April 11, 2006 RESOURCE COMMITTEE

The Committee met at 9:00 a.m. in the Assembly Chamber.

CHAIR (Harding): Order, please!

Good morning everyone. I would like to welcome you all to our Resource

Committee meeting to discuss the Estimates of the Department of Natural

Resources.

First of all, I would like to ask the Committee members to introduce

themselves by name and district.

MR. PARSONS: Kelvin Parsons, MHA for Burgeo & LaPoile.

MR. JOYCE: Eddie Joyce, MHA for Bay of Islands.

MR. HUNTER: Ray Hunter, MHA for Windsor-Springdale.

MS JOHNSON: Charlene Johnson, MHA for Trinity-Bay de Verde.

CHAIR: Harry Harding, Chair and MHA for Bonavista North.

I will ask the minister now to introduce the officials that he has with him

this morning.

MR. E. BYRNE: Ed Byrne, Minister of Natural of Resources.

I will just turn it to our officials to introduce themselves.

MR. SAUNDERS: Bruce Saunders, Deputy Minister.

MR. MOORES: Len Moores, Chief Executive Officer of Forestry.

MR. HANLON: Brendan Hanlon, Financial Manager.

MS BARRON: Tracy Barron, Director of Communications.

CHAIR: Thank you very much.

We try to follow some kind of order here so that we can get through this in

as an efficient manner as possible.

I would like for Minister Byrne to begin. He may have up to fifteen minutes,

if he so chooses, to give an overview of his department's estimates. Following

that, the critic, or whomever from the member's side, may ask questions.

Minister Byrne.

MR. E. BYRNE: Thank you, Mr. Chair.

It is a pleasure to be here this morning to participate, obviously, in part

of the Budget process, the Estimates Committee meeting, to answer any questions

related to what is contained in the Estimates book or any other questions

related to policy directions and initiatives of the department and answer those

on behalf of the government.

First of all, I will just give an overview of the department, for the record.

The Department of Natural Resources is a fairly broad department that operates

and interacts with most of the significant industries in the Province. Our

mandate is responsible for the management, development and prosecution of the

forestry industry, of the agrifoods industry, of the oil and gas industry, of

the mining industry and responsible directly, I guess, for the development of

energy and oversight of energy, particularly through Newfoundland and Labrador

Hydro.

There is a lot of growth that is occurring in the department, not necessarily

from the Budget perspective but from the industries that participate. Agrifoods

is worth, today, approximately about $500 million to $550 million. A growing

industry, in our view, based on what is occurring in the industry and where we

are headed. That could double within the next five to six years; direct and

indirect employment of about 6,000 people.

Forestry; I do not want to be hung for saying it, but one of the industries

that plays the largest and has the most significant impact in rural Newfoundland

and Labrador is the forestry industry. In terms of direct employment and

indirect employment, it is about 12,000 people; worth about $1.2 billion to $1.3

billion to the provincial economy. It operates in every rural part of our

Province, from Labrador all over the Island, from not just pulp and paper and

loggers but also within the integrated sawmill industry.

The mining industry; it is an exciting time to be involved in the mining

industry in the Province. Exploration commitments, we conservatively estimate -

which we try to do and not overselling what is about to occur - will reach about

$50 million this year. It employs, directly, about 3,200 people. Again, in rural

parts of the Province. We have seen interest, obviously in Labrador, significant

interest in Labrador, both in Labrador West, with one, maybe two, potential iron

ore projects. Significant exploration going on with respect to uranium in

Labrador. Just as an interesting note, what is driving the mining industry today

obviously is the commodity markets. Base metals are at an all-time high,

primarily being driven by the insatiable Chinese appetite, to be frank with

everybody, but that provides the Province with an opportunity in trying to

incent and move that industry forward.

On the oil and gas side, there are significant exploration commitments that

have been made. I know in early 2007 we will probably see the largest drill ship

in the world, the Erik Raude, that is committed to be here for two years, is my

understanding, both in the Orphan Basin and potentially in the Laurentian and

Sub-Laurentian Basin. The industry is worth in excess of about $5 billion to our

GDP; employees a significant number of people. Obviously, within the North East

Avalon where the industry is headquartered, but certainly, if you look outside

of that, in the Laurentian and Sub-Laurentian Basin, the opportunities for the

Burin Peninsula and the Bull Arm Site as well. There is significant interest

onshore, both in the Deer Lake area and in the Port au Port area, that I think

holds tremendous promise, which I think we will see sooner rather than later.

On the energy side, as people would be aware, we are right in the middle of a

broad scale energy policy review that is inclusive of everything that we have

talked about: renewable energy from wind, energy policy from natural gas

royalty, the development of the Newfoundland and Labrador Hydro and its

interaction and how it plays a role and where we see Newfoundland and Labrador

Hydro going, moving more towards an energy corporation model by way of the

potential for taking equity interest and ownership on behalf of the people of

the Province through our Crown corporation. So, we are excited by that and by

the opportunities that it will hold.

With that sort of broad overview, I am certainly willing, Mr. Chair, to open

it up. I will answer any questions to the best of our ability. Any that we do

not have the information, we will let you know right away and we will endeavour

to get it to you as soon as possible. With that, we will turn it back over to

yourself.

CHAIR: Thank you, Minister Byrne.

Now it is open for a member on the member's side.

Mr. Joyce.

MR. JOYCE: I am going to be about five or ten minutes, then Kelvin is

going to take over. He is the tough one.

The stumpage fees around the Province - I know last year, minister, you

reversed the decision and was going to make it retroactive. Were there any

increases in stumpage fees this year?

MR. E. BYRNE: Yes, and that is under review right now. Part of the review

- this occurred, I will step back to two years ago. This is, obviously, part and

parcel of the softwood lumber issue and the issue of countervailing duties on

us. We looked at trying to get a greater value on royalties within the industry.

Now, nobody likes paying additional fees. I do not know - we certainly did not

want to increase fees for the sake of increasing fees. This was part of a plan

that stemmed back two-and-a-half years ago. So, that was advised.

The reversal came because industry - we thought that industry was aware and

they were not, so we reversed the decision immediately and put it forward for

April 1 on. Right now, compared to two-and-a-half years ago to today, a number

of things have fundamentally changed in the industry. The biggest thing that has

changed has been the increase in the Canadian dollar, vis- B -vis

its relationship with the American dollar.

If you look at the industry, generally, prices are - it travels in cycles. If

you look at the last thirty to forty years, it is incredible but it mirrors

exactly what occurs. Cycles go up in terms of price, they slump down, and

normally on about a ten year average. What has been unusual this time, we are

into a higher price cycle, both for pulp and paper, which would generally bring

the industry out of the market slumps that occur and that they plan for. Part

and parcel of the stumpage fees was that, but it has been more than offset. The

higher price cycle has been more than offset by the strength of the Canadian

dollar. So, what we looked at and what we are looking at right now - and the

situation that occurred on the Northern Peninsula provided, I guess, an

opportunity for us to make an earlier announcement than what we had planned, but

nonetheless, it was a timely one in terms of a complete review of the industry

from our perspective; our programming, how our relationship exists between

ourselves and the industry, the integrated sawmill industry, what royalties we

expect, the pulp and paper industry, how does our spray program work, how does

our silviculture programs work. Right now, I think the companies pay about 70

per cent - if I am correct, Len. We pay about 30 per cent as the Province.

Since silviculture has been involved, we have planted in excess of 200

million seedlings on the Island. Again this year, we increased silviculture -

and I am not trying to evade your question. In terms of the stumpage fees, they

are under review right now. I have explained that to the Newfoundland and

Labrador Lumber Producers Association, in terms of being caught up in the review

that we are looking at internally, in terms of our programs, what support we

provide the industry. It is significant, as you are aware, but we are kind of

going through a process now of rethinking everything we do to try to reposition

the industry for the anomaly that we are involved with, in terms of the impact

of the Canadian dollar, but one that, I sense - this is my own personal opinion

- is going to be around with us for some time. It is under review.

MR. JOYCE: With the Northern Peninsula, there was an issue there in

helping out Kruger. What concessions were made to Kruger? I will tell you why,

there are 250 - but there were about twenty-five or thirty unionized workers

left out in Corner Brook. Was there -

MR. E. BYRNE: Well, there were no concessions. The response that we put

in play for the Northern Peninsula was not to help Kruger. It was to help

everyone on the Northern Peninsula. We were advised, hours basically, the

morning of, when a decision was made not to purchase any pulp wood from the

Northern Peninsula for the upcoming season. Essentially, that would have put the

entire industry on the Northern Peninsula in a tailspin. In District 17 and

District 18 - Is it seventeen that is Kruger leased land or eighteen?

OFFICIAL: Both.

MR. E. BYRNE: Both, but there is Crown land in seventeen?

OFFICIAL: Crown land in eighteen.

MR. E. BYRNE: In eighteen, sorry. The land that is leased to Kruger dates

back - and this is important just historically, Mr. Joyce. I will get to the

directness of your question in terms of what arrangement we put in place because

we have already talked about it publicly and I will restate it here again this

morning.

Back in 1994, when Kruger was about to go under, the Administration of the

day - I thought it was a good move because it repatriated what land was gone

from us forever and a day. The union employees, the association itself, put in

$15 million. The government of the day, under Clyde Wells, put in $15 million to

assist Kruger, and Kruger himself put in $15 million. When that cycle began to

come back up, Kruger repaid the employees their $15 million, I think it was,

from their pension funds. What we got for it was ownership back of the land that

was alienated forever and a day. We entered into a long-term lease. I do not

have an difficulty with that because long-term leases in terms of fibre supply

are important. So, from that perspective, what Kruger basically said to the

Northern Peninsula is that, because there is a glut in a the marketplace,

because there is an excess fibre supply in the Maritimes because of mill

closures, we can get wood cheaper for a small period of time, about a year,

cheaper right now than we can cutting if off the Northern Peninsula, so they

made a decision to shut down the Northern Peninsula for the sake, basically, of

$400,000. That is what they were going to save.

We responded immediately by saying - I know myself and the CEO of the

forestry service got on the phone with the senior brass in Kruger and said -

look you just cannot do this. This is not an option. If you have difficulties

with respect to the cost of your wood on the Northern Peninsula, we felt that

you had an obligation to advise us. Now, let's enter into a discussion on what

we can do to help mitigate that, or are there things that we can do?

It quickly became apparent the Kruger had built a bridge over the gorge on

the main river which the Department of Environment and Conservation, I think the

record shows, at the time, were not very supportive of, and that, as a result,

Kruger wanted to move that bridge at a replacement cost of about $300,000 or

$350,000. They wanted to take that, dissemble it, and use it elsewhere. Some

departments - Tourism, Environment and Conservation - wanted that to stay there,

so we felt that in purchasing that bridge for the replacement cost was one way

that we could mitigate the Northern Peninsula situation for this year while this

review was ongoing.

Secondly, we said we would look at, within our own programming, whether it be

the spray program, whether it be the forestry roads program, over the next

several months to see if there was anything else that we could do. That was the

arrangement that we reached with Kruger with respect to the Northern Peninsula

for this year.

Now, the Northern Peninsula, I think the situation with Kruger underlines a

more fundamental problem with the industry, if I can put it that way. We have to

move to broaden what we do in the forest industry in terms of diversifying it

more. All of our eggs in some regions are in one basket, so that - if a

situation like Kruger is in, they can say: Look, we are not purchasing this

year, then you have operators like Ted Lewis. All the contractors that are up

there are beholding in many ways to what the company is up to and we have to try

to, over time, move away from that so that we are not confined to one single

option in any region of the Province. In some regions we are not. Having said

that, that is what our review is hopefully going to accomplish, and that is

where we are headed.

MR. JOYCE: I do not think anybody disagrees with the move to keep the

jobs on the Northern Peninsula, whatsoever. It had to be (inaudible).

MR. E. BYRNE: No, I understand that.

I am sorry, your question was with respect to the impact on other loggers who

- about twenty-five of them.

MR. JOYCE: Some of them just mentioned it to me on the other side.

MR. E. BYRNE: About three weeks ago we met with the local unions, which I

do on a regular and systematic basis, with their national rep as well. Kruger

tells us that those positions will be mitigated in terms of, they are looking

for ways to find other positions for those individuals.

I had a call just two days ago where, I think when the House closes tomorrow,

early next week I will be meeting with the union out in Corner Brook. They will

be advised of that today, because they are looking for another meeting. I will

be meeting with them. So, we are continuing to work with the union and the

company to try to find a way to offset the impacts because of the situation and

the circumstances that the industry finds itself in.

MR. JOYCE: Is that common knowledge, that you will be meeting with the

union? I will tell you why. I will be talking to - and I am, on a daily basis,

talking to - a few of the loggers who are affected. Can I mention that to them,

or is it confirmed?

MR. E. BYRNE: Absolutely, you can say that I have met with their union. I

am meeting with them, hopefully, again next week. I will be in Corner Brook next

week, the eighteenth, nineteenth, at which time I can inform everybody we will

be releasing the wood supply for the next twenty-five year plan. That is part

and parcel of getting out there, so, yes, you can certainly mention that. That

is not an issue from our perspective.

MR. JOYCE: An update on the Stephenville mill - any news on that?

MR. E. BYRNE: No, what we have been charged with, part of the process

that was put in place by government, we were charged with the responsibility of

potentially looking for another operator on the pulp and paper side or other

forest related activities.

We have talked to about ten to eleven large pulp and paper companies,

aggressively trying to search for another operator, and we have not had anyone

who has been significantly interested. There have been some expressions, like,

okay, give us some information about the structure and all that sort of stuff -

which we have been doing - but at this point we have not identified another

operator, and nor has another operator come forward to say we are interested in

purchasing the mill for a pulp and paper operation.

What we are looking at are other opportunities on the integrated forestry

side that could play a role in the forestry industry in Stephenville and in the

Bay St. George area, outside of other opportunities that we are looking at

within the department for initiatives that are upcoming. We have been

aggressively pursuing that, working with the Cabinet committee, working with the

committee on the ground, but again it is reflective of the state of the industry

of where we are.

Again, I can say to you, we have not given up at this point on the notion

that there will be a potential operator for that site, because it does have some

strategic advantages. It is on tide water, transportation costs are generally

lower, the infrastructure surrounding the site is competitive and world-class,

so there are some strategic advantages to the area.

MR. JOYCE: What is the status on number seven for Grand Falls?

MR. E. BYRNE: It is working today. From our perspective, we have had no

discussions with Abitibi on Grand Falls since August, other than to tell them

that Bill 27 is one that this government believes in and supports

wholeheartedly, which demands a two-machine operation until 2010. If they fail

to live up to that legislative and legal commitment, then the legislation is

clear; we do not have to do anything. If they shut one of those machines down,

60 per cent of their wood supply or their licences would be revoked immediately.

That position is supported strongly by the people in Grand Falls and in Central

Newfoundland. It is supported strongly by the six locals in the mill, and

supported strongly by the mayors in the area, particularly the mayors in Botwood,

Bishop's Falls and in Grand Falls-Windsor.

What we have said to Abitibi is: You need to tell us what your future plans

are for Central Newfoundland. You are sitting on significant hydro assets that

keep your energy costs low. You have a ready, available, and a steady wood

supply, which are the two fundamentals to run a pulp and paper operation. We

believe there is a solid future for Central Newfoundland as a result of that.

Abitibi first came to government and basically said: We would like you to

strip Bill 27. We want priority access, which means right of first refusal, to

every stick of Crown timber left on the Island and every stick of timber in

Labrador.

Now, after we laughed them out of the office, eighteen to twenty months ago,

and got into a discussion about what their issues were, it became apparent that,

before they were going to commit to anything, they wanted us to change Bill 27.

I understand why, because they wanted the issue of wood supply guaranteed for

them so then they could go ahead and do what they wanted to do. We said we make

no apologies for not changing that piece of legislation because it is the only

leverage that we have, as a government, on behalf of the people in the area, to

ensure that the operations in Grand Falls-Windsor, from Abitibi's perspective,

are there for the benefit of the people.

Until we are comfortable and understand what their plans are, and until the

region, the locals and the elected municipal leadership, is comfortable where

they are going, then that remains what it is today.

I have not heard, and we have not heard, from Abitibi, other than, we are

putting that together now - the impact that Stephenville is gone, from their

perspective, or they have closed their operation in Stephenville. Do they

envisage still a one-machine operation in Grand Falls, or a two-machine

operation? We are waiting to hear from them, and they have indicated to us that

some time in late May they will bring forward a proposal.

My understanding, as well, is that they recently met with the mayors out

there, and the locals. I think there was a headline, after the meeting, that the

Mayor of Grand Falls-Windsor said that they would not be discussing anything

that went on in the meeting publicly, so I have no idea what went on at that

meeting other than, from our perspective, our position has been out there

publicly. It is the same one we hold privately.

MR. JOYCE: The silviculture program, how much money is put into that this

year?

MR. E. BYRNE: We increased it by $1 million this year, up to what, $8

million?

OFFICIAL: Eight-and-a-half million.

MR. E. BYRNE: Eight-and-a-half million. The impact on that will be that

we will increase production this year from 11 million seedlings up to 15

million. Primarily, Norway spruce is what we invest in because the growth cycle

- there is a ten-year turnaround. You can harvest it in ten years from the day

of planting.

The more we put into that perspective in terms of silviculture, and the

better utilization management that we get, or management of better utilization

that we get, the better off in the long run the industry is from the

availability of fibre.

It is $8.5 million, up $1 million this year, with a commitment to up it again

next year and the year after. It is the future of the industry.

MR. JOYCE: It is very, very important.

MR. E. BYRNE: Extremely.

MR. JOYCE: Absolutely, no doubt.

The forestry plan, Minister, you mentioned a couple of weeks ago that you

were starting, when is that expected to be on stream? Because, as we -

MR. E. BYRNE: The consultation process will begin following the closure

of the House. It will mirror, to some degree - we will release the details

because we have not signed off, or I have not signed off, on all of the details,

but it will be a fairly broad consultation similar to the energy policy review

that we conducted, exclusively within the industry. Integrated sawmill, pulp and

paper, associated unions, impact municipalities role, all stakeholders will have

an opportunity to participate. That would begin in earnest when the House

closes.

MR. JOYCE: Again, on the silviculture - you may have to get back to me -

is there any silviculture out in the Hughes Brook area this year on North Arm,

Goose Arm Road, in the western region?

MR. MOORES: I am sure there will be thinning in the area. (Inaudible),

that would be our primary treatment in the Hughes Brook area. We will also be

doing part of our spray program for balsam fir sawfly. That is a major area that

has infestation.

Just to let you know, the Canadian Forest Service have finalized and gotten

approval from the federal government to spray a biological pesticide, a local

virus -

MR. E. BYRNE: We have a lot of faith rested in that one, because we have

been trying for three or four year to get that approved.

MR. MOORES: Three or four years to get it licensed to use. We have been

using it as an experimental spray for about seven or eight years and it has been

very effective at 5,000 hectares a year, so this year it will be going up to

about 30,000, but that whole area that you talked about in terms of the

silviculture in areas is really now predicated on being able to protect that

investment.

MR. JOYCE: I was asked to ask you this question, from a person who has a

mussel farm over in Northwest Cove. I know you may have to get back to me on

this. The department usually upgrades the road; it is in behind Hughes Brook,

going towards Goose Arm. Will there be any work done on that road this year?

MR. MOORES: I will have to get back to you on that one.

MR. E. BYRNE: We will get back to you on that one.

MR. JOYCE: I knew that. It is Northwest Cove in Goose Arm. The boys have

a mussel farm there. It is pretty productive, actually. This year they had a lot

of -

MR. E. BYRNE: They are counting on the forestry roads to get there.

MR. JOYCE: The two culverts need to be replaced. It is a forestry road,

and it has been used for years, but they are not sure if it is going to be

upgraded this year. I think it is two culverts and the grading.

MR. E. BYRNE: It is really funny, you know. Since becoming minister - and

this is not reflective or directed to that question, but it reminds me - on the

one hand we provide more access in terms of forestry roads, access to greater

fibre limits, and I have listened in the last little while to individuals say we

are cutting everything, we are not replanting anything - which is not true.

I heard yesterday, or last week, from somebody on the West Coast, in an

interview, offering opinions that were not based on fact whatsoever, just

complete fiction, which I tried to correct this morning in an interview, that

our process of how we arrive at our annual allowable cuts is done behind the

scenes, in the cloak of darkness.

The fact of the matter is that, in every forestry district in the Province,

and if you compare it across the country, it takes about twelve to eighteen

months to come up with a forestry plan in a district. Why? Because

municipalities are involved, environmental groups and associations are involved

in a very public way in meetings with our staff. We have staff burnout issues

because some of our managers are exclusively dedicated - a year of nightly

meetings. Then all of our forestry plans are registered through the

environmental assessment process, which is not done across the country. We

probably have one of the most exhausted - I know we do, I should not say think.

I know we have the most exhausted, the most public - from a public input point

of view, in developing forestry plans and trying to mitigate values, whether

environmental issues, Pine Martin, caribou issues, in developing a forestry

plan.

When it comes to issues like roads, we hear a lot of time: How come you are

building roads in this way? It does not take a year, once a road is built, that

some of the people who have condemned the road going in there are the first ones

to tell you: Don't reclaim that because I am using that now, or we are using

it for other purposes, venture tourism and all that sort of thing. So, we run

into that on a daily basis, to be frank with you.

MR. JOYCE: It does not happen on the West Coast though, does it?

I was asked to ask, by my colleague, the wood licences for Carbonear to be

able to get their permits. Is there any consideration of having that reinstated

because now the people -

MR. E. BYRNE: Are you talking about the office?

MR. JOYCE: Yes.

MR. E. BYRNE: It is already done.

MR. JOYCE: Done since...?

MR. E. BYRNE: That is already done.

MR. JOYCE: So, they can pick up their permits?

MR. E. BYRNE: Yes, as they always could there.

MR. JOYCE: No, it was cancelled there for awhile.

MR. E. BYRNE: We corrected that.

MR. JOYCE: Perfect.

MR. E. BYRNE: What happened, it was not closed. I think there was a

staffing issue in terms of there was somebody on a leave of absence - I believe,

Len?

MR. MOORES: Yes.

MR. E. BYRNE: So, in terms of bodies, it required a change but we

corrected that. My understanding is that the office will be open the same as it

was last year and the year before in terms of timing to get permits.

MR. JOYCE: I am finished my questions. I just want to make a comment,

minister. Over the years I have dealt with the staff in Corner Brook and the

Western region, and I just want to say that the relationship I have with the

staff is good. They are an excellent group. They are very co-operative, very

understanding, and more so with me, they are more forthright on issuing -

MR. E. BYRNE: I appreciate that. We don't do enough, I think - we have

talked about it recently. I don't think we do enough to promote our industry

and an understanding that needs to be - we need to educate the public on how

exact the science of this industry really is, in terms of inventory, in terms of

understanding how our permitting system works. It is not done on a willy-nilly

basis. It is done with sustainability in mind, as you know. How we arrive at the

conclusions, we arrive at in terms of fibre supply. It is a credit to the staff

and the department, but it is a very exact science on the one hand and then how

we monitor that and ensure that the rules and regulations in the legislative

framework that we operate under, through our conservation officers, how they

implement that, it is a credit to them. I appreciate the feedback.

MR. JOYCE: I know that over our way now - I am sure Len is well aware of

it - the situation, a lot of times, where people are looking to set up a little

bandsaw somewhere, looking for a bit of wood, or some are looking for permits. I

deal with the bunch in Corner Brook on Massey Drive a lot. They are very

co-operative, very upfront and very forward. I just wanted to recognize the

staff because they do a good job to the general public.

MR. E. BYRNE: I want to say this - I appreciate that and I am sure the

staff appreciates it, too. From my perspective, I remember when first becoming

minister we had a lot of requests about: I need a couple of thousand cubic

metres of wood - and how that is decided. I made a decision right upfront that

what we do is based upon the science we have. Myself, as a minister, I have

never - and the staff will tell you this - put my finger into the middle of

saying: Can you take some wood from here and put it over there, or take some

wood from here and give it to that person? Because that is a recipe for

disaster. We allocate it on the basis of what we have to where we feel it can

get the best bang for the industry and for the people of the Province. That is

the way it should remain, to be honest with you.

Anyway, I appreciate your comments on the staff.

MR. JOYCE: Just a final note, if there is anything that you can do for

those twenty-five to thirty loggers in the Corner Brook-Bay of Islands area -

MR. E. BYRNE: Yes, it is extremely important.

MR. JOYCE: Yes. Right now they are not expected to be called back until -

I think it is January of next year. They are people right from the Corner

Brook-Bay of Islands area.

MR. E. BYRNE: Yes, I know they are.

MR. JOYCE: Thank you.

MR. E. BYRNE: You're welcome.

CHAIR: Mr. Parsons.

MR. PARSONS: Thank you.

Being from Port aux Basques, you will see why I do not ask many questions

about forestry. I leave that to Mr. Joyce.

MR. E. BYRNE: My last time in Isle aux Morts there was no silviculture

going on.

MR. PARSONS: It is not a big thing out my way.

Minister, maybe to begin, just a few line by line items from the actual

Estimates itself. Starting on page 137, under the heading General

Administration, 1.2.01.01, Salaries.

MR. E. BYRNE: Yes.

MR. PARSONS: A couple of hundred thousand dollars increase there. Is that

for new positions?

MR. E. BYRNE: In terms of -

MR. PARSONS: The Salary piece there, it is gone up by $200,000. Would

that be new -

MR. E. BYRNE: New salaries. New contractual obligations that we

anticipate, yes.

MR. PARSONS: What positions would you be talking about here?

MR. E. BYRNE: There is a new ADM of energy policy.

MR. SAUNDERS: Yes, there was a new ADM of energy policy created within

the division and there are a couple of policy analysts in that as well.

MR. E. BYRNE: Yes, and that was part and parcel of trying to, I guess,

recognizing the additional responsibilities that are on the department for

energy policy and, at the same time, we have encountered, in the last eighteen

months, significant difficulty in maintaining individuals within the department,

simply because of - and this is not exclusive to our industry but it is more

pronounced, I think, on the energy side than anywhere else. The salaries that we

pay at that level pale in comparison to what industry is offering. Anyway, it

was sort of a reorganization. As we moved Hydro forward we needed to increase, I

guess, our expertise in maintenance of what we are doing on the energy side.

MR. PARSONS: Page 138, 1.2.03.07 Administrative Support. Property and

Furnishings have gone up by about $660,000 or so.

MR. E. BYRNE: Right.

MR. PARSONS: The reason for that?

MR. E. BYRNE: That is all on the animal health capital funding - I guess,

Bruce? That was the announcement we made with respect to increased animal health

services. There was Western regional laboratory and post-mortem facilities,

about $300,000. Laboratory renovations were required because there were

significant occupational, health and safety issues on Brookfield Road with our

facilities there, about $350,000. Chemistry analyzer and equipment X-ray

machine, $13,000 and $12,000 respectively.

So, that was investments made to try to keep pace with the West Nile Virus,

avian influenza, the growth of the industry, particularly the dairy industry and

the fur industry and investments made both in Western Newfoundland and in this

region, to ensure that our facilities are up to scratch to do what we have to

do.

MR. PARSONS: Under Forest Management, the next page, 139, 2.1.01. It

looks like Salaries have increased again there by almost $300,000.

MR. MOORES: Those additional salaries were received for the inland fish

program and some additional temporary salary people we had in our inventory

program.

MR. E. BYRNE: We invested in inventory this year an additional $700,000

to get a greater sense - some of that will happen on the Island, some of it will

happen in Labrador, to expand our knowledge base on the availability of fibre

supply, particularly in Labrador. So, with some of that, and inland fish, came

the additional in Salaries.

MR. PARSONS: That is not the section, I guess, where your inland

conservation officers would fall under that section, is it?

MR. MOORES: This is part of the budget where the inland fish program is

derived from.

MR. PARSONS: Okay. Is all that the feds contributed is $130,000?

MR. MOORES: In terms of the inventory, we have (inaudible) that $130,000

from the federal government as part of the National Forestry Inventory program.

MR. E. BYRNE: It has nothing to do with inland fish.

MR. PARSONS: Okay. On the issue in the inland fish piece, that is just a

provincial initiative. There is no input from the feds there at all?

MR. E. BYRNE: Well, not necessarily. There is an interesting story

occurring there. In the first year of the inland fish program, I think we had a

total of 176 or 178 charges. Very successful. The second year, 150-odd charges.

Very successful. What was different from year one to year two is that we feel we

embarrassed DFO, because even though there were less charges, DFO quadrupled its

effort in the inland fish program in year two; quadrupled it.

Some of my conservation officers in the department told us that they were

tripping over some DFO officials on the river systems. Even with that

quadrupling of effort from DFO and our maintenance of the effort that we had put

in, charges were less; which speaks, I think, to the effectiveness of the

program or the beginning of the change of the mindset.

On a go forward basis, this is supposedly - well, not supposedly. It is the

exclusive constitutional obligation and jurisdiction of the Department of

Fisheries and Oceans, not the provincial government. So, we are in discussions -

I know that from my perspective, discussing with Minister Hearn, after this

season their involvement to ensure that if that is there then we could look at,

potentially, parring down if we have a level of comfort, that our river systems

are going to be protected. We felt strongly, and the Premier felt strongly, the

first year of this program, that in the absence of any movement we could

continue with the debate with the Department of Fisheries and Oceans, continue

whose responsibility it is in rooms like this, but at the same time, there is

nothing practical happening on the ground to stop the rape of a resource. So, we

feel really strongly about this initiative.

We were encouraged by DFO's increased presence last year and what seems to

be again this year. Discussions are ongoing on a go forward basis after this

season. I think you said one time we should just send them a bill.

MR. PARSONS: Yes, it doesn't work that way.

MR. E. BYRNE: No. I don't necessarily disagree with you.

MR. PARSONS: Page 149, 5.1.01, Policy and Strategic Planning, under

Energy Resources Management.

MR. E. BYRNE: Yes, that is the salary piece I think you are talking

about.

MR. PARSONS: There seems to be quite a substantial increase in everything

under that heading. Salaries are gone up about $1.2 million, Transportation and

Communications by about $100,000, Professional Services by about $100,000.

MR. E. BYRNE: There was $1.5 million that was due to restructuring the

Energy branch. Purchased Services, Grants and Subsidies - where are we, Bruce?

Total Strategic Planning. Estimates are essentially up - for that reason - for

the restructuring of the Energy branch. We had two executive positions, $100,000

each; four directors, $80,000 each; six senior management, $65,000 each;

existing vacancies that were within the department, about $330,000. For a total

of twelve people, basically, for $1.240 million. At present, there are seven

vacancies within the division that were used as planned savings for salaries

within the department which will be funded through the $1.2 million required in

salaries for the restructuring of the Energy branch.

MR. PARSONS: Those vacancies, does that tie in with you earlier comment

that it is difficult to attract the personnel that you need sometimes?

MR. E. BYRNE: Difficult not only to attract, difficult to maintain. A lot

of this, too, is part and parcel of the energy policy review that is ongoing and

the dedicated resources we put to that. Within the Department of Natural

Resources, the energy division is most challenged, more than any other division

within the department, on not only recruiting but maintaining.

We had senior petroleum auditors who left for double the salary. We recently

had an ADM who took a job in Calgary. I do not know what his salary was or what

he was offered. He was making a competitive salary here, but it was a

significant offer. Those are issues that the deputy and government struggle with

everyday. Anyway, that is part and parcel of the change in direction there.

MR. PARSONS: On the next page, 150, the Canada/Newfoundland and Labrador

Offshore Petroleum Board, item 5.1.03. Do the feds make any contribution to the

running of the board? Because this just shows the provincial cost.

MR. E. BYRNE: Go ahead, Bruce.

MR. SAUNDERS: The board is funded 50-50 by the federal government and the

provincial government. Up to this year, we have cost recovered 50 per cent of

that from the industry. That has now moved to 75 per cent cost recovery from the

industry. So, if you see the numbers changing from what was budgeted in

2005-2006 to the revised, to what has shown up in 2006-2007, it reflects the 75

per cent cost recovery. So, the board's total budget, if you wanted it, would

be double the $4.4 million. Then it flows down through from there.

MR. PARSONS: I notice there is some increase this year. I did not know if

that might be for the new anticipated position that you -

MR. E. BYRNE: No, it is not.

MR. PARSONS: Now, Minister, getting on to some general type questions,

and I may be all over the map on this thing -

MR. E. BYRNE: That is fine.

MR. PARSONS: What is the status of the refinery proposal right now? You

have had a couple of discussions. It came up recently, in the last week or so,

in the context of the Hebron-Ben Nevis negotiations and the fact that apparently

it is off the table in that context.

We also had the Premier, a couple of years ago, I believe, now talking about

he had sent a letter to Richard Branson, who was talking about possibly looking

at a refinery facility in North America.

MR. E. BYRNE: Right.

MR. PARSONS: Where do we sit right now in terms of a refinery and the

Branson proposal or the Branson letter?

MR. E. BYRNE: I will tell you first why we believe there is an

opportunity to build another refinery.

Capacity on the planet is at its peak with respect to refinery. Most of the

refining capacity on the planet today is geared towards sweet crude that is

coming out of Hibernia. This is very top of the trees. What is likely to occur

in the next thirty to forty years is more towards a heavier sour crude - in all

jurisdictions, not just here.

CHAIR: Excuse me for a minute.

MR. E. BYRNE: Yes.

CHAIR: I just received a note that I am supposed to be at a very

important meeting in the Premier's office at 10:00 o'clock.

MR. E. BYRNE: Who is? You are?

CHAIR: I guess we can appoint one of our members to act as Chair.

MR. E. BYRNE: Sure.

CHAIR: Mr. O'Brien, would you?

MR. E. BYRNE: In that context, when you look at what is happening -

because we are dealing with events that are happening on the world stage. You

look at the crisis in the Middle East, the impact of intervention of U.S. policy

in Iraq, the uncertainty surrounding U.S. policy in Iran, natural disasters that

are occurring, and instability, natural disasters certainly in the U.S.

I was watching a program the other night where they are predicting, this year

upcoming, because water temperatures are warmer than where they were this time

last year, I think they were predicting eleven to twelve Category 1 storms

coming up out of the Gulf of Mexico this year.

On top of that, we live in a politically secure environment, next to the

marketplace that has the biggest demand or appetite for refining products, so it

was in that context that we felt that we had an opportunity.

The assessment of refining capacity on the planet is not happening just to

Newfoundland and Labrador. There is somewhat of a race that is occurring by

companies and organizations and consortiums. From that perspective, then, we

were approached with a proposal, not for any money from ourselves but from a

group of companies - and companies of outstanding reputation, primarily driven

and financed out of the UK - that are looking seriously at an additional

refinery in Newfoundland and Labrador, outside of what is currently available or

what has currently been refined by North Atlantic Refining in Come by Chance, to

try to take advantage and position itself; because we have the infrastructure

here in terms of ice-free water, on-tide water, all of the necessary

infrastructure in that area, a skilled workforce, one of the big selling points,

so that study is ongoing and expected to conclude itself within the next four to

five months. Then we will be in a better position, based upon that private

sector proposal, to update the people of the Province once it is concluded. At

this point it is not concluded, but we do feel strongly that there is a

significant opportunity, not just to develop our own offshore oil and gas.

If you look at what is coming from the Middle East and Qatar and other places

in terms of shipment of natural gas or oil, for example, they are in large

tankers because of U.S. security. New U.S. security guidelines that are

occurring require that these large vessels offload in smaller vessels to get

into the marketplace, so we are in a very strategic location in terms of the

shipping lanes to be able to take advantage of what we feel is an emerging

situation, and that is sort of the impetus of where that is to; and the

proposal, based on what the proponents have told us - one of the proponents is

an outstanding local company in terms of Altius Minerals - their assessment will

be complete in about four months.

MR. PARSONS: Was there every any written correspondence between

government, the Premier's office or whatever, and Richard Branson?

MR. E. BYRNE: I could check for you. My understanding is that there was

certainly a call made, and a follow-up letter, but I can double-check for you on

that.

MR. PARSONS: And if there was any response to it?

MR. E. BYRNE: I can check for you on that.

MR. PARSONS: Regarding the 8.5 per cent share of Hibernia, any

representations made to the new federal government concerning a possible

transfer or sale of (inaudible)?

MR. E. BYRNE: I had a meeting with the federal Minister of Natural

Resources, I guess, about four weeks ago, when he was in the Province. It has

been our stated position, and I have reiterated to him, we believe that we have

a right to that. I think the federal government's understanding is that the

revenue source that it provides is pretty significant. Again, this is one of the

issues that the new regional minister, in terms of Minister Hearn, for the

Province, and ourselves, are looking at right now.

MR. PARSONS: Any indication from Mr. Lund if it was on or not on?

MR. E. BYRNE: No indication at this point.

MR. PARSONS: How about the Canadian Hibernia Holding Corporation, which I

understand have their offices (inaudible) away out in Calgary? Was there some

representation in the past to have that moved here, possibly?

MR. E. BYRNE: Absolutely. It is a continued representation to have that

here.

MR. PARSONS: What is the status of it right now?

MR. E. BYRNE: At this point it remains where it is, but it is an

outstanding grievance, from the government's point of view, with that company.

Every time we meet, we mention it. Every time we talk, we say, what about it?

When are you moving your headquarters here?

MR. PARSONS: Do you readily have the employment levels available for

Hibernia, Terra Nova and White Rose?

MR. E. BYRNE: We certainly can get them for you.

MR. PARSONS: I am just wondering.

MR. E. BYRNE: I do not have them off the tip of our fingertips, but we

certainly could get them for you.

MR. PARSONS: Okay. We would appreciate that.

MR. E. BYRNE: Yes.

MR. PARSONS: Is there some repair work required to the Terra Nova FPSO?

MR. E. BYRNE: Yes. This is where the oil and gas industry, the regulation

of it - because the FPSO is a ship, too, so it has to come out of the water for

maintenance and work. There is no yard in Canada that could handle the size of

that vessel. I think it is in Sweden. Is it going to Sweden?

OFFICIAL: Sweden, yes.

MR. E. BYRNE: Sweden, yes.

They have to scrape the hull, repaint the hull. I know, when Petro-Canada

came to see us, they wanted to do all of the maintenance work - not here. We did

not agree with that because it required an amendment to the development plan

application. That is why, right now, at the Bull Arm site, they are building

that $48 million module, additional living quarters for the FPSO.

What is occurring now is that, once that comes out of the water, or once they

disconnect, then Transport Canada guidelines take precedence over the

operational guidelines of the Atlantic Accord. That will go to Sweden, be dry

docked. What work has to be done there in terms of scraping of the hull,

repainting of the hull, and maintenance associated with that, will be done

there. They have a really small weather window to do this in, so timing is

tight. They want to get back, get hooked up, and start production again.

The module itself is being built here, the accommodations module, which is a

significant piece of work here and is going on now. That went out to a public

tender process. I think three bidders qualified,:Kiewit, Penney Energy and North

Eastern Constructors Limited, and North Eastern Constructors Limited won the

bidding process. Our only demand was that it be done in the Province.

That will be married, then, with the FPSO ,and then any other maintenance

beyond that required by the board will be done once it is back and hooked up.

The maintenance associated with the hull when it is in dry dock will be done in

Sweden. The construction of the modules, the extra living quarters, is being

done here. Any addition maintenance work, once that is required, once that is

married, up and running again, will be done when it is in production.

MR. PARSONS: When did it go in the water, the FPSO? How long has it been?

MR. E. BYRNE: Originally? Let's see, about 2001 or 2002.

MR. PARSONS: Something has happened fairly soon or unexpectedly, I guess,

in the industry, to require it to come out that quickly.

MR. E. BYRNE: Go ahead.

MR. SAUNDERS: There are a couple of things. They do have some issues, as

the minister indicated, with antifouling paint, or the lack thereof, with the

hull.

That has caused a real issue for them, but the other issue is - I think this

was almost a recognition from day one - they did not have sufficient

accommodations on the FPSO to be able to undertake the maintenance that was

required while she was sea.

MR. E. BYRNE: It was a design flaw.

MR. SAUNDERS: Yes.

MR. E. BYRNE: One that was pointed out during the debate at the time.

MR. SAUNDERS: It was probably a cost-saving measure as well.

What they recognize now is, by putting additional accommodations on the FPSO,

that a lot of the maintenance that is required into the future can be done while

she is still at sea.

MR. E. BYRNE: And while in production at the same time.

MR. PARSONS: What is the value of the Bull Arm contract, that North

Eastern contract?

MR. SAUNDERS: I thought it was about $12 million, but I stand to be

corrected on that.

MR. E. BYRNE: I will put it to you this way - I can get the number for

you, member, but what I can say to you is that the biggest part of what they had

to do that could be done here is being done here.

MR. PARSONS: How long is that going to take, that whole process? That

will be this year? What does that down time, we will call, translate into? There

are obviously upsides to it in the sense of the module being built in Bull Arm

and so on.

MR. E. BYRNE: They are talking about the fall. They are talking about

coming out of the water and going back in the water and in production by

mid-fall, so it is very tight. Everything has to go correctly.

MR. PARSONS: I am just thinking that obviously there is a production crew

and there is a repair and maintenance crew. Obviously, when it comes out of the

water, we have some upsides in terms of one crew but downsides in the other.

What is the net effect to both?

MR. SAUNDERS: Some of the crew will go with the vessel to do work that is

required while she is on dry dock. Most of the other crew members will be

redeployed. We have not been told that they are going to be "laid

off".

MR. E. BYRNE: No, there is no indication whatsoever that will occur.

MR. PARSONS: What initial interest has government received, in speaking

with oil companies, that might lead to any new exploration parcels being put

forward?

MR. E. BYRNE: If you look at what has occurred in terms of exploration

right now, the largest drill ship in the world is going to be here for

approximately two years, in terms of the Erik Raude, dedicated primarily to the

Orphan Basin. These larger companies ExxonMobil, Chevron and Texaco, who did a

back-in or farm-in, what they call, into the Orphan Basin, along with

ConocoPhillips in the Laurentian, Sub-Laurentian Basin - right now, in terms of

getting a drill ship, I think it is a business we should look at getting into

ourselves. I had that discussion at 7:30 this morning when I met with an

engineering group, an international group. Drill rig rates last week were

$530,000 per day. If you are not entering into long-term contracts, I mean more

than twenty-four months, they are not going to come to where you are because

there is that high of a demand for them. So, my understanding, and certainly the

staff can correct me if I am wrong, but my understanding is that the Erik Raude

will be drilling in the Orphan Basin early, first quarter, 2007, and that Husky

Energy are also drilling, so they will have access. ConocoPhillips concluded

their 3D seismic work, or a good portion of it, in the Laurentian and Sub-Laurentian

Basin in terms of having a notion of where they need to potentially put their

drill rig. These are expensive things to do, $70 million or $80 million U.S., to

go in and drill a hole that could come up dry on you. The amount of work, for

work that goes into it, is pretty significant, so the risk is mitigated to the

extent that it can.

There is a lot of exploration about to occur in the areas that I outlined. We

just released or just put out parcels of land for the bidding process on the

West Coast of the Island in terms of offshore. We are extremely hopeful that

will bear some fruit and promise for us because we believe there is an industry

about to happen or expansion of our industry into that area. So, there are

significant exploration commitments that have been made. For example, in the

Orphan Basin, there is $673 million that must be spent over five years.

MR. PARSONS: Does that fall under the heading of deep water areas?

MR. E. BYRNE: It is 1,500 to 2,000 metres, and maybe even up to 3,000

metres in some areas.

MR. PARSONS: So that is the deep water areas?

MR. E. BYRNE: Yes.

OFFICIAL: And most of the (inaudible) activity in the Laurentian

Sub-basin is deep water as well.

MR. E. BYRNE: Yes. We are talking 600 metres to 800 metres there?

OFFICIAL: Oh, even more than that, 1,000 metres -

MR. E. BYRNE: One thousand metres in some places, yes.

MR. PARSONS: Natural gas development, where are we sitting right now?

MR. E. BYRNE: Well, there is significant interest from, particularly by

Husky, notions of CNG, LNG or a direct pipeline to market, are all being

discussed right now amongst the companies themselves.

Part and parcel of where we are, we are going through our energy policy

review. We will look at what comes out of that in terms of natural gas

development and what we expect. Industries have talked to us, they want

certainty in terms of a royalty regime. We would like to have one in place but

we have a balancing act to provide here, too. You can put a royalty regime in

place on the one hand, you have a significant development without understanding

what is out there - generic regime was developed over time. We have specific

royalty regimes for specific projects in the Province right now, but natural gas

is in front of us. It is going to happen sooner rather than later, in our view.

So part of our energy policy review and the public policy that will come out of

that will provide, certainly from our perspective, from the government's

perspective, on where we would like to go and what we expect from that

development. Now, whether that ends up being congruent where companies are and

what they want, we will have to wait and see, but we are working daily with

companies on that now, particularly Husky who are really bullish about - it is

2.2 trillion, 2.3 trillion cubic feet of gas in Husky's development. So that

is a significant resource that they are anxious to get developed.

MR. PARSONS: The generic royalty regime again, is there some indication

that is one of the reasons why there is not more happening in natural gas

because the Province does not have the royalty regime in place?

MR. E. BYRNE: That is what the companies will tell you, yes. They have

told me that directly. They want a natural gas royalty regime. They want this

and they want that, and they want it now. That is the only thing holding up

development, and we appreciate that. Like I have said to the companies that are

interested: Look, we are just about there. We were elected two-and-a-half years

ago, we are going through an energy policy review. We have a strategic energy

advisor, in terms of Woods McKenzie, that is working with us on this. We are

closer to having answers for you on that than we are far away. The industry, I

think, have been generally patient with us.

MR. PARSONS: When do you see the energy policy review being finished?

MR. E. BYRNE: I think in the fall. We have not set a time line because of

all the expressions that we have gotten, both publicly and privately, but we are

hoping to have it done by the fall.

MR. PARSONS: I am just trying to get some clarification here. Is the

generic royalty regime something that is going to come about and be started to

work on after your energy policy review, or is it being worked on?

MR. E. BYRNE: It is a natural gas royalty regime you are talking about?

MR. PARSONS: Yes.

MR. E. BYRNE: While that decision has not been made, it certainly is our

intention to provide as much certainty and clarity on what we want and what our

expectations are with respect to the development of natural gas in the Province

from industrial benefits to royalties, and that would include, potentially, a

natural gas regime.

We are living in a time of - even as long as four or five years ago, no one

anticipated that oil prices would be where they are or anticipated that they

would be staying there. That has fundamentally changed how we are looking at

things, that we provide for - as we talked about - super royalty or if there are

windfall profits coming as a result of increased oil prices per barrel, than we

believe we have an absolute right to share in those windfall profits. But, at

the same time, if prices return to where they were, then we need to have regimes

in place that recognize the certainty of that era too. So that is where we are

with it.

MR. PARSONS: Other than the Terra Nova FPSO accommodations module, has

there been any work identified for Bull Arm or the Marystown Shipyard?

MR. E. BYRNE: There has been other work. I can get you what has occurred

there in the past and what is potentially going to occur there. That is not a

problem. I can provide that to you. I do not have it with me today. I know that

there is some other - as recently as last week, there is potential for other

stuff.

As you are aware, I think it was last year, the money that was in reserve at

the Bull Arm site that was running the operations ran out. But from our

perspective, we put in last year - I think it was the first year last year,

Bruce, wasn't it, when it expired? - that was in the base to keep it running,

the exact same amount that it would require just to keep the site up and moving

and people there, $1.1 million. We have a strong belief that the Bull Arm site

is a tremendous and strategic piece of infrastructure for us. We invested in the

retractable doors, that was a big attraction to the site. I don't know if you

have been down there, but they had to haul out these walls all the time. We put

in these huge retractable doors that allowed for any - it is a pretty strategic

piece of infrastructure that we put in place and we are looking at other things

over time, both ourselves and in association with the industry, if we can get an

increased level of activity there, but it continues to be a great site from our

perspective and one that we believe in and one that we are going to continue to

invest in.

MR. PARSONS: I wonder if you might clarify for me the fuss about the wind

power project in Labrador? The Metis seem to be - a lot of controversy there.

MR. E. BYRNE: Absolutely! I can clarify it for you, as I clarified it to

them.

Number one, Ventus Energy today consists of six people, a CEO - they are a

big investment fund. They have identified, in many provinces, that they are

going to be into the wind energy business. They showed up on our doorstep and

said: We have a $2.5 billion project, we want your support. We said it sounds

great but we have about thirteen or fourteen other proposals on the table before

us right now on wind energy and all of it is on hold until our energy policy

discussion paper and our energy policy review is done and we plan to put in

place a long-term strategy for the development of wind. On top of that, I

indicated to them in our boardroom that we have not decided on what role our own

Hydro company will play in this, whether they will play a role as a partner or

not a partner. All of that is fluid. So, this proposal that you have in front of

us, like every other proposal that we have in front of us, is on hold until we

develop our broad strategy on wind. Apparently that was not acceptable to them.

They were very critical of us as a government.

Now this is a company that came in, had not identified what royalties they

were going to provide, did not have any discussion about benefits, other than

there is going to be a whole bunch of construction jobs up in Labrador. That is

all great, but what happens when all those construction jobs are gone? Because

it does not take a lot of people of run a wind farm once they are all erected.

We were upfront, frank and honest with them on the development of wind energy.

Subsequent to that, we discovered that they had no discussions with the Innu

Nation and where they were proposing to put the park was on a recognized Innu

land claim area. They had no discussions. Now, they quickly backtracked and

tried to get the Innu Nation involved but it was too late. From our perspective,

that was something that they had to do that they had not done. The President of

the Innu Nation phoned me, in my capacity as the minister, and said: Now,

minister, what is all this proposal about? I said: Well, I can only tell you

what they have told me. Have they had any discussions with you? Absolutely none!

I said: Well, that is an issue for you and them to work out. So, that is where

that evolved from.

Again, it is like probably fourteen or fifteen other proposals that have come

to us unsolicited that we have put a hold on, because here is what we think,

here is what we believe. Once our public policy decisions on wind and other

renewables are established, we believe there is a significant industrial benefit

and opportunities associated with the development of wind energy. If we identify

a certain percentage of wind or certain megawatts - the same thing but depending

on how you come at it - that we want developed over time, there are significant

assembly and fabrication opportunities that are associated with the construction

and assembly and fabrication of these giants, and I have been in some of them,

they are absolute giants. We have the facilities here in Placentia and Marystown

and the Bull Arm site which can participate in that, but we also know that

unless we have a long-term policy saying that over the next ten years our target

is to put x number of megawatts into the system, then those opportunities are

not going to be there.

We also need to understand, I have run into this publicly a lot: Well, you

know, wind energy can replace Holyrood and the 600 megawatts in Holyrood.

Notionally, that is true. Practically it might not be, because there is one

certainty with the development of wind energy, that while we have a tremendous

resource, and I guess colloquially or antidotally we hear: Sir, you know that

the wind blows here all the time. It does, but there are days that it does not.

When it does not and when you create the demand on the one hand that needs to be

maintained, backup systems are required. What we have done on wind energy right

now, the only thing we have done, is that we have gone out for a request for

proposals through Newfoundland and Labrador Hydro for a small development or a

certain number of megawatts to get an understanding of the interaction that wind

will have on the Island portion of the Province. That policy will come out of

the energy policy review and we are looking forward to that, to be honest.

That is what happened with Ventus Energy. I read last week that they are in a

bit of a squabble now with Quebec Hydro on a development in Ontario about

wielding energy from Ontario to somewhere else. This company is what they are,

but you do not come into any government - would be my assertion - and say: We

have a $2.5 billion project; there are going to be a lot of construction jobs;

it is great for you, and then - imagine if we had signed onto that without

understanding the benefits to Labrador, any IBA agreements related to it being

done in a recognized land claim area and without any knowledge of - I mean, that

will blow for 100 years, potentially; no royalty regimes and then say that

government was anti-business when they were told all of this upfront. Everything

I said publicly - after that they held a press release. I told them the day

before.

It is also interesting, that the very day that government started its energy

policy consultations, first in Labrador, which was open to every group and

organization, including the Metis Nation, was the very day that they held a

press conference at the Fairmont in St. John's to talk about a wind energy

development.

MR. PARSONS: Motivation?

MR. E. BYRNE: I have no idea. Coincidental? Maybe. I just found it

amusing and interesting that that occurred at that time because it was the

second time. The first time we held a broad public consultation to begin the

notion of dealing with Lower Churchill when we were in Goose Bay. That day it

was open to everybody again. That is when we had all the municipal leadership in

from Labrador. People thought we were going up to make an announcement on an

agreement. We were just starting the process, when myself, the Minister of

Fisheries and the Minister Responsible for Aboriginal Affairs, the Minister

Responsible for Human Resources, Labour and Employment at the time, the Minister

Responsible for Labrador Affairs, and the Premier, the CEO of Hydro, the

Vice-President of the Lower Churchill Development Corporation, were all in Goose

Bay at a public consultation where we flew in all the municipal leadership,

where all the elected members were there on that day, and the first time the

Metis Nation were in St. John's holding a press conference, the same day

again, during consultations. So it is interesting.

MR. PARSONS: Minister, what is the status of the Lower Churchill

discussions right now?

MR. E. BYRNE: We are still at the end of Phase II. My sense is that

within the next - I am reluctant to give a time frame because I do not want to

be held to it. I do not want to say that we set a time frame, but we are about

to conclude that Phase II process. Then whatever announcements are going to come

out of that in the Phase III will happen, I would think, in the very near term

as opposed to the longer term.

MR. PARSONS: The Voisey's Bay project, particularly the hydromet

facility, Argentia-Long Harbour, where are we with that right now? I realize

government asked them for a lot of further information.

MR. E. BYRNE: Yes, we just got the information and just got it analyzed.

I met - and this will become public very soon actually. I committed to a process

with both the company and with the stakeholders in the area when this started,

that once our assessment was complete I would meet with the stakeholders, which

I did last week. I am hoping to meet with the company this week to share with

them part of our assessment, because there are more questions. I do not think it

is a slam dunk on the decision they have made. I am meeting with the company

this week and then we will release what our assessment is. From that perspective

- the municipal leadership, the AMA and the Chambers of Commerce, they have

accepted - I put this forward to them: Here is how we see this going forward

because it is a lot of information. At the same time, we did say to Voisey's

Bay Nickel Company, because they asked - they wanted to begin the process of

registering their project in Long Harbour because they had certain time lines.

So, I wrote them a letter saying: We concur that you can go ahead with the

environmental assessment process in recognition of your time lines but in no way

should you take from this that we necessarily condone your move because our

assessment is still being complete. We would not want to put the Province in a

situation by where, while that assessment is ongoing, that we interrupt with

your time line. That would put them in a position to say: Well, we could not

make the decisions based upon the agreement that we signed because of your lack

of action on a file - if you know what I mean.

MR. PARSONS: Yes.

MR. E. BYRNE: I would think that once I meet with the company then we are

going to make - that is the plan and say: Here is the information, here is our

assessment, and here is where we think this is going. We need to meet with them

first.

MR. PARSONS: When do you anticipate that might happen?

MR. E. BYRNE: I am hoping within a couple of weeks.

MR. PARSONS: Duck Pond Mine, where is that right now in terms of -

MR. E. BYRNE: Well, it is an exciting project, as your colleague may tell

you, in Central Newfoundland. They have the construction - we were in and had a

briefing about two weeks ago. We get updated regularly on it. That project is

moving ahead, on time, according to schedule, on budget and having an impact, a

positive one, in the region in terms of economically.

The only issue that is really at issue - actually, I think the Mayor of

Buchans is in today meeting with them on it - is one that became public a couple

of weeks ago, in terms of the registration of the environmental assessment

process, is that they committed to not having - during the production phase of

the mine. So, once all the mine site was done, constructed, they committed that

there would not be a camp on site. In other words, the spread of the economic

impact would be felt in comminutes if people had to move in or stay in Buchans

or Millertown or wherever, in the area. They have recently come back and said to

us: Look, we would like to change that. We said: Well, we do not agree with you

changing that. Our view is that you made commitments to the people of Central

Newfoundland and we expect you to uphold it. They have indicated to us: Well, we

are having difficulty getting miners because there is no campsite. Miners who

have established homes in areas of the Province or outside the Province - but in

areas, primarily, in the Province - do not want to come in and buy a home

necessarily for a seven or ten-year period. All we said to that: You have made a

commitment and we expect you to live up to it. Go find a solution to it.

Now, according to the environmental assessment process, if they want to want

to make a change to their agreement or a proposed change, we cannot stop them

from doing that. They can apply to the environmental assessment process, and

that opens all that up again in terms of where a camp may be. I think they

notified us that they would be doing that, as I have talked about, but our

position is that there are other ways that you can mitigate this, that can have

an impact - impacts that you promised, we feel that you can live up to those

outside of having a camp right on site. If you look at the mayors in the area,

they were excited and supportive of this project primarily for that reason.

So, that is our position, but at the same time, it is an exciting project,

there is no question about that. What is most important about that project is

that there are, probably, four to five other smaller finds in the area that were

not big enough to warrant the investment of the infrastructure that they have

invested, but now that it is there, those finds, more than likely, are probably

more economic - we know they are more economically feasible to develop because

they can, potentially, have access to that infrastructure once that mine is

depleted.

MR. PARSONS: Did Hydro agree to put the power line in there after?

MR. E. BYRNE: Yes, but they paid it back, and they will pay it back over

time.

I will tell you a story on that now. They came to see us because Newfoundland

Power were originally looking at doing it, and Newfoundland Power wanted, I

think, a $6 million cheque today; pretty significant. We said: Well, let's

have a chat with Newfoundland and Labrador Hydro - I committed to them - and see

what they can do. So, Hydro - essentially, the same cost but the recouping of

that over the life of mine, which is a normal everyday business practice from

Hydro's perspective. I mean, no loss to Hydro's revenues, an increase,

another industrial customer on the Island, but it helped mitigate and get that

mine going sooner rather than later because we did not require that up-front

cheque right off the bat.

MR. PARSONS: Were there any direct monetary subsidies by government to

the project?

MR. E. BYRNE: No, there was not. There was consideration being given to

it but when they

[Technical Difficulties]

talk about the ovoid and the blending of the operation in the eastern deeps,

in terms of getting into the underground mining sooner. So that is primarily the

difference, the size, scope and magnitude of the deposits.

MR. PARSONS: In terms of mineral exploration in the Province, is there

much?

MR. E. BYRNE: This year we anticipate $50 million. We are almost back to

where we were in the early 1990s when Voisey's was discovered. Most in the

industry tell us that once you get into this level of exploration, that you are

going to get into some significant finds. We anticipate $50 million this year.

That is up about 35 per cent, 36 per cent from two years ago. What that means in

employment, employment levels have gone from about 2,600 people to about 3,200

and that will increase again this year in terms of the exploration activity.

That is one of the reasons - probably the single, biggest reason why we upped

the Mineral Incentive Program to $2.5 million this year and added another

$500,000 to our budget base for geological survey to try to really incent even

more for next year. So, there is about $50 million this year to be spent, most

of that in Labrador but a lot on the Island as well.

MR. PARSONS: Have there been any significant discoveries?

MR. E. BYRNE: A significant promise, if you look at - particularly for

uranium in Labrador and the black sands project on the Churchill River, which is

an interesting project that is emerging in front of us as well. Yes, there is

significant promise, no question about it. I think this is the year that - in my

own view, I am optimistic that this is the year that we are seeing - like the

oil and gas industry, we are seeing significant exploration by the juniors, but

I think this is the year where we are going to see some big developments and

other bigger mines. That presents a whole host of challenges in terms of power

requirements and all the processes like we went through in Voisey's Bay. So it

is going to be a really exciting year for the industry, as I see it.

MR. PARSONS: I guess the energy policy review no doubt needed to be done

and is being done, but is that in and of itself - I guess somewhere you had to

do it, but it seems like it may be slowing down a lot of things overall as well.

Like, nobody can move on wind power until it is done. You do not know where we

are going on the generic regime for natural gas. There are a whole host of

things and (inaudible) that -

MR. E. BYRNE: Yes, a legitimate observation.

MR. PARSONS: - everything seems to have come to a complete stop and

everybody is saying, whoa.

MR. E. BYRNE: Some of the bigger public pieces have, but our view is that

this is going to be complete very soon, that it is going to speed things up on

the back end or over the long haul because there will be certainty about where

we are going in certain industries and that is where the benefit will be, as we

see it.

MR. PARSONS: I guess it is part of the policy review?

MR. E. BYRNE: No, there are things occurring in parallel that the world

just cannot stop on us. We are still having discussions with Husky on what we

can do to help with the natural gas royalty regime. What is it they are looking

for, from us now? We are still moving ahead on Hydro, for example. We are still

trying to move ahead on enticing more exploration. So, there are things that are

happening that we cannot stop and nor should we. But once this is complete and

we table it, I mean from that will be the broad public policy that will, no

doubt, cause debate, and so it should. No doubt out of that broad public policy

could come requirements for legislative changes that will evolve from that

document, and so it should. But once it is done I think they will be, certainly,

provided on any number of fronts, from, say, this day forward for some time,

that we will start to really speed things up somewhat.

MR. PARSONS: Thank you.

I have nothing further, minister.

MR. E. BYRNE: Okay.

CHAIR: Any further questions from the Committee?

I guess we have to wait for the Clerk to come back now to conclude the

meeting.

MR. E. BYRNE: Okay. Well, thanks everybody. I appreciate it.

CHAIR: I will ask the Clerk now to call the subheads.

CLERK: 1.1.01 to 6.1.01 inclusive.

CHAIR: Shall subheads 1.1.01 to 6.1.01 inclusive carry?

All those in favour, aye'.

SOME HON. MEMBERS: Aye.

CHAIR: All those against, nay'.

Carried.

On motion, subheads 1.1.01 through 6.1.01 carried.

CHAIR: Shall the total carry?

All those in favour, aye'.

SOME HON. MEMBERS: Aye.

CHAIR: All those against, nay'.

Carried.

On motion, Department of Natural Resources, total heads, carried.

CHAIR: Shall I report the Estimates for the Department of Natural

Resources for the year 2006-2007 carried without amendment.

All those in favour, aye'.

SOME HON. MEMBERS: Aye.

CHAIR: All those against, nay'.

Carried.

On motion, Estimates for the Department of Natural Resources, carried without

amendment.

CHAIR: I would like to thank the minister and his officials. Also, we

have a couple of things to do - I thank the members of the committee and the

staff - to adopt the minutes of our last meeting as circulated on April 6. Would

someone move -

MR. O'BRIEN: So moved.

CHAIR: Moved by Mr. O'Brien. Seconded?

MR. HUNTER: So moved.

CHAIR: Seconded by Mr. Hunter.

Shall the minutes of the Resource Committee meeting held on April 6 carry as

circulated?

All those in favour, aye'.

SOME HON. MEMBERS: Aye.

CHAIR: All those against, nay'.

Carried.

On motion, minutes adopted as circulated.

CHAIR: Our next meeting will be this evening at 7 o'clock in the

Committee Room and we will be doing the Department of Fisheries and Aquaculture

and Aboriginal Affairs.

Thank you very much.

A motion to adjourn? Mr. O'Brien?

MR. O'BRIEN: So moved.

CHAIR: This meeting stands adjourned.

On motion, Committee adjourned.