Resource Committee — Department of Natural Resources last year — 22 May 1996

1996-05-22

Newfoundland and Labrador — Committees

May 22, 1996

RESOURCE ESTIMATES COMMITTEE

The Committee met at 7:00 p.m. in the House of

Assembly.

CHAIR (Mr. Perry Canning): This is the

first meeting of the Resource Committee for this budget. First of all, my name

is Perry Canning, from Labrador West. I would ask everybody to introduce

themselves for the record.

You can start, Roger.

MR. FITZGERALD: My name is Roger Fitzgerald,

M.H.A. for Bonavista South.

MR. SHELLEY: Paul Shelley, M.H.A for Baie Verte

District.

MS THISTLE: Anna Thistle, M.H.A. for Grand

Falls - Buchans.

MR. FRENCH: Bob Mercer, M.H.A. for Humber East.

MR. WOODFORD: Rick Woodford, M.H.A. for Humber

Valley.

MR. OSBORNE: Tom Osborne, M.H.A. for St. John's

South.

CHAIR: Thank you very much.

Perhaps the Minister can introduce his delegation.

DR. GIBBONS: Rex Gibbons, the Minister of Mines

and Energy. With me on my right is Paul Dean, Assistant Deputy Minister of

Mines; on my left, Martin Sheppard, Assistant Deputy Minister for Energy; and

Leonard Clarke, Director of Financial Operations of the department.

CHAIR: Thank you very much, Minister.

Well, good evening and welcome to everybody. I

would just like to say this is our first meeting and we have four new MHAs

sitting here in this particular Committee and several veterans, including a

veteran minister, so it should make for an interesting evening. I welcome the

Minister and his delegation. We will get right into it and we have agreed,

Minister, that there will be fifteen minutes of an opening statement by you and

a fifteen-minute response by Mr. Shelley.

DR. GIBBONS: Okay, I am ready to go.

CHAIR: We are ready.

DR. GIBBONS: Thank you very much, Mr. Chairman.

I do have a statement because I would like to put

on the record some of the good things that are happening in the sector of mines

and energy in the Province. Before I get into my statement, I want to give out

some goodies. I have a bunch of copies of this brochure on the rich mineral

resources of the Province and it will probably be informative for people to have

a copy of that. There is a copy of our latest Mineral Information Newsletter

from the Department, more details. There is a copy of a mining magazine with the

two Prospectors of the Year, Albert Chislett and Christopher Verbiski, with all

sorts of other good information on the mining side. I have a written document,

an update on the oil and gas sector. I probably could have brought some

magazines on the oil and gas sector which are equally glossy and equally good to

this one on the good things that are happening in Hibernia and Terra Nova, the

West Coast etc. So these are documents with a lot of information on the

industry.

At this time, I will proceed into the statement

that I have to put what we are going to discuss this evening in context. Mr.

Chairman and members of your Committee, the total budget of the new Department

of Mines and Energy for 1996-1997 is $10,167,400 with a net expenditure of

$9,110,600. This is a reduction of $1,763,100 from the net budget of the Mines

and Energy branches of the former Department of Natural Resources last year.

The reduction in the estimates is a result of three

principal factors, number one, the termination or the end of the Canada

Newfoundland Agreement and Mineral Development. It ended on March 31; number

two, the elimination of funding for the Newfoundland Exploration Assistance

Program; and, number three, the general government restraint as a result of our

current fiscal situation.

The department's estimates before you represent 0.3

per cent of government's total budget for the current fiscal year. So we are not

a big percentage in terms of the expenditures of government. We are a very small

percentage. And yet, we are talking about the mine sector and the energy sector

which are economically the two sectors that are probably getting the most news

in terms of the importance to the future of this Province from the resource

sector. And some of these things have been outlined in speeches in the past,

including the Throne Speech recently.

In the department, we deliver some very effective

programs and policies which are efficient and flexible and meet the principal

needs of our client groups, as well as provide for effective management of the

Province's mineral and energy resources.

The department's programs in the mineral resource

management sector are delivered through the Mines Branch with the Assistant

Deputy, Paul Dean, who is with us tonight. The principal programs of the Mines

branch are the geological survey, the Mineral Lands Division and the Mineral

Development Division.

The geological survey is one of the main activities

of the Mines branch, and again this year, geological survey work will continue

to provide and to increase the basic geological data base to help promote

mineral exploration and mineral development. The work of the survey is a major

factor in attracting investment in mineral exploration to this Province and in

assisting in the discovery of new mineral deposits.

The field program this year will focus on Labrador

with several bedrock mapping and geo-chemistry projects in Northern Labrador, in

the Nain and Hopedale regions. This year we will begin a new project to further

evaluate a nickel potential of all the regions of Labrador with initial focus on

the Nain region for obvious reasons. Other projects planned throughout the

Province include bedrock mapping and mineral deposit assessment in Central

Newfoundland, evaluation of the gold potential on the Avalon Peninsula,

continued evaluations of limestone and marble deposits of Western Newfoundland

and I mentioned stone projects in Coastal Labrador. We can get into more

discussion of some of these later if you so desire.

The mineral lands division of the mines branch is

responsible for administering the Province's mineral land tenure system and for

regulating mining developments and operations in the best interest of the

Province. This includes the administration of land tenure regulations,

particularly the mineral act and the quarry materials act. The division also now

administers the Mineral Holdings Impost Act which has been transferred recently

from the Department of Finance. One of the highlights, of course, in 1995 was

that the number of claims staked jumped from about 20,000, the year before -I

believe the number was 22,000 - to 248,000 last year. So 250,000 last year and

it created lots of excitement but for that division an awful lot of work.

Now, I will ad lib away from the written statement

here and say that for about six months last year the staff in that division were

so busy that we had a second shift that would come on about 4:00 p.m. to work

until midnight to try to do the paperwork to take over from the shift that was

going off at about 4:30 p.m. each day. They did manage and they did deal with

the 250,000 claims.

The other division of the Mines branch, the Mineral

Development Division, is responsible for implementation of the regulatory

framework required to control the development, operation and termination of

mining operations. This includes systematic monitoring of present operations and

other developmental activities and the pursuit of developmental opportunities.

It includes, for example, a Prospector's Assistance and Training Program as well

as our regional office in Wabush. This is the division that analyses whether or

not a deposit may contain an economic quantity that can warrant development.

The Mines branch is showing some significant

reductions. We have allocated $5,221,300, which is a net reduction of $1,114,700

from last year. So that is a significant decrease from last year. The reductions

are primarily, as I said earlier, the result of the end of the Newfoundland

Exploration Program, the cancellation of it. Last year we put $500,000 into

that. Secondly, the end of the agreement on mineral development, we had $800,000

in that last year of provincial funds. The department has provided funding of

$350,000 to continue with some of the key programs previously funded under the

Mineral Development Agreement and that will be reflected in our detailed

estimates tonight. We are also continuing the Prospector's Assistance and

Training Program and putting $180,000 into that, probably our best single

investment.

The mineral industry: I want to say a few things

about the mineral industry but the documents I gave you earlier show great

detail on that and you can go through them at your leisure. The total value of

mineral shipments increased by $102 million from 1994-1995, that is 12 per cent.

The current forecast for 1996 is a further increase of $67 million or 7 per cent

to $1.01 billion. The last time we broke a billion dollars in mineral production

was 1981, fifteen years ago. We were expecting it to be higher than that this

year but unfortunately, the strike in Labrador West has caused us to subtract

maybe about $250,000 from our estimate.

This growth is a reflection of several important

factors. No. 1, strong industrial growth in the United States and

internationally, strong demand, accordingly, for iron ore. As a result, No. 2,

an increase in price on iron ore concentrate and pellets; No. 3, an increase in

production by both of our iron ore companies, Iron Ore Company of Canada and

Wabush Mines; and No.4, a decreased value of the Canadian dollar which helps us

on the foreign exchange. Right now, we expect these conditions to prevail

through this year and into 1997; we are not forecasting, nor is the industry,

beyond 1997 at this time but we look forward to a pretty healthy industry for

the next couple of years.

Mineral exploration expenditures are forecast to

rise by 57 per cent this year from $70.8 million last year to $111 million in

1996. Go back two further years and the total was only $8 million, back in 1993,

Paul?

MR. DEAN: Ninety-two.

DR. GIBBONS: Ninety-two, it was $12.5 million;

last year $70.8 million. This substantial increase, of course, reflects -

MR. DEAN: You were right.

DR. GIBBONS: I was right, in 1993 it was $8

million and in 1994 it was $12.5 million. This substantial increase reflects a

dramatic rise in exploration activities in Labrador as a result of the Voisey's

Bay discovery, the most significant mineral discovery in our history as a

Province and probably one of the most significant in the history of Canada.

In late 1995, the Province saw the opening of

another new mining operation on the Baie Verte Peninsula, Ming Minerals began

shipping copper concentrate from the re-activated Rambler project on December

27, last year. Since then, they have made two or three additional shipments.

Their re-opening has been quite successful and I wish them well in 1996. In

April just past, Atlantic Minerals of Corner Brook started operating the Lower

Cove quarry on the Port au Port Peninsula. Also, Raymo Processing Limited, with

its new partner, Electra Mining has finished construction of a vat-leaching

process to extract gold from the tailings of the former Rambler Mines on the

Baie Verte Peninsula and production has started at the site, we are pleased to

say.

I expect Richmont Mines, its Nugget Pond project,

to proceed this summer, another gold mine, as well, as a slate quarry at Keels.

If environmental approvals are granted this year, Roycefield resources antimony

project, the Beaver Brook Antimony project south of Gander Lake could start

construction this year. They are presently in the environmental review process.

Production of magnetite as ballast for the Hibernia project has begun from a

deposit near St. George's and a new gypsum operation in the same region will

also see a start this summer, in this case, supplying gypsum to the wallboard

plant at Corner Brook.

Several other mining projects such as Major

General's gold project near Springdale; Burin Minerals Fluorspar project at St.

Lawrence, Torngat Corporation's second, an anorthosite quarry near Nain in

Labrador and Newfoundland Slate's second slate quarry near Long Harbour,

Placentia Bay are all at different stages of development and all could proceed

to production within the next twelve to eighteen months. Right now we expect

they all should.

Now, I would like to switch to the petroleum side.

Mr. Chairman, the allocation for the Petroleum And Energy Resources Management

Program or the Energy Branch has been reduced to $2.98 million for this budget

year, down from $3.63 million last year. About $2 million of this is provided to

fund the provincial share of the Canada-Newfoundland Offshore Petroleum Board,

as well as some capital projects under the Offshore Development Fund. The

remainder, about $1 million, is used to fund four separate activities within the

Energy branch of the department. I will briefly describe these.

The Petroleum Resource Management Division

administers the petroleum land tenure system, provides petroleum resource policy

recommendations and advice to government and provides geological, geophysical

engineering and regulatory service in the oil and gas sector. Activities over

the coming year will focus on management of onshore petroleum resources and

assessment of petroleum potential, as well as promotion of the Province's

onshore and offshore resources, provision of technical support to provincial

negotiating teams, and review of offshore management decisions made by the

Offshore Board, as well as ongoing development of the offshore and onshore

regulatory regimes.

I would like to refer here to the recent land sale

that we had on the West Coast. Twenty-eight of thirty-one packages were bid, and

CNOPB, the Offshore Board, has a sale on dated September 30 1996: Four packages

on the West Coast and four on the Grand Banks. We are looking forward to that

one, particularly in light of drilling that is ongoing now in Western

Newfoundland.

The Policy, Planning and Co-ordination Division of

the Energy branch plans and provides policy, recommendations and advice on

energy matters, co-ordinates and implements initiatives related to public and

community relations - for example, the Bull Arm site committee - as well as

energy and environmental initiatives, and on a limited basis, energy efficiency

and alternate energy matters. Included in the division's activities for this

year are the provision of administrative liaison between the Federal and

Provincial Governments and the Offshore Board, the finalization of a Memorandum

of Understanding on a joint environmental assessment of the Terra Nova project,

and the establishment of the Terra Nova public review panel. From the energy

perspective, the Department of Environment and Labour provincially is also

involved in this. The division administers, as I said earlier, the Bull Arm area

co-ordinating committee agreement, and is co-ordinating the preparation of the

Provincial Government submission to the National Climate Change Voluntary

Challenge and Registry, in association with the concerns about global warming.

The division co-ordinates energy policy, planning, advertising, promotion and

community relations.

We also have an energy economics division which

provides energy economic policy recommendations and advice to government from

the economic implications of energy activities. Activities of this division for

this coming year will focus on negotiation of the energy

chapter of the Internal

Trade Agreement - this has not been concluded and I believe may be the only

chapter not concluded - as well as participation in the development of generic

and project-specific petroleum fiscal regimes and royalty systems. Ongoing

activities include the monitoring of crude oil sales and reference prices,

electricity prices, motor, gasoline and home heating oil prices and markets, and

monitoring operations at the refinery in Come by Chance.

We have a new division called the Petroleum

Projects Monitoring Division which will develop and administer petroleum project

agreements and royalty systems and provide fiscal policy recommendations and

advice to government. Key activities this year will centre on preparation and

administration of royalty legislation and auditing of cost for the determination

of royalties from Hibernia as the first project, and other petroleum projects as

they evolve, with Terra Nova, of course, being close behind. The division will

participate in the negotiation and preparation of petroleum agreements and

develop and implement petroleum revenue strategies. This division will also

develop and maintain industry information systems as needed to do the job

relative to determination of royalties, et cetera.

The Hibernia monitoring division of government has

also been transferred to the department with this Budget year. This program has

a budget allocation of about $250,000. This particular unit has been monitoring

activities associated with the construction of the Hibernia project which, of

course, we know will be coming to an end within the next year.

Mr. Chairman, that concludes my overview of the

activities of the department. I look forward to further discussion.

CHAIR: Thank you, Minister, it was quite

enlightening. I must say, having come from a community of mines in Western

Labrador, your department means quite a bit to me. It may be a small department

but it is an exciting department with a big role to play in this Province.

CLERK: 1.1.01.

CHAIR: The Clerk has called 1.1.01. I recognize

Paul, now, to respond to the minister.

MR. SHELLEY: Thank you very much, Mr. Chairman.

I am delighted to be here this evening, especially

as the vice-chairman, but also as the mining critic for the Opposition, and

along with my colleagues here. We do have some questions on the estimates, but I

will make a few comments to start with.

First of all, to repeat again, I am delighted to be

the shadow critic for the mining department because I am very interested in that

particular industry. It is for obvious reasons, because in my district and

surrounding area, mining is a very important part of the potential there. As a

matter of fact, as you look around the Province these days, like the minister, I

am very lucky to be in that portfolio, to be honest with you, because it is the

bright spot on the horizon for Newfoundland. We do have great potential and, of

course, that it is developed properly and that we get our full and fair share,

as we always say, I guess is the goal of the government, and that is what we

hope to hold them accountable to.

I will start off by saying the Province, as a

whole, has great potential, but we will get into some general statements a

little bit later on Voisey's Bay. Of course, that is the cream of the crop, I

guess you could say, when talking about the mining industry and everybody has

questions on those. I have many more questions for the House of Assembly for the

minister but he knows thus far that I am going to have constructive straight

forward questions on Voisey's Bay, in particular, because it is such a mammoth

project. I have spoken to the minister about it. It is such a big project and it

is hard to get a grasp on it. There are a lot of questions by Newfoundlanders in

general and Labradorians about how it will be developed and certainly without

drawing any partisan lines, I know the minister will agree with me when I say

that Newfoundlanders don't feel very comfortable when we talk about developing

our resources, for obvious reasons, that we have not gotten our full and fair

share under all kinds of governments over the past years. I guess now

Newfoundlanders are looking around and saying, well we have something here. I

hope we have learned from our mistakes of the past and hopefully we will develop

such a resource as Voisey's Bay offers the proper way and proceed so that we

will get our full and fair share.

On the other side of it is the smaller industries.

When we talk about bringing in amendments and legislation and so on, to make

sure that we do get our fair share, we also at the same time keep in mind the

smaller companies who, basically, lead us to the bigger Voisey's Bays and so on.

Of course, without the smaller companies and the exploration that goes on in

this Province, as anywhere in Canada, we will not find the Voisey's Bays of the

world. So it is very important that we keep encouraging and we don't deter

exploration from happening in the Province. I think we are all in agreement with

that, in that whatever legislation this government or any government brings in

is that we keep it in mind that small mining companies have to be interested and

still excited about coming here. We have to do everything possible to encourage

those companies to come and look for more.

I still think we are going to find - I don't know

about Voisey's Bay but I still think if exploration continues in my area, on the

Baie Verte Peninsula, we are certainly going to have a big find down in that

area pretty soon. It is a very active area of the Province, the Baie Verte area

and, as the minister mentioned already, Raymo is going to try a fairly new

technology - I guess it is. I don't know if it is new to the world but it is new

in Newfoundland, fairly new. It was tried in Murray Brook, that leach process,

which was very interesting. I think they have started that now and I think it is

going to prove successful. I think it is really a pilot project to lead into

other projects in the Baie Verte area, and in any other area, for that matter.

Now, we also see - and I really want to throw a

compliment out here to the group at Ming Mineral. I especially want to mention

this evening, too, I think it is only fair to do it, Sam Blagdon who died

tragically this past year. He had great foresight with respect to an old mine,

so to speak, and did a lot of aggressive pursuit of how to start that mine up

again, along with Clarence Martin, Peter Dimmel and those groups there. I think

that is just an example of what the minister has been dealing with as far as

people interested in mining in this Province is concerned and they have gotten

good co-operation from the minister and his deputy ministers.

Also, before I go on, I don't want to miss this and

say that I commend Paul Dean for the job he has done in keeping in touch with

people in the industry especially. I have dealt with him and asked questions and

he has been very good to me in answering questions and giving information. I

have also heard it many times by people in my area who are involved with the

mining industry out there that they have had great co-operation from the

minister and his department. So I will say that. I think that, for one thing, we

are all on the same line with that, that we all want to see development of mines

in the Province wherever we can and we are going to need that co-operation at

all levels of government, I guess you could say.

Those are some general comments and I say again

that Voisey's Bay -there will be a lot of questions over the coming months; it

is obvious, I know the minister expects that. I am sure there are lots of

questions the minister himself has on Voisey's Bay, because it is such a big

project. And as we see it unfold and develop we will continue to raise questions

in the House of Assembly that are pertinent to it. I will try to remain

constructive so that we have the right answers and we know where we are heading

specifically.

Now, I am going to go into a few specific questions

on the estimates for a few minutes and then I will pass it over to my colleagues

and they will have a few more questions. I am sure everybody here will have a

few questions. I just want to start with a couple of general comments in the

Budget, just get you to comment back and forth on them. One comment was made

that the Province will provide funding to continue some activities under the

Mineral Development Agreement, in particular, the Prospector's Assistance

Program despite the loss of Federal participation. Could you just elaborate on

what you mean by some more activities?

DR. GIBBONS: Prospector's Assistance, I think,

we have $180,000, Paul, in the Budget. We are continuing our Training Program at

West Viking College in Stephenville. The next group which will be the sixth

group of twenty prospectors will be there at the end of the month. There will be

some money available for the regular Prospector's grants as we have had in the

past. We have enjoyed lots of success with this program. We now have one hundred

graduates of the West Viking College Program. We have some other people who have

joined the Prospecting Fraternity because of interest in it in the last few

years. And finally, I believe, we really have a good Prospecting Fraternity in

the Province and we want to promote it. Without prospectors Al Chislett and

Chris Verbiski we would not be talking today about Voisey's Bay. They found it.

And as a citizen of Newfoundland and Labrador, I am proud that it was found by a

couple of our prospectors and not by one of the big companies that had explored

there for years, but had not found it. So it is great to see a successful

prospector, a couple of prospectors in this case.

MR. SHELLEY: I am glad to hear that especially

with the Prospector's grant. Like you said, it starts from the grassroots and

our own people and that is where that developed.

Another statement that I would like for you to

comment on - it is negative, but still I would like to see where you see it

going. It said: No funding has been provided for the Newfoundland Exploration

Assistance Program and the Dimension Stone Program.

DR. GIBBONS: No, we had a couple of years of

success with that program. Was it two years, Paul, or was it longer than that? I

cannot remember the exact number of years. But we initiated this particular

program under The Strategic Economic Plan to cost share particular projects with

industry. It worked very well. We were spending about $500,000 per year. But in

view of the tight budget situation this year and in view of the fact that

exploration in the Province has gone from $8 million in 1993 to $111 million

this year, that we could stop it this year and see how things go. Industry seems

to be raising lots of money on its own, so let us see how they do on their own

right now with all this money being spent.

MR. SHELLEY: Hopefully they will. Of course,

you know how important that was, too.

Another quick note is the increased claim recording

fee from $5 to $10 now.

DR. GIBBONS: Well, we do not see that as a

significant matter. Most of the provinces in the country charge more than we

did. We were frankly at the bottom at $5. I think we are pretty well at the

average right now at $10. A number of provinces and territories charge more than

$10.

MR. SHELLEY: So that is the ball park figure.

DR. GIBBONS: So we are in the ball park with

the rest of them.

MR. SHELLEY: So $5 is really low, then.

DR. GIBBONS: Five dollars was low. We were

really at the bottom at $5. We pro-rated the registration fee by area of a

claim. Nobody else was as low as we were.

CHAIR: Minister, could I interrupt for a

second. For the purposes of Hansard, could we identify ourselves when we speak

because they may have some difficulty at the end of the day trying to transcribe

this.

DR. GIBBONS: I agree.

MR. SHELLEY: Thank you.

In projected revenues, I have a couple of questions

there. First of all, on the mining tax and royalties it is up from $19,121,000

to $22,000,000.

DR. GIBBONS: Yes, I do not have that figure.

Well, it would be expected to rise because the value of production is rising.

MR. SHELLEY: That is specifically why, is it?

DR. GIBBONS: Yes. The industry is having a

better year.

MR. SHELLEY: Also in projected revenues -

Mining Permits and Fees up from $1,900,000 to $5,000,000.

DR. GIBBONS: What -

MR. SHELLEY: Ninety-five, yes.

DR. GIBBONS: The security deposits. Each time

you stake a claim with the map staking process you have to make a security

deposit of $50 against your first year's work requirement. The first year you

are required to do $200 worth of work and you have to deposit one-quarter of

that. If you do your work you get your money back; if you don't do your work we

keep your money. It is an incentive if you are going to stake claims in the

Province to do the work, not speculate. We discourage speculation, is the

message there. We want a true and honest effort by the people who are

interested. We don't want everybody just to stake claims for the sake of the

money they are going to make by selling the claims down the street, which was

done last year by some people.

MR. SHELLEY: On page 175, in the Minister's

Office, the minister expects to spend $14,000 more this year than last year?

DR. GIBBONS: I think if you look carefully at

it, most of that seems to be in the line of Transportation and Communications.

MR. SHELLEY: Yes, that is why I am asking.

Where do you mean by that, though?

DR. GIBBONS: I think that is more associated

with the fact that we try to equalize the Transportation and Communications bill

in all ministers' offices. You can see that I didn't spend a lot last year. If I

can avoid going on an airplane I will avoid it. I like to keep my feet on the

ground. I will only travel if I have to and need to.

MR. SHELLEY: So you expect that on

transportation.

DR. GIBBONS: That is transportation cost if I

need it. If I don't have to travel I will not.

MR. SHELLEY: Okay, that is fair enough.

Executive Support. Salaries are budgeted to increase by $37,000.

DR. GIBBONS: I don't have the answer to that

one. Does someone have the answer? Why is that?

WITNESS: (Inaudible).

MR. SHELLEY: (Inaudible).

DR. GIBBONS: I am being told by the man in

charge of finances - because we did have a change in deputy minister, a new

deputy minister, so some transitional stuff is going on there, I think.

MR. SHELLEY: That is where that has come from?

Okay.

This is something that was brought up to me by some

people who were doing some exploration in Labrador, but in regard to wildlife:

maybe you have heard the complaint before and can elaborate on it anyway. They

say in setting up for a drill site they are finding out that after they get set

up they are getting all kinds of backlash about wildlife complaints, or that

there was a pine marten in the area, or whatever, something to do with wildlife.

Have you done anything to rectify that so that they don't go in and get set up,

and then find they have to move, or there is something around them, and so on?

DR. GIBBONS: Yes, well, from the Mines

department they get the mineral exploration permits and the mineral licences,

but then you might find you are in a sensitive area for wildlife or archaeology

or any number of reasons. Then you may require a permit from the Wildlife

division or approval from the Wildlife division or some type of a clearance from

the Wildlife division, or from, again, the Historic Resources division of the

Department of Tourism, Culture and Recreation, to ensure that - again, we have

to pay appropriate attention to matters that are sensitive, whether they are

wildlife, or archaeological or some other reason. We just cannot have a

free-for-all.

We had to make some amendments to our mineral

exploration regulations last year because in some cases there seemed to be a

free-for-all. There is a little more structure to it now, and that is causing

some difficulty for some operators who were used to the freedom of the past. We

are doing our best to work with them, and we are going to work with them, and

sort of guide them through the process.

MR. SHELLEY: Could it not be a possible

suggestion for a solution, then, that the whole areas that have potential for

mining be mapped out with respect to wildlife? I'm sure that can be done. If

Wildlife has its books in order it can tell you what, where, and wherever so

that you know beforehand on permits and drilling. Or is that too far-fetched?

DR. GIBBONS: It is a bit of a stretch. Because

you have to realize that in the last twelve months we have had about 30 per cent

of Labrador staked. In the past we would get maybe 20,000 claims a year. Now, we

have 250,000 claims per year. All of a sudden people are everywhere in a rather

intensive exploration. We created problems for ourselves with the discovery of

Voisey's Bay. It is a great problem to have and we think we can deal with it.

MR. SHELLEY: On page 176, Geological Survey,

Salaries again have been increased by $95,000.

DR. GIBBONS: In that one, you have to turn the

page again and look at the bottom of page 177 and you will see that Geological

Survey there has gone from $470,000 to zero.

MR. SHELLEY: So that is where it was the

transfer of the people from that -

DR. GIBBONS: So we made up a little bit,

$300,000 is it, Paul?

MR. DEAN: One hundred and twenty thousand

dollars in salaries.

DR. GIBBONS: One hundred and twenty thousand

dollars in salaries but about $300,000 altogether shifted into the geological

survey from what was previously done under the Mineral Development Agreement so

that we can maintain at least, a good, sound field program. So you will see the

numbers there.

MR. SHELLEY: That is a transfer, basically,

then?

DR. GIBBONS: A transfer yes, but there is a big

decrease on the next page.

MR. SHELLEY: Okay. Now, while we are on that, I

heard some of your comments when you were saying them, and I am sorry but I

didn't get it all when you talked about the geological survey, all of that being

lost now. Could you comment on that as to why you think the -

DR. GIBBONS: Well, it is not all lost because

most of our geological survey work previously was being done on what I would

call a provincial A-base funding, most of our work and you can see it when you

look at page 176, that was the provincial amount that was being done last year,

the $2.4 million in salaries, and then, when you turn the page and see 2.1.04,

Geological Survey - MDAII, the Mineral Agreement, we only had $470,000 in

salaries, so only a small percentage of the work that we were doing in the field

was associated with the federal-provincial agreement - just a small amount.

MR. SHELLEY: Yes, no big loss to that.

DR. GIBBONS: So we only lost a small amount and

we managed to take some of it over into the regular A-base budget to still

maintain a good, core program and we think it is essential to maintain a good,

core program if we are going to find the Voisey's Bays of the future and the

other mineral deposits of the future.

MR. SHELLEY: On page 177 again, savings of

$140,000 from 1995 to 1996 are almost entirely due to the cut in Grants and

Subsidies from $375,000 to $76,000. Could you -

DR. GIBBONS: What line are you on now? That is

related to the Exploration Assistance Program that we talked about, a

half-million dollar program where we cost-shared funds with industry. That one

is gone and that is why you see that big difference.

MR. SHELLEY: Just clarification on that one,

that's all.

Okay, we have a few more but what I will do now is

stop and pass it over and it will come back to me.

CHAIR: Thank you, Mr. Shelley. Is there

somebody else who would -

DR. GIBBONS: Before anyone else starts, I just

want to make -

CHAIR: Sure, go ahead.

DR. GIBBONS: For my own part to the record

following up on some of the things Mr. Shelley said, referring to Sam Blagdon;

I, too, want to add my great regards to Sam Blagdon, in his memory. I knew him

and his family well and, Sam Blagdon, the morning of the accident, was actually

on his way to St. John's to meet with me on an important mining matter. So it

was quite a shocking day for all of us in the department, knowing that Sam was

on his way in to see us when that happened, and I hope that he is appropriately

recognized when we have the mining conference in Baie Verte next month. I want

to be there and to be part of it.

In talking about Voisey's Bay, I just want, for the

record again, to note that at 5:22 a fax arrived in my office from Inco; the

deal has been finalized. Inco has now become the owner of Diamond Fields in

Voisey's Bay. The deal has been done as of today, so this is, in many ways,

probably going to be a red-letter day in mining for the Province of Newfoundland

and Labrador. That is all.

Thank you, Mr. Chairman.

CHAIR: Thank you, Mr. Minister.

Roger -

MR. FITZGERALD: Thank you, Mr. Chairman.

I have a few questions to ask the minister.

Minister, I have asked you a couple of questions

before, I will repeat one right now and if you will be kind enough to give me a

good tip on Voisey's Bay, I will disappear out of here pretty fast and you could

be on you way and we could both save some time and make some money.

DR. GIBBONS: I would say most of the big

dollars have already been made. My advice, Mr. Fitzgerald, would be: be careful

of the juniors. Don't buy on anything that does not have an assay on the table.

Be cautious.

MR. FITZGERALD: Mr. Minister, in the estimates,

it shows a fair amount of money put forward for Transportation and

Communications. In fact, I don't know if you have added up yours in your

particular department but it adds up to $641,000 for Transportation and

Communications. Would you consider that to be a normal figure compared - and I

suppose, when I think of Transportation and Communications, I think of

telephones and I think of travel. When you look at the total number of

ninety-four employees, would you consider that being high compared to other

departments?

DR. GIBBONS: My geological staff, Mr.

Fitzgerald, would probably say that is low. Because actually that Transportation

and Communications covers the cost of field programs, when you put field crews

out in the bush. It is probably low, in their minds. They probably would like to

have a bit more money for a bit more field activity. So that is what is included

in that. That is why that number may be a little higher than other departments

that do not have field surveys.

MR. SHELLEY: You will have to take me to

Voisey's Bay to see.

DR. GIBBONS: These are the field crews out in

the woods looking at rocks.

MR. FITZGERALD: You also mentioned in your

opening statement there a few minutes ago, that one-quarter of a million claims

went through your department, I think, last year. How do you go about filing a

claim? Can you tell me the cost of a claim? And if there is a time limit on

somebody coming and filing a claim as far as the length of time to activate such

claim?

DR. GIBBONS: Yes, right now, it is quite easy

to stake a claim. You come into the department, if you want to come in person.

You do not have to come in person, you can send it in the mail, and I don't

think we have started by fax yet, have we, Paul?

MR. DEAN: No.

DR. GIBBONS: But some jurisdictions do it by

fax. But now it is done on a map. You don't have to go out in the woods and put

in the pegs. So it is relatively easy to mark it on a map and each claim is a

quarter of a kilometre on a side. So there are four claims in one square

kilometre. The new fee is $10 for the registration and you must make a $50

deposit against a first year's work requirement. In that first twelve-month

period, you are required to spend $200 working a claim, in the next year $250,

in the next year $300. So we increase the requirements annually. And if you do

not do the work in the first year, your claim reverts to the Crown, or if you do

it for two years and then don't do it for the third, your claim will revert to

the Crown. So there is a requirement and an onus upon the claim holder to do

work every year and there is an increasing requirement every year after the

first.

MR. FITZGERALD: You also mentioned slate

mining. That is about the only mine, I think, that I have in my district, and

then there is a small mine being active there in the summer months at Keels. I

know of another one in Trinity North, I think it is Nut Cove, around Burgoynes

Cove. The one in Keels, the particular operator there seems to have an awful

time trying to arrange funding, and I know that he has put an honest effort into

it himself and pretty well exhausted all of his life savings. All the

appearances is that he is into a good find there. There is a good market for

slate. What happens in a case like that? Is government not there to try to

promote the industry and try to arrange for him and take him through ACOA and

those other funding agencies, or do you people just stay out of it altogether

and arrange that the particular individual go and look after funding himself?

DR. GIBBONS: Well, we and our agencies in the

past have helped considerably to promote the slate business. I think ACOA was

also a contributor in helping the slate business. Fortunately, the company at

Nut Cove - Burgoynes Cove seems to be very productive now and producing about

5,000 tons per year. So they got to a stage where they have developed good

international markets. They have good quality products. The Keels deposit has

good quality rock, of a different colour, I believe, from Nut Cove, Paul?

MR. DEAN: Yes.

DR. GIBBONS: A different colour and in demand.

I mentioned it earlier; it is one of the operations that is on our list. It is

something that we would expect to be operating in the next twelve to eighteen

months - I am not quite sure on what scale. But it is a good rock and the

markets are available internationally, so we wish him well. I know the gentleman

very well.

MR. FITZGERALD: Mr. Minister, is it up to the

individual himself to find markets?

DR. GIBBONS: Yes.

MR. FITZGERALD: Does government - or government

doesn't have anything to do with marketing, it is really a private matter?

DR. GIBBONS: No, it is really private.

FITZGERALD: It is really entirely up to

himself.

The one thing, I suppose, that is probably first

and foremost on most people's minds these last few months is the price of

gasoline and the difference that you see in St. John's versus, I will speak for

Bonavista, since it is the one I am most familiar with. It is not uncommon to

find - I think the price of regular gasoline here is something like 63.8 cents

at self-serve, and places like Bonavista, it is 70 cents or even higher. Is

government looking at regulating this particular industry? Or is there any

justification in some of those oil companies and vendors charging such a

difference in prices in rural versus urban areas?

DR. GIBBONS: Number one, we are not looking at

regulating. A few years ago when there was a similar price shock - I think it

was at the time of the Kuwait incident - we did an extensive review as to

whether or not we should regulate the price of gasoline in the Province. It took

us several months, maybe about a year, and the conclusion was that we should not

regulate. At that time, only two provinces in Canada were regulating, Nova

Scotia and Prince Edward Island, and before our assessment was completed, Nova

Scotia came out and said: Well, we have had enough of this regulation of

gasoline, we are going to stop regulating gasoline. So then Prince Edward Island

was the only one left, and today, Prince Edward Island is the only one left. No

other jurisdiction in North America regulates the price of gasoline. It is left

to market forces.

Unfortunately, in the last six months, we have had

another price shock and the price of petroleum, crude oil in particular, went up

by about six dollars over the winter. Now, most of that has gone back in the

last little while; this morning it was eighteen dollars and something on channel

20, Business Report, so we are getting back to where it used to be six months

ago. My expectation is that the price of gasoline should also start to drop back

in the near future.

It is not Newfoundland only this time; it has

happened all over the Western world. The United States has had a real debate

about it. I was in Houston, Texas for the Oil Show not long ago and the price of

gasoline in Houston was up by about 20 per cent in the last six months, and down

there they consider that to be something quite shocking. But they understood it,

that the price of crude was driving it. In the last few days there has been an

agreement between the United Nations and Iraq, that Iraq can put $1 billion

worth of crude into world markets every thirty days or ninety days, Martin?

MR. SHEPPARD: Ninety days.

DR. GIBBONS: Ninety days, is it? So with that

Iraqui crude coming into the market now, it is going to help the demand/supply

situation and I would think that the price of crude should go back to where it

was before this price shock. So I think we are going to see the price of

gasoline come back approximately to where it was. Now, back in February, we

actually saw a decrease of two cents per litre and in March, it went up by two

cents per litre and in April it went up by three cents per litre. So it does

have that volatility, depending on the price, and it will go down, in my view.

It will go down again now that the crude price has gone down pretty well to

where it was or approaching where it was.

Now, the second part of your question is a

different matter - why the difference between St. John's and Bonavista, or St.

John's and Lumsden, where I was last week and paid about, it must have been

close to ten cents difference on a litre. A lot of that was related to local

marketing. That is not price being set by the big companies. The price was put

in their product to their service stations and they will charge the cost of the

product plus the cost of transporting it, and then you have the local mark-up.

And a lot of the variability in the smaller towns is the local mark-up, as I

understand it.

Compare, for example, a big station on Blackmarsh

Road in St. John's and the cheapest price that I see in St. John's is Blackmarsh

Esso, 63.4 cents, it is always a half-cent below the other self-serves. They

probably put through more gasoline than any other station in the Province. They

can afford to have a slightly smaller mark-up. But when you compare that to a

small station in a little rural town where a local businessman is trying to

survive, his mark-up is going to be probably a little higher because his

flow-through is much, much smaller. These marginal-size operators have a

slightly bigger mark-up, so that is what you are seeing. You are seeing the

local business environment giving you the difference in the price. It is not a

price fixing by anybody, it is a local business situation. We wish it were not

the case, but that is normal, and I am hoping this summer we see some price wars

that will help drive them down, even in the local areas.

MR. FITZGERALD: Yes. I don't know if you

consider it as normal or not when you see a difference of forty cents in a

gallon of gasoline which is approximately what it works out to, because, you

know, I am not convinced that it costs that much more to ship gasoline from St.

John's to Clarenville, for instance, or Bonavista.

DR. GIBBONS: No, no. I didn't say it was all,

the shipping process is probably only a penny in Bonavista.

MR. FITZGERALD: They are buying the same oil, I

mean, it is coming from the same storage tanks here, and sometimes I think that

the oil companies are allowed to set those exorbitant prices and consumers have

no other choice but to buy. And I think a lot of people feel the same way as I

do, that there should be a limit on what gasoline vendors can charge, because it

is not a luxury anymore, it is a necessity, and you have no other choice but to

buy it.

DR. GIBBONS: I think you misunderstood what I

said. I don't believe you are seeing that as a price being fixed by the company

that is providing the product. They will have their cost of the product and they

will have the cost of transporting that product to the station but I think you

are seeing a local variation in local mark-ups and I think that is what is

causing a lot of that; it is the local station, it is not owned by the big

companies at all. Most of the stations that sell under a particular flag are not

owned by the big companies, they are locally-owned stations.

MR. FITZGERALD: Don't they dictate the price

charged at the gas tanks?

DR. GIBBONS: They dictate their own price.

MR. FITZGERALD: The only difference is what the

vendor will take off his own profits.

DR. GIBBONS: Yes.

MR. FITZGERALD: That is all.

DR. GIBBONS: The big companies will only

dictate what they want as the price of their product. I would think that they

are pretty well consistent throughout the Province, except for the

transportation fees around the Province. Any other difference, to me, is

reflecting the local mark-up and not a dictate of the big company. It is the

local business environment, I think, that you are seeing there. From our

assessment that is primarily what you are seeing there, the local business

environment.

MR. FITZGERALD: Some of the mark-ups, I think,

are probably even much more than the profits they make on a gallon of gas, from

what I've been seeing and what I've been told that the mark-ups are. Anyway, it

is certainly unfair to the people who live in rural areas.

Offshore oil and gas. Do I understand correctly

when I say that it is not an option for offshore oil and gas to be landed and

refined at Come By Chance?

DR. GIBBONS: You are wrong. It could be. The

petroleum that is produced in the offshore in Newfoundland, the Grand Banks of

Newfoundland, will be commercially available. Now, I would expect that some of

the companies, as owners of the product, will want to take a significant amount

of what they own to their own refineries, but the product would be commercially

available, just like product produced in the North Sea today, commercially

available at the well head, can be bought by anybody. Come By Chance right now

is buying crude oil from all over the world, pretty well, and likewise, they

could bid to buy from Hibernia. The operator at Come By Chance, two or three

years ago when I visited the site, was saying: Yes, Rex, we can refine Hibernia

crude and we would be glad to bid on it and buy it. There is nothing to stop

them from bidding to buy some of the product, and I would hope they would. Now,

there is one technical matter. In cold weather, because of the wax content, you

have to have your pipes heated and all that, and they would have to make sure

they can accommodate (inaudible) -

MR. FITZGERALD: But the option of buying is

there.

DR. GIBBONS: The option is there. The option is

there for sure.

MR. FITZGERALD: Mr. Minister, anything new on

the oil transhipment facility, which was a hot topic during the election?

DR. GIBBONS: Nothing new that I can say

tonight, other than that it is down - you probably saw the bit in the news a few

days ago that the companies involved, Chevron and Mobil, had an engineering

company from St. John's, SNC-Lavalin(###), headquarters here in St. John's,

analyzing a number of sites. They analyzed - I believe the total number was

twelve - different sites on the South Coast of Newfoundland. Last week they

short-listed that to three sites: Come By Chance, Whiffin Head, which is three

kilometres from Come By Chance, near Arnold's Cove, and another site near

Admiral's Beach. So it is down to three sites now. What I'm told is that within

the next few weeks, within this quarter, by the end of June, we should have a

decision. It is down to three and I would expect that one of those three will be

the winner.

MR. FITZGERALD: On page 179, 3.1.01, there is a

cut of $67,000 in that particular heading. I'm just wondering if that particular

cut will have consequences in terms of planning for petroleum resource

development. Why has it been cut by $67,000?

DR. GIBBONS: I'm not sure of the answer to that

one. Martin Sheppard, do you have the answer to that?

MR. SHEPPARD: In the head 3.1.0 -

MR. FITZGERALD: 3.1.01, page 179.

MR. SHEPPARD: The majority of it is in

Professional Services -

CHAIR: Mr. Sheppard, excuse me. Just introduce

yourself to the mike for Hansard purposes.

MR. SHEPPARD: Martin Sheppard. The majority of

the reduction is in the Professional Services category from $93,500 down to

$3,500. That is the result of a carryover of Strategic Economic Planning money

that was - it is not to be used now with the elimination previously of the

Energy Efficiency and Alternative Energy Division of the branch. So the majority

of the reduction is in that particular activity, alternative energy and energy

conservation.

MR. FITZGERALD: Are you saying the .05 part of

that one, Professional Services?

MR. SHEPPARD: Yes, that is where the -

MR. FITZGERALD: The $93,500 was budgeted but

what was actually spent was $16,000 last year?

DR. GIBBONS: Correct, and we stopped that

activity.

MR. FITZGERALD: Okay. Mr. Chairman, I will just

pass it on to somebody else and I will come back later.

CHAIR: Mr. Woodford, would you -

DR. GIBBONS: Mr. Chairman, before we go on to

the next speaker just one point back on the gasoline.

I want to put things in perspective as to what is

happening with gasoline prices in North America and in Canada. Recently, I was

reviewing a report that was done on this - not for us but it was done on this

subject - comparing what has been happening in the petroleum sector and the

gasoline sector downstream, compared to some of the other sectors. For example,

in the electricity sector of a public utility, the rate of return by the

regulated public utilities across Canada has been about 12 per cent to 13 per

cent. In the gasoline sector - where it is not regulated - driven by market

forces, the rate of return to the sector was about 4 per cent to 5 per cent,

depending on the company. Some companies may have had a rate of return of 5 per

cent, some less than 4 per cent. I think, overall, in a five-year period, the

rate of return on gasoline in Canada was 3.8 per cent to the industry. So you

are comparing a market driven industry with a regulated industry and the market

driven industry is going to give the customer the better service every time,

based on this study that was done, compared to a public utility board rate of

return where you are going to be guaranteed your 12 per cent. So despite the

fact that we get the spikes, they work themselves out in the end. So just a

point of information on gasoline.

MR. FITZGERALD: We talked about the -

DR. GIBBONS: I am sorry - I will get back to

it; go ahead.

MR. FITZGERALD: Okay. The thing that was

concerning me, when we talked about the individual mark-ups of individual

service stations - you can correct me if I am wrong - from what I understand,

you get approximately a twenty cent per gallon mark-up. That is what an operator

of a service station would expect to retrieve on the sale of gasoline. It is not

uncommon for some of those service stations to be selling at a thirty cent and

higher price per gallon than what you find in St. John's. That is why it leads

me to believe - I think it is the larger companies which are driving up the

price of gasoline and not the individual owners in the mark-up they want from

that particular commodity.

DR. GIBBONS: No, it is right the opposite of

that. It is actually being driven by the low volumes in the small markets. It is

not by the big companies. The normal thing across the industry is about a five

or six cent per litre mark-up at the retail station but you get the variations

that you talk about when you get to a low volume station. And it is the low

volume stations that have the bigger margins. Just to survive - you are selling

gas, you are selling chips and drinks and a few other things, but they

generally, from our assessment, have a bigger mark-up and that is why you are

seeing those big jumps.

MR. FITZGERALD: I don't know if we gain

anything from it or not because, as you know, most of our goods come into this

Province by road transport. I think when those tractor-trailers roll off the

boats they have lots of fuel to travel their distance here in Newfoundland and

fuel up again when they get back on the other side of the straits.

DR. GIBBONS: In the case with them, we catch

them in terms of our taxes on road fuels because they have to give us a prorated

amount based on the amount of travelling they do in the Province, regardless of

where they buy their gas. We certainly catch most of them.

MR. FITZGERALD: Do they have to buy a

particular amount of fuel in Newfoundland in order to get their plates

registered or whatever at the end of the year? How is that regulated?

DR. GIBBONS: My understanding is they have to

pay us a prorated amount of road tax based on the transportation miles they

travel in Newfoundland, regardless of where they buy that gas.

MR. FITZGERALD: Okay.

DR. GIBBONS: And they have to keep their road

logs. So we get them through the tax department, regardless of their source.

MR. FITZGERALD: So it doesn't matter if they

buy gasoline here or not?

DR. GIBBONS: No, it doesn't matter as far as

the taxes -

MR. FITZGERALD: As far as government and

taxation is concerned.

DR. GIBBONS: As far as we are concerned, we get

them based on their road logs, how much they travel in the Province.

MR. FITZGERALD: The only thing is, the service

station doesn't make the sale.

DR. GIBBONS: Exactly that.

CHAIR: Mr. Woodford.

MR. WOODFORD: Rick Woodford, Humber Valley. For

the record, Mr. Minister, the West Coast drilling now by Hunt Oil just brought

in the jack-up rig out there. Is there any indication of other companies which

would be doing some drilling over there in the near future? Anywhere on the

other claims?

DR. GIBBONS: Presently, we actually have two

wells underway over there. Talisman, who is partnering with Vinland Petroleum, a

local Newfoundland company, is drilling a well from Cape St. George under Bay

St. George right now. It is an onshore to offshore well. This one has been

underway since the latter part of February. So it is about three-quarters done

maybe. Maybe another month or so and they should finish, I would think, Martin?

MR. SHEPPARD: Yes, pretty well.

DR. GIBBONS: Last week, I think it was on the

15th, Hunt and PanCanadian spudded the first ever offshore well off the West

Coast of Newfoundland with the Rowan Gorilla IV. At this time, there is no

indication of anybody else planning to drill over there, but this past winter we

had a lot of seismic surveys done and we had a great land sale, of course, in

March. Depending on what comes from the two wells that are now being drilled, I

guess you will see whether or not there is going to be any other drilling in the

near future. It will probably be with one or other of those two rigs.

MR. WOODFORD: Is the department aware of any

other activity now with regard to the marble deposits, the stone deposits in on

Goose Arm? You know what happened there with regard to Len Pye; something

similar has happened to Mr. Blagdon, only in a different way.

DR. GIBBONS: Exactly, and since Len died, there

has not been a lot of action on it. But I am going to ask Paul Dean, the

Assistant Deputy to maybe bring us up to date on that because I am not fully up

to date on what is happening. I know there is some interest in the marble over

there, but not as much as I would like to see.

MR. DEAN: Yes, Mr. Woodford, there is still

some interest in West Coast marble, in general, that includes everything from

the north side of Deer Lake down through and south of Corner Brook. The deposit

that has been best defined, if you like, is the one that you just referred to at

Goose Arm Road. There has not been much activity since Mr. Pye's death. But

there has been some activity in the adjacent areas by some of our former

employees, believe it or not, from the Department of Mines and Energy who have

gone from the good area of St. John's to live on the West Coast. So there is

some activity there, and there is also some activity south of Corner Brook.

There are some very nice marble breccias and pink marble south of Corner Brook.

So some of that material, particularly south of Corner Brook, was taken to

Buchans for cutting and processing in the plant in Buchans and I am informed

that some of that turned out to be very good.

So there are some good resources there on the West

Coast and perhaps it is a bit like Mr. Fitzgerald referring to the Keels slate

deposit. The people involved really do not have a lot of financial resources and

they need some good partnerships to bring these deposits into production. And we

try to help them find those partnerships, but it takes some time.

MR. WOODFORD: What about Glover Island? What is

new with regard to Glover Island now? I heard a few reports the other day on

CBC. But is there any activity that the department is aware of there, anything

new?

MR. DEAN: No, Mr. Woodford, there is not much

new from last year. I think at this Committee meeting last year my expressed

opinion was that there was a lot of gold on Glover Island, but it required a lot

more exploration activity to find enough in one concentration to think of it as

an economic ore body. I still hold that opinion that there is still a lot of

exploration that should be done and needs to be done on Glover Island. But I

think the potential there is just as good as it is in the Baie Verte region, as

Mr. Shelley referred to earlier.

MR. WOODFORD: Along the lines of the

questioning by the Member for Bonavista South with regard to gas prices. I have

to agree with him, as far as I am concerned, it is something terrible what has

gone on there in the last couple of months. Has the department been following

what is happening with the House of Commons? I understand now there is a House

of Commons Committee looking into this particular problem to see if there is

some kind of price fixing or gouging or whatever there. Is the department in

touch with what is going on on the national level with regard to this?

DR. GIBBONS: We are aware that the competition

bureau has been asked to review this matter. It has done it before. Some future

government will probably ask to do it again. This is just my frank opinion - I

don't see them finding a different result. There has been a lot of debate on

this in Canada, in the United States, in the last few months because of what has

happened to the price of gas. I frankly don't expect they will find a different

answer from what they found when they did it ten years ago. It is a new

government saying: We want to take a new look. We are aware that they are doing

it and we look forward to seeing what they get. I'm expressing my frank opinion,

I don't expect to see a different answer.

MR. WOODFORD: Okay. Thanks, Mr. Chairman.

CHAIR: Ms Thistle.

MS THISTLE: Mr. Minister, I would like for you

to bring us up to date on the activity that is happening now in Grand Falls -

Buchans, in particular, Buchans - Millertown. I have heard that there is an

investment, or some speculation, I suppose, on the part of one investor up there

who is buying up some houses in the Buchans area. That has sparked a lot of

excitement and activity in Buchans. I was wondering if you would bring us up to

scratch on what is happening there.

DR. GIBBONS: Yes, Ms Thistle. Despite all the

attention to Labrador and Voisey's Bay, et cetera, there is still a lot of

exploration going on on the Island, in particular from the Baie Verte -

Springdale region on the coast of Notre Dame Bay, all the way down through

Central Newfoundland, the Buchans belt - we often call it the Buchans belt -

right down through Glover Island as well, down to the South Coast. There is

still a lot of claims in good standing and there is still a fair bit of

exploration activity including drilling in Buchans, right in the town, in the

last few months, right through the water supply, through the ice, with

appropriate environmental precautions taken.

MR. WOODFORD: They are drilling through Sandy

Lake?

DR. GIBBONS: Drilling in the water supply,

wasn't it, Mr. Dean? Yes, I'm told.

MR. DEAN: I believe we issued a permit but

there was never enough ice on the water supply.

DR. GIBBONS: Never enough ice. We issued the

permit but never got enough ice to do it. It was an unusual winter. Usually

there is enough ice to carry a tractor. They have been drilling right in

downtown Buchans, I believe. There have been rumours. Again, I would caution

people, don't spend your money on rumours. I know what happened last week to

people who spent money on rumours until the assay results came in. Be careful.

The exploration activity is ongoing, and I would

again wish them well. I know that in Buchans, during the life of the Buchans

mine, they mined out about a dozen different deposits. That means they found

about a dozen different deposits over time. The geology is great. You usually

find ore deposits where you found them before. So I am hoping that this company

that is doing the drilling there now will be successful. A major international

company called Phelps Dodge is drilling in the Buchans area right now. I just

hope they are successful.

MS THISTLE: So do I. What is happening in

Millertown? There is some exploration going on in Millertown as well, isn't

there?

DR. GIBBONS: I don't know the specifics in

Millertown but I will ask Paul Dean if he can speak on it.

MS THISTLE: There is a survey line being cut

there for some reason right now. You aren't aware of this, are you?

MR. DEAN: Ms Thistle, yes, within the Buchans -

Millertown area there are, I would say, twelve or thirteen companies I can think

of that hold mineral rights, that have claims in that area. That is a result of

some of the old ASARCO holdings coming back to the Crown and the minister making

them available for staking. So there is competitive activity, if you like, in

the Millertown - Buchans area for the first time. Some of these companies, I

know, are doing ground geophysical surveys, and to do these surveys that does

involve cutting survey lines through the woods and laying out grids to use

geophysical surveys to define a drill target. This is at the very preliminary

stage. On a day-to-day basis we aren't always aware of what company is doing

what until it gets to the drilling phase. It wouldn't surprise me at all that

there are companies in the Millertown area that are doing ground geophysics and

cutting survey lines.

MS THISTLE: Mr. Minister, I know your

department must have a record of all activity that is going on in the Province

at any given time. Is that information readily available to the general public?

DR. GIBBONS: The information as to where the

claims are is public information, which means that the names of the companies is

public information. We have reports on exploration that are required to be

submitted to us annually. Within sixty days of the anniversary date of a claim,

the company is required to give us a report; within a three-year time frame that

becomes public information, but there is a three-year confidentiality period on

information on a claim unless the company decides to make it public. So we have

a lot of information that is open and available to the public right now; we have

some that is in that intermediate category that is still confidential, and the

general stuff like who owns the claim, where, which is public information so

there is lots of information in the department for the public.

MS THISTLE: Mr. Minister, I am thinking along

the lines of people anxious to apply for employment through some of these

companies. Is there a list readily available where people can make applications?

DR. GIBBONS: Mr. Dean says that we do have a

typed list of all the companies so I guess we can make it available to people.

Very frequently, people will call our offices looking for a name or address of a

particular company that is working somewhere so that they can make contact with

them and apply, so we are pleased to accommodate where we can.

MS THISTLE: Very good. There is one other

question I would like to ask you, Mr. Minister. It is along the lines of gas

pricing and I can't resist that question.

A town councillor from my district of Grand

Falls-Buchans, is actively pursuing information on gas pricing, and in some of

the information that he has collected so far, from local operators throughout

the Province, they are denying that they are actually inflating prices. They are

saying that the prices are set by the major oil companies and so, we are hearing

conflicting information, and we are at a loss now to really tell who is telling

the truth in other words. But it is a major problem surfacing here now, across

the Province, and you know, we would like to get to the bottom of it.

DR. GIBBONS: Well, I can only repeat what I

have said before. From anything that we have done, the companies set a price on

their product and a transportation-distribution price on their product and

anything else, to my understanding, is left to the local agent. I know that the

differences may become more striking because of the big prices in the last few

months. I don't know if there is anything else you could add to this, Martin.

MR. SHEPPARD: The market at play in this

Province is, in terms of gasoline prices, not at all very much different from

what it is across the country generally, and in the United States.

The problem has been, as the minister said, with

the price of crude oil eventually being translated into being refined and the

product gasoline being created, and it is very much tied to the refinery rack

prices that are in play at a particular moment which are in turn, related to the

crude price. What has happened is that the market in North America has been

driven to a large extent by very low inventories in the United States. This was

as a result of the anticipation of the Iraqui oil coming into the market sooner

than it actually has, and what the suppliers in the United States have done is,

they have kept their inventories low and this has resulted in an escalation in

the price instead of what was anticipated to be with the inclusion of the Iraqui

oil, a decrease in the price of crude so, they anticipated the Iraqui oil coming

on sooner than it actually has and because the inventories were low, the crude

oil price rose.

Now, when the Iraqui oil comes on and the

inventories build back up, then the price can be expected to go with the market

and decrease, in terms of gasoline prices.

I think the market-driven aspect of it as opposed

to regulating prices is much the better way to go. For example, on February 5,

1996 market forces dictated a two-cent per litre reduction in the price. So, as

the minister said, the prices in gasoline in Newfoundland are not much different

from what they are in any other area of the country, or in the United States,

for that matter. They move up and down, related to the cost of crude oil.

MS THISTLE: Thank you. I understand the

fluctuations of prices in all the rural markets, but I am more or less

interested in provincial difference in prices throughout the Province. I think

many studies have been done on this same matter in the past by Chambers of

Commerce throughout the Province and different town councils and so on. But I

think it always becomes a mystery, because we have oil storage tanks in Botwood

for Grand Falls/Windsor, and the price of gas seems to be much higher in Grand

Falls/Windsor than it is in St. John's, as we all know, and transportation

should not be the reason.

DR. GIBBONS: It is not.

MS THISTLE: So we are still at a loss. Why is

it higher?

DR. GIBBONS: As I said earlier, it is not

transportation. Whatever the transportation cost is, it is built in there. It is

your local market. You have stations that have small flow-through relative to

the big stations like the one I mentioned earlier in St. John's, which is

probably the biggest one in the Province, and you are going to have more local

mark-up. So, in my view, regardless of what those local stations are telling the

councillor from Grand Falls/Windsor, the mark-up is in the local stations. The

international companies are not going to charge more plus the transportation

component to Grand Falls than they are going to charge for St. John's plus the

transportation component. They are going to have similar prices. So you are

looking at local market variations. That is what it showed the last time we

studied it.

MS THISTLE: It is interesting, isn't it.

Because sometimes in the past, the prices have been lower in Botwood.

DR. GIBBONS: You will get price wars.

MS THISTLE: Yes.

DR. GIBBONS: You will get price wars. We have

had them on the West Coast. I know, last year, the year before we had a big one

in Corner Brook. The prices were very low. You will see them again. I expect we

will see some gas wars this summer.

MS THISTLE: So government's finding has been

that it is really attributed to the local market.

DR. GIBBONS: Yes, local markets. Everything is

market-driven.

MS THISTLE: Very good. Thank you for your

explanation.

CHAIR: Thank you, Ms Thistle.

I propose that we have a ten-minute break now. I

don't know if there is anybody here who smokes or otherwise, but maybe just ten

minutes to loosen up a little bit. There is coffee outside. We will come back at

twenty-five to.

DR. GIBBONS: Oh, coffee. I am finished now.

Recess

CHAIR: I think Mr. Osborne would like to direct

some questions to the minister now.

MR. OSBORNE: Yes, sure. On page 180: Energy

Economic Policy.

DR. GIBBONS: I can tell (inaudible). Okay.

MR. OSBORNE: I have all of the respect in the

world for you, Mr. Gibbons, I am sure you can handle it.

The Salaries in 1995 are $45,000 more than estimated.

This budget projects a further increase of $57,000. Why the increases? And why

are the Professional Services down by $27,000 over last year?

DR. GIBBONS: If you look at that one on the bottom

of page 180, that is

article 3.1.05, Economic Policy, and 3.1.06 on the top of

the next page, you will notice significant increases in Salaries in both cases.

We are starting to do more now in preparation for the production phase of

Hibernia where we have, frankly, offices filled with agreements and things that

we are going to have to monitor and audit, etcetera to get ready for the

production phase. We are bringing on more staff this year to be ready for

production which is due to start next year, in December of 1997. So you are

seeing a bit of an increase in the salaries in the Economic Policy group and a

more significant increase in the Petroleum Products Monitoring group.

We are showing some real growth in that

section

because the construction phase of Hibernia is just about over or about to go

into production and we have to do an audit now on every cent that has been

spent. In order to calculate royalties we have to know what everything has been

spent on in the past. So we are gearing up in this particular sector now of

economics and monitoring of Hibernia. That is why you are seeing the changes

there.

Now, I don't know why the Professional Services

dropped in Economic Policy - can Martin Sheppard help me with that, maybe?

MR. SHEPPARD: There are certain priorities that we

were unable to accomplish during the year in terms of professional studies. I

would like to note that in the 1995/'96 budget column for Energy Economic

Policy, you will see numbers that start with $141,900 and end with $282,200 on

the bottom line. We had an appropriation for the Petroleum Projects Monitoring

Division - which is the next activity on page 181 - which should be included in

those numbers. Therefore, what appears to be a substantial increase in Salaries

from 1995/'96 within the Energy Economic Policy Division is much less

substantial. So the $76,000 that is showing in Petroleum Projects Monitoring

really needs to be added to that 1995/'96 budget number under Energy Economic

Policy.

DR. GIBBONS: As I was saying, you are seeing a

combination of those two where we are now gearing up the unit that is going to

be monitoring Hibernia production rather than construction. So we are seeing

some extra people that are going to be hired in that area; chartered

accountants, auditors and those kinds of people, in that particular area.

MR. OSBORNE: Professional Services: What types of

services would these be? Where exactly is this money spent?

DR. GIBBONS: Generally, some type of economic

consultant. For example, we had an economic consultant do some work for us on

types of royalty systems world-wide. So that is where that money would be spent,

on that type of activity, as one example. In the past year that was one of the

specific examples we had, where we had one particular consultant go and look at

the royalty systems in Australia, Norway and other sectors and say, now what are

we going to do in Newfoundland, as we were finalizing our own royalty system. So

that is where that type of expenditure is made.

MR. OSBORNE: Okay, just a couple of other

questions. Under the Development of Infrastructure-Offshore Fund, last year's

budget estimated $3 million for Grants and Subsidies. None of this allocation

was spent. This year you have $1 million. Basically my question is, why last

year did the $3 million not get touched and what is the $1 million allocated for

this year?

DR. GIBBONS: In the Canada-Newfoundland Offshore

Development Fund, we started with $300 million about ten years ago. Presently,

we have $279 million spent, I think it is, or committed. We have about $20

million left to spend and this $1 million is a million of that amount that is

not unspent - projects not completed, so expenditure is not finalized; but

within the next two years, all of this money has to be spent or committed. It

must all be committed by the time Hibernia production starts. So the $3 million

and the $1 million reflect amounts from that $20 million of unspent money. It

may or may not get spent this year as companies, primarily, or departments of

government might submit projects to us for consideration for expenditure under

the offshore fund. That is what that category is, offshore fund money.

MR. OSBORNE: Okay.

DR. GIBBONS: It may or may not be spent. It

depends on whether projects come forward.

MR. OSBORNE: One question which is not outlined, I

guess, in the book: Once production of Hibernia oil begins, what is the - I

know, under the transfer payments with Canada that so much of the money has to

go back into the federal pocket. What percentage of the money coming to

Newfoundland has to go back to Canada?

DR. GIBBONS: For royalties collected, taxes

collected related to offshore production, there is an equalization offset. In

the initial stages there was going to be a loss of about dollar for dollar.

About $0.97 on the dollar would come off equalization for every dollar that we

collected in extra royalties. A couple of years ago, the former Minister of

Finance, Mr. Baker, got an agreement from the Federal Government to change that

to about $0.70 on the dollar, so we would be keeping about $0.30 on the dollar.

There is a formula, as well, relative to Hibernia

production that we are now reviewing whereby we may even get a further

modification of that. We are looking at it further to see if we can get an

improvement beyond the $0.70. It has gone from $0.97 approximately down to about

$0.70, and we are looking at it even further. At this time we can say we are

going to get about $0.30 on the dollar for royalties.

MR. OSBORNE: That is basically the same deal we

have with Voisey's Bay. It is 30 per cent on the dollar, is it?

DR. GIBBONS: In a sense. We don't know yet what it

is going to be for Voisey's Bay, but it varies across Canada. It isn't unique to

Newfoundland or Labrador. It varies across Canada and it varies according to

commodity. So you may lose a certain amount on equalization for a particular

mineral commodity or a particular other resource commodity, and we haven't

finalized exactly how Voisey's Bay will be treated. In the nickel case, for

example, we do have nickel from Manitoba and Sudbury, Ontario, that is already

factored into the formula. We are looking at whether the Voisey's Bay nickel

should go into the formula and be treated just like nickel from Manitoba and

Ontario, or whether it should be treated differently. We know how it is treated

in those provinces. We are continuing to work on how it should be treated for

Newfoundland and Labrador. From our perspective, we want to try to maximize the

amount that we keep. We haven't finalized yet on exactly what it will be, but I

have said and others have said, $0.70 or better. We are still working on it. As

I said, we do have the models from Manitoba and Ontario.

MR. OSBORNE: One final question. This has probably

been raised in the House over the last year or so, I'm not sure. I am new to the

House. Are there any talks of producing other hydro projects in the Province? I

know, over the past six or seven years we have heard on a couple of occasions

rumour that they are looking at production of the Lower Churchill and that type

of thing. Is there anything in the works provincially?

DR. GIBBONS: What is happening right now is that

the growth in demand on the Island is fairly flat. You might recall that I

tabled the Hydro annual report yesterday - was it yesterday? - and said that we

did actually have a 2.3 per cent growth in demand and production of last year

over the previous year. But it has been pretty flat the last few years, so we

haven't had a big reason to develop new sites on the Island. But Hydro projected

that they would need new power by about 1998, and they called tenders a few

years ago to get some small hydro developed by the private sector. They selected

four projects totalling 38 megawatts.

These are presently going through the environmental

review process. One is through in White Bay, the other three are partly through.

Neither of the other three is through fully yet. They total 38 megawatts. If

these get brought on stream, the time

schedule is to have them on stream by the

fall of 1998. Then there would be no longer any need on the Island until at

least 2001, depending on what other things might happen. I will get to that in a

second.

In Labrador and the Lower Churchill, we negotiated

with Hydro Quebec to develop the Lower Churchill and sell the surplus power

south. And at the same time, Hydro Quebec was looking at developing the Great

Whale. And the Great Whale was supposed to be constructed and on stream by 1998,

the Lower Churchill constructed and on stream by about 2000 -2001. And back

about three years ago, because of changing economic circumstances in North

America, it all basically died. The Great Whale got put on hold, the Lower

Churchill got put on hold, and neither of these is proceeding at this time

because there is no demand at this time in the United States market for power

from these mega developments. Presently - and I reflect on this from a meeting

that I attended in Boston, the Energy Conference Meeting last November, where I

was a speaker. At that time, some of the other speakers were saying that energy

can now be produced in Boston, or anywhere in the northeast states, from natural

gas piped in from the West, for about four cents per kilowatt hour, about forty

mils. And there is no way you can do a mega development in Northern Canada and

transport the power south and compete with that. So the cheaper source now is

combined cycle gas generators using natural gas.

So I do not see any immediate future in mega

developments in Northern Quebec or Northern Labrador. On the other hand, we are

seeing the prospects of what is going to happen with Voisey's Bay, and how much

power might be needed; depending on where you are going to have your mill, your

smelter, and your refinery, you are going to need power development. If it is in

Labrador, we believe we have enough in the present recall rights to cover all of

the demand. I think that is pretty well the situation, Paul -

MR. DEAN: (Inaudible).

DR. GIBBONS: - in the present recall rights to

cover all of the demand if it is in Labrador. If it should happen that a

component might be built somewhere in insular Newfoundland, then we would

probably have to move quickly through Hydro to get some other development on the

Island, in which case, there are a number of options available. Some of them are

Hydro. The Greenwood Project near Grand Falls is an option. There are three

options in the Bay d'Espoir watershed totalling about eighty megawatts. And

there are a number of other small Hydro sites in the fifteen to thirty megawatt

size that companies would love to put forward. There is a cogeneration

possibility at the paper mill at Stephenville. There is a cogeneration

possibility at Come By Chance refinery where we regularly see the fire in the

stack, and you could put a cogeneration unit in there.

So there are a number of options available on the

Island if there is a demand for the power. At this time, there is no demand.

MR. OSBORNE: No. The reason for my question was,

you know, with a smelter or the Voisey's Bay project in mind, as well as other

mining projects, I was not aware that we had such a reserve, I guess, off

Churchill Falls. You mentioned there was plenty of reserve there that we could -

DR. GIBBONS: There is sufficient. Presently, under

the Churchill contract, we have a recall right of 300 megawatts. Presently, we

have about 127 megawatts not being recalled, not being used. So we just have to

serve notice and call that at any time. That would be more than adequate, we

believe, for the smelter refinery complex based on the technology that is

presently being talked about to us. If it is not done in Labrador, and it is on

the Island, we believe there are a number of options available that could be

quickly developed, in the time frame again to have the power available when

needed. So there are options.

MR. OSBORNE: Thank you.

CHAIR: Mr. Shelley.

MR. SHELLEY: Actually, Tom was starting to ask a

few of the questions I was going to ask, especially with respect to Voisey's Bay

- I will get to that. But in the economy book, in the projects, with Terra Nova

it said that they should be submitting an application plan, a DPA, to the

Petroleum Board this year. Do you have any idea when that plan will be

submitted?

DR. GIBBONS: It is getting close to completion, I

understand. They made the announcement back in the fall of 1995 that they were

going to proceed and develop a Development Plan Application to submit to the

offshore board. They have made great progress on it and I believe they are

getting close. So I believe they will meet their projection and have it

submitted in 1996.

MR. SHELLEY: I guess, this summer, maybe?

DR. GIBBONS: I don't want to put a particular time

frame on it because as surely as I do, we will miss it, but I don't see any

problem now with meeting a '96 target.

MR. SHELLEY: With Whiterose, it says that if

everything goes according to plan, Whiterose could be flowing by 2004 with 400

to 500 people employed during peak times. As far as training people for these

400 to 500 jobs, does your department set up programs? What preparedness are we

doing for those types of jobs?

DR. GIBBONS: Well, the Education department is

co-ordinating that. At this time, of course, it is relative to Hibernia, where

we are moving into the production phase. Terra Nova is right now projected to be

in production by 2001, it could be a bit earlier, and Whiterose in production by

2004. So there is lots of time for these others, but we know that with oil and

gas right now, we are developing an industry and we are moving into the

production stage of an industry that is going to last a half-century, in my

view. So there are a lot of young people in Newfoundland and Labrador who are

taking the appropriate programs to get into the petroleum sector. There is a

whole variety of jobs, whether you are again, talking about the petroleum

technology speciality jobs or just other jobs associated with the business.

But there are programs and I referred to some

speciality courses at Cabot College, for example, that are being well attended.

So we are helping with these programs. We are helping with them through the

offshore development fund, in some cases, putting in the infrastructure. Some of

it is worth visiting. A lot of progress is being made in that area. Anyone who

is interested right now should say, `Yes, I know there can be a career in oil

and gas and I can go for it. Yes, there can be a career relative to nickel, I

can go for it and plan for it today.' So there are options there that people

should not hesitate to plan for. They are going to be with us for a quarter of a

century at least.

MR. SHELLEY: Yes, well, all Newfoundlanders are

concerned with that, especially as we see Voisey's Bay developing, the oil

industry developing, and we want to make sure we have people trained here in

this Province and not have to bring them in from outside, of course.

DR. GIBBONS: Relative to that again, we just

recently approved some further things in Cabot, for example, to add to the

present petroleum technology training programs to make sure that we are

providing what residents of this Province need to learn.

MR. SHELLEY: That is good to hear.

DR. GIBBONS: Let's get them trained here.

MR. SHELLEY: Now back to Voisey's Bay again, as

you just said, you just received this evening confirmation, of course, no

surprise - that Inco will be the developer of Voisey's Bay. As far as time

frames go, I know it is only speculation and guessing at some points, but as to

the development plan for Voisey's Bay, the development plan for the entire

smelting, refining, mining and so on, what kinds of time frames are we talking

about? When we see that on the table, what exactly will be -

DR. GIBBONS: In my view, it is going to have to

move quickly if the company expects to meet the very optimistic time frames that

they themselves mention. Even in today's announcement, they said they would wish

to be able to see some production by the latter part of 1998. Now, I think that

is really optimistic, really optimistic. Tech Corporation has been doing a

feasibility study on the mine and mill for several months, targeting completion

by the end of June, next month. So once that's done, I would think that they can

quickly register with the Environment department and be into the complete

environmental assessment process for Voisey's Bay development.

MR. SHELLEY: So Tech was doing - just to mining?

DR. GIBBONS: Mining mill, I think - mining mill

was being done by Tech and it is targeted for completion by the end of next

month.

The other stuff, I don't know - Inco itself has been

doing the assessment of the further processing and they have had consultants in

this Province who have been reviewing sites and doing things relative to it.

They have not, at this time, made a public announcement on what they are doing

on this and the exact schedule. I don't know if Paul has anything extra to add

to that, but Inco has been doing the further processing assessment. In regard to

all of it, the full package, if they expect to move at all and be close to the

optimistic time frame that they themselves mentioned again today, they should

have been registered last year, because we understand how long it takes to get

through an environmental assessment process and some of these other matters.

MR. SHELLEY: Well, they are still buying nickel,

as I understand -- isn't it 20 per cent to keep up with their own market

demands?

DR. GIBBONS: Inco again it mentions here in this

particular press release today, is buying one-third of the nickel that they are

presently selling, so they would like to be producing that themselves, which is

understandable; they would like to have it on a fast track. But there is a

process which has to be followed and the next step of that process after the

completion of the feasibility studies, is to register with Environment, and we

know that takes a certain time frame, so you have to get through that before you

get a sign off and get into the construction phase - and you have to go through

your construction phase before you get to production. So, it is relatively easy

to add these time frames together.

MR. SHELLEY: Yes. Every time I read something on

them on the Internet or anywhere, they want to move quickly, for obvious

reasons, the size of this project and the need for this nickel and how fast they

can recover with this (inaudible) profit and so on. It is a magnificent project.

And when we start talking about the smelter and so on, we joked about it before,

and there was no doubt about it, especially during the election, it was like a

smelter on wheels; everywhere you went, there was a smelter going there. Well,

we know that is not going to happen, but there is going to be a smelter and

there is going to be refining, and to be quite frank about it, the more I read

and study it, it is all new to me - and I don't mind admitting ignorance to that

kind of development or how big it is - refining is what I am really interested

in, and I think probably your department is, because we know that those are the

best jobs, the highest paid jobs, and maybe the most jobs are in the refining

part of the process, besides the actual mining itself from what I can gather,

and you can correct me if I am wrong. It is all guessing, of course, and when

you develop the mine, it is the mining part, then you have the smelting portion

and the refining process. And, of course, with Falcon Bridge, although there was

legislation in Ontario, the refining for Falcon Bridge was done in Norway. I

think that is right?

WITNESS: That's correct.

MR. SHELLEY: So I mean, that fear is there. Now,

the next question to you - and of course, I am just asking for your opinion, I

guess you could say at this point, is when it comes to smelting and refining, do

you see the two staying together in the same location or is there the possible

breakdown of smelting to refining in different locations?

DR. GIBBONS: They could be either together at the

same location or they could be at separate locations. It happens both ways,

nationally or internationally; if you were out in Thompson, Manitoba, you would

see it all together in a single complex but if you are up in Ontario, you see

the smelter in one place, the refinery in another place and, as you said,

refineries on the other side of the Atlantic; you might have a cobalt refinery,

a copper refinery, a nickel refinery in different places. So there are different

concepts to consider and to assess in each case.

MR. SHELLEY: There are all kinds of possibilities.

DR. GIBBONS: A lot of possibilities there and, you

know, there is nothing any of us would want more than to see as much further

processing as possible. And in some speeches that I have given, I have been

conveniently sitting at tables with knives and forks and said: I would love to

see the time when we could make some knives and forks and make a few kitchen

sinks, because about 60 per cent of the nickel and stainless steel is going into

kitchen sinks and things related to that. So if you are doing the processing, if

you are producing the metal, the pure metal, then it is not a big step from

there to doing some of the other things.

MR. SHELLEY: No, that is fair enough, and those

were general questions - that is why I asked them. I think this is the right

time to ask them. There will be lots of questions, as the minister can imagine,

and so there should be on this project in the House of Assembly as we move on. I

don't think anybody in this Legislature tonight would not feel that with such a

project, this could very well be a big part of the solution to building

Newfoundland's economy. There is no doubt about it, Newfoundland and Labrador,

if handled properly -

WITNESS: (Inaudible).

MR. SHELLEY: Yes, we should remember that - and if

it is done right. I will have more specific questions as it develops and we see

how fast it will go, according to Inco, now that they have put the hammer down,

so to speak.

DR. GIBBONS: As a government, of course, we are

looking at this very closely, very carefully. We want to ensure that we get the

maximum out of this for the people of this Province, the absolute maximum. When

we brought the amendment to the Legislature last fall to put that requirement in

the Mining Act, people were saying: Well, maybe there are thirty million tons to

fifty million tons of ore in the ground. Well, in January that moved to 100

million tons - on January 8, I believe the date was. About a month ago, INCO,

big conservative INCO said, we now believe we have one hundred and fifty million

tons. So we are going to continue to watch this and we hope that the Archean

people who are doing the drilling can continue to increase the reserves, because

right now we know, based on what is in the ground, that this has huge potential

for us and, as I said, we want to maximize the benefits from it.

MR. SHELLEY: Now, the $4.3 billion that was put

forward as the bid by INCO - I think it is $4.3 billion; I saw it as $4.5

billion, then it went to $4.3 billion.

DR. GIBBONS: It varies depending on the prices of

the stock, because you are looking at a stock swap. What is the price of INCO

stock today and what is the price of Diamond Field stock today? So it is going

to vary a little bit on the price of the stock.

MR. SHELLEY: Now, I will ask this for the sake of

the record. Because I have been asked it and until I did a little bit of

research of my own - but I will ask you the question because Newfoundlanders who

do not know about this type of project, they say, of course, $4.3 billion traded

hands and a resource that is owned by Newfoundland and Labrador, we did not get

a cent out of it. Okay, just to elaborate on why we didn't.

DR. GIBBONS: At this time you are really talking

about the value of stock. We have not produced one ounce of nickel, not an

ounce. So it is just the value of a company that two years ago had about 130

million shares outstanding on the Vancouver Stock Exchange at about $3.30 each.

That stock today is worth about $160 for the same 130 million shares. So you see

the value that is being attributed to it by INCO. So it there is very little

cash changing hands in this deal. You are getting a lot of shares changing

hands. So you got an exchange of INCO shares for Diamond Field shares. So you

still have 130 million owners of shares, I do not know how many owners of

shares, but 130 million shares owned by somebody out there. So now the Diamond

Field shares become shares of INCO, for whoever owns shares, as you do the stock

swap. So there is no big amount of money. And my understanding is that at this

stage you are not even into a situation where something is income taxable unless

somebody decides: well, I am going to take my money and run and sell my shares,

and you can do that on the stock market any day through the Toronto Stock

Exchange. Then you are going to be taxable, depending on where you live, and a

lot of people live in Newfoundland and Labrador who have shares in Diamond Field

and INCO, a lot of people. I have heard stories where some of them have done

very well, thank you. So the taxes will be paid when people sell their shares.

MR. SHELLEY: I understand that. And by the way, it

is pretty well the answer that I have been giving to the people who ask. Of

course, I did a few calls in the different provinces around the country, and

asking - but I guess, for somebody who does not understand it, to see two big

corporate giants battling back and forth in the billions of dollars over

resource that belongs to Newfoundland and Labrador, then you say this all

happened and we didn't get anything out of it. But, of course, I agree with you,

it was stocks changing hands but nobody really making any money off anything.

When it goes ahead, we will hopefully will get the full and fair share out of

it.

But the development plan and so on is what is going to

be very interesting to see, how they proceed with that, and to see what is

really laid on the table and how that develops.

I have one other short question, actually two more,

but I will ask this one first. It is specific to it. The antimony find in

Glenwood - there has been some talk and speculation about problems with the

environment. Could you just elaborate on that?

DR. GIBBONS: I wouldn't think there should be any

problem with the environment.

MR. SHELLEY: Is there any problem with that

mineral itself?

DR. GIBBONS: No, no, there is no problem with that

particular mineral, it is rather inert. I am aware of the question that was

raised a year ago in the House of Assembly about antimony as a metal. I think it

was totally taken out of context. We are not talking about antimony metal here,

we are talking about antimony sulphide, a rather inert substance, and we are

talking about processing that antimony sulphide into an antimony oxide which

would be used as primarily a flame retardant in plastics and rubbers, and

various other fabrics. We may have some clothes on now that has antimony

trioxide as a flame retardant on it.

MR. SHELLEY: It is like asbestos (inaudible).

DR. GIBBONS: So I do not see that as a problem.

The project is presently registered with the Environment department as a mining

project, and personally, I hope it gets through fairly quickly so that we can

get on with this mine development. It is big enough to have at least a ten-year

life. As a project in this Province, it would hire about 125 to 130 people. I

think it would be great for Central Newfoundland. I look forward to the day when

it operates.

MR. SHELLEY: Definitely. I just wanted to ask

that, and to have it clarified here, because I certainly would not want to see

it held up either. Hopefully, it will progress as quickly as possible.

I am just going to make two comments on the mining

conferences now. I will let a couple of questions go and maybe come back and

finish off with one or two. First of all, of course, the mine in Baie Verte has

been a great success, has been growing, and I look forward to seeing the

minister and maybe some of his officials there again this year. I'm sure you

will be. I think it would be fitting, and I will mention it again, that we do

something for Sam Blagdon at that conference. I will be talking to the

organizing committee and I will also let them know that you have mentioned it,

that we have both mentioned it.

Also, the Goose Bay convention which is about to come

up, I think that is going to prove very good for this Province and it is going

to attract a lot of attention to Goose Bay at that particular time. I certainly

wish them well in that conference, too. I think it opens up Newfoundland to

potential exploration and so on, and makes it more interesting here. I will try

to attend - well, I will definitely be at the Baie Verte conference, and I'm

going to try to attend the Goose Bay one, as well, although I will have to sleep

in an igloo, maybe, but I will find somewhere to sleep. I look forward to seeing

the minister and his officials at both those conferences.

Thank you very much.

DR. GIBBONS: We are going to be at them. This, I

believe, is going to probably be the most exciting year we have ever seen in

terms of mineral exploration, the most money spent in the history of the

Province in mineral exploration. The conference in Baie Verte will probably be

one of the highlights of the year for the Province and the beginning of the

field season. We are looking forward to that. Goose Bay - it is sold out, you

can't get a bed in Goose Bay. You will have to call your buddies.

CHAIR: Thank you, Mr. Minister.

Mr. Fitzgerald, do you have any further questions?

MR. FITZGERALD: Yes, thank you, Mr. Chairman.

Minister, a few minutes ago you talked about refining

and smelting. Up until now, when you speak of a refiner or smelter you think of

big consumptions of electricity, and you obviously sounded very optimistic about

being able to respond to the need. There are a couple of other processing

methods that I'm not even sure if I know how to pronounce them. I wonder if you

can explain to me how they work. One, I think, is hydrometallurgy, and the other

is pyrometallurgy, which is used now in refineries and smelters from what I

understand, and that uses much less consumption of electricity. Would this be an

option for something like Voisey's Bay?

DR. GIBBONS: Yes. Pyrometallurgy is the standard

technology that is being used today. Hydrometallurgy is the developing

technology. I'm not sure what - well, we have chosen probably pyro, isn't it

Paul? Are we sure at this stage?

MR. DEAN: I think for the smelter, but for the

refinery it will be almost automatically pyrometallurgy.

DR. GIBBONS: Okay, yes. It will probably be a

standard technology, pyrometallurgy smelter, rather than a hydromet project.

Again, different technologies, but hydromet technology is sort of an evolving

technology. Of course, it is always evolving, even pyrometallurgy evolving,

itself, as a technology.

MR. FITZGERALD: The Hibernia site, Mr. Minister.

What does government plan to do with that after the ground-based structure is

launched and we are finished the construction phase? From what I understand, you

have somebody hired there now to look at disposing of the assets there. Surely,

we aren't going to tear everything down there and allow people to go in and bid

on whatever is there, and do away with an opportunity to have something else

happen there, are we?

DR. GIBBONS: No. My colleague will probably talk

to you more about that. Minister Furey in the Department of Industry, Trade and

Technology has responsibility for that site. It is under that department that

Max Ruelokke has been hired as the president of the Bull Arm area committee, the

site committee, or corporation. We are marketing the site worldwide right now.

When I was at the oil show in Houston in early May,

the staff were there then with a complete description of the site, marketing it

to the industry in Houston. They will be doing it elsewhere internationally as a

great site to do business. It is a state-of-the-art site, modern technology for

everything, and we want to find future uses for it. We are looking, actively

looking, for future uses for the site.

Of course, the second project to come along will be

Terra Nova and that site, as well as Marystown and probably others, can be used

and be bid for work relative to Terra Nova, but there is going to be much less

work. Terra Nova is going to be done with a floater. It is not a gravity base,

so there is not nearly the same amount of work. But that is a superb site. We

just hope we can find work that we can bid on internationally, because if Korea

can bid to do work for Newfoundland and Italy can bid to do work for

Newfoundland, why can't Newfoundland bid to do work for somewhere else in world?

And that's our plan. We have the facilities and we believe we have the people.

Anyone who has looked at the topsides work that was done on the super module at

Bull Arm and compared it to the two done in Korea and the two done in Italy,

will say that the one built here by our Newfoundland workers was done best of

all. So we know we can do the quality work, and we are aggressively looking,

actively looking, for future uses for the site.

MR. FITZGERALD: I understand as well and talking

to some people out there - in fact, I worked there myself and from what I saw

there, the Newfoundlanders, the local people, were certainly quite capable of

doing the work that needed to be done there. I think it would be a shame if we

allowed it to be disposed of and not take advantage of it to do other things

here.

When do Hydro revenues decline? There is a time frame

there built into the Churchill Falls agreement that is supposed to happen

sometime in the near future when even the paltry amount that we get from Hydro

now - Quebec, from -

DR. GIBBONS: Forty years - 2016. After the first

forty years of the contract, for the last twenty-five years the rate decreases

from three to two, over time gradually. So it is after 2016, twenty years from

now - to halfway through the first forty.

MR. FITZGERALD: So up until that time the revenue

stays as is?

DR. GIBBONS: As is now, yes.

MR. FITZGERALD: Where you on the news tonight

giving an update on the royalty regime for offshore petroleum in the Province?

DR. GIBBONS: Me?

MR. FITZGERALD: Yes.

DR. GIBBONS: No.

MR. FITZGERALD: Was somebody?

DR. GIBBONS: The Premier gave a speech today at

Ocean Industries Association, he may have gotten scrummed afterwards. I was

there for the speech and there was just a mention of the fact in the speech that

we are close to completing a generic royalty regime for the Province and close

to making an announcement on it and we hope to do so over the next few weeks. No

time has been set yet, to the best of my knowledge. I don't know what might have

been said in the scrum but I know the lines that were in the speech.

MR. FITZGERALD: So there wasn't something

announced?

WITNESS: (Inaudible).

DR. GIBBONS: What I just said is that we are

getting close. We expect, in the very near future, to be making an announcement

about a generic royalty regime for the offshore, for oil and gas. We have been

studying this now for about two years or so in great detail, particularly in the

last year, and we are getting there.

MR. FITZGERALD: What is the expected life span of

Hope Brook? Is that particular mine close to its production life?

DR. GIBBONS: Yes, it is getting close. When Hope

Brook reopened, we were saying about four or five years left. So by the end of

next year we will be getting close to the end. I am sure that company is

aggressively - I know, as a matter of fact, that that company is aggressively

exploring along the south coast of the island in areas adjacent to Hope Brook

and they are also exploring in other parts of the island to try to find more

mill feed for the Hope Brook mill, because again, there is a great mill there.

Its capacity is close to 4,000 tons per day. And, unfortunately, any mine has a

limited life.

MR. FITZGERALD: Are you planning on making a

submission before the Public Utilities Board against the increase of rates for

Newfoundland Power?

DR. GIBBONS: No.

MR. FITZGERALD: Are you planning on sending one of

your ministers or some of your staff?

DR. GIBBONS: No. We have made it possible to have

a great consumer advocate to represent the public. He is doing, in my view, the

best job that has ever been done by a consumer advocate in this Province and I

am looking forward to the results.

MR. FITZGERALD: That is not to say why we can't

give him some support.

DR. GIBBONS: We are giving him the support. We

give him all the information he needs.

MR. FITZGERALD: Do you personally agree with the

proposed rate hike - the hike they are looking for?

DR. GIBBONS: I believe that if we did not have a

Public Utilities Board to review such matters, we would have to invent one. So I

am not going to give my own opinion on whether there should be a rate hike or

not. I say the Public Utilities should look at all of the facts and decide

whether or not there should be an increase in rate, a decrease in rate or

whether it should stay where it is. But the Public Utilities Board should set

the rate. As I said earlier, the consumers advocate that we arranged to

represent the public is doing a superb job so far. I wish him continued success

in that.

MR. FITZGERALD: One last question. Do you think

$28 million was enough for any company or any utility to make here in

Newfoundland, considering the economic climate that we are experiencing today?

DR. GIBBONS: Let me refer you back to my earlier

comment about regulated utilities versus market-driven industries. Regulated

utilities in the electrical and related sectors have been making 12 per cent to

13 per cent because that is normally the rate of return they have been allowed.

MR. FITZGERALD: Yes.

DR. GIBBONS: But market-driven industries like

downstream oil and gas have been making 4 per cent and 5 per cent and less in

the last several years. So, you know, I buy electricity and gas, too.

CHAIR: Go ahead, Mr. Shelley.

MR. SHELLEY: A couple of quick ones, since I have

been mostly provincial. I will get to my district. First of all, have you heard

anything from an old copper find near Fleur de Lys?

DR. GIBBONS: I am not aware of anything, Mr.

Shelley.

MR. SHELLEY: I do not know, if Mr. Dean does. All

I know is that there have been some drill holes from back in the early 1900s and

apparently there is some interest there again. That is all I know.

DR. GIBBONS: Maybe Paul Dean can report on it. I

am not aware of anything new.

MR. DEAN: Yes, Mr. Shelley, in the last few weeks

we have been contacted by some companies and legal representatives from some

companies expressing an interest in some old mining properties in the Fleur de

Lys area. So there is a renewed interest in those properties. We are dealing

with some interests on a daily basis.

MR. SHELLEY: That is all I have heard, too. I just

wanted to see how far it was with it.

Now, still again on the Baie Verte Peninsula.

Exploration like Nugget Pond, of course, is looking pretty well. I think they

will be starting construction of the mill site before the end of the month is

out. They expect to be in production very soon. Exploration with Nugget Pond and

Ming Mineral and so on, (inaudible) that will take place this summer.

DR. GIBBONS: Paul, is there anything further you

want to add to that?

MR. DEAN: I think the figure that the minister

mentioned, the total figure for the Province, is $111 million. Of that $111

million, I think something in the range of $25 million is being spent on the

Island portion of the Province. A lot of it is in Central Newfoundland, Baie

Verte, Springdale, Buchans, the traditional heart of the exploration sector. I

do not have an exact figure for the Baie Verte Peninsula.

MR. SHELLEY: I can get that though, can I?

MR. DEAN: I think we can give you an estimate upon

request, Mr. Shelley. No problem at all. We are aware of some new ventures on

the Baie Verte Peninsula that are still in the making. But we are confident they

will translate into hard exploration dollars spent on the ground this summer.

MR. SHELLEY: Yes, Pine Cove, Rambler, and Nugget

Pond, and so on.

Anything being revised with places like Betts Cove and

a few of those other new ones?

MR. DEAN: Yes, there is more activity than we have

seen in previous years being planned for that whole belt that goes from Nippers

Harbour to Tilt Cove. As a matter of fact, there is some current drilling at

Rouges Harbour, south of Nippers Harbour, as we speak.

MR. SHELLEY: Okay. That is what I want to know. I

just want to see how much interest was there, especially in that area. I know it

has a lot of potential.

DR. GIBBONS: The interesting thing is that

Voisey's Bay is really having a spin-off for the Island as well. Because

companies that are coming here to look at Labrador are saying where else can we

do some exploration? So again, comparing 1993 when we had $8 million spent for

the whole Province, now we are going to get about $25 million this year on the

Island. A lot of that is spin-off from companies that are looking at Labrador

and saying, we want to look at the Island, too. We are getting a new look by

some new companies.

MR. SHELLEY: That is what I said in my opening

comments about the prospector's course and the assistance, anything we can do

with these small companies to get out there and look around. Because as we know,

I mean, Voisey's Bay was jumped over a hundred times before our own local people

finally got in there. I think the same thing could happen in any part of the

Province. I know, on the Baie Verte Peninsula, of course, speaking of my

district again, there is great potential there, and also the Central

Newfoundland area, around the Grand Falls - Buchans area and so on. Whatever we

can do to encourage that type of thing in this Province, I think it is a plus.

That is all I have for questions.

CHAIR: Thank you very much.

I am very pleased with the level of debate tonight. In

fact, the decorum was above ten out of ten, so I am very pleased with that. It

has been an interesting and thoughtful night. The debate was eye-opening. It is

ironic, and I don't think the irony should fail on anybody, that a department

that consumes 0.3 per cent of our revenues has such an impact on the whole of

the Province. Each of us is very pleased and proud to see what is happening in

the mines and in the energy sector of our Province.

I would now ask the Clerk if it is in proper order to

entertain a motion to approve the Estimates of the Department of Mines and

Energy. That includes the minister's salary.

MR. WOODFORD: So moved, Mr. Chairman, to accept

the headings from 1.1.01 to 4.1.01, inclusive.

On motion, subheads 1.1.01 through 4.1.01, carried.

On motion, Department of Mines and Energy, total

heads, carried.

CHAIR: Thank you very much. We will adjourn now,

and go home and watch the hockey game, I guess.

DR. GIBBONS: Mr. Chairman, on behalf of my

department and my staff, I want to thank you and the Committee members, and the

staff who are with us tonight. We sincerely appreciate it. It was a good

evening.

The Committee adjourned.

Document details

Collection	Newfoundland and Labrador — Committees
Citation	1996-05-22
Type	committee
Volume / chapter	committees_standingcommittees_resource_ga43session1_1996-05-22_rc-me_.htm
Language	en
Format	html
Source	PROVINCIAL
Identifier	f3c3ff4807c89bafaa15d61138b7551dbf48c85d

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