case of what has been discussed in the House of Assembly around a numbered company that is not doing business with government, we do not have that information. MS. COFFIN: Okay. Since we’ve opened up that box, can you maybe tell me a little bit more about that numbered company that is not dealing with government? Why is that an issue then perhaps? I’m new, remember. MR. MITCHELMORE: Right. We have entered into an agreement with Canopy Growth to build a facility here in this province, and they’re going to spend tens of millions of dollars. The City of St.

John’s will see an annual benefit in terms of taxation from that. And the workers that are there, the construction jobs and the investment that’s happening is quite significant. We have a contract that’s based on performance. So in terms of sales, if the company sells X here in this province and can provide receipts for eligible cost, they will get a reduced remittance from the province. But the province will still get its share of any sales that would’ve happened in this situation.

In terms of any costs that would be ineligible, if a company is not the landowner and they’re leasing land, then that is not an eligible cost. We’ve stated that and clarified that multiple times in this House of Assembly. We can only provide a remittance based on our contract and what the obligations to the contract provide. So when it comes to the company, our role is that this company is not a related company, so the Canopy Growth Corporation is not receiving a

June 18, 2019 RESOURCE COMMITTEE 69 benefit from this company. And beyond that, they’re arm’s length of government, so they are not involved. MS. COFFIN: I’m sorry, you’re saying that the Canopy Growth is not getting a benefit from the company, the numbered company from which they are leasing this land. Is that what you’re saying? I’m sorry, the answer was a little wide- ranging. MR. MITCHELMORE: I’m saying that they are not a related company. So it is not a Canopy Growth construction that would be involved. It is not another company that’s associated with them.

They are arm’s-length in terms of a company of which they would be doing business. MS. COFFIN: Okay. Let’s go back to the jobs now. You say you anticipate that many of the jobs that are being generated by the construction of this are being filled by Newfoundlanders and Labradorians. That’s certainly not the case. Have you done any cost-benefit analysis; or in the loan guarantee or the grants that you’ve given to these companies, do you have any requirement that they use local labour?

We are in a situation where most of our union halls are very full right now, and I know that there are a lot of people clamouring for work. I’m hearing rumours that there are drywallers coming in from PEI and Montreal. So if we are using subcontractors or main contractors that are coming in from the Mainland and they are bringing in their own workers, then that means those benefits – while they are getting accommodations and food for a very short period of time while they’re here in the province, the bulk of their salaries will be moved back out of the province again.

Is that one of the stipulations of your loan agreements? MR. MITCHELMORE: I would say that it’s very serious to say that the majority of people employed at this particular site, which is a private company that would be contracting, is not hiring Newfoundlanders and Labradorians, unless you can provide evidence to the contrary. MS. COFFIN: I’m just saying I hear rumours of that. It’s just rumours and speculation at this point. I am asking if there was a caveat in the agreement, something like a community benefits agreement that ensures local workers are being used. MR.

MITCHELMORE: Companies will hire local workers, where absolutely possible, and that is the case in this situation. As I said in the House of Assembly – I believe the MHA for Topsail - Paradise had asked some questions. It is my understanding there was an

article that was posted around a drywall company from Quebec that had done some work there, but it’s my understanding that, based on Canopy Growth’s response, they would have reached out to local companies. If it could be done here in the province, they would’ve certainly utilized that work. So they had to go outside the province to secure work in this particular field. MS. COFFIN: My time is up. CHAIR: Any questions from other Members? MR. PARROTT: Yeah, I’ve got a couple of questions. Under Salaries, Salaries in budget ’18-’19 was $319,000 less than ’17-’18.

After finding a savings of $236,900 for that year, the revised numbers show that, again, a savings of $476,700 were found last year. However, budget ’19-’20 only shows a salary reduction of $67,300. How are these salary levels determined, when they were previously able to identify such large savings? MR. MITCHELMORE: The department had gone through a reorganization. In the Accelerated Growth Division there was a significant decrease in salary of $476,700 as you mentioned, and that reflects some savings during the recruitment period for six positions during the fiscal year.

We anticipate and we have worked to fill those positions, so the decrease right now reflects the adjustments required for our current salary plan. As you hire new employees that would be in this area, there’s a smaller amount in the salary line, but that may reflect the pay scale as to which

June 18, 2019 RESOURCE COMMITTEE 70 they enter because these would be new employees. MR. PARROTT: Okay. MR. MITCHELMORE: In 2018-2019 we actually had a number of new hires within the department and that’s certainly important, because a key part of what we are doing in the department, as I mentioned in the initial remarks, is around working with companies to scale them up, to have a firm level of growth. We have an ambitious plan to target 40 companies to ensure that we are providing them with the right level of supports to create further jobs. MR.

PARROTT: Grants and Subsidies, can you provide us with a list of all the grants and subsidies from last year? MR. MITCHELMORE: The Grants and Subsidies, that’s $279,000 that would primarily be funding for ATIGA, I believe. MR. PARROTT: Sorry, we couldn’t hear you. MR. MITCHELMORE: That would be money for ATIGA, the Atlantic Trade and Investment Growth Agreement. MR. PARROTT: What explains the line item for Loans, Advances and Investments being under budget by $1,648,500 in the revised ’18- ’19 numbers? Can you explain how many applicants there were and how was the $8 million located for ’19-’20? MR.

MITCHELMORE: Where are you? Can you explain which budget line –? MR. PARROTT: Sorry, that’s under the Investment Attraction Fund, 2.1.02. MR. MITCHELMORE: The Investment Attraction Fund, Loans, Advances and Investments – in 2018-19 we used an investment of $6,351,500 and that would have been funds disbursed to the existing investment attraction funds through varies clients, such as Eastern Composite, Provincial Aerospace and Quorum. They would have totalled $1.85 million. Then in the venture capital funds we would have disbursed over $4 million; $2 million to each particular fund.

We would have an allocation for new projects as well, total $6,351,471. MR. PARROTT: Can we get a list of the companies and how much each company received? MR. MITCHELMORE: Yes, we can provide that. MR. PARROTT: Under line item 2.2.01, Purchased Services in the budget is to receive an increase of $500,300 in ’19-’20. This represents a significant increase of a budget that in the past years was only five figures. What explains this significant increase? MR. MITCHELMORE: Under Business Analysis? MR. PARROTT: Yeah, Purchased Services. MR.

MITCHELMORE: This is something that was highlighted through the McKinsey report, as well as the new budget, to highlight a new investment attraction initiative, which would be $500,000. There’s an additional $300 for photocopier-printer cost that was determined though zero-based budgeting. That would bring our total to $515,500. Clearly, to achieve new opportunities, given what we’ve been doing in various sectors of technology, of agriculture, of aquaculture, the oil and gas and mining, there are opportunities.

If we target and have that expertise for investment attraction, then we can leverage more opportunities into the economy of Newfoundland and Labrador and get best value. We have exceptional staff at the Department of Tourism, Culture, Industry and Innovation, but this investment opportunity would provide an opportunity to maybe hire some specific experts in the field to do some very targeted level of investment. We have seen in areas such as telecommunication, it may require a specific skill set to attract that individual to unlock some potential. MR. PARROTT: How does this align with the attrition plan?

June 18, 2019 RESOURCE COMMITTEE 71 MR. MITCHELMORE: Well, this targeted investment would be hire through contract. MR. PARROTT: Okay. Under 2.3.01, this line wasn’t included in the past budget and it appears to be an amalgamation of past categories. Can you explain and provide a breakdown of how they determined the $16,836,000? MR.

MITCHELMORE: 2.3.01, Innovation and Business Investment, we had spent a fair bit of time in this House of Assembly creating the Innovation and Business Investment Corporation, creating a new act, finding a means for the full continuum of support when it comes to business, in terms of idea, pre-commercial, that R&D and innovative stage, to get somebody to commercial, to get somebody to international markets. So the Grants and Subsidy lines reflect, basically, revenue that was brought in from RDC being merged into the department. It’s an overall investment of grants and subsidies to various companies there. MR.

PARROTT: How many applicants did you have last year? MR. MITCHELMORE: In terms of applicants, we had 264 projects last year. MR. PARROTT: How many applicants? MR. MITCHELMORE: I don’t have that specific number in terms of applications. MR. PARROTT: So 264, I assume, is approved, right? MR. MITCHELMORE: We had 264 projects. MR. PARROTT: Yeah. MR. MITCHELMORE: That we had approved, yes. MR. PARROTT: Okay. The revenue of $1.5 million, can you explain where that comes from? MR. MITCHELMORE: That came from when we had merged the Research & Development Corporation.

It’s basically revenue that would’ve been allocated as the savings through the ’17-’18 budget that would have to be reported in 2018-2019. MR. PARROTT: Just one question back to the Canopy Growth. You indicated about monies – anyhow, how the whole situation works. Are there any monies given to Canopy Growth for the building of that facility? Are we loaning them money? They’re doing all that on their own? Okay. MR. MITCHELMORE: We have provided them with no funding. The agreement is that they have to produce sales in this province, and then they would get a reduced remittance.

No different than any other cannabis producer that’s supplying through the NLC. They’re getting a remittance. MR. PARROTT: Yeah. MR. MITCHELMORE: But Canopy Growth and Biome would be getting a reduced remittance, based on their performance targets of making investment in Newfoundland and Labrador. MR. PARROTT: Just one other question. MR. MITCHELMORE: It’s a performance- based contract that would allow us to build an industry, because up to that date, we had not had anybody making an investment here in this province. MR. PARROTT: Yes. MR.

MITCHELMORE: Without having some form of incentive to attract large-industry players and build capacity here, likely we would not see these players make such significant investments and create (inaudible). MR. PARROTT: Okay, just one question on R&D. Currently, all of our offshore producers pay royalties in under the Atlantic Accord to the PRNL. Has the department looked at anything like that for cannabis growers? It would be a

June 18, 2019 RESOURCE COMMITTEE 72 great way to force them to invest into our province, invest into research and give us a path forward with that, with a guaranteed income. MR. MITCHELMORE: Yes, we did build into the contract that there would be $500,000 from Canopy Growth that would be invested in research and development projects. MR. PARROTT: Over how long? Is that over a long period of time or is it …? MR. MITCHELMORE: There would be a period of time, that’s part of the contract. MR. PARROTT: Okay, thank you. MR. MITCHELMORE: Five years? CHAIR: Okay, the Members time has expired. Any further questions?

The Member for St. John’s East - Quidi Vidi. MS. COFFIN: Excellent. As part of the research and development at Canopy Growth at $500,000, is there any specifics around if they’re doing it in-house or are they going to partner with local companies or are they going to partner with local educational institutions? MR. MITCHELMORE: Yeah, this would not be in-house research and development, but we are having meetings with the company where we would highlight projects; they would highlight their initiatives as to what they would see would be of a benefit to the industry.

Canopy Growth, in particular, they have a craft- grower program that they would support smaller producers as well. So I certainly see this as being a partnership, either with academic institutions or those who would be involved in research so that we can have more development. When we decided that we would be developing a cannabis industry here in Newfoundland and Labrador, it was for full supply chain benefits from R&D, from start-up to export. Canopy Growth and Biome, they’re building very large facilities here. They’re going to be producing far more than what Newfoundlanders and Labradorians can consume.

The benefit that they would get from a reduced remittance would only be on product that is sold in Newfoundland and Labrador. So their business model would have to be based on export as well. Our geographic location is one that is very strategic. We are certainly close to Europe and being on the water, we have ability to do shipping. Newfoundland and Labrador certainly has a good investment climate given that we’ve been able to attract these large national companies that are publicly traded. MS. COFFIN: Okay.

Two things that come from that, one of which is: Do we own the intellectual property rights of any R&D that is done by that? MR. MITCHELMORE: If it’s done with the university, there’s obviously an IP office and those who are doing research and those who are involved would enter into a particular agreement around IP. It is certainly a conversation that we’ve been having through our Innovation Council of Newfoundland and Labrador around IP. It was part of the Technology Sector Work Plan around who owns intellectual property.

That’s certainly something that will be part of the ongoing conversation with the company and with whoever they enter into an arrangement. Right now, the question is somewhat premature. MS. COFFIN: The thing with Memorial University is they have a creator-owned IP process. We want to be very careful about that because, of course, that means that anyone engaged in that research then owns that research. You need to be acutely aware of that for sure. Let’s talk about the export market now. We’ve seen numerous companies be unable to manage in Newfoundland and Labrador because we have exorbitant transportation costs.

While we are on the water, so is Halifax and so are a great many other places. When we are strategically positioned, I have some questions about how that might manifest as a booming export market. Can you explain to me what their export development plan is?

June 18, 2019 RESOURCE COMMITTEE 73 MR. MITCHELMORE: I wouldn’t be able to speak specifically to any company and what they’re doing as an export. They are a privately traded company and they will have their own plans as to what they would do, whether they’re going to charter flights, whether they’re going to be involved in hiring barges, or however they would ship product. What I would say is that Newfoundland and Labrador has international airports, we have facilities of which we can do shipping. We have the Argentia port which does international shipping. It’s the largest in Newfoundland and Labrador; St.

Anthony has the second-largest international containerized port. We do a significant amount of seafood right now direct into Europe. What we see in St. John’s is freight-forwarding services that would go to Halifax and then get into Europe. We actually do have direct links into Europe, very lucrative markets right now. MS. COFFIN: I’ve worked on them. I’ve worked on export development initiatives since the early ’90s, so I’m very aware of what our potential is there.

What I’m afraid of is that we are going to be left with a three-sizes-too-big marijuana growing facility that has some difficulty with their export and then comes to government starting to look for subsidizing their routes for export in order for them to continue to operate in the province. I would hate to have them hold our jobs hostage for additional supports in trying to access the export markets. That’s why I say I’m quite concerned about the export development there. Let’s see what else we have here. I think we’re good on – MR. MITCHELMORE: I could make a small commentary on that.

The companies, obviously, do their due diligence. They look at their investment, they look at opportunity and they look at what they can sell in the local market, the Canadian market, the North American and the international marketplace. They obviously see Newfoundland and Labrador as a good place to do business or else they would not put up tens of millions of dollars. The only way they can recoup their costs is to make the sales locally in Newfoundland and Labrador, so they’re putting a lot of risk. The risk is not with the province, it is not with government, it is not with the taxpayers.

It is not like many other agreements and arrangements which one enters into. If the company is unable to recover their cost, they have taken on the risk and they own that facility and they own that cost. Really, in this circumstance, in this situation, government is well positioned and well protected. The companies obviously have significant cash, they have significant equity. They have made their decisions based on where they see their long-term vision. They’ve entered into a 20-year agreement. When it comes to a 20-year agreement, just looking at taxation for one company where the city of St.

John’s would benefit $1 million in taxation, it will lead to $20 million over that life of that particular agreement. That is very beneficial when you’re trying to look at, from a city point of view, balancing a budget or making investments into their infrastructure and their particular projects. It would help significantly. Any municipality that was able to have $1 million added to its bottom line can then go out and leverage significant other projects. MS. COFFIN: I do appreciate that.

What I am looking at is potential pitfalls down the road because we have been held hostage by such things before and I want to ensure that we are no longer. I’d like to see that long-term planning piece. You said earlier that you haven’t turned down any supplier applications. So anyone who makes an application has, so far, been awarded a contract? Is that correct? MR. MITCHELMORE: They would have to have a licence from Health Canada. MS. COFFIN: Okay. So if they get the licence from Health Canada, then that’s all is necessary at this point. That’s reassuring.

I know a number of people I can pass that along to as well.

June 18, 2019 RESOURCE COMMITTEE 74 Innovation and business investment seems to be its own entity onto itself, which I understand. Can you tell me the relationship between that entity and some of the other things that we’re seeing here like the Accelerated Growth fund, the Investment Attraction Fund, the Business Analysis fund and then we move over into the our regional economic development, Sector Diversification. All of these things seem to be doing very similar things.

I can appreciate why they need to be compartmentalized in some respects, but I’m very curious to know if the Innovation And Business Investment Corporation, which is getting $16 million, is duplicating any of the efforts over here. We see grants and subsidies in several of these places are very small sums, but then they’re associated with higher levels of salary.

It would be really nice to see if all of these little pots of money, while they can be allocated out for different purposes, maybe if they were all perhaps administered in the one spot, like a one- stop shop for small business – and I’ve certainly had my share of small businesses come to me saying: How can I get government to help? I think that might be a reasonable approach to this. Perhaps you can share with me how there is or is not duplication in this process. MR. MITCHELMORE: I want to go back because I didn’t have a full opportunity when you had asked about cannabis production facilities.

I would say that a licence from Health Canada is what is required from a company before we would entertain a negotiation. We would certainly do our due diligence – MS. COFFIN: Good. MR. MITCHELMORE: – on any particular application to make sure that there are benefits to Newfoundland and Labrador and that it’s in the best interests of the province to enter into such an arrangement. What I have said is that we have turned down no one, at this point, that has come to us looking to enter into a supply agreement.

That would be local companies or international or national companies that have come to Newfoundland and Labrador. What I will say is that we have – for example, if you take what we’ve done in this department, we’ve gone through a significant restructuring. There were 26 directors in this department in 2016 and now there are 11. We also had the Research & Development Corporation, which was a separate entity, that we had realized savings. We had brought the Research & Development Corporation into the department and realized $3 million in operational savings, but that did come with some job losses for that entity.

We have streamlined what we do in the department to make sure that if somebody comes with an idea, is in the early stage, the research, the development, the pre-commercial, the commercial, all of that full continuum of wanting to go international, needing help with the marketing, needing firm-level support, they can now get in the Department of TCII. We’ve reduced a barrier by merging the Research & Development Corporation into the department because before there were some grey areas. People would come to the Research & Development Corporation and they would only deal with pre-commercial.

Some firms could be in a pre-commercial state but also in a commercial state and also need other support. They would be talking to multiple people; it could miss or delay opportunities. And we’ve expanded what we do in InnovateNL and that focused in all sectors of the economy.

Whereas, primarily, the Research and Development Corporation invested heavily in mining and the oil and gas sectors, and not looking at other areas like health innovation or looking at various technology sectors, more focused on the ocean because we have 53 per cent of the ocean economy in Canada, we are a big player here. So what I would say is we’ve taken a significant approach to streamline what we do to be able to help people who are coming to look for dollars and look for supports and look for various avenues to help their company to leverage other opportunities in our whole suite of programming.

And we can do it through InnovateNL, but we also have areas where it’s more regionally focused where we have Regional Economic Development officers that

June 18, 2019 RESOURCE COMMITTEE 75 would be dealing with, primarily, a lot of non- profits, non-commercial and small business. As we look at all of our business financing and business programming that we have within the department, we are making sure that our economic development officers and others that are in the field are equipped with being able to deliver these particular programs or be able relay those programs to the appropriate people, the specialists that will be in the department.

But they would have one point of contact; it’s a one- window approach to be able to get services within the Department of Tourism, Culture, Industry and Innovation. That’s the pathway that we see moving forward so we can make sure that were reducing red tape and barriers for business and for non- commercial entities. Whether they are municipalities or the university, or the college or others, we have many stakeholders and many partners that we work with and we want to make sure that we continue to work with them through all of the various programs that we have in the department. MS. COFFIN: Okay, my time is up.

CHAIR: Are we ready to call these headings? MR. LANE: Minister, I just got a question about Canopy as well. Before I do, though, I think that it’s important just to note, because you did say in one of your responses, somewhere along the way, about Members who would prefer to see cannabis imported into the province.

As one Member who has raised concerns about this – and I think I speak for the other Members as well because we’ve chatted about it – the issue is not about local jobs and production versus importing; the issue has always been about local jobs by local companies and keeping not just jobs here, not just the taxes that you talked about, but the actual profits so that it would be Newfoundlanders and Labradorians that own the cannabis growing facilities as opposed to some Mainland outfit and the profits going to shareholders up on the Mainland somewhere.

So that’s the only issue on which we’ve ever disagreed as far as I am concerned on that. I just wanted to state that for the record. On the question of the local benefits agreements that came up, I’ve heard the same rumors, as my colleague to the right, about workers from Quebec and PEI and so on that are working on that facility. I heard you say in your response, I think you said something to the effect of: I’m sure Canopy would go for local workers and ask for local workers and so on. But that wasn’t really the question.

So the question was, or at least my question is: Was there something inked on that contract that said, in light of the fact that we’re going to give you a $40-million tax break – albeit it’s performance based, I understand that. But in light of that, when you’re building this facility, you are going to use local workers. Not I hope you would and I encourage you to but, as part of the deal, you’re going to use local workers. Was that inked on the contract with Canopy? Is it inked on the contract for the new one in Bay St. George or wherever it’s to on the West Coast and so on?

Is that something that is being thought about and placed in these types of arrangements to ensure that we have local workers? We’ve heard from Trades NL now. Whether they’re unionized or non-unionized, there are all kinds of tradespersons. We hear the Member for Humber - Bay of Islands every day standing up presenting petitions about local workers not getting jobs on projects on the West Coast. So I’m wondering is it in the contract, yes or no. MR. MITCHELMORE: So I want to go to your initial point that you made because Newfoundland and Labrador certainly wants to see local companies grow and prosper.

Any local company has that opportunity to enter into a supply-and-production agreement in Newfoundland and Labrador. No company, nobody local had a licence or had the ability and there’s no production to be able to supply. So from the point of legalization, if we had waited for a local company, we would not have had a supply agreement, we would not have had cannabis production and these benefits accruing. MR. LANE: You could’ve had the supply, just not the production.

June 18, 2019 RESOURCE COMMITTEE 76 MR. MITCHELMORE: So in moving forward, to be able to have this investment – because we want investment to come here. It’s no different than the offshore in Newfoundland and Labrador, being able to attract international companies like Exxon, Suncor or Husky coming to make investment here in our province. No different than hotel chains that may be international in nature. They may have local investment. Sometimes they have their private equity firms.

They’re not all owned by local people, but they do employ local people that work at these hotels and there are benefits that would happen throughout the economy by making investments in various hotels that would happen in the City of St. John’s or Mount Pearl or others. So I think one has to reflect on the level of investment. Because we want to have both local investment and maximum local investment from people who are starting business, but we also want to attract investment – whether it’s Canadian investment or foreign direct investment – to grow our economy here in this province.

I think that’s certainly something that’s important. The other point that you make around procurement and public procurement. There are vast differences in government procuring to build public buildings, public facilities within the Public Procurement Act, such as a hospital that government will own or a long-term care facility. This is something that is being paid for by the private sector; it is being built by the private sector. They are making the investment, not the taxpayers and not the Government of Newfoundland and Labrador, when it comes to cannabis production facilities.

I will make the point of saying that I was with the Member for Humber - St. George’s, and Mr. Callahan, who is local and owns Back Home Medical Cannabis Corporation, who is the local president, partnered with Biome – and Biome will be making investment and scaling up. Mr. Callahan is very passionate about making investment and bringing people back home. That is why he called his company Back Home. He wants to bring Newfoundlanders and Labradorians away, create $54,000 annual salaries in St. George’s – a very rural community – that’s going to pay well over $15 an hour. It’s going to pay significantly.

And he’s going to focus every aspect to hire local people, because these are the types of people that are involved. Companies, when they start up in Newfoundland and Labrador – private-sector companies – we see it in every community where they look to hire local contractors, they’re good corporate citizens and they give back to the community. Canopy Growth Corporation, for example, made a donation to the Community Food Sharing Association. We need to look at the corporate community here in Newfoundland and Labrador and their responsibilities.

And those who are invested here see opportunities to work with other companies to see the trickle-down spinoff and economy, because it’s more expensive if you have to look at bringing in crews and bringing in people from outside of Newfoundland and Labrador. We do have labour mobility agreements within Canada, and we do have a number of people that work across Canada, and a number of companies that bid successfully on private contracts that bring their crews, their Newfoundlanders and Labradorians to Nova Scotia, to Alberta, elsewhere.

There are people that commute and that has a significant impact on the economy too. Those that have worked in the oil and gas industry, for example, in Fort McMurray or in other places, they commute and they bring a lot of dollars back to Newfoundland and Labrador, whether it’s on the Northern Peninsula, the Burin Peninsula, in Clarenville or in Grand Falls-Winsor. There’s certainly an important conversation to be had. I think every community in every jurisdiction, we want to see where there are maximum benefits and where we can help companies grow, and our department is part of that.

We will be an enabler and we will work to find ways in which companies can capitalize on every opportunity. This is why we hold supplier development sessions. This is why we reach out to make sure that local companies can capitalize and be engaged and properly bid and work with government procurement or make sure that they

June 18, 2019 RESOURCE COMMITTEE 77 have the support that they can attach to get contracts with companies such as Biome or Back Home or Canopy. MR. LANE: I thank the minister for the detailed answer. Minister, I understand the point you’re making, and, listen, I know Mr. Callahan, very well actually, I have no doubt that he will do what he can to employ local people and so on; no doubt whatsoever. I realize that there are Newfoundlanders and companies that work all over the world and so on, I get that, but there is definitely a move around the country and so on to have local benefits agreements.

In this particular case, while you may say it is a private company, which I agree it is a private company, and are they investing tens of millions? Yes, I believe for Canopy they’re investing $45 million, I believe is the number. But they’re going to get $40 million of that back in tax remittance, which would be money into the public coffers, which now will not be money into the public coffers because they’re giving it a tax break. I understand why you did it, I understand the performance base, but, at the end of the day, they’re still benefitting with $40 million in taxpayers’ money.

I guess the question was, based on that arrangement, that they will be able to pay off their capital through those remittances, is there a local benefits agreement on the construction of the facility? I take it from your answer that, no, there is not. Is that correct? MR. MITCHELMORE: There are local contractors that are working and engaged. There are local people that are hired. MR. LANE: That wasn’t the question, Minister. I simply asked is it written on – there’s nothing in the agreement saying they have to use local workers. It’s a simple question. Either there is or there isn’t or I can ATIPP the contract.

MR. MITCHELMORE: The contract is publicly available. MR. LANE: I would hope we don’t need to get to that stage. MR. MITCHELMORE: We’ve proactively disclosed the contract for Canopy Growth. When it comes to what you’re saying of $40 million, the only way $40 million would be beneficial and in receipt is if the company has full eligible cost – MR. LANE: Yeah. MR. MITCHELMORE: – that they can show that they have made those expenditures as per the agreement. They would have to do that. They would also have to make those sales within the province. MR. LANE: Yeah. MR.

MITCHELMORE: So if they’re making those sales in the province, the province is actually getting more revenue based on its portion of taxation from cannabis. They would also be producing, so there’s a supply chain. There’s R & D that’s happening. There’s the taxation that’s being achieved by 145 workers at the site, beyond all the workers that would be at their retail outlets. So there’s a multiplier effect. The City of St. John’s is benefiting $1 million a year for 20 years that it wouldn’t.

So if you look at that they would get $40 million over the life if they’re eligible for the full cost, well, the city is going to get $20 million that it would not have had otherwise, that’s a benefit to the taxpayers of the City of St. John’s. MR. LANE: If a local Newfoundlander built the same facility, they would still get the same taxes. MR. MITCHELMORE: It is quite possible that a local Newfoundlander or Labradorian will look to make that investment and do the exact same thing. That opportunity exists.

We have said no to no one that has come forward to us, so that opportunity is there and we would encourage it. We would encourage local Newfoundland companies, local hires, absolutely. Unless there’s evidence to the contrary that there’s not, I would refrain from saying that people are not hiring local when

June 18, 2019 RESOURCE COMMITTEE 78 there are significant local hires in this particular projects within the private sector. MR. LANE: Well, I wouldn’t refrain from saying it. Thank you. CHAIR: We’ve had several rounds on these headings now and we’re approaching the time when we would normally take a five-minute break. Are people ready for the vote on these headings? MR. PARROTT: I’d just like to make one more comment, if possible? CHAIR: Okay. MR. PARROTT: So to your point about local contractors.

There’s no doubt there are local contractors working there, but, as a point of fact, there is a company from Quebec with 50 to 60 employees down here. They have had conversations with the local building trades. It is a unionized company that does not fall under the local building trades agreement and they are now paying (inaudible), or whatever the proper terminology is, but they are paying in. It is a fact that they are using a company out of Quebec, 50 to 60 people with a higher wage, paying for hotels and paying for travel when that work could be carried out by locals.

I would encourage you to contact the building trades if you think that’s not a fact, or visit the site. MR. MITCHELMORE: Well, I have reached out to Trades NL for a particular meeting so I welcome having a conversation with Trades NL. They have not approached me with this particular issue. There is, as has been reported, a subcontractor that has been doing speciality work that could not be procured in the Province of Newfoundland and Labrador pertaining to drywall. MR. PARROTT: Drywall is not a speciality. Anyhow, I’m good. CHAIR: Okay, are we ready to vote on these headings?

Seeing no objections, I’m going to call these. Shall heading 2.1.01 to 2.3.01 inclusive carry? SOME HON. MEMBERS: Aye. CHAIR: Carried. On motion, subheads 2.1.01 through 2.3.01 carried. CHAIR: Okay, so we’ll take a five-minute break now. We’ll all be back here 8:06 p.m. Recess CHAIR: We will get started again. We are going to call the next heading. CLERK: Subheads 3.1.01 through 3.4.01 inclusive. CHAIR: Shall these headings carry? Questions? MR.

PARROTT: 3.1.01, Salaries – in the revised numbers for budget ’18-’19 a savings of $247,600 was identified last year, but budget ’19-’20 marks this line item for decrease of only $137,500. How are these savings located? MR. MITCHELMORE: The decrease, primarily, in 2018-2019 reflects saving realized during the recruitment period for various positions during the fiscal year. This year was adjustments required in the salary plan for $1,635,300. I believe there was one salaried position that would have been attrition that would not be filled and that’s the petroleum engineer position. MR.

PARROTT: Transportation and Communications, in the revised numbers for budget ’18-’19 there are a savings of $58,000 identified last year. How were these savings located? MR. MITCHELMORE: Which line?

June 18, 2019 RESOURCE COMMITTEE 79 MR. PARROTT: Transportation and Communications. MR. MITCHELMORE: There was a $58,000 reduction in travel to trade show and missions, industry sessions and client sites; reduction in the number of staff attending any particular trade show and number of events were actually attended by local staff because of our regional offices and presence. Because of how we’ve been enabling our economic development officers to be that touch point and connected to all of our programming so we can have better efficiencies within the office, we’ve been able to realize those savings.

But we do anticipate that through this Sector Diversification Division – and this is so important with all of our plans that we have put in place through Regional Innovation Systems pilot.

So if you look at the agriculture and aquaculture industries, tourism and fisheries, if you look at aerospace and defence, and ocean technology as well as industrial benefits in places like Clareville and on the Burin Peninsula, we want to make sure that we’re capitalizing and there may be a greater requirement this year through those implementations for travel and various trade shows and doing industry sessions with craft, manufacturing, ocean and other sectors. And we’ve determined that there would be an additional $100 through zero-based budgeting. MR. PARROTT: Okay.

Increase of $200,000 in Professional Services, can you please explain why that’s going up so significantly? MR. MITCHELMORE: Yes. This is a one- time expenditure that we’ve announced in budget 2019-20. We had highlighted from the McKinsey report to look at doing an MRO study, so that’s maintenance, repair and overhaul for the aviation industry. That’s something that we will undertake. That’s $200,000 of that amount. MR. PARROTT: Maintenance, repair and overhaul of assets we own? MR.

MITCHELMORE: No, the maintenance, repair and overhaul would be an industry speciality for the aviation industry, so for commercial aircraft. So players that are in the industry like Provincial Aerospace or EVAS Air or others are currently involved in maintenance, overall repairs and some do training as well, what they would be doing is bringing in aircraft, whether it would be from a commercial supplier like Air Canada or WestJet or international airlines in doing that work here, adding value and high-paying jobs.

This was identified in the McKinsey report where there could be an opportunity for more heavy checks on aircraft and, given the capacity that we have within the province for aviation and the companies, this is an opportunity that they see that could create more jobs and grow the economy. So we’ve allocated $200,000 to try and capitalize on that. MR. PARROTT: So is there any thought given to any of these companies being an AMO? It’s been my background.

So in order for them to do any work on these aircraft, any kind of overhaul based on periodicity, they have to be an AMO specific to that aircraft and if they currently don’t work on that aircraft, they have no ability to do that. MR. MITCHELMORE: There are two things that were in the budget and one comes from the Department of Advanced Education, Skills and Labour is around the certification and training that would be happening at the College of the North Atlantic for various technicians to provide certification.

There are also elements of investment that we’ve made to the Gander College of the North Atlantic in partnership with the federal government to enhance equipment. But we see opportunity where there could be military aircraft as well that could be involved in maintenance, repair and overhaul. So this will all be a part of the study that will go out in this $200,000 to highlight what the opportunity would be, so the investment is a study that would take place. MR. PARROTT: Okay. Purchased Services, in the revised numbers for budget ’18-’19, the money allocated for Purchased Services last year went over budget

June 18, 2019 RESOURCE COMMITTEE 80 by $521,000. What caused that line item to jump significantly? MR. MITCHELMORE: The $521,000 revised reflects four Atlantic Cable Facility repair cost, approximately $100,000 each, as well as the cost to issue an RFP to divest of the Atlantic Cable at approximately $130,000. Just for context, and I just want to clarify, the Atlantic Cable Facility, Persona Communications constructed it in 2007 in partnership with Rogers Communications, MTS Allstream and the Government of Newfoundland and Labrador. The project constructed fibre facilities between St.

John’s and Halifax in a ring configuration involved in terrestrial and submarine routes, and government’s contribution at that time was $15 million. It was proposed to add redundancy in communication facilities on the Island, and to foster increased competition in the communications sector. Eastlink currently maintains the fibre portion and all the signees to the original agreements. We have, as a government, to deal with the maintenance cost to the fibre and we also have to pay for breaks for various reasons.

This can be a significant cost, so we are exploring and taking proactive action from an initiative in 2007 that has led to these costs to look at opportunities to ensure efficient and effective management of this provincial asset and identify where revenue generation or cost savings can be had. MR. PARROTT: Okay. Under Grants and Subsidies, there’s a reduction of $187,500. How was the reduction determined, and what impact do you expect that’s going to have on the economic diversification agenda and on the tourism sector? MR.

MITCHELMORE: Under the Grants and Subsidies, what we have here is a reflection of less federal funding for the Canadian Safety and Security Program. That would be the windup or the conclusion of a multi-year agreement with C-CORE. They were engaged with the federal government to design enhanced space-based ice products for transportation product, so that was something that was done there.

The other grants that are provided in this field is that $100,000 to the East Coast Trail, which I was at the Trail Raiser a couple Saturdays ago, where, through the private sector and through over 500 individuals, donors to the East Coast Trail, they raised over $90,000 as well to help with the ongoing maintenance, which is really great. Market readiness at $15,000; $40,000 for the craft development industry; innovation growth space at $75,000; and there’s $150,300 for Canadian Safety and Security.

That also reflects the line item for Revenue of $150,300 because if we get federal revenue, we have to record it as well. MR. PARROTT: Just as another point, can we get a list of the grants and subsidies from last year? MR. MITCHELMORE: Sure. It would basically be what I had just noted and the additional amount would be for the Canadian Safety and Security Program, and we will provide that. MR. PARROTT: Line item 3.2.01, what support does the department give to communities who want to build a co-operative model for economic and business development, particularly in the tourism sector?

I refer, specifically, to something similar to the model being used in Bonavista right now. So, anywhere, Trinity or Bonavista, if you go down there – if I go to Blue Whale for dinner, they recommend that I go to Amherst Cove and eat at the Bonavista Social Club. Everybody down there is working collaboratively to – MR. MITCHELMORE: Okay. Right. MR. PARROTT: So is there any incentive? MR. MITCHELMORE: I had just drawn the conclusion of formalized co-operative. We have over 90 in the province and we have MOU, a co- operative agreement.

We have been, as I mentioned in my opening remarks – and Bonavista has really been a champion. It has taken them some time as well to realize the benefit of referral and collaboration, and they have seen tremendous success.

June 18, 2019 RESOURCE COMMITTEE 81 I only want to cite that during Budget 2016, I went to Bonavista to the Chamber of Commerce and I delivered a speech, and they had 80 members at that time. Now, if we fast-forward three years later, they have just under 160 members. They have grown the amount of small businesses, the clustering. And we have made investments because they’ve been working collaboratively in things like the Bonavista Biennale where they’ve been able to add capacity, having 24 locations, where contemporary art will be placed in multiple communities. Typically biennales are placed in urban areas.

When I was travelling in Ibiza, just in January on a personal holiday, I had seen that they had their 20th anniversary of their biennale. This is the first time – and it’s coming back this year. I encourage you and everyone else to go. They added over 1,000 new visitors just to see the contemporary art, and then all of those regions benefited because people went to Keels, Duntara and went to various communities, not just in Bonavista and Elliston and in Port Rexton, Trinity, major clusters. We have Provincial Historic Sites, really key assets. There’s the Rising Tide Theatre that’s been there for over four years.

If you look at some of the pioneers like John and Peggy Fisher with Fishers’ Loft and the investment that they’ve made, but then there’s new investment. One of the exciting areas of sector development where we’ve seen real growth is in the craft beer industry, so Port Rexton Brewing, and there are real accolades. We’ve made investments where they’re now going to open up a manufacturing facility and do canning on site, creating more jobs. Bonavista has seen the natural benefit of doing referrals, and all areas and all regions are seeing benefit from it.

Tourism is really a collaborative area of work, it is not about being competitive with each other in the marketplace. So over the last time we’ve done our Exit Survey, there’s been 2,000 additional jobs added and there have been new businesses created in the tourism and hospitality industry. We provide support through our Tourism Product Development Plan, and not all the support is financial in nature. Sometimes it is what we can provide to companies, advice or direction, but we encourage that.

Places like Clarenville, from a hub and spoke model, are benefiting as well because bus tours are coming to the Clarenville Inn, or you also see investments like the St. Jude Hotel that has just undergone a major renovation and remodel and rebrand because of economic activity that’s happening around tourism but other economic development within the region. When businesses work together and collaborate, we have a lot greater success. I’d be more than happy to maybe take the conversation off side, rather than use more time to explain all this here.

We could have a good conversation about what’s going on in Bonavista, how our department has made investments, what’s been working and what hasn’t, and in the entire region. So I’d be more than happy to take the conversation off side and have these chats. MR. PARROTT: Perfect. CHAIR: Further questions? The hon. the Member for St. John’s East - Quidi Vidi. MS. COFFIN: Thank you. Let start with, what has been the effect of provincial, interprovincial and international trade agreements on local businesses? MR.

MITCHELMORE: We’ve had significant benefits achieved given that 50 per cent of our GDP, as I had mentioned, is based on export. It’s quite significant. We’ve seen just this year an industrial shrimp benefit agreement based on the CETA negotiation that will see thousands of metric tons of industrial shrimp landed at Newfoundland and Labrador for local fish plants to produce and create additional weeks’ work for plant workers and other benefits that would exist from that. That would’ve been shrimp that would’ve been produced in other jurisdictions, like in Iceland or Denmark or other European jurisdictions that

June 18, 2019 RESOURCE COMMITTEE 82 may have had a higher cost of labour. But because of a tariff that existed or a trade barrier, it would not have been landed here. So we are seeing some benefits from CETA. We also have the Canadian Free Trade Agreement that we’ve entered into, which we’re going through a process of reducing regulatory barriers and reconciliation, and finding ways of which we can advance matters. There’s a

chapter on energy and electricity as well that can create significant opportunities for this province. When it comes to trade, it’s very important to Newfoundland and Labrador, given the types of commodities that we deal in terms of mining, in terms of oil and gas, in terms of the fishery and aquaculture, and given our population base. Why we have a number of high-value jobs in these sectors in the economy and the supply and service area is because of such trade agreements, and our ability to export and be competitive. MS. COFFIN: I had a conversation with the procurement agency earlier.

During that conversation, we were talking about social and green procurement, as well as a number of other initiatives – which are fantastic, but unfortunately one of the constraints of that was when we were talking about encouraging the use of local suppliers, they were negatively impacted by some of these trade agreements, because, of course, they said that intra-provincial trade was paramount. And one of the stipulations of that was tenders or requests for proposals or procurement – and I’m not sure what the dollar amount was – had to be opened up to intra- provincial bidders.

So I’m just wondering if we’ve seen any negative effects. Because quite often that’s what happens in trade agreements, is we see benefits in some sectors, but some other sectors will be negatively impacted. Because that’s how trade works. When you have a comparative advantage in a particular area, you benefit in that area, but when you do not have a comparative advantage, you lose out. So I’m just wondering if there are any negative effects that we’ve seen. MR. MITCHELMORE: Do you have any specific example of which you would want to give?

In speaking of social financing or social enterprises, we have a Social Enterprise Action Plan. We see the value of which social enterprises locally are able to bid competitively, and they have been winning contracts. One only has to look at the Newfoundland and Labrador Housing Corporation and the success of companies like Choices for Youth with their social enterprises, or Stella’s Circle and what they do in terms of their social enterprises.

Because you had opened up with green and social in your commentary, there are avenues of which social enterprises can have incredible opportunities for local people and local benefits, and even work with other companies, too, in part of the procurement process. We do a lot in the Department of TCII around supplier development or working with the federal government and the entities to make sure that, through our Regional Trade Network, companies are prepared and they can look at where the opportunities are for them; they can target, whether it’s the Canadian marketplace, whether it’s international.

Through ATIGA, that I talked about earlier, you see a lot of pan- Atlantic missions, and we’ve gone to places like the UK, the Netherlands, and in very specific target. Newfoundland and Labrador has a significant advantage to the Atlantic provinces when it comes to trade because we have done almost $2 billion worth of export in the UK and the Netherlands alone.

We are far ahead of any of the Atlantic provinces in their export into these markets, but working together we can capitalize on opportunities, especially when it comes to the Ocean Supercluster and where the private sector is unlocking $150 million of their money to do research, to do various development or innovation, to partner with the federal government to unlock an equal value. Given that we have 53 per cent of the ocean economy in Canada, we see where local companies are going to be able to even partner with more international players and get a bigger piece of the pie, and that’s really important for us.

MS. COFFIN: Well, I’m glad to see that some local producers are benefitting from some of these trade agreements.

June 18, 2019 RESOURCE COMMITTEE 83 Going back to, perhaps, some of the things that I heard on the doorstep along the way that would go closer to this procurement agreement issue, I certainly have spoke to small businesses who would normally fill government contracts, who now have found that they are not getting that, so I suspect that might be a product of it, but we’ll leave that be for now. Perhaps another area we may want to look at there would be secondary processing in the fishing industry, because that’s where a lot of the jobs are and that’s where a lot of the value added is.

So I’d be really curious to see, perhaps, how we’re faring in terms of the value-added piece and if we are actually at a comparative disadvantage, and that might be where we are losing out. For now, let’s move on to diversification. I noticed that we have diversification in at least three of the different sections here. Some of it’s about planning, some of it’s about helping industries diversify, looking for diversification initiatives. I’m just kind of trying to get my head around why we spent $1 million on a report to find out where we need to diversify. MR.

MITCHELMORE: The Department of Tourism, Culture, Industry and Innovation is involved in working with a number of key stakeholders who are members of the Cabinet Committee on Jobs. We’ve created sector work plans, and we’ve been leading some of those with the Technology Sector Work Plan, for example.

Others we have worked with, other departments and key stakeholders, and with it, through the McKinsey report, and as you can see even within the department, there are a couple of key initiatives that we’ve taken from that report to capitalize on the work that we’re doing, that we may not have focused on, such as the MRO opportunity and direct-targeted investment to look at sector diversification.

I think that’s really key in being able to build a certain expertise, to grow various sectors, whether it would be in aerospace and defence – because I went to the Dubai Air Show and looking at what Provincial Aerospace is doing; they’ve done business in Abu Dhabi and been there for quite some time. They have relationships and contracts internationally. They can be a lever to help other companies that are working internationally and want to be in that space.

As well, they have company contracts with other international players, whether it would be Thales or CarteNav or others, and some of that relationship trickles down and brings benefit to Newfoundland and Labrador in terms of how conferences are held or people setting up offices here in this province and creating employment, such as what some of these companies have been doing. We need to look at and continue to be very nimble, as a small province, but realize our capabilities.

I don’t think we’ve talked enough about some of the companies that are operating here and what excitement and what they are actually doing. I highlighted Mysa and Empowered Homes and what they’re doing for energy conservation. You only have to look at what Kraken is doing in terms of their robotics with AUVs, and how they’re getting military contracts and international dollars and investment being put into them, that’s creating dozens of jobs here in our province that would be high paying. We have a number of companies that are operating in that space.

Genoa Design, I believe the MHA for Mount Pearl North mentioned them today in a speech. They have over 100 employees and they’re dealing with steel structure, and very c

Document details

Collection	Newfoundland and Labrador — Committees
Citation	2019-06-18
Type	committee
Volume / chapter	committees_standingcommittees_resource_ga49_pdfs_2019-06-18_20_rc_20-_20department_20of_20tourism__20culture__20industry_20and_20innovation_.pdf
Language	en
Format	json
Source	PROVINCIAL
Identifier	ef9c4549da5f81ce05f7d05c5ea89e08be9ddcf2

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