Volume 1 PROVINCE OF NEWFOUNDLAND THIRTY-SEVENTH GENERAL ASSEMBLY OF NEWFOUNDLAND 1st. Session VERBATIM REPORT TUESDAY, DECEMBER 16, 1975 SPEAKER; THE HONOURABLE GERALD RYAN OTTENHEIMER Number 18

December 16, 1975 The House met at 3:00 P.~~. Mr. Speaker in the Chair. MR. SPEAKER: Order, please! Tape 1'46 PK- 1 STATF.HENTS BY MINISTERS ~~PEAKER: The han. Minister of Manpower and Industrial Relations. MR. E. MAYNARD: In ~fay 1973 the then Minister of ~fanpower and Industrial Relations appointed an Industrial Inquiry Commission to investigate the industrial dispute between the American Smelting and Refining Company, Buchans Unit, and the United Steelworkers of America, Local 5457. Professor Howard Dyer was named as sole commissioner and was assigned a double task:

(1) To attempt to resolve the industrial dispute at that time;

(2) To enquire into the employment prospects at the mine in Buchans in the immediate and foreseeable future with particular reference to the life expectancy of the mining operation in its present f'!'rm or any modification thereof. In the second part of Professor Dyer's report of the Jn.i• .:s! r!o'1l dispute it is stated that the approximate life expectancy of the mining operation is six years - in order words, 1979. Tha': statement was based on the then known reserves of 1,894,000 tons of ore heinr, mined at a rate of extraction of approximately 300,0rJO tons per year.

In the concluding pages of the report,Professor Dyer recommended to government that a committee be established to study the various aspects of the problems associated with the closing of the mines.

In April, 1975 the government appointed the Buchans Task Force whose terms of reference were as follows: "To Assess the future viability of the Town of Buchans by identification and analysis of the various socio-economic factors which will be influenced by a phase out of the mines and conduct a systematic study into those socio-economic conditions, physical assets, and to make recommendations to government as to possible policy alternatives which would secure the future of the tmm''. 165t

December 16, 1975 Tape 646 PK- 2 Mr. Maynard: The Task Force and its seven sub-committees have been meeting regularly since being established. However, very early in its deliberations the Task Force realized that the question of local government - a question that is not directly related to the closing of the mines - should be pursued immediately by the Department of Municipal Affairs and Housing. As most people are aware Buchans is a company to~m with ASARCO supplying all municipal services and contro l ling most of the housing units in the town.

Notl.rithstanding the other apparent problems associated with the closing of the mines, the Task Force recommended to government that the concerns of the community regarding local goverr.ment should and could be divorced from the problems dif the town's mining operation. As a result, my colleague, the hon. Brian Peckford, wrote to the two principal companies involved, ASARCO and the Price Company Limited, to invite them to sit on a committee which will study the question of incorporation for the town. The companies have replied to Mr.

Peckford's letter and both have given their agreement in principle to incorporation of the town of Buchans. The companies have also appointed senior representatives to serve on the committee, Mr. J. E. A. MacDonald, Assistant to the Vice-President (Hining) is ASARCO's appointee while Mr. G. L. Colbourne, vice-president, Mineral Resource Division, is the Price Company Limited appointee. The government members of the committee are Col. J.

Allston, representing the Task Force, and Mr. f'."t er l.,'ith<>rs, representing the Department of Municipal Affairs. - It is the government's hope that the above mentioned committee will convene early in the New Year to actively pursue the question of incorporation for the community of Buchans. The Committee's job is not to study the question for a long period of time, but rather to work out the detailed mechanics as to how incorporation can be achieved.

We would hope with the setting up of that Committee to implement at least one of the recommendations of the Buchans Task Force before the final report is actually brought about. 1655

-~---- necember 16, 1975 Tape 646 l'K - 3 000 t!R. SPEAKER: Poes the hon . member have leave to revert to statements by mini ster? llON. MEMBERS: Agreed. NR.. SPEAKER: The hon. member for Windsor-Buchans ·. !·iR. G. FLIGHT: Mr. Speaker, I am aware of the workings of the 'fask Force up to this point, and I am aware of ~11\at the long-term hopes of the Task Force were. I am also aware that very recently t here was a ·que stionnaire circulated throughout the town to try to ascertain the feelings of the peo!)le o£ the town tow-ards incorpo rati on.

The minister has indicated that there is a committe e set up to look at tht: possibilities , and he has indicated that ASARCO is receptive to in,corporat;l.on . I am aware, Sir, that in 1961 a minister of the then administration approached ASARCO,and approache d ASARCO ~lith the idea of incorporatio n and t hey were in no way receptive at that time. So I can only assume that t heir thinking along those lines have changed .

Hould the minister indicate to the House or to me as to what the results of the questionnaire that was circulated in the tol'tl wi th regards to incorporation - l<:::tt we·re the .-esults? \~ere the peopl e in 'Buchanl' - did they indicate their desire to indeed he comin g i.ncorpora ted town as oppo sed to a compan y controlled town as it is today? 1&58

December 16, 1975 Tape 647 PK - 1 HR._SPEAKER: The hon. Minister for Manpower and Industrial Relations. HO~._E;. MAYNARD: Hr. Speaker, as far as the attitude of ASARCO is concerned, it apparently has changed. Both Price Company and ASARCO have indicated their willingness to see the town incorporated. The specific details of the answers to thequestionnaire I cann u t give the hon. gentleman at this time, but I will certainly get the inforrr~tion and provide it to him within the next day or so - the actual response, rate and whether it was favourable or otherwise. NOTICES OF MOTIONS: NR. SPEAKER: The hon.

Minister of Municipal Affairs and Housing. RON. A. B. PECKFORD: Mr. Speaker, I give notice that I will on tomorrm~ ask leave to introduce a '•ill, "An Act Further To Amend The City of St. John's Act." ANSHERS TO QUESTIONS FOR l.fiUCH NOTICE HAS BEEN GIVEN NR. S1'EAKER: The hon. Hinister of Education. ----- HON. ~..J!OUSE: A question was asked a few days ago by the member for St. George's 1'1 :·:-.. ·•·:' "· " •··. ~-lith respect to superannuation of teachers and the different standards applied to male and female teachers.

As it now stands the male married teacher pays a 4 per cent premium and such provides total family benefits. The married famale is not considered the breadwinner of the family and pays 3 per cent for personal coverage. However a married female may apply for and receive the 4 per cent coverage if her husband is finacially dependent on her. And the same applies to a widow for the coverage of ~ependent children.

Last year in the teachers ' collective agreement it was asked that this be changed to allow 4 per cent deductions for total coverage for male and female teachers, that is, married male and female teachers, and the government has a committee set up of four members of government and four members of the NTA and they are presently working on the matter, and we have not yet reached a report on it. I further wish, }{r. Speaker, to table answers to questions asked by the bon. member for Bellevue (Hr. Callan) on the Order Paper of November 24. There were some questions in that

section that were not 1657

December 16 , 1975 Tape 647 PK- 2 Mr. House: ·related to .the Department of Education, and these questions have been passed on to· the appropriate department. I am tah ~. ing ans1:1ers to questions 4 711, 4 79, 480 , 481, 484, 485, 490, 493, 494, 499, 500, 503, 506, 508, 513, 514, 518 and 521. AN HON. t{EMBF.R: Hear, hear ! MR. SPB.\KER: The hon . }!inister of F'ishe ries. HON. H. CARTER: ~lr. Speaker, I beg leave to table answers to questions No . 338, and 348 placed on the Order Paper by the han. member for ~~illingate (Mr.

Smallwood), question 622 and 668 placed on the Order Paper by the member for Fo go (Capt . E. Winsor ) anti question No. 697 by the membE<r f or 1.aPoile (Mr. Ne3rv). HR. SPEAKER: RON. J . ~toR~AN : The han. 'inist er of Transportation and Communications. ~!r . Speaker, in answer to question no. 423 as placed on the Order Pai>er by the hon . gentleman from ~llingate (Hr. Smallwood) 1 che ques tion with regards to the number of settlements in the "'rovince 1~hich are now isolated , and the miles of road and the approximate mileage, and the population of these coTmlluni ties around the Province. Jl.lr.

Spea'ker, rhe answer is there are fourteen communities left t ha t are isolated •·lith no roads leadinp . to these communities . A totaJ population of 4, 5110 people, and che approximate milea~e 1~as 174 mil es. 'IR. S'i.ALLimOD: l!;lnnds roostly? }!R. J-IORG!..N: Some of i:hem, not all of them. 1658

neceJTtber [(-., 1075 Tape 1'-M~ (afternoon) TTl-1 OP},J, iF,--::lnNS ''1>. SPF.ftKFP: The hon. me!'lher for T:'.aie Verte-Hhite Bay ("r. Pideout). ''P .• l'IDE0UT: Yr. Speaker, I have a question for the Yinister of Transportation <mrl rom111unications. I wonder if the. ndn:i ster ~~·on] d infoT1!1 the Honse ,,rhether or not there are any areas in the Province at the present t:ime that are not on the t~,ro shtft svste111 as far as snow clearing is concerned? ~'!'-. SPEAKEP : ~"'. HO'PGAN: The hon. 1-'inister of Transportat1.on anc'l rornmunicat:!ons. ''r.

Spe;~ker, the two shtft, three shift syste111 that PE' sh:i.ft, three cre'·' systeT'l is used mainly on the Trans· Ganada ancl the major, secondary ancl trunk roads. The two shift system is used -tn !'lost of the rem;~ininf areas of the Province, yes. HR. SPEAKF:l': The hon. member for Baie Verte-'lh ite Bay (Hr. "iC!eout) . 1~. l'IDEOT"l': Po supp] ementary, ~'r. Speaker. I vender for my mm clarification, ,,,on]CI the ll'inister tell me whtch catepory the trunk roacl froJTl :Raie ~·e.rtc to the Trans-ranac'!a Hir,hway falJs in? ~-IT'. SPEJ\J'F'l' : The hon. >'inister of Transportation 11nr roroJT1utdcations.

Ml'. ''0PC:AN: The road referred to, }1r. Speal<-er, :is,T ~~·ou]d consider, a maior seconcl11ry road and would he ~efinitely on a two shift svste!'l. ''1>. SPEAK~!' : The hon. !'le!'lher for roncept:!op Eay ~onth (~r. Nolan). ~rp. N11LN1: ~·r. Speaker, .~ C1Uest1.on for the ''in ister of "ines and C.ner?Y· I untlerstann thflt the Y"in:ister met in Ottllva recent]v on energy l'!atters. "v qnestjon centers, Hr.

Speaker, around ~-!hether or not the !"inister is prepared to say wh<lt if anv llCtion has heen taken on curt;liling pr1.ces hy oil companies or ras companies in this Province such RS has heen done,for example •. in "!ova Scotia and in 0ntario during the past year. >'11, SPEAKFR: The i'on. l"finister of ~-':ines and Fner?v. }IT'. CPOS13IE: ~~r. f--pe.aker, there Wil.S a meeting Ja.st Friday of the Hfni ster of Fnervy, ''ines anrl T'esonrces of ranac'la with the ministers of the ten provjnces ,,rho are respcmsibJ e for enerp:y matters cal 1 ec'l bv the rovern!'lent of ranacla.

The purnose of the meeting "Tas to c'liscuss the present and future prospects with respect to the supp]y and cost of 1659

necemher J•,, IQ75 Tape 64R (afternoon) H--7 enerp:y in ran:lc:1R, to (1is<'nss the question of petroleum prices <1na crucle on prices in r.,n,r'a,;md other matters associaterl there~ri.th.

At tl1at meet inr the C:overnment of ranac1a ~1acle it verv c-1 ear that the present subsic'v prop:rammP ,,.; th respect to crude oi] prices \·.•here the C:nvernment of (:;mac:1a sul,siclizes nil :lmpClrteel into Eastern r:anacla so that it rem;>:lnR at the sAme pd t'e for crude on as on that i" nrorlucecl in r;>nada, in hlest<>rn r;macla, ••nu.lel have t.o C,e revie~<ecl anr' that the all'ount of the subsir1v <dl 1 J,avP tn he chanp-ed next vear. Tl,_e pTPRr>Pt ;'l<>rePment Fill last, T think it iR until the enr of June, 1 Q7f..

The T"ini ster pC1intecl ont that oH and p:Fts supplieR in r:macla • ClT thflt ranac'a waR no lonp-Pr or ,.rould not t-e :in thE' next short tertl' periocl sP.lf-suffic:ient in Clil and ~as supplieR, that the revenue frotl' the oil export tax anel Cli1 sC11<' to the Pn:ltoc:1 ~tates is declining he cause the amount of oi 1 exporterl ,,ras clecl in in~, that thev "mu] d hAve a deficit this year on : ~~ . i tax.and the ten cent ~ gallon t~x of the ferer?] p:C1VE'rnment on g~so1ine they still h~vP r> short ft11J thi R vear.

This '·'Oul d ],e increasinr in the VE>ilrs to co!'le if thev ret~in the RFll'lE' prClp-rawl'le. lle m11~e :it cJe~r tC1 the meetin~ th11t the price C1f ('rure oll "'llS cert;dnlv ~Tninr. to h"''r' to incre:'lse in the future, after J1me 1(), next veRr, to ~o tnP~rclR in oreler to encourap-€' exploratinn in the frf'ntier areils of r,n~r" and sn nn. /1 nul!'!->er of re11sons '•'f'Te riven bv him, ·, t it is rf'corni:>:er hv mnst of the provinees that tl1is iR the CI'ISP. !•loF the t1Uestinn to J,e cledr'ed next ve~r ,,rill he hrn-1 ll'llch of an increllse ,,.;] 1 thE'.rf' he next year, hm,, much will the r:overn!'lent of rana<'la want to necrPFtse the suhsiily by 11nr therefore incr<':H;e the r.rurle oil cost 'hv.

That has not vet been discussed nor c'edrlec'. '!'here ••as also cJiscnssec1 at tl-tat meet:lnp- what the fecleral government consirers to hp a prohlem and "'hich I thin\r is a problem of the c1ifferent polici-es in ili fferent proYinceR "'i th reRper.t to the price of oi 1 anC! p_pso] inf' prnch1cts. SeverR1 provir>ces control the retail priceR of nll or p,asol i.ne, f660

~ecPmher 16, t975 "!>.

C:RflSBff.: Tape 64R (afternoon) oil product!>. ~·ost of the prov1.nces no not. lol'hen the price of crur1e oil was incre<~se<' lAst vear by the co!'lpanies ~dth the concurrence of the federal governme nt anrl the provinces, the fe<'era l ~overn!'lent decicled that fC\rtv-fi.ve <lays "'as the correct per:!o<l before the p roducers ~1ould be all o•··ecl to start charginR ldrher prices for the prC\clucts that are refiner frol" cn1de. tn other words, forty-five clays is the tiMe :I t take~ for the~ to use up their old inventory hefore they start using new. rert<>in provinces n 1 sar.reecl w:! th that and put a freeze on the pd.ce for J C\njler peri or~>.

In olnt a ri o . lhe i ree?.e e:-:plr~d the r e j n t!\t; rnicidlc I 11!over>her, and jn t!OV2 Scotia, "anito!,a And Britis ll r ol••l"bia , T t h inl< it ~o.•ns, tool- the sa!"e ldn<l of ?.t.titurle for varyinr- peri oris. '!'he fec!P.rA 1 povernnent feeJ s 1nnd the pr"vinces all .-r.ree in theorv. tl•.'lt there shnulcl lo,p one crucle oil price acros s f'an.acla. Therefc:orP the feclcr<J 1 p.overnment <'oP.s not ~.n sh to see eli ffenmces in the var:!ous prov:inces with respec:t to those matters. 1661 IB-3

December 16, 1975 Tape 649 PK - 1 Mr. Crosbie: We have taken the position, and in fact - well it waR "~reed at that meeting that there would be a task force of officials appointed of the ten provinces and the federal government to consider the question of what is the correct to allow.on a regional basis, becaus.e there may be differences regionally . w'fJat iR the correct period before crude oil prices should be allowed to be reflected in retail prices, Js it forty-five days, ninety days, sixty days, one hundred days? This may vary according to region.

So there is a task force of officials appointed to report l-ack by the end of January after studying all of the information that is available, and studying the records of the oil companies and so on as to what is the proper period. So hopefully it can be agreed by all of the provinces as to what the correct period is before increased crude prices are allowed to be reflected in increased retail prices. This Province has taken the position that we are going to ask the House of Assembly or the Province to give the government po1o1ers to control retail prices of gasoline and oil products in the Province.

We have not decided whether this should be controlled by the Public Utilities Board or some other agency, and I think that initially we will ask for the government to freeze prices or to control prices if the government feels that anything has been done is unreasonable. In the meantime, Mr. Gillespie has said that the Prices Control Review Board-or whatever it is called-·of Canada is going to closely monitor oil and gasoline prices, and they should be able to do the job with respect to retail prices , and the Department of Energy, ~lines and Resources with respect to crude pric~s.

Our response h<1s been that if t~e find they are doing a reasonable job, we do not want to institute another bureaucracy here in Newfoundland.If they are doing a satisfactory job, 1o1e will not need to excercise these powers,but we are going to ask the House to give us certain standby powers. The other questions discussed at the conference concern conservation and other matters with respect to energy, So I think that I will answer the han. gentleman's question. The provinces 1662

December 16, 1975 Tape 649 PK- 2 Hr. Crosbie: that now have controls,like Nova Scotia,are adamant that they are going to continue having them or continue imposing them. Certain provinces,like New Brunswick, are very much opposed to this being done by the various provinces at different levels across Canada and the federal government takes that position also. So it appears obvious that the price of crude oil in Canada will go up next year after the end of June, but how much and so on will have to be decided by Energy Hinisters and First Ministers and their governments between now and the end of June 1976. MR.

SPEAKER: The han. member for Conception Bay South. MR. J. NOLAN: Mr. Speaker, a question for the Minister of Nanpower. Hhat if any action has been taken to hopefully offset the threatened strikes in the Wate rford Hos p ita~, r xoTI House ann so on that are no~i7 threatened in this Province? '1R . SPEAKER: The hon. llinister of Manpower and Industrial Relations. BON. W. DOODY: (Hinister of Finance) : ~lay I, Mr. Speaker, as President of Treasury Board who is responsible for that particular area of the collective bargaining- process?

The on-going negotiations and discussions have been in progress for some time \o7ith the unions involved. Some months ago,as the han. members are aware, Sir, a collective bargaining agreement was signed with the unions involved and there was one outstanding area of concern which had not been resolved, namely, the contact pay situation.At that time it was agreed that a collective agreement covering all of the other outstanding problems would be signed by both the hospital boards, government and the unions involved, and the contact pay problem would be worked out at a later date.

If nhe parties involved could not come to an agreement - it was decided then,at that time,that the conciliation board would be recalled and they would be asked to give an opinion as to how the contact pay problem sl.c-uld be resolved. That report,.which was unanimous by all three members of the board has been received, and government has accepted it with the exception of the classification of six people,which is a rather minor area of concern. In effect, gvvernment has agreed with the 1663'

December 16, 1975 Tape 649 PK - 3 Hr. Doody: conciliation hoard report ,which Has unanimous. Now the problem that we have is that the union is insisting th«t the 1664

necemher 16, 1975 MR. DOODY: T~pe 650 (afternoon) IB-1 contact pay ~rhlch is re11.l l y a pay, extra money~ glven to those people •mo have constant communiclltion or constant contact tdth pat:ients, particularly in tl'1e \,Taterforcl Hospjtal and the F.xon House and the rhilflren's Home and the HiJJv5e~' Lodge, that they shonlc1 be given some extrn p<Jv over ancl above the other people in the institutions.

The union has notv talren the posit:l.on that all the people in these institutions.- stenC'p.raphers, cJerks, S'Y7itchbo<~rc1 operlltorE, .ianitors, roaintenance roen- that all these people shoul.f! be entitled to what they rPfer to as contact pav. Fe f5nc1 that this i.s unacc .entable anr1 un­ reason<~ble ancl \7e he~ve, yc>u know, PE' just simply cannot p:o aJonr 1-1jth H because it "'ould completely nere~te the ac1vantar:e that the people who are exposed tn constant contact t;r1 th some of the more (lj ffj cult cases in these institutions have.

So vre have felt that this is not acceptable. ~·!e h:we p]eac1eC' •'i th the unions invol veil and talkecl to them fit rre11t lenpth. T. find it a1Jsolutely inconcejve~bJe, Sir, that the strike threat t-dll he ce~rriecl throup-h with.

It seems to me to be ;~possible to conceive that <~ny union,having been granted the responsibility a1onr uith the ri.rht to stri .ke,'Ymulcl exerdse it over such an itel'1 <>t thjs point in tjl'1e, that they ••auld elect to fO on strike on a pc>int the~t is obviously not a sipnificant one in terms of. the total packap.e> th11t hrlR he en ne!!oti 11tecl H:lth the!" o\•er the p11st yee~r. T finn it clHficul t to ima!!ine ,e~nd T think th?.t ll'ost peop]e in this han.

Honse 11nrl incleeC' most peop]e tn this Province. and T think that !'1ost people 1n the union involvecl,~··oulrl find :It cliff:lcult to imagine that at this time, at rbristl'1aS time e~bove all tillles, that these people t•'onld vall< out e~ncl ]eave the hospital for mental and nervous riseases, the Haterford Hospi tal,wi thout staff and care>, that the Children's Home woulcl be tvithout people to look after them,and that the Exon House would not have people to look after them. He have e~lready been informed by the aclministration, for :Instance 11t the Haterford Fame, that the Christmas parties that they 1665

necemher 15, 1975 HR. DOODY: T~pe n50 (afternoon) h11t1 arranpet1 for the inmates in there hnve hncl to he cl'lncel J e(l.

TR-? 'l'he <lcpartments t1ircctlv invoJvecl, the nepartl'lent of Health, nepartment of Rehabilitation and ~ecreation, have taken ~hat steps that are possible to try to cope ~1ith an emer11ency situatjon such as is nm1 heinp; threatenecl. 'Rut I reaUy fee], ~Hr, tl1flt :In a]] honesty and in all faith ann conficlence in the Jahour movement ann the responsible le<~ders ann membership,that this strike Fill not TTiateriPlize, that the omse that i>ppears to be the one thnt is beinp espousecl by the union Jeac1ership, one that is not ~mrthy of .ieop11rrlizinp the p0sition that they h'"'e won over so !M.ny years, that the prorre!'ls that has been l'lAre :In the nuhl ic service unions "'ill he so w:PFuJ1v ancl "11'!1ost irresponsihl v ahused.

Sn, Si.r, T reRlly can f'AV in Rn!''·•er to t.!1e cmestion froll1 the hon. mell1her opposite that (

a) the departTTients of povernmen t responsible havP. t«ke>n evprv possible precaution to look aftf'r those peor>)e ,.•ho are i.ncaJ"lahlP of 1ool· :lnr: <1fter themsP.lVf ·S, tlH' in,.,,.tes of thef'e insti tuti.ons ; and (2) that 'l're>asury '\oar<" has t1one evervthinr th<~t it can vdthin ,.,.<!!'On to reH!'OTI Fi.th the unions involve<" . ••v Ferve!nt hope, Sir, is that responsihility will prev<Jil ;md tl1nt tl:ere ,,;] 1 1.inceec1,be> no stri!<e situation. Snf<r. WlN. JdE~'IIJ':"S: !1 e;or! J'par! ""· ST>F.AKEl': !1eforP.

T recnpnize the hon. rent1ei!'1'ln for <1 suppler,entary T would just li~e tn <"ram to the 8ttention of t~e l'ouse RP.ction lPl in J'.e.,urhesne whir.h is rmHe i'ifficult to i.ll1p1errpnt hut it ill th<'rP nnd ohviouslv it is there for" rP.nson. 'l'he APction rearls: nuestions must he """'•lf'rPcl hrief1v nn~ c1istinct1v, ;mel ~e lil"ite<" to the necef's~rv expl11nHtions.

The same sentenRP r oes on: Thmlf!h " certain 1atituc1e is pr>nnHtecl to ~ ·inisters of thP. rro \.rn ,-rhenevPr thev fine' it. nec-essarv to extenrl their reTl'arks t.·ith the view 0f cl~arlv explalninv thL ~ ~att~r in alt~stion. nbvi.ouslv the question of lat:!tucle,;mcl i.t is a ouestion of j 11dp:eJTient,anr' ;m extremely cHffic-111 t matter ·on ,,•hich to mnke a precise intPrvention,<>.nc certainly the rh,.ir c'oes not ,,•ish to interrupt w~en the 1666

Pece~ber 16, 1075 MR. SJ>F' AKER.: Tape GSC (afternoon) matter is one of some coMplexity ~~P.re there ~y be insufftcient unclerstl\nclinr if,in fnct,a person is cut off. Rut I rea(l it ~·ith 1~-3 reference to the last two Answers by the last t~o hon. ~entle~n to my left.

I feet thilt it is neces~m:v to <!-ca~1 to the <Lttention of hon . mel"her!l to my lef t,just as when otlef'tions,Sn m'' oninion, are either too lenRthly or contain material which shouJ~ not tn fact he in them, it i.s my tluty to call this to the Attention of p.entlf!men to my ri~ht. '~'he hon. men>her (t'r. :-to ]an) h<td a snpplementarv, t believe. !IR. NOLA.'II: If J could pur sue thi11, 'fr.

Speaker, with the hon . minister: Ts ther,• an action pl;m, if I can cnll it that, in the eventuality that the st rike <loes coll'f' about ~ T.s there sof'!ethinr: no<~ in preparatinn ,thl1t the m:lnister c<~n assu re us C'lf,to protect the people who are in these ins titut ions? That is 1'1Y real cuest~e>n. t-'1> , SPF.AJ<P.l>: The ron . !'ini~:ter of 1'1nance . 1667

L Tnpe fi.'il (ilfternoon) "IB-l ''1'. nnOJW: 'T'he cnwstion, Sir, is a lepitiTT'flte one,ancl one that I respe~t. r.ert~inJv trere is 11n ~tction plan that h11s ~tlreaclv heen ~nnonnce<l,T thinlc pn!-,licly, hv the aclministrator of the 1,.Taterfnrr1 Jln~<rital, thnt thCise people wh0 l'lre capahle of ],ein)': c'isdte1rger:l are l•einp. clischarrec1, that outpatients services have been discontinuerl, that no new admittances «1re heing accepte~, that psychiatric cases are now hein~ referre~ to the appropriate ~arr:ls at the other hospitals in the city. Thf' smne is true of the other inRtHutions.

Obviously ;m action pl ;m has l•een preparen .:md is re11dv for i11'p] e!'lentati Cln. 'lut as J sal r1 he fore 011r fervent l1ope <1nc'l r1esire i !" that to put the plan in action wiLl not he necessAry hecilnsc '·'f' feel tl,~tt responsibi 1 i.ty, yon knn'''• 1dll t11lre c11re of the f'>itnation ann ,,,e ,_,; 11 not come to <1 ,.;trH·p sitliAtion. ~11t insof~r AS it is possihle, Sjr, in n sit11~tion 2s ~elicAte l'lS those institutinns,01ere people nre 1iterAllv helpless, ,,•hPre the ehilc'ren 11re 1nc<>pah1e of lookinr after thf'"'selves,anr so1T'e of thcll' nePc1 a.lT'lost hourlv, const;~nt, T'linnte to TT'innte attention, ~nd some of the patients in thes~ other institutions are in the s~~e pos'tion, '"l'c'n the <1rtion plan J'lust of necessity he<' 1i11'itec' one.

Insofar :1s is pnssih1<> for the c'lep<~rt1'lents to create an Action pl;m a.nr' hl'lve it renclv to ro into nction, i.t l1a.s heen c1one anc'l is rpac'ly to 1'lnve. lint honefullv, Sir, it t~ll n0t he necessa.ry. V11 • SPT:foKfll: "" FLTr.llT: PeHr! Henr! Tl1e hon. member for Hindsor-Buchans (}'r. 1'1 ight). "r. Spe~tker, T <1m not re1'11 y sure '''h<'lt mini.ster T shon10 MlclrPRR tl,is C]llestion to"so T HilJ 11c'lc'lress it to thP House Leader and he can direct it to the appropriate minister. Is this f'OVC'Tnn>ent 11ctivel y cons:!c1ednp the esta.hl ishment of 1' schon] of mininr in NeFfNmc'land?

Tf it is, "'hat place is beinr. cons:lderecl 11s the 1 ocatinn for that scbool? '-f". ':_?EAK1'1': The hon. '"inister of "ines ancl ll,nerpy. 'IT'. (;PI"\SlHl'.: This question was answerei1 there a week or two weeks ago, Nr. Speaker, r.ut the bon. gentleman might not have been here. There iR 1668

~~c~mher 16, 1975 Mr. Crosbie. Tane 651 (a fternoon) <' proposal t hA t the "'~n:lster of Pun:lcipn\ Affairs And Hnus i nn is tn-2 very 1'1\ICh i nterester' i n fo r the esta hl ishment of A mi.ning school i n the fomer mine near <;rdnt,clal e, ~lhalesback ~·ine. MR. DOODY: 1 though t Bell Island t,-oulcl re approp r iate. t~ rnosP.I F. : ~'ip.ht.

That bas heen invest:l~ater' by a committee of official~> t~ho hav(> repor tecl to the ~nvernll'ent .,i!>.nd the r eport is no~r hei nP cnnl'liclerec' by the 11!!\tal nr pans nf rovemment t hat ce>nsicle r TP~rts, the ~eso~ce Policy C~ittee , and on i t q ~av to cabin et . !>r H :is unrler ar:t 5ve con,:;irleration. The propoPa) iii to e~>t;tl>J:fsh :1 min:lnr schoc-1 14hich t..1ll he lo<'Ate rl at: IJ11a lesback and use the- r-ines no"' no lonr.e r in use the r e- . 'l'hi!>t is the propnR:tl.

"ht>tl,er it pjl] he acce pter' ~ r not i~ not yt>t kno~~ . !'P . ~PEAKr:l': "'he "e>n. nenl">er fc-r 1•1i.nrlso r -r.uchans , ("r. !'J Jrhr) . "'t> fLJrf!T: Tn followfn'" thl' th:lnts up , to the hl'n . l"ini ster, ,.,l,At w1s tht> critcri;~ if' esr;~l-.J ish:lnr the wr:-1esl,n C'k mine l't rreen 1'\av - yes , rree" P:ty , T. ruess it is - was consideration riven tn any oth er of the l"ines, pa rt icula r ly t he BuC'h11ns m:ITte.••hich ns the •·il':! StPr nf "anpow\r an<' Industrial Relations has indicated. that there is ,.. tasi' ~orr.c!

Ret up 1 ook lnr for •·Ja yl'l r c> ruarantee t !•e future v:l;rh ilitv of the rn~"n of' "nchsms . "ot.: , i t RP.Cli'S to l'!e t hi!t a school cf ll'in'nr ancl all 1 r pe rta ins t he r eto t·.'ouJd he one th:lnr r!le~t coultl h;tvc> - ~ . 'PLH'l!'l": - guarante ed the v1 ;~hil i ty nf the futm:P of B'uchans. I'll , ~PT'AJ<f!': nrrle r. r 1 e(lsP. ! T. !<houJd point n11t tn t he hnn . r.ent lemAn t hat his ouestin n c;hnuld be re!<trictecl to " nuestion and any necessnry e xplanation,se> th<~t t 11e t:H<'Stion Hill 1-e 1nt el J1g:lhle . MR.

ROBERTS: f:t>F..AKFT': ~1' . rMSJIIF.: Ne thj nY. 1 t "-'AS necel'ISl'l ry. l <lo not. 'r. ~peaY.er, I w:ill not c!eal t·rJth the arl!ull'entat ive par t of the question . The reason why the r.reen BAy t~alesbnck mine was r:onsiclered is hecause the whole thing spran f from the breast of i669

necember 16, 1975 l'lr. Crosbie. tape 651 (afternoon) the 1'\emher for the tHstdct of C'reen Bny,who :Is the l'!:lnister of ~·unk:!pal Affair~\ and Housinp. Re js the C>ne ,,;10 came up wHh the JB-3 su~~testion an<' the ide11. he is the nne "'hn has heen pusninr. it 1 he is the one who sug~testen it and cause<' r.he povenu!ll!nt to appoint the comorlttee. ~o~ the BuchanR mjne,of course,:ls still operatinr. and it i,s goi ng to operate at lea~t tmt il 1<179.ancl ,we hope , lonrer.

Rut the lfu;~leshaclr l"ine is not no"' operating and it is bPcause C>f the diligent con C't'rn of the me!!'ber for r.reen r.ay for his clistrtct that this supr.estion ~.·as brout:ht forth . That is what has been studiec and that is what is being reportecl on. It may not be acceptecl. I r Mav prove to be imp r:~ctical. The ••inister C>f "'unicipal Affai r s and llous:lnr. ~~~a~ blow his hr<~ins out ,or Snl'!ethin~. That hPppens . But it :Is his hahy an<' that is wh11t is beinF considered. }'1'. SPI".AKE": The hnn. meMber for IHnclf:or-1\uchans ( Mr. Pl ir.ht). }A)?. rJ.lr:R"': .A, 11uon 1 Pmentary: 16.70

December 16, 1975 Tape 652 PK - 1 Mr. Flight: Would the minister advise the House as to whether or not this House will get a chance to decide whether that will indP?.d be rhe si.re for the mine? MR. SPEAKER: The hon. Minister of Mines and Energy. MR. CROSBIE: Mr. Speaker, that is a decision that will have to be made by the government. nf ,:ou.-se, if it invc1ves spending rounr•y, we would have to ask members of this hon. Rouse to vote the money to spend to operate.

H11 t first it would have to be a decision of the F;Overnment, tne government will have to ask the House of Assembly to agree to vote the necessary funds, if hon. gentlemen of the House would refuse to vote the funds the·government will have to resign, and there would be a new government and so on and so forth. But the general procedure is that the government will first have to decide,and ask the House to support it. MR. SPEAKER: The hon. member r..'r i'ort au ;'ott. MR. J. HODDER: Mr. Speaker, a question to the hon.

Minister of get an answer - dnc>s the government intend to provide a cost of living increase in social assistance payments in January,l976 as indicated when the new social assistance programme was introduced in November,l973? AN RON. MEMBER: Hear, hear! MR. SPEAKER: The han. member for Social Services and Rehabilitation. RON: C. BRETT: Mr. Speaker, it appears that we may not be able to pay this increase in January,that we find ourselves in a similar position to the federal government and other provinces of Canada who are unable to implement some of their social programmes this year.

In fact, Sir, I am expecting that the federal government will not index the family allowance to the cost of living. Sowe are not unlike our sister provinces and the federal government in that: '"e may nut be able to bring in this increase in January. MR. SPEAKER: The han. member from Conception Bay South. MR. J. NOLAN: Mr. Speaker, a question to the Minister of Justice 1671

December 16, 1975 Tape 652 PK - 2 Mr:__B_olan :_ in reference to an item recently referring to the federal member for St. John's East, Mr. }kGrath concerning a letter that he addressed, I believe,to the minister concerning obscene literature here in this Province,asking his assistance,! believe,in doing something about it. What if anything has the minister done or will he do on this matter in response to the member's req~est? MR. SPEAKER: The hon. Minister of Justice. ~~H .. 'H)! \i~;: is t b . .:.t tn i~artsard '! - -..... _ ... ~ MR.

MURPHY: Subscribing to all the magazines the.t .r fm McGrath is talking about. 11R. HICK}f.AN: Mr. Speaker, that is a rather delicate question and it deserves a rather delicate answer. MR. CROSBIE: An indelicate question . MR. HICK'!-!AN: The - l-ION. MEMBERS: Oh, oh! MR. HI~~: - provision of the Criminal Code as it relates to - MR. Ji!CK}!AN: - vu 1 nn r r ;1pi 1 lc literature is being enforced vigorously in this Province.

It has been the case right along. : l>i;, y••ac · gentlemen will recall that there was at least one instance where some person or persons were unwise enough to bring into this Province for sale literature that did not meet the definition of f"n ·nnp· ,. i · as varied from one court to the next, and prosecutions were taken and convictions were registered against these individuals.

The police are keeping a very watchful eye, and hopefully whenever they see something that offends them,or offends the public or the morals of the public- I suppose part of it is, you know, in the eye of the beholder - vigorous action will be taken by both the Royal Canadian Mounted Police and the Newfoundland Constabulary to enforce that provision of the Criminal Code of Canada. AN RON . HEMBER: Keeping a personal eye on - SOME RON. MEMBERS: Hear, hear! 1672

December 16, 1975 Tape 652 PK - 3 MR. SPEAKER: The bon. Leader of the Opposition. HON. E. ROBERTS: A supplementary, Mr. Speaker. Growing out of the fact that we are assured by the minister that the police are keeping a Wl;ltchful eye on this sort of literatur .e and I guess we will have to ehange the slogan of ""!'he mounties gar their man'' to ,.they get their \1oman" -but, Your Honour, I wonde.r if the min i iHteJ; could tell us whether prosecutions are initiated at the initiative of the police or whether they await comp.laints from citizens or other bOdies? MR. SPF.AKER: The bon. }linister of Justice. MR.

HICKMAN: I guess it can be either way, Mr. Speaker. The ones that were taken this year~as I understand i.t, were initiated by the t•oUce and not upon complaints of any citizen in the Province. But if a citizen feels that he or she have been E!ltposed to that sort of thing., and a complaint is laid,the police will investigate that as well. MR. ROBERTS : A further supplementary, Your Honour.

Has the minister issued any special instructions to the police forces,who of course are under hi.s direction and control altho .ugh the la.w itself, the statute, is federal, has he issued any special instructions to the police to be Ul\•~sus1ly vigilant with respect to this material, because there seems to be some concern over getting more than out fair share of it these days? 1673

December 16, 1975 Tape 653 (afternoon) Ill-1 }~r. Speaker, T did investiga.te- or i!'sue instructions to the police so~e time ago as ~ result of representati~ns that I recall were made to me by an organization in Corner Brook. To my knowledge - and the police have been acting pursuanct to same - it is my full intention, as I do from t:l .me to time when I receive compJaints, to draw to the attention of both chiefs of police the recommendations or the concern incl:l.cated by ~·r. James A. 1-fcCrath, ?·'.P. in his most recent letter to me.

If the House fns:lsts,I suppose,J would take up~n myseJf the hurcensome tas~ of censoring these publications after careful scrutiny. T\ut I put myself completely in the hands of the House in that mntter. l'!'R. SPF:AKER: The hon. me~ber for ronception Bay South (~'r. Nolan). ~n>. NOLAN: "r. Speaker, on the same matter, if I !llay pursue this a 1:1 ttle, I am wonderinp: films and the J ike that I am sure has been brou?ht to the attention of the hon. minister from time to time. f~r example, I am sure he knows that in rreat ~ritian before each movie there is Lore'!

Har] eck or someone comes out with <1 notice before the MOVie - m•. NFAP.Y: J.orc1 roochrin. t!J'. 1!0TJ N : Yes. l·'ell he is as <1 matter of AN Jl()]\1. >'E>~EP : nh , oh ! "'~. NOLAN: T'if>ht. An)T\~ay the po:lnt of my question is, ~•ho c'fednes \•Th<tt movies are run ~n this Province? n0 \·•e hnve R censorship bo<trd? Ts it clone in }7eH Brunswiclc,as ,,,e hnve been tolcl? nr in fact is the Minister of Justice a sort of a. porno?raphic C?.ar? J ynenn, is it your responsjbi];ty or not? The hon. ~<i.n1ster of .Justice. I shou1d point out that tld s ans~1er "dJ J conc]ucle the Oral Question Period. Mr.

Speaker, to my knm~leclge - anc" T say to my 1 · -no~rl ec1p,e hecause it has been rif.ficnlt to ascertain the ans~'er to that anestjon that the hon. gentlem<tn has just asked - the Province of. NeP Brunswick has <t censor board. He do not. There is a very stronr.; schooJ of thought, I thinl: you wtJl find amongst, particularly a~onr,st the 1674

December 1~, 1975 MR. HICKMAN: Tape 653 (afternoon) IB-2 activists of this Province that censorship is something that should be avoiderl if at a]] possible. But films that do not get by, as I unrlerstancl, at the New Brunswick censorship board, do not see the lip-ht of clay in this Province. I must confess I get somewhat suspicious of the use of the word 'restrictecl 1 or 'adult entertainment only' that you see ~1hen movj_es are advertfsed. I saw recent]y in the Canadian city ~-,here Gone I.Jith The Hincl had underne<'l.th it, 1 a.dult entertainment'.

Now surely that kind of a fill"' does not fall into that category. I am just suspicious enough to conclude that sometimes that designation is useil in the hope of attracting a larger aud:lence than out of concern for the morals of the hon.· sentleman for Conception Bay South (~r. Nolan). Hll.. SPEAKER: }'P. CJ!OS'IIIE: ()RflEPS OF THE nAY: Mot ion one. The hon. !'in :I ster of ~<ines and Energy. Mr. Speaker, in :lntroduc1nr, this motion I suppose I should first refer to it to refresh hon. p.;entlel"'en's mi.nds about what the Matton is ahout.

The mot:lon asks the members of the House of L\ssemhlv to approve the steps taken to Clate by the government and the Hyclro Corporati.on in connection with the development of the Gull Island hyclro s:lte, the :Inter-connection ben,een Gul1 Ts1and and the Churchill Falls hydro site, the development and construction of transmissi.on lines frol!l Labrador to the Island of Newfounrlla .nd hy 1~ay of a tun.neJ under the Strait of Belle Isle and vork in connection therewith so that Labrador hydro por.rer can be available for the ent:lre Province, a] 1 as detail eel in a >·Tin :I sterial statement made to the House by myself on Novel!lher 28, 197S,and that th:l.s hon.

House of Assembly approve the plans announcecl by the Government of Nel,,foundland and Labrador for the phasecl cont:l.nuation of the project during 1976. 1675

December 16, 1975 Tape 654 PK - 1 Hr. Crosbie: Mr. Speaker, I do not know of any topic or subject in this Province that is of any greater importance,so I trust that hon. gentlemen ~~ill bear with me if I am a hit lengthly in introducing this motion. I do not intend to go over the ground that is already outlined in the ministerial statement of November 28, but there is a lot of other information I \vould like to give the House on the ~~hole subject of hydro power and energy in Newfoundland.

Han. gentleman ~~ill have to decide when they have heard the debate whether they support the government's policy or whether they want to vote against the government's policy. If hon. ~entlemen in a majority vote against the government's policy,of course the government will resign and some other group of han. gentlemen can undertal<e the government of the Province. I certainly myself Pill resign if the House does not approve the policy that is contained in this resolution because I support it completely and unreservedly and 1 ,';u ,1er cent. Now first, Mr.

Speaker, just to set the background, the energy background in Canada, I just want to give a few bits of informatio~ that were used at a meeting held in Ottawa,that I mentioned earlier today. of F.nergy Hinisters that was held in Otta\m last Friday, on what the energy background is in this Province,because $2.3 billion­ lvhich is the estimated cost now in developing Gull Island hv<ir<l and transmitting it to the Province of Newfoundland and interconnecting Churchill Falls with Goose Bay and the Upper Churchill with the Lower and so on- is a lot of money. It certainly is a lot of money.

But \vhen you look at that in the context of what has to be invested in Canada if we are to be self-sufficient in energy in the next ten to fifteen years,it is not a great deal of money. So I would just like to point out, Mr.

Speaker, that the projections of the Government of Canada as to what is required in energy investment in Canada in 1974 prices, the amount that will have to be spent in the next fifteen years in developing hydro energy, nuclear power, oil, gas, transmission lines and the like will be $170 billion, that is, $170 billion will be required for those purposes in the next fifteen years if we are 1676

December 16, 1975 Tape 654 PK- 2 Mr. Cr osbie : to meet our energy needs here in Canada. When you hear that gigantic figure then I think it is quite obvious that $2.3 billion for this Province is not out of line with what is attainable or should be attainable in the whole Dominion of Canada. Now another interesting figure that came out of those discussions was that in the next ten years the amount that is required to be invested in energy is,I think the figure is- in the next ten years -I am just finding it- here it is,$110 billion or $120 billion. Yes. No. Right.

For the fifteen years to 1990 it is $170 billion, that would represent an annual allocation of 5 per cent to 5 1/2 per cent of the Gross National Product to e~ergy investment. Historically energy investment has averaged about three and one half per cent of the GNP. From 1950 to 1974 three and a half per cent of the GNP was invested in energy development. But i~ will have to increase to five and a half per cent if it were to meet our needs in Canada in the next fifteen years . Now the estimated capital requirements for the same purposes for the next ten years to 1985 are $115 billion in all energy sources.

Of that amount they estimate that the electrical sector will need $50 billion. So that in the next ten years at least $50 billion is required in investment in Canada to develop electrical energy. Once again,when you look at that,Gull Island is only $2.3 billion. The rest is oil and gas exploration,$21 billion; synthetic production from coal,$8 billion; other petroleum production,$8 billion; coal and uranium , $7 billion; pip@lines about $21 billion. The expenditures will be concentrated heavily from 1980 to 1985. And, Mr.

Speaker, there is no doubt from all of the inforwztion given at that meeting that the price of crude oil within five years time is likely to be at least $17.10 a barrel,whereas today,because ' of the subsidy , I think the price of crude oil is about $7.50 a barrel. In other words a 1677

necember 16, 1975 Tape No. liSS N:l'l - 1 "P. C:RC'ISBIE: barrel of crude oil in the next five or six years will not be costing as it is costing them today,about $7.50 a barrel, it ~Vill more likely he about $17 a barrel or alD"ost two and a half times as much as it is today, which means that oil energy is going to he very, verv expensive energy. Just be. fore getting on, Nr.

Speaker, one very interesting point, just in relation to oil for a moment, it is estimated that if the average efficiency of motor vehicles was increased from an average consumption of gasoline of 17.5 miles per gallon this year, t<l 28 mi l es per gallon by 1985, the level of gasoline consumption needed in 1985 for motor vehicles l·•ill be 25 per cent _less than ,,.e currently need, evPn though they are assuming that the numher of automobiles grows o< t an ave r age rate of 3 per cent a year through the next decade.

But it is quite obvious l•7ben you see facts like this that the manufacturers of motor cars are gotng to have to be directed that they are to manufacture motor cars that l~ill consume far less gasoline per m:lle than t 11 ey have heen doing in the past, and only thus are we likely to survive this f>ne rgy cdsis. So, ~- ·r. Speak«.>r, remember t hat it is very likelv th a t the price uf oil is goi ng to average $17. 10 a barrel in Canada in 1980. ~~· .. 2f-'Al,h_~05lD. : 19 ? t·TP.. CROSBIE: 80. And that is the kind of thing that you have got to look at, the clesi rable alternative of hydro energy keeping in mind.

Plus the fact that the amount required for ene rgy investment in the next fifteen years is at least 8170 billion, SllS billion in the next ten, C:SO billion for electrical enersw, so (;ull Islancl~'· 'hen you look 11 t those ~igantic figures for the whole of Canada, does not loom as al.arming as one might othert,'i se think it ·ls. )<n. Slf:\l.L\.JC'IC'ID: !-!auld the hon. gentleman get even more p1 easure if he to•'lc the budget of the '~hole of mank:tn•? ~ ·!Jl. CROSBIE: T am not taking any pleasure in any of this in p<l.rticular, ~r.

Speak~r. except it is mv duty to trv and outline it ann l do not knm,, the point of the question really, 1678

Decemher 16, 1975 Tape No. 655 N~ - 2 ~1R. ROWE: I have a question. This $110 billion that the minister refers to, is that for exploration and capital cost on the part of the government and private enterprise? 'fP .• CROSBIE: This is from all sources, government MR. SMALl HOOD: ~.fuat does it matter? It is still eneq~y. ~'R. CROSBIE~ That is right. It is from government or private sources or t~hatever. It 1.s capital that is p,oinp: to be nPeded if "'e are fOinr. to ~e self-sufficient or meet our needs in ener~y in the next fifteen years, and $115 hillion in the next ten. So that is the hackground, Mr.

Speaker, and that is twrth keeping in mind "1hen one considers whether or not the Gull Hydro Pro j ect and bringing r.ull Hydro power to Newfoundland is something that is ~orth attempting,no matter that there may be risks in attemptinp: to do it. ~ow ~ull Island, }'r. Speaker, in my view is not a grand imperial concept. I think that the BR INCO Has sa:! d to be a grand impe. rial concept. This is a grand Newfoundland concept. It is a grand concept necessary for the development of this province, in my vie...,., if the Province is to have any kind of a future at all in the expansionar y sense.

The present position of that ~reject is outlined in a statement I made ~ovemher 28 and I am not p,oi.ng to repeat it. It is ev:l.dent for anyone who reads that statement that the government has proceeded as carefully as possihle. We have had 1.nvesti.p,ations made.

We have had the area studied. 1~e arf' not jus t jumping ahead hlindly, that we recognize the risks and that becaus e of the rtsks that are inherent in the t~hole thinp, we have had to make the dec if' ion '•1e announced the end of November, to postpone the hydro for a year and te carry on very slowly with the transmission lines and the tunnel until we can get certain questions finally and conclusively ans"rered. But if we do not continue on in this alternative, Mr. Speaker, then I say that Newfoundland ,.;ill have no possibility, or little possibility of ~rowth or expansion.

Nm~ it would be far safer for this Province to forget Gull Island, to forget it, or if it is ever developed just to sell its energy else" here, if there is a customer. That is,the safest course is, to forget Gull Island and to go ahead with steam plants for the next few years,and 1679

Oec e~ber 1~, 1q75 Tape No. 655 NI-l - .3 'IR. CROSBIL then by 1985 to ~to on •.1ith a nuclear plant and carry on i.n that directio n,H ~~e can afford that when the time comel;. That is the safest cour~e, because in the hydro development t he big infusion of capital has to go on the front end. l~ c have to make the biJ: investment on the front end hecause to get the hydro development vou have got to invest all the money in the first f ive or six vear~ and therefore you take a bigr,er risk. 1680

December 16, 1975. Tape 656 RH - 1 ~!T-. CROSBIE: -------- bigger risks. Is the loarl growth going to be what is forecast or 1·rill it be less than what is forecast? Can you raise all that money in the bond marketsiand so on and so forth,in the first five or six years? It is riskier to go this 1o1ay because you got a front end in- vestment. If we go the other way,steam and nuclear, then you only need to invest you have got two or three years or four years lead time, you need to invest less,and the amount of the investment will he spread over fifteen years rather than spread over five or six years.

As the statement pointed out.to go the steam nuclear route will involve about the same capital investment but it will be spread over a longer period, until 1990. It 1vill he spread over fifteen years. Obviously that is a lot safer. But the pm.rer that comes from that, if we go that ~ray, Hill be a lot more expensive as you can see when you realize the extreme probability that oil1dll be $17.10 in 1980. M.R. S}tALLWOOD: It will be more than that. HR . CROSBIE: It is quite possible that it might be more. Now, Mr. Speaker, what - MR. SNALLHOOD: Nr. Speaker, would the hon. gentleman allow me?

He is making a speech dealinf!; with one of the most important things to happen in "lewfoundlanrl perhaps in, say, twenty years, and fe1~er t ; .. >1' ;,,, ! ; the members of that side of the House are here to hear it. It is pretty serious. ~!R. CROSBIE: Hell, ~rr. Speaker, I do not know where the members are. He have been through this several times in caucus and they probably all know what I am going to say,or they have other business. But I agree with the hon. gentleman it is certainly serious.

I Now, I .iust want to touch on the history of the Labrador water rir,hts and the BRINCO situation before carrying on,because there has to be some background given, }lr. Speaker, to properly understand where we are today. The history of that situation is that in 1953 a principle agreement was entered into with BRINCO which granted to BRINCO an option 1681

December 16, 1975. Tape 656 Rll - 2 ~~~·-'.J~ISII IE _: __ for a twenty year period on the hydro power resources of Newfoundland and Labrador. That twenty year period would have expired May 20, 1973 had the principle agreement not been amended. In 1961 that principle agreement p r ov ide d for c;.,rrai ·. r, nr,.s a ;,.d cundir .<}O S "1~ucr whicn BRINCO could get a lease to develop the water power in Labrador or in Newfoundland. They had an option that they could inform the government they wanted to exercise their option in any particular water rights, particularly in Labrador.

Now in 1961 BRINCO had the government pass, the government of the day pass the Upper Churchill Lease Act and the Upper Churchill Lease Act took out of the principle agreement the water ri ghts in connection with the Upper Churchill River and a new lease was introduced and approved hy the Rouse of Assemhly of Newfoundland at the urging,presumahly,of the f!:OVernment of the day. BRINCO wanted a new lease because the lease conditions in the old agreement of 1953 were no longer satisfactory. They ~~ant eel. certain other concessions. had to have

an act emhodying a different lease passed 1.rhich gave them more concessions. That was in 19f>1. So BRINCO from 1953 to l961,and after that , controlled the ~~ater power rights, and T. am s pe .ll' int; no'' <'lf Labrador, but also in Newfoundland. In l9A5 they surrendered to the Crown, to the Government of Ne•rfoundland.their l•later nower rights on the Island and retained only their water po1~er rights in Labrador. That was so that the Government of :<e1-1foundland could go ahead 1-1ith the Bay d 'Espoir pro;ect and develop the power down at Bay d 'Espoir.

So they entered i n to an agreement 1dth the government of the day ancl. surrendered their 1-1ater rights on the Island of Newfoundland. In 191)6-67

an act was passed amending the principle agreement of 1953 and among the changes it extended to BR1NCO the right to the water powers of Labrador for another ten years, t , Nay l'l, 1983, so that their right to control the 1.;ater power situation in Labrador was then extended until 1983. In 1967 another amendment was passed to exempt the Churchill Falls project f n •m many ne''' : axes cr cornnration lncomo• tax th <lt "<'11ld he rc.hHte d to tl1~ Province. 1682

December 16, 1975 Tape no. 657 Page l - mw Mr. C:rosb ie . What t he federal government did in order to enable BRINCO and the Newfoundland Government to enable -BRINCO to meet the prices that Quebec Hydro was insisting that they would only pay a certain price for the power from the Upper Churchill,was to agree to rebate to the provinces ninety-five per cent of the Corporation tax that Ottawa collected from hydro companies. MR. SMALLWOOD: Not ninety-five per cent. MR. CROSBIE: Ninety-iive per cent. MR. SMALLWOOD: Ninety-four point six or ninety-five point - it was not a straight ninety-five per cent. MR.

CROSBIE: Well ninety-five is easier to compute. It is approximately right, ~fr. Speaker. They retained five per cent and they rehated at ninety-f i ve per cent to the provincPs, and the provinces could rebate that to their hydro authorities,or to the hydro customers , if they wished.

In the case of Newfoundland, the government agreed to rebate half of it to the Upper Churchill Company to CFLCo so that CFLCo could reduce its price to Quebec Hydro by an equivalent amount,because Quebec Hydro took the position that it was going to pay nothing to CFLCo that would represent taxes that were to be paid to the fede~al government. MR. SHALLWOOD: MR. CROSBIE: MR. SNALLWOOD: MR. CROSBIE: This did not represent any loss of revenue to Newfoundland - That is correct, Mr. Speaker. - only to the Government of Canada. TI1e federal government rebated to Newfoundland.

Newfoundland chose to rebate it to CFLCo so that CFLCo could give Quehec Hyr1ro a lm,rer price. Now there is a bit of a difference between doing that to benefit Quebec Hydro than doing it to benefit your own consumers in Newfoundland. But in any event,that is the way it was done. So it was no money out of Newfoundland's pockets 1 except we did not retain the rebate . We passed it on to CFLCo who passed it on to Quebec Hydro. Some of it we retained. We only rebated half of it. 1683

December 16, 1975 Tape no. 657 There was no change was there? No change in what? Page ~1R. SMALLWOOD: ~. CROSBIE: ~. SMALLWOOD: If the hon. gentleman will allow? We had in any case for many years,even before Confederation it was the law, that provinces received from the Government of Canada a certain proportion of what 2- mw that government collected from electric companies and companies producing steam,and something else 1 for sale to the public, not to themselves or not to a subservient company, the Government of Canada collected it and paid half of it back to the province where it originated.

This was not changed by driving it from fifty per cent to ninety-four point six or something of that nature. MR. CROSBIE: That might well l>c right, Hr. Speaker. Now, Mr. Speaker, this is a difficult enough topic, you know, that I got to try to cover, and I do not mind questions ordinarily but it is going to throw me off the track if I have to answer questions. MR. SMALLWOOD: I doubt that. I doubt the minister is not going to be thrown off the track. HR. CROSBIE: Yes. I am getting very confused, Hr. Speaker, or it is a very confusing subject. Anyway I am just trying to give the background.

I am not criticizing whether this Nas rtght or not right. There would have been no Upper Churchill if it had not been done,presumably. MR. SMALLWOOD: Right. ~. CROSBIE: So those amendments were passed in 1967. Now, Hr. Speaker, the Upper Churchill project went ahead. Now the Province having given BRI~CO or CFLCo these water power rights or the lease, the Province did not apparently have the power to approve or disapprove of the power contracts that BRINCO or CFLCo eventually entered into with Quebec Hydro. They had the right to develop the water power rights.

They had the leases, the new lease which gave them- for example, under the principal agreement of 1953, you had to get the government's consent to export power out of the Province. That was gone in the new lease and so on. There were certain other concessions. Having gotten these concessions from the Newfoundland 1684

December 16, 1975 NR . CROSRIF.: Tape no. 657 Page 3 - 111W Government, they could sell the power to Quebec Hydro without our concurrence and enter into a power contract that they found would stand , up or satisfy them and their own shareholders and investors. And, of course, a contract was entered into on the Upper Churchill. There was a letter of intent first,if I can just get the right date. There was a letter of intent signed between Hydro Quebec and CFLCo on October 13, 1966 setting out the principles of their agreement,and a power contract signed on May 12, 1969.

That is when it was actually executed, Now the effective date of that contract is not reached until 1976. The contract will have a term of sixty-five years, from 1976. The present price being paid under that contract is 2.77 mils per kilowatt hour,but the final price will be set on the effective date in 1976. The effective date is a date when the complete development is concluded and the complete amount of the investment is known,and at that time when you know the exact investment and so on that will fix on that effective date the price for the remainder of the contract.

At the moment it is 2.77 mils per kilowatt hour. AN RON. MEMBER: Is that delivered at point A? MR. CROSBIE: That is delivered at point A on the border, yes . That price will increase to 3.02 mils on the effective date. That is the current estimate. It will be 3.02 mils. To that you have to add an intricate adjustment charge that Hydro Quebec is paying because certain interest rates were higher than were in the contract. So if you add 0.5 mils to the 3. 02 mils, you will have a price 1685

Decemher 16, 1~75. ~!R. CROSBIE: Tape 658 RJT - 1 set for the first fortv years under the contract of approximately 3. 52 mils 1'l kilowatt hour. No~1 a mil is one-tenth of a cent per kilowatt honr. So that is 3. 5 , thn~e and a half cents, three and a ha]f tenths of a cent per kilowatt hour. that will be the charj1;e under that contract for forty years 1 and at the end of the forty years the price will go down to approximately 2.54 mils per l:ilm vatt hour. So after forty years the price will go down to approximateJy tHo and a ~alf mils per kilowatt hour for the following twenty-five years. ~oH, Hr.

Speaker, in hindsight, we have to admit it is in hindsight, in hidsight that is one of the most beneficial contracts that was ever entered into by anv contracting narty in the history of the 'vorld,and the contractin!! party I am referring to, of course, is Hvdro ()uebec. It is one of the most favourable contracts ever entered into hv anyone,anywhere in the world as far as I know.

At the same time, of course, it i.s one that turns out not to be to the favour of this Province, not to be of benefit to this Province, not to be the benefit to this Province that it mi~ht have been had 1ve knew then what we know nmv or had more foresight been used in thosP. days lvhen the whole thinp, Has being ~mrked out. Now there are no escalation provisions in that power contract between Hydro Ouehec and CFLCo. There is no provision for escalation. One interesting thing, Hr.

Speaker, is this - that if the sale price of that energy from Churchill Falls was increased hy one mil per kilowatt hour from whatever it it, three and a half mils, if it was increased one mil next year to four and a half mils that would bring in to r.FJ/~o an additional $31.5 million in revenue. Of that additional revenue to CFLCo,since we now own 65.8 per cent of CFLCo, the Government of Newfound­ land owns 65.8 per cent of the shares of CFLCo,we lvould have the benefit of 65.8 per cent of that additional $31.5 million which would be $20.7 million a year.

If the price charged for energy next year under that contract was fifteen mils 1which it might well be if that contract 168 .6

December 16, 1975. MR. CROSBIE: Tape 658 RH - 2 was being entered into now, if it was fifteen mils the additional revenue to CFLCo ~1ould be $310 - or no, the total revenue of CFLCo would be $310.5 million a year,and when you reduced it by the revenue they are now getting it would be an additional reveue of $250 million or $260 million - sorry, our share of it is,65.8 per cent share of it would come to at least $250 million or $260 million a year. MR. S}~LWOOD: What would it be if it was fifty mils? MR. CROSBIE: Never mind fifty, Mr. Speaker? I am using - NR. SMALLI-lOOD: Or forty mils or thirty mils? MR.

CROSBIE: Yes, and we will know that before the contract expires because in twenty years time the cost of power will probably be forty mils or fifty mils and it will be sixty mils and 0uebec Hydro is going to make billions of dollars off this contract. It is just as well to face the fact and to realize that it is true. Sorry, what was the question? MR. ROBERTS: What is the revenue now, say, the three mil fir-ure? MR.

CROSBIE: I have not got that figure here now but the revenue now, of course, at the 3.5 mils is sufficient to amortize the deht that was incurred to build the Upper Churchill and to pay a dividend to the shareholders or they never would have gotten into the deal. I tvill come to what our share would have been had we not increased it to 65.8 per cent. So the facts have to be recognized, Hr.

Speaker, that that contract is one that confers incalcuable benefits on Quebec Hydro anQ that this Province loses because of our lack of perspicacity,or maybe it was impossible at the time to foresee what would happen in energy crisis and the rest of it. But whatever the reasons it is a contract that has tremendous benefit to Hydro Ouebec,and that would be of tremendous benefit to us had there even been an escalation clause in the pmver contract which there was not. 1687

December 16, 1975 Tape 659 PK - 1 Hr. Crosbie: There were other things wrong with that contract. Now I am just giving a background to show our position when we came into office, Mr. Speaker. Among the other things wrong with that contract was the fact that when pol~er lias recalled,we had the right to recall 300 megawatts of power out of all the power to be generated on the Upper Churchill. Newfoundland could call back for use in Newfoundland 300 megawatts. But we discovered,and the former Premier discovered before he had left office,that we could not recall it at the same price that Quebec Hydro paid for it.

Rut if the power was recalled, customers in Newfoundland would have to pay more for it than Quebec Hydro had to pay for it. AN HON. MEt-ffiER: The customer. Hhat customer? MR. CROSBIE: The customer, the customer who discovered that was the Iron Ore Company of Canada. The Iron ~re Company of Canada - the reason why the former Premier had not signed a lease on the Lower Churchill before he left office was because there lJas a dispute between the then Premier and CFLCo as to what power should be sold to the Iron Ore Company of Canada for. MR. SMALL! -rOOD: No, no! MR. CROSBIE: Well that is the reason. ~fR.

SNALLWOOD: No. MR. CROSBIE: And the - NR. SMALLWOOD: It is not so. Well the han. gentleman can explain it himself . That is •..that is said in BRINCO's book that he was looking at last night, that CFLCo wanted to charge the Iron Ore Company of Canada a higher price than it was going to charge Quebec Hydro.

And the basic reason for that was that the trust deed entered into by CFLCo to secure all of its borrowing said that the company was not to sell power recaptured "unless the terms of such sale are not materially less favourable to the company then the terms on which such power have not so recaptured l~ould have been sold under the power contract." llR. CROSBIE: }fR. SMALLWOOD: Yes. 1688

December 16, 1975 Tape 659 PK - 2 MR. CROSBIE: '' And the fact was on power sold within Newfoundland they did not get a rebate of the federal corporation tax which they got if they sold to Quebec Hydro." MR. SMALW'OOD: If the han. gentleman would allow me, and I know he is just as eager as I am to have - MR. CROSBIE: Go ahead. ------- MR. SMALLHOOD: - the simple, unadorned truth known to the people of Newfoundland . I objected most violently 1 to the extent that when Mr.

Mulholland the head of BRINCO, of Churchill Falls Power, had lunch with me in the dining room downstairs,which is the Premier's dining room,! stormed out of that dining room slamming the door behind me because I insisted and he objected - the present head of the Bank of Montreal of Canada- I insisted that power from the Upper Churchill consumed in this Province by whomsoever could consume it should he at a price lower than the price charged to Hydro Quebec. ~m. CROSBIE: Fine . ~MALLWOOD: I am terribly proud of that. !ffi. CROSBIE: That is correct, Mr. Speaker. MR. SMALLWOOD: I am terribly proud of that. MR.

CROSBIE: I confirm that. But the pity of it was, Mr. Speaker, that t here had been nothing in the agreements with CFLCo.or with the people who are now in charge of the situation, who had been given these concessions by the Newfoundland Government , which had said that. There was nothing in writing which required them to sell the recaptured power to the Government of Newfoundland at any price other than under the formula that I have read out here that was in the trust deeds, so Newfoundland had no way of forcing CFLCo - MR. SHALLWOOD: Oh yes. MR. CROSBIE: - to sell any part of that 300 megawatts. MR.

SMALLWOOD: We did. We did by saying to them if you do not sell power from the Upper Churchill at a price lower than Hydro Quebec are paying~then you do not get the power from the Lower Churchill. 1689

December 16, 1975 Tape 659 PK- 3 MR. CROSBIE: Well - ~IR. SMALLI~OOD : That is a pretty powerful weapon. ~. SPEAKF.R (COLLINS ~ : Order, please! }!R. CROSBIE: That weapon was as powerful as a powder puff, Hr. Speaker. l!R. SPEAKER (COLLINS): Order, please! When an bon. member is addressing the House he has the right to address the House in silence unless at his wish to countenance - AN HO~. ME~m'ER: In perfect silence. }!R. SPEAYillR (COLLINS): -in perfect silence- unless it is his wish t~ countenance irterruptions. MR. CROSBIE: Very good. Well, ~:r.

Speaker , the bon. gentleman just - that is what t said a few minutes ago . I said that the reason why that lease was not signed on the Lower Churchill, and thank God it was not, ~1as that the then Premier would not sign it because he was angry with CFLCo about their attempt to get more from the Iron Ore Company of Canada for the power than he t:1ought they should charge. 1690

J)ecemher 16, 1975 Tape No. 660 NM - 1 HR. SHALLWOOD: Surely the hon. gentleman will agree that that was a mere temporary argument for a moment, for a day. It was not a definitive and final settlement. MR. CROSBIE: That argument started sometime in 1971. It was not concluded, luckily,in January 1972 when the new government came in. ~!R. S~IALLWOOD: I ~~as seventeen years on getting Churchill Falls going. Hhat was a few months'? •-•P. CROSBIE: I am not criticizing the hon. gentleman. I am just saying ~~hy this contract was not signed ,and thank C'..od it was not!

If there had not heen that dispute the J.o~'er Churchill would have been sip,ned away to CFLCo on the same terms and conditions as the Upper Churchill and we would have been ruined altogether. So I am delighted and thrilled that it did not happen. }IR, SJ'IALLWOOD: I do not think that we would have been ruined. ·~. CROSBIE: Ruination. ------ }IR. S"t-lALLWOOD: ~lore ruin like that would help us a lot. ~~. CROSBIE: ~•ore ruin like the Upper Churchill would really put us under. ~'R. S:'>!ALL\~oon: It 1vould help us a lot. ~IR. CRO~BIF.: Tt would not help us at all, :>'r. Speaker. H~.

SMALLl-'OOD: That is your salvation right no,~. MP. SPF.AKF.R (DR. COLLINS): Order, please! Order, please! }'11. CROSBIE: It iR not our salvation. Hr. Speaker, I am goinp; to continue with my remarks and anybody who thinks the Upper (:h.urchill is our salvation then can form thetr own judgement. I only want to p.ive the facts as I see them. So in any event it was not signed because of this dispuu·. i"hac 1vas obviously a gap.

There had heen no azreement in .,riting between Newfoundland and CFLCo as to what recaptured power would be sold to Ne1vfoundland for, Rnd the trust deed scuppered us entirely because it lvas in the trust deed with the bond holders that it could not he resold in Newfoundland for less than they could have made if it was sold to Hydro Quebec. So they had to charge at least the same in Newfoundland,and as it turned out more unless we would also rebate to them 1691

necemher 1fi, 197 5 Tape No. 660 NN - 2 }!R. CROSBIE: the federal corporation tax rebated to us by Ottawa as we were doing for power sold to Hydro Quebec. So there was no written a11;reement on the recapture.and no written agreement on the price of recaptured pmrer, 1'ha~ was ~t wealcr1ess. The t~·\lSt deed prevented us from insisting on a lo••er price in Newfoundland or Labrador than Quebec paid. We could not do anything about that because of the trust deed.

There was no understanding and nothing in 1~riting as to ~~hat rate a capital cost allo~rance or depecreiation they could use on their assets, which would vastly effect what corporation tax we 1muld get in the first few years of the agreement. fhat was another weakness. f.nd then, Hr.

Speaker, apart from these 1•eaknesses, we discovered that the effects of tax equalization has been completelv left out of the ~Yhole formula,which was even more disastrous because it turned out that if the tax equalization formula was not changed Newfoundland would suffer a net deficit in the revenue on the ••hole situation, rather than even any net gain. So those are some of the weaknesses of the Upper Churchill arrangement. Now I do not want to go into the whole tax equalization quPstion, it is so complicated.

I went into it in the House here, T h<'lieve 1 in 1'172, and luckily we have heen able to )!et some changE's since But had ve not p:otten thesE' changes the net effect of the Upper Churchill ,..ould h<' that we wonld h:ve lost money because '"e Hould have lost more in equalization from the Government nf ranada than ••e Here going to get from rFT.r.n in horsepower royalty, c0rporntton tax and dividends over the period. to the Public I'tilities 1ncol'te Tax Transfpr Act, that is the federal of that tn CFLCo.

B :tour equalization pavments from thf' Government of Canada declined hy the same nmount as we got hack under that transfer and "e then took half of what 1ve got back and passed it over to CYLCo so ,.,e had no'·' lost more than we were p,aininr; in equalization on that. So that Pas very damaginF: to us. Then w1 th respect to provincial corporate lncoa,e tax, we were 1692

neceml-e>r lb, ll175 Tnpe ~o. 660 "»4 - 3 _''R. C:P.I'lSRT_f:..:_ ~tnfn!' to lose equalization, rou~hlv a dollnr for a d~llar. 4ell if vou fet provincial cornoration tax.and that revenue sou rce i~ tmoroving,>~nd vou lose enuallzation,that is the normal coursP. of cvP.nt$. Rut the effect was that there is no net benefit to U$. ·,d ··i th re$pC'ct to water power rtontals anrl royaltie.c; under the equalization formula we were fac1nf a lot's of ~10 million a vear , hec;tU se that formula is hased on the amoun t of water oo~>.•e r ~enerated in a prov1nce . I ~ hJs nothin~ to do' with where it i~ consumed .

So that H Newfoundland is a hiF: pr..dtt c P.r of hyd ro electric po"•er, under the formula.when you compa re us to other provin~t>s , we lose equalization because we are one of rhe bigge st in v,eneratint po..,er. ~· v;. t hP fact that that POl-•Pr Is sold elsewhere and not used in thP Pr ovince lloes not mntter nn thP (<>rm• I ·• . !'CJ w ~ arP goins:: t<J l MlP around ~ 1 0 mi l lion n yPar in tax e~ualizatlon for that reason. So that whnn '·'<' Jooked at this wholP. situntion in tht> wintPr 1693

December 16, 1975 Tape no. 661 Page 1 - mw Mr. Crosbie. of 1972 this was an added feature of the undesirability, putting it mildly, of the Upper Churchill arrangement. Now we were successful, together with BRINCO, in convincing the federal government to change the tax equalization formula so that the worst features of that formula now do not apply to this situation. With respect to the public corporation - the Puitta­ the corporation tax they rebated to us, they changed that so that a $3.5 million loss that we were going to have changed to a $350,000 a year credit.

A corporation tax, there is nothing you can do about that, but once CFLCo becomes a Crmm corporation, it will not nay corporation tax and that will not be taken into the formula, but we will still have our share of that revenue, and we will benefit by that. The 111ater power rentals and royalties: We succeeded in getting Quebec to make a change which together with a change that the federal government agreed to, it saved us a considerable loss there, and in addition we now have the royalties from CFLCo payable to Newfoundland Hydro and that takes them out of the equalization formula.

So that the result of all these changes which we brought about, which the federal government has agreed to or we brought about ourselves,is that our equalization loss now in all the revenue from CFLCo is less than $3 million a year so that we gained from CFLQ) by the difference. What was a loss, a total more than the revenue we were going to get from CFLCo,is now a loss in equalization of about $3 million a year 1 and if CFLCo had gone on as it was before we took it over from BRINCO, we 1vould have had revenue coming in on the average in a couple of year's time of $14 million or $15 million.

So those changes -so the equalization situation was changed by the changes that we succeeded in bringing about after 1972, Rut that was another feature of the contract which had not been considered at the time.or the equalization formula w~s changed afterwards 1but which made the agreement very much less desirable than it should have been. Now, }rr. Speaker, we would have been a lot better off had that contract not been entered into in that form, I do not think there is any question about that, but you have to accept situations as you find them. 1694

December 16, 1975 Tape no. 661 Page 2 - mw Mr. Crosbie. The revenue that Newfoundland would have gotten from CFLCo had the old arrangement stayed in being, until our action in 1974, would have been an average, once dividends started to be paid - by the way, Mr. Speaker, there will be no dividends paid by CFLCo until 1977.

Under the trust deed they cannot pay dividends until 1977 - had the old arrangement continued in being, we would have averaged over the first forty years about $14 million a year in revenue from CFLCo, and there would have been income taxes, both the federal. ones ~re retain and provincial, about Sn.Q million; the rentals, eight per cent of the net before tax, about $2.7 million; in royalties every year, fifty cents a horsepower, about $2.4 million; in dividends,once they started paying dividends, they estimated that Newfoundland wou~d receive on its then eight-point-eight per cent of the shares about $2 million a year.

So the total would have been somewhere between $14 million and $15 million from about 1978 or 1979 or 1980 onwards. That is the total revenue Newfoundland would have gotten from the Upper Churchill had the former arrangements stayed in effect that were in effect when we took office in 1972. A mere - not even a bag of beans, a drop in the budtet, nothing. Fourteen or fifteen million a year is nothing for that huge resource of the Province that is now being sold to Quebec, but that is what we would receive or could expect to receive.

Now the effect of inflation on that of course makes it less and less valuable every year, Mr. Speaker, as you know. In any event that was the arrangement. This year:,by the way, Newfoundland Hydro has received, in rental, that is the eight per cent of the net before tax from CFLCo,and in the fifty cents a horsepower royalty, an amount of approximately $5.1 million. Next 1695

December 16, 1975. Tape 662 RFI - 1 year thev estimate they will receive the same. These two amounts no not change very much. The estimate for next year is $2,613,00n for 1Q76 for rental and $2 ,480 ,!'101) in a horsepower tax. That nm.1 goes to New- foundland Hydro because Newfoundland Hydro now owns all the shares of CFLCo. MR. ROBERTS: All of them? ~ffi. CROSBIE: Yes, I am telling you they do. MR. ROBERTS~ 100 per cent of the shares? HR. CROSBIE: Yes, l()n per cent of the ones the Province owns. MR. l<uBf.RTS: Oh! Oh, yes! But that amounts to on]v two-thirds of them! ~ffi. CROSBIE: Yes, 65.8 per cent.

But Newfoundland Hydro receives the rentals and the royalties and will receive the dividends once dividends are to he pairl. !1R. ROBERTS : Hhat 'rill that ao'! "'!R. CROSBIE: Well, yes, I got an estimate, yes. Let us see. Now, Hr. Speaker, as long as BRINCO, as long as BRINCO is left in control of CF'LCo this Province could not decide its mm destiny or even attempt to decide it . Here we had a comj'lany, privately owned, that controlled all the water pm•er rights of the vast territory of Labrador. MP. CROSBIE: Yes, controlled them until 19R3. ~.

S'4JILLYIOOD : No, only the Upper Churchill. :~ot even the Lm~er Churchill. 'ffi. CROSE IF.: '1r. Sneaker, BRINC:O - I have just explained B!liN·C n had the water pmver rights to all of Labrador until l '1113. lffi.. SHALLI-IOOD : No . HR. CROSBIE: ivell I say yes. HR. S~W.LYIOOD: I say no. HR. CROSBIE: ------ ivell, you will have to prove it is no. I say yes, until 1983. "tr.. S~!ALLHOOD: No, let the minister prove the opposite. }1R. CROS!\IE: I do not have to prove the opposite that we have the loaners reports here. HR. S~1ALL\v00D: Why not ? Hhy does he not? HR.

CROS1HF.: Their option '•1aS extended for ten years more from May of 1973 19~3. 1696

December lfi, 1975. Tape nn2 11H - 2 MR. SHAT.LWOOD: Option~ NR. CROSBIE: So llRINCO controllert the 'vater rights of Labrador until HR. SHALUJOOD : No. NR. CROSBIE: - given to them by the hon. gentleman opposite tvho is now interjecting. HR. SHAT.LWOOD: No, no . ~IR. CROS1liE: T sup;gest to him he tvait to make his own speech and not inter1ect. No one likes to hear about the mistakes they have made. I knotv I oo not either, "\r. Sneaker. I am only trying to give the hackground .. and a lot of this is hindsi?:ht.

So the position tvas that here 1vas RRINCO. controlling CFT,Co, ann controlling all the water pmver ri!l;hts of Labrador until 1Qf13. 1·UL SMALLWOOD : Oh no~ And stanrling het-v1een us and the Fecteral Government 1 and standinr, hetween us and 0uehec Hydro,such a situation,as I said, most unusual in tl-te vrorld certain 1 y to have this situation pertaining. So in 1972 Hhen the p,overnment took office, wh<~t happenen? Down came Mr.

Hulhollancl ann certain other of his officials ,,•ith a lease in their hand for us to sign on the tower Churchill, a lease identical with the ahominaU on that hl'ld heen signerl on the Upper Church.i 11 - HR. S~!ALL\.TOOD: Did they not have control? ~ !R. CROSBIE: - giving them the same concession. l"!R . SM.I\J.UTOOD: Did they not have control of the Lotver Churchill? HR. CROSBIE: They had an option which they exercised. r~. SNALLWOOD: i\h, ah, ah ~ An option, not control. HR. CROSRIE: Mr. Speaker, these gentlemen had an option on all the water potver rights of Labrador until 19R3 - :-IR.

SMALLH"OOD: But not control. !ffi. CROSBIE: - and no one else could touch them as long as t~ey had that option. 1697

December ln, 1975. Tape 602 RH - 3 MR. SHALLWOOD: HR. CROSBI:R: ~1R. SMALLWOOD : !'IlL CROSBIE: ~!R. SMALLWOOD: MR. CROSBIE: On what condition? They crmtrolled the "'ater Dower rights. On ,.,hat conditions? Hhose conditions? Conditions nothing . !·!hose conditions? Hr. Speaker, can I speak uninterrupted? NR. SPEAKER (Dr. Collins): Orner, please! Order, please! HR. CROSBIE: The hon. gentlem;m can defenrl- you know, he can gj ve his m•m vie~v ~hen he is finished. This is the result of my researches. This is the result of the ler.al advice we have had since 1973 that I am ~iving.

They control the water power of Labrador until 1Q83 at Hhich time it would !,ave exrdred. That is '"hat ,.,e were facen ~·lith. These f!entlemen came ciown with a lease for us to sign haserl rJn the same terms and conditions as the llpper Churchill, the same tax exemptions, the same concessions.givjn,. thf'.m ahsolute control. Thev could si~n a contract with Hyrlro Ouehec at whatever price thev liJre.j -the horsepmver tax and the eight ner cent and the rest of it. And of course \ve sht'r.re c\ r h<>m the rloor politely. \,Te rlid not sism the lease. HR.

SJvlAI,LHOOD: Houle\ the hon., uoulrl the l,on. !l'.inister allow me to ask 'Tim a <]Uest.ion. Did the ~nvernment have to accept that leRse and if - !!R. CROSBIE: No, we did not. lilt. SM"ALL1~00D: No, they did not and I knotv they did - and if they did not have to accept the proposed lease hy BRINCO or Churchill Falls Power Corporation·what would happen if they did not? They iust could have said no, could they not? HR. CROSBIE: Mr. Speal,er, 1 trierl to explain that. He rlid not have to accept their lease. If we had to accept it we would have had to accept it. He had choice.

LuckiJ y it had not been signed by the previous &overnment . MR. SMALLWOOD: ~1R. CROSBIE: Rip,ht. Thank God! It was a miracle that we got in and we refused 1698

necernh~r 16, 1975. 'IR . Cf!OSBIF.: Tape ()(,2 P.ll - 4 to stnn it. Natura tly t~e hac! t!le l"il!.ht to refust> . Othen~ise ~v('l would have hRd to sign it. Rut it would be a deadlock , because thev had the water power rights and could hold them until 1983. So we could not develop the Lower Churchill on our own o r any other water power in T.ahrador until after lQ83 . So it is a s at4-off. They harl t he option on th~ 141\ter rights which we could not take without exrrropriatinP them, and they wanted us to sign a lease on cer t ain terms 1~hich we t~ould not si~>n::~turally, 1699

December 16, 1975 Mr. Crosbie: not after. Tape 663 PK- 1 MR. SMALLWOOD: and there was the control. NR. CROSBIE: Not after. Anyway, Mr. Speaker, so we said, no 1 we are not going to sign that lease on the Lower Churchill, we are not going to have the Lower Churchill proceed under the same terms and cond:f_tions as the Upper. He are a bit wiser nmv, this is 1972 not 1965 or 1Q67 or 1953. So we said, no. And a long process then of negotiations started. Now let me say this quite clearly, ~1r.

SpeakeJt at no time did CFLCo or BRINCO ever suggest that they wanted to develop the power at Gull Island and bring it to Newfoundland. Not on one occasion did they ever say that, that they ever suggested it. Their idea from the start was to develop the Lower Churchill and sell the power to Quebec Hydro. Not only that,their view from the start was that Newfoundland could not get one iota more than we have gotten on the Upper Churchill, that if we got one other concession out of them they would not be able to sell to Hydro Quebec at a low enough price.

So for the rest of 1972 and 1q73 we negotiated with CFLCo and laid down our conditions. We appointed- I am not going to go into all of the history of the thing, although it should be put in the record some day,and ~•ill he, It will all go on a record some day as it should. But we negotiated with them. We established a committee of our own civil servants to look at the whole thing properly, to advise us and to brief us, We met with them from time to time, and I wrote them on January 12, 1973 outlining the conditions under which we would permit them to go ahead on the Lo~ver Churchill.

I think I spoke about that in the Rouse here one time before. We laid down eighteen conditions, Hr. Speaker, that we would consent to their proceeding under. One of those conditions was that we have one-thrid of the equity of the company that would proceed,without paying anything for the equity. We would have that instead of 8 per cent and the horsepower tax, we would take a third of the equity; that we had to consent to the terms and conditions of the power contract because we 1700

December 1~. 1975 Tape 663 PK - 2 were not going to have another power contract entered into as had heen entered into on the Lower Churchill. It would have - Upper. Upper.

It would have to have escalation clauses and so on and so forth; that they would have to build a line from Gull Island to C~ose Bay to supply the Goose Bay area with power; that there would be no exemption for sales tax and gasoline tax; that there would be no rebate of the federal corporation tax, and a number of other clauses that were necessary to protect Newfoundland, including we would have to consent to the trust deed and to the terms of the trust deed and so on, to avoid what had turned out to be the weaknesses in the Upper Churchill contrac~ If you cannot learn by your mistakes or by mistakes that have been made by somebody else you are pretty darn foolish,and we were not going to be caught making any of those mistakes with what we then knew the situation was on the Vpper Churchill.

Well that was in January 12, 1973 we had meetings and so on and so forth. You know, BRINCO can be amply called, it used to be called by a certain legal advisor of the government 1 the Greater East India Company.because they thought we were colonials. They had an imperialist attitude. AN HON. MEMBER: They still think - MR. CROSBIE: ------- Their arrogance was unexampled, unexcelled. MR. NEARY: It was called Bunco by one bon. gentleman over there. MR. CROSBIE: Bunco it was once called in this House. They were arrogant to the nth. degree.

They thought they were dealing with little colonial boys that did not need to be listened to or paid any attention to. But on April 9, 1973 Mr. Harry MacDonald of BRINCO or CFLCo wrote stating that they could not accept certain of our conditions, and they said it was essential that they must have, for example, a rebate of the. federal corporation tax that we got back from Ottawa or it could not go ahead,and they had to have other concessions, they would not he ahle to sell it at a price to Quebec Hydro low enough that Quebec Hydro would sign a contract and so on.

So they could not accept our conditions, in particular, the rebate, the tax ~ebate provision. 1701

December 16, 1975 Tape 663 l>K- 3 Mr. Crosbie; So then we said,all right the only thing to do is to see Quebec Hydro and see whether Quebec Hydro appear likely to agree to pay a price for Lower Churchill power that will increase the pie so that you can meet some of the conditions that Newfoundland wants if the Lower Churchill is to be developed. Because what is the point of developing it and exporting the power unless Newfoundland is going to make substantial revenue from it? It is better to let it flow to the sea~as I said at the time, Mr.

Speaker, than to develop it for the good of some other province and not our own. We cannot use it here and have to export it, surely we have to get the best price we can for it, and get some decent revenue~not $14 million or $15 million a year.

So then in May we did see- I think, it was in May - we saw Quebec Hydro, and Quebec Hydro,as one would expect,being in a very good bargaining position,did not indicate that much interest in the Lower Churchill power, said they were going to do James Bay, they might pay ~1hat they paid on the Upper Churchill and allow something for escalation, but certainly did not go out of their way to indicate that they were going to whop out with a nice increase in the rate of power that they would pay CFLCo for the power from the Lower Churchill.

Well if Quebec Hydro was not prepared to pay what power was then seeming to become 1vorth, and this was in 1973 before the eruption of the fall of 1973, then we were not willing to have it developed. It was as simple as that! He were not going to develop it 1702

December 16, 1975 Tape no. 664 Page 1 - mw '·"'· r.PflS !HE: just for the benefit of Quebec Hydro. So the thing we had to look at then, Mr. Speaker, was, could we develop it? Could we develop it for use in Newfoundland? In July of 1973 - MR. S}~LWOOD: The Island or the Province? NR. CROSBIE: Both, Labrador 1 and in particular the Island. HR. MURPHY: Labrador is a part of Newfoundland now I am told. MR. CROSBIE: TI1ey are both part of the same Province. In July 1973 there was an Order-in-Council passed in which we undertook the studies of Gull by Zinder and Teshmont and so on.

A lot of the studies are described in that statement. In July 1973 there had been certain preliminary work done. A series of studies started to see whether it would be possible to bring power from Labrador to the Island of Newfoundland. Now at no time - I repeat again, Mr. Speaker - at no time did BRINCO express any interest whatsoever in developing the Lower Churchill and bringing any part of that power to the Island of Newfoundland. MR. Sl-IALLI~OOD: Did they refuse? MR. CROSBIE: Because they thought it was too risky and so on and so forth. They had done the Upper Churchill with Quebec Hydro.

They knew they could finance it with Quebec Hydro. They did not know whether they could finance down in Newfoundland. MR. SMALLWOOD: Was there a customer? }ffi, CROSBIE: We had the customers here in Newfoundland. }ffi, SMALLWOOD: Was there a customer? MR. CROSBIE: Perhaps here in Newfoundland. they did not think our credit was good enough So they wanted to go the easy route. Well, I do not blame them. They nn• a privat t! •:< nterpr.1se comp<>ny. Tlwv ~xi st to make money for their stockholders.

We are a Province, we exist to try to do something for the benefit of the Province, and the benefit to the Provine~ would not be to sell power outside Newfoundland at a price that would not give us a very substantial return for the energy. So it was An impasse. 1703

• .!. December 16, 1975 Mr. Crosbie. Tape no. 664 Page 2 - mw Now, Mr. Speaker, when we first took of~ice, it was suggested to us by a high official of the Power Commission - I got the memorandum here, February 1972 - that what we needed to do was immediately institute studies leading to the nationalization of CFLCo, that this would be the only solution for Newfoundland. MR. WHITE: Who was the o liiciai'! MR. CROSBIE: The official can remain nameless unless he wants to claim the credit himself, a high official. MR. NEARY: MR. CROSBIE: MR. NEARY: MR. CROSBIE: MR. NEARY: MR. CROSBIE: MR. NEARY: MR. CROSBIE: MR.

NEARY: MR. CROSBIE: No, no, put his name on the public record. ~ lo . he can put his own name there. He should go into the history books. Well, he should go in the history book. Well, who was it? And I do not think he would mind being known. Well, who was it? It was Mr. George Hobbs. Oh, I see. That was in February 1972. Mr. George Hobbs is a Newfoundland patriot, and he had been dealing with these people,or being dealt with by them for years, and he knew the the problems, and he knew that the problems could not be overcome unless we nationalized CFLCo. llut we did not rush at that route.

We had a task force on electric energy, Mr. Speaker, and that task force reported, I think it was around June of 1973. It was chaired by one of the deans up at Memorial University and studied the whole energy situation in Newfoundland. That task force reported and said that the government should immediately get into detailed studies leading to the nationalization of all our power resources in Labrador. So the government did that. MR. ROBERTS: Did they recommend nationalization? MR. CROSBIE: l cannut remeTTlber rhe exact ~<OJ:din•;. Yc:<, thpv d'd do it.

They recommended it but said,"Before you do, get more detailed studies." MR. ROBERTS: rf. \ L is a n•asnnah.le precaution. MR. CROSBIE: Right. 1704

December 16, 1975 Tape no. 664 Page 3 - mw MR. CROSBIE : So, Mr. Speaker, we took that advice HR. SMALLWOOD: Look! Surely the minister agrees that all power in Labrador was already nationalized except for the Upper Churchill. MR. CROSBIE: hon. gentleman MR. SMALLWOOD: MR. CROSBIE: MR. SMALLWOOD: MR. CROSBIE: Mit. SMALLWOOD: MR. CROSBIE 'HR. SMALLWOOD: HR. CROSBIE : MR. SMALLWOOD : MR. CROSBIE: MR. SMALLWOOD: MR. CROSBIE: HR. SMALLWOOD: MR. CROSBIE: MR. SMALLWOOD: MR. CROSBIE: that bad. MR. SMALLWOOD: MR. CROSBIE: All power in Labrador had been given away by the opposit-; .- None! - under an option - Not at all!

None! - to BRINCO - Not a horsepower. - to 1983 . No! Yes! Not given away, not a horsepower! Given away! There is no other way you can describe it. Oh, come on! Come on! In 1983 it would have come back - Come on! Come on! - if we wanted to wait until 1983. Come on now! Come on! The hon. gentleman should calmn down. It is not all Come on! I mean the facts are there. So, Mr. Speaker, then we decided, yes, this has to be looked at seriously.

You know, how much longer can the Province tolerate this 1that this resource is going to be tied up until 1983 by BRINCO,whose only aim and objective is to get our power and sell it to Quebec, to give them a return to their shareholders~that will give us practically nothing, and we have got no hope, and we cannot do anything with the rest of the power until 1983 when their option expires. So we did have a look at nationalization and the studies we had done indicated 1705

December 16, 1975 Tape no. 664 Page 4 - mw Hr. Crosbie. it was possible, and it would be advantageous, and as all the hon. gentlemen know, we went ahead and in March 1974 we approached BRINCO and eventually the agreement was reached that they would sell us t heir shares of CFLCo, and they sold them to us. If they had not sold them to us, we would have asked the House of Assembly to pass legislation expropriating the shares of BRINCO which was a provincially owned company. Incorporated. HR. CROSBIE: Provincially incorporated compa4f.

Well, I will not get into the great debate on the merits of that, because that has been debated in this House, Mr . Speaker, but I will respond if anybody wants to question it. I say it was one of 11o·s

December 16, 1975 Tape 665 PK - 1 Mr. Crosbie: the greatest moves this Province ever made 1 justified in every last detail. So that whether we can do Gull Island or cannot do Gull Island,and whether we can do the Eagle River or cannot do the Eagle River,or whether we can do the Romaine or cannot do the Romaine,or whether we can do anything, we can decide at least o.ur own destiny in Labrador now with respect to hydro power that we did not have the right to do before. And we have got CFLCo,which is now owned sixty-five and one-eighth per cent by us, and the remainder hy Quebec or Quebec Hydro. MR.

NEARY: Does the minister think that the development would have gone ahead if BRINCO had stayed and sold the power to Quebec Hydro? MR. CROSBIE: going ahead. No, not a chance, because we would not agree to it MR. NEARY: I mean it could have gone ahead under another scheme. MR. CROSBIE: It is difficult - no, I do not believe that that is so because Quebec had made a decision to go on with James Bay, and that project 1 of course 1 is going to be monumentally expensive. I think the last publicly reported cost of it is suppose to be $12 billion. It will be a lot more than that. And they have gone on with James Bay.

So all of these studies went on,and they are all repeated in that earlier statement,and we decided,based on the Techmont-Zinder Report which came in in January. )and the report from our fiscal agents which came in January or February. We decided - I think I have got the date here - on February 19, 1974 to proceed to nationalize BRINCO or to purchase CFLCo, whatever could be arranged. And that thing was closed on June 27, finally in 1974. The legislation 'lo7as passed in the House on June 10.

And of May, 1974 we went to the federal government with a concept of developing Gull to bring to Newfoundland and ask for financial assistance and all the federal studies ·started and so on as all reviewed in this ministerial statement. Now, Mr. Speaker, just to get some other information here now1 I gave what the receipts would have been from the Upper Churchill 1707

December 16, 1975 Tape 665 PK - 2 Mr. Crosbie: to have the arrangements remain as it was. I should now I think report on where the shares are that we purchased of CFLCo. In June of this year Newfoundland and Labrador Hydro purchased from Newfoundland Industrial Development Corporation, which is the government's investment vehicle, 4,989,330 shares of CFLCo, that is the fifty- seven per cent that we bought in June of 1974, and they paid $144,752,000 for those shares, that is $29.00 a share approximately.

The effective date of the purchase was January 1, 1975 - now that is in Canadian dollars - of that amount $130 million represented the purchase price by government from BRINCO of those shares,about $4,077,000 represented the unfavourable balance between Canadian and U.S. dollars because the original loan to buy the BRINCO shares was in U.S. dollars; $9 million to $10 million represented interest on the loan for the intervening period and expenses in negotiating the purchase.

So that Newfoundland Hydro has paid Canadian $144,752,000 for these fifty-seven per cent of the shares of CFLCo that were purchased from BRINCO. Then in July of this year Newfoundland and Labrador Hydro purchased from the Province 775,998 shar~s of CFLCo, that is 8.8 per cent of the shares bf CFLCo,for $29.00 each effective January 1, 1975, and in payment Hydro has issued shares to the Province, 22,503,942 common shares of a par value of $1.00 each.

Now these various - the 8.8 per cent of the CFLCo shares were bought by the Province at various times between 1964 and 196R, and of course the Province had to borrow money to buy them and it has had interest on the money since and so on. But that 8.8 per cent portion of the shares of CFLCo have been bought by the Hydro at the same price but they have issued shares to the Province. There has been no money change hands. And of course the Hydro has assumed the loan originally incurred to buy the shares from BRINC0, which is a five year loan which was 1708

December 16, 1975 Tal'e 666 NM - 1 MR. CROSBIE: explained to the House before and 1.re will have to start putting that on a long-term basis next year. Now the first receipt by Newfoundland and Labrador Hydro of dividends from CFLCo will come in 1977. That is when the trust deed oerm1ts dividends to be paid. We are now working out the final details of CFLCo becoming a Crown Corporation because it is owned 65.8 per cent by this government and the rest of it by the Government of Quebec. ~ffi.

SMALLWOOD: Could the hon. minister tell me, under the Canadian Cornoration Income Tax structure, a corporation owned as to not less than 90 per cent by the government of a nrovince is a Crown Corporation for tax purnoses, and if it falls below 90 per cent it ceases to be a Crown Corl'oration for tax purposes and becomes taxable. But what of a case of a Corporation which is owned as to 90 per cent or more by Her Majestv the Oueen in right of two Provinces, in this case Churchill Falls Power, which is owned 100 per cent by two Provinces. Is that exempt as such from federal cornoration income tax? MR.

CROSBIE: ~1ell we understand that it will be, that there will be - MR. SMALLWOOD: Is or will? ~R. CROSBIE: Is. MR. SMALLWOOD: Is. MR. CROSBIE: This is being worked out now. The reason why it is taking so long is it is a very complicated matter. It affects the trust deeds of CFLCo and Quebec Hydro and so on, but these negotiations have all been completed now, and the status of CFLCo as a Crown Corporation should be recognized next year.

Now if it is recognized, it is is recognized as a Crown Cornoration, and it is difficult to see how it would not be, I am just saving that this is not being done yet as a formalitv, of course the amount available to pay dividends would he considerably greater than has been the case heretofore because there will not be any tax naid. And then the estimate, our estimate is that our share of the dividends - MR. ROBERTS: 66 per cent. 1709

necember 16, 1975 Tape No. 666 NH- 2 11P_. CROSTHE: - l'l'~ - ~-!ill come to $25 million a year and that in the ~rear ?flnR the djvidend payment Hill peak at about S30 m:ill:!on, that ts our share. ~m. NOLAN: That is in the contract. t•p. CROSBIE: Right. Now that being the case the dividends from the purchase of CFLCo alone should repay the loans incurred for the purchase of the !'hares over a period of twenty to t~o~enty-one years in full, to service the debt and renay it.

Nmv the price paid to BRINCO for CFLCo also included an amount for the water poPer rights that BRINCO had still remcoininr, with it in Lahrador,and the amount paid to them valued at $30 million,I think it is valued at, remains with NIDC,and,of course 1 if there is another hydro development in Newfoundland thev ~Vould sell the hydro rights to 'llewfoundland and Labrador Hydro for that particular project. 1f t he L<1W<er C:hurchill goes ahead they vill have to be compensated to some extent for the water pm,•er rights to the Lm.:er Churchill.

So the shares have heen transferred to Newfoundland and Labrador Hydro, the 1vatcr power rights remain tVith NIDC. ~~. SHALLWOOD: NIDC? MJl. CROSBIE: Yes, Ne1vfoundland Indus trial Development Corporation. 'lR. NEARY: How much tv ill they get in return for the water ri ghts1 ~~. CROSBIE: Well all you do is try to charge off what you paid for them. You knmv they are not roing to make any money on them. They would he developed hy a public corporation in any event. So tbinl: that explains where the shares are gone, llr. Speaker.

Now I have here, in case anyone i.s interested, ten copies of all the contracts that were i.ssued on the Gull Island project to date. This is a list, ten copiPs of a list of all the supply construction contracts on the Cull Island project to date, if anybody wants to see thPm. ~'R. NEARY: Can I have a copy? MR. CROSBIE: There are other reasons of course why we had ·to take over CFLCo, ~r. Speaker, which are obvious from my statement the other day 1 1710

December 16, 1975 Tape No. 666 N¥. - 3 ~. CROSBIE: One reason,of course~s that you cannot proceed with the Lower Churchill River development without having it tied in and synchronized 'vith the 1711

December 16, 1975. HR. CROSJHF.: Tape 667 RH - 1 Upper Churchill because of the flow of the water and other things pointed out in that statement, the benefits of :l.t being a crown corporation, the advantages it gives us in dealing with the Romaine R]_ver. The Romaine diversion on the Upper Churchill is another very advantap.;eous power project that can increase the energy produced by the Upper Churchill by a considerable amount at very low cost. t!R. SHALLHOOD: How much? NR. CROSBIE: I cannot give it right off the bat. HR. SMALL!-JOOD : How much power? NR. CROSBIE: 1-/hat? HR. SHALLHOOD: Not money, power? l1R.

CROSBIE: I would have to get that. I cannot remember the exact amount of power hut I will get that. MR. SI~.ALLHOOD: A million, a half a million 1 w,p,, CROSRIE: In the area of a half a million. HR. Sl'IALLHOOD: Horsepower? }ffi . CROSBIE: I will have to get it for you later. I cannot hear my promoter in the gallery, Hr. Speaker. R:!ght. Gallery? ~1\t. CROSBIE: T have to have somebody here to keep an eagle eye on me from ~!ewfoundland and Labrador 11vdro1so that if I say anythinp factually incorrect they can whip me down a note so that I can correct it. So far they have not had to whip me dm-m any notes.

So I hope I am beinp. correct. Now, Hr. Speaker, it mip;ht be interestinp.; for hon. gentlemen, iust for some information on the cost of enerp.y and rates which is a very complicated subject . Before doing that I might just do somet~inp, that is simpler. ~~at are the additions that are planned to the provincial hydro or energy svs tern bet~1een now and 19 8() 1 Now in 19 7 5 vie had a fifty megar,vatt gas turbine being constructed at Stephenville. That is p,oing to cost $7.5 million. In 1976 to meet the load p,rowth we have to have a fifty megawatt gas turbine constructed at St. John's. T~at is $8.5 million.

That is the estimated cost. In 1977 1-1e have a new 154 1712

December 6, 1975. MR. CROSBIE: Tape 667 RH - 2 megawatt unit number seven coming on at Bay d'Espoir. The cost of that is $4(} million. Now that does not give any more capacity, ~l. r. Speaker, but it gives more energy. It does not add to the capacity. The amount of water that will go down through Bay d'Espoir will be no greater with this new unit on. l-1e are not extending the dams. We are not including Lloyd' s Lake, Lloyd's River. There is no more water going to go through but because of the new installation you will be able to get more energy from the amount of water that is there. So the capacity - HR.

SMALLWOOD: Out of the same water'? MR. CROSBIE: Yes. So the capacity stays the same but the amount of energy will be increased. That is a $40 million project. MR. SMALLWOOD: r.an the minister explain a little? MR. CROSBIE: Explain what? MR. S ~~LWOOD: The same water produces ,at $40 million expense, it produces more energy. MR. CROSBIE: More energy, yes. MR. SMALLWOOD: How? MR. CROSBIE: Well, because it provides another turbine for this water to go through. MR • SMALLWOOD: The second time? The same water used twice? HR. CROSBIE: I will have to ask the technicians if it is used twice.

I mean,it does not extend to capacity hecause you still got - you could only extend t~e capacity by getting more water to go t~rough. HR. SUALLWOOD: You get more energy. MR. CROSBIE: Yes. MR. ROBERTS: You extend it. MR. CROSBIE: No, no. It is going to increase its capacity to produce energy hut not its capacity generally. }!R. S~1ALLHOOD: You are not going to spend $40 million without getting more electricity~or more energy,or juice or whatever you like. 1713

'I:a!'e f>f..7 ·H - 1 . u~ . CRCISBIT.: Hip,h t. There •.JouJ.d he more ener cy . Righ t, but there oul<i he more elect ricit y . ~ut th re are tt•o diff ere nce s be t"•e en capacity and ene rgv. In 1°78 there IJill be a eigh ty- five mep,aliatt gas turbine . That ~rill cost $15 l'lillio n . This is orol'osed . In 107!1 it is p roposed to hun d another 150 mel!'awat t unit at l'olyrood, $75 mil l ion . In 1980 it is pr oposed to build . a seventy mep,awatt gas turbine . AN llON . !BIBER : Seventy? MR . CROSBIE: Seventy, hi e tdll. cost - i t is estimate d at that t i me $14 mill i on . So, lr.

Speaker, in the next fiv e ears we will hav e to so end $10'1 million on t ese interi m measures to at tempt to keep up \·lith the demand for ener~y in ~ewfoundlancl . T!1at is if we are J!;Oinl! to attempt to satisfv the rleman~J fo r ener~. One alternative t~e h11ve rat her t"tan RO with C:ulJ i.s to ratio pot•e r,or is to t>.ncoura2 e less use of nmJer hv allm~in ~ pot·Jcr t o he come verv muc'l more t>-'Cpensi ve and there fore encourap,e oeople t o use Jes~ of i t . That is one alternative 1714

necember 16, 1975 MR. CROSBIE: Tape 668 (afternoon) IR-1 han. gentlemen mir.;ht consider if they do not l:lke the alternat:lve of procee(ling with Gull. We can ration power on the Island. That is not our policy and will not be. MR. NEARY: Row about if we recover from the llpper Churchill? What would that do? MR. CROSBIE: From the which? HR. NEARY: If we recover, you know, the power fro"' the Upper Churchill. l"R.. CROSBIE: I am coming to that now. Now, Mr. Speaker, in ~etting the cost of energy, it is tremendously complicated.

But in 1975 the 2verage cost of ener11:y on the Ne~o•foundland system js 13 roils per kilowatt hour. That includes the cost of generating it from various sources as welJ as tranmission costs and the companies operating overheads. The cost of energy from Bay D'Esroir,for~etting the transmission costs,is 5 mils per kilowatt hour. }IP.. S •Au.t~OOD : l•lhat does the transmission add to that? MR. CPOSBIE: Well you have to Jmov1 where it is being transm:l .tted to. The average cost on the Island for all of this is 13 mils. So the transmission costs, you know, will be considerable on this power.

In 1975 - VT> • S~'ALLT>700D : Transm:lssion and generation together about 13 mils? l·!JI .• CROSBIE: 'T'hat is on the whoJ e system, taking al 1 sources of power . 1'1>. SMALI.TN'OOn: 'T'he Island? HP. CROSBIE: llir;ht, on the Island. ]'T' !; 'ALL HOOD : Thirteen !"ils? ~"l' r!lOSJHF. : l'jpht. The cost of generati.on at the Holyrood Thermal Plant toC'ay, not incJudinp transmissj .on costs,is 30 mils per kilowatt hour. MR. ROBF.RTS: r-P. r"POSBIE: Th:lrty! Yes, but I will just expla:l .n why. The reason v•hy it :Is thirty,of course,is that the Holyrood Plant is not being used to its !"aximum capac:! t y. ~m.

P.OBERTS: tfuat is the load factor out there, 23 per cent? 1715

December 16, 1975 Tape 668 (afternoon) Tr.-2 "P rrnSIHE: \·'ell, in 'inlyrc>oc' in 1975 the fixer'! costs are $'1.200.()00. That is 10 mils. The unit enerr.y cost is 10 mils. The fuel costs ancl other costs are $R,246,nno which 1s unit enerry cnRt of 20 mils. That is the cost of the units they are tnrninp out this vear. ~n that their cost th:ls year is 30 l":!ls. Rut if it Fas usec1 this vear at full capacity the fixecl cost would stHl he $4,200,000 hut the unit energy cost would he 2 mils 11nd the fuel anfl other cost Fou]d be $27 million or 14 l"'i.Js on the unjt basis.

So t"r.e total cost HOule'! be $J} ,200, ()()() Or the Unit COSt T•T0\1] C he }6 tnilS • n. 110RRPTS : ~'ll • CP0SB IE: We are running at 20 per cent capacity? I ;.m not sure of the exact percentare but it rmnJ (I be sornethinf! like that. ''P.. SHALL HOOD: T~e 6 mils 1s the servicing of the clebt? MT~. C1'0SRIE: We 1l it j s the fixec1 cost applicable to the Holvrood Plant r·•hich r·muld be Phat :It ~muld cost plus the - ~<Jl. SHALLW00D: Servicing the cap:!tnl cost. ~'F.

CT>OSTIIE: ~<> if it ,,ras useil tc> full capacity toclay 1t r;rou] d be nhout Hi mils~whereaR !lay n'l'Rpoir ~·oulcl he 5 mils- for~ettin? the transmission cost. I see, nnt cnuntinp - VJ>. Cl'OSlliE: ~hat is nt tonav'R, nf course, price per barrel of oil rvhich is only e~hnut st>ven flollars "' barrel vith the subs:fdy. Fell actually the enerry sctleR from l'nJvrood are ahout 616 million ~-ilowatt hourR this year and on the Tsland T think this fi~ure is for, it is 2.577 billion. fo that is the kine'! of costs that there are in the system toflay. P.ut, of course ~these costs are rj sinr: every year, ~'r.

Speaker, and they are roinp: to rise ap.;ain next ve:ar and the year after and the year after that, <'!nd J no not knoP when - it might ston, snn,,t:mtia1l v the increases would stoTJ when r·•e. rot r.u]] Island pm~er on the TsJ11nrl, because the hydro pm•er once you pet it here, ~·batever the co~o;t is the.n, is not poing to chanp:e verv much in the future years hecRuse the pr:fce is then set by what it cost for the deve]c>pment plus what the interest rateR ~mere and the rest of it. Hut if we have to 1716

necember 16, 1975 Taoe 668(afternoon) -~· CROSRIF.: denend on steam J'lOI~er tho~e costs <1re likelv to he ~oiny un every y~ar . Now this year thev avera~ed perham; $7 nr $7.20 a b~trrel vi.tn the federal subsidy. As J saitl, a liklihood is that in 1980 lB-3 thev will he ~17 a barrel 11nd the cost of enerr,y from that ste11m o l ant will be very , very expensive. Roughlv sneaking if oil ~oes 1m a <Iollar a barrE'! the energy costs from Holyrood 11ill Ro up ahout 1.9 mils. ~ow if 11 barrel of oil went up by $10 by 1980 then the cost of the nower out at Holyrood 1-1ould he P.oi.np; up bv about 18 mils.

These are alJ just rough figures, of course, because it all has to be worked out exactly at the time. ll!ow for anyone who is interested , Mr. Sneaker, there are also snme statist1cs here on the ~eneration of oower in the Province durinp. 1974, what nower was generated by the Pow.er C:ornoration, bv the Lip,ht and Power, by Bowaters, bv Price. The total on the Island ~o~as 4,202,00n,ooo kilowatt hours. There was generated at Churchill FaJJ s 23 billion, at Twin Falls, 1 bil.lion; at ~enihek, 112 million. The total for the Drovince was 28,692 billion, 1717

necemher 16, 1975 Tape 669 (aft~rnoon) !B-1 MR. CROSBIF: and there j ~' a breaknot\'11 here ln case any !'lember is interested. }'T'. NEA!IY: T din not think anybody penerater'l pn1ver no•..-. other than Netvfound] and llyclro. }'J1. GROSBIE: No, Newfoundland Light still generates so171e as do llowaters and Price. 1'P.. NEAtlY: T thoupht they took them over. ~'1'. r~f)STli!':: ~ey c;mnot clo It anYJ71ore in the future. hut vhat they wer~ alre<~cly produdn?, you lmo~1,in the past, they are <~Jlm,red to continue cloinp. P.ut thev are not alJ 01~ed to ex ten<"' or expanr'l the:l r generatinp capacity.

So that p;:lves you some idea of the cost and the syste1'1. ~lot'', ~~r. Speaker - and it is just as we] 1 to face the facts thnt these ener~~.r costs are roinp to be rising every year. and that there pi_] 1 he further rises next year and there w:f.ll be rises the year after, and of course these 11re the wholesale rates l:>ec;mse Ne•·•founrl) anc1 ancl L;thr;H1or 1'0ver rorporati on onJ v se]] s to either 'le,·rfouncl1 anc' Li l?ht 11nil Po~·er or to 1 arpe industr.inJ custo1'1ers anrl not to anyone e] se.

Ne•·•fonnrlJanr'l L:lroht anr Pover has rot to recover. its cost of d:lstr:lhut.inf' the electricity 11nd so on. 'loH the hon. r-ent] e.man sorneti!T'es 11sks ,anrl the ouest ion col"es ttp .<thout rr>rn,,.•hich t\ras ?nother very unfortunate contract enterec" into l:>y the 1 ast mh•dnistration. The prn~er agree!T'ent 1vith E"Rr:O l<i'. S enterec" into jn C:epteJTlher ].l;, 1C)61i followinp. nepotiations which hegan in 1°1il•. The rnte under th.:Jt contract is 2.5 l'l:!ls,if thev use jt to the cap ad tv thev a-re supposecl to use it. It j s 2. 5 JTiiJ s per kiJ m,•att hour or a !llinimu1'1 monthly paywent .

NmJ EPCO has not yet used or taken the enerr.v it j s suppose(! to take under the contract every year. So i.t has been pay:lnp: ll'ore than 2.5 mils under this formula. It has been paying sometimes 3 m:lh; and sometimes as hir-h as 4.5 JTI]Js hecause it has not taken the m:!n:lmn!'l nuantity it :is supposerl to take under the contract. That contrac.t runs for twenty-five years from January 1, the on po"•er r<'!te of Jpnuary 1, 19fi9 to necember 31, 19Q3. The annu11l cost to rlate of the payments that the Province has hail to pay Hydro 1718

December 16, l'l75 Tape 669 (afternoon) IB-2 under the Industrial Development Incentives Act are the follm.•ing: - now Hydro of course loses money on this contract becau~e of the cost. Their costs of supplying this energy are tremendously higher than the price they get paid by EPCO and the Province has undertaken to make up the deficit to them hetween Hydro's cost and what they have to sell H to 'F:RCO for. This goes into the class of one of the IOOSt disasterons contracts ever entered into by any government any1•rhere in the civiJized or uncivilized ~vorld also. _llR.. NEAPY : l'lr.

Hobbs was not responsible for that one.Jlvas he? :t-'R. Cl?OSB1E: The last adminfstration is responsible. I do not know tvhat 1~r. Hobbs res-ronsib:tli ty is but somebody is responsible. Not• the subsidy cost is '$1.5 million jn 1969-1970; $3.8 million in 197~-1971. ~~. NEAPY: Oh, my! ~- CROSBIE: - $5.1 million in 1971-1972; $4.5 ~illion in 1972-1973 ; $4.6 million in 1973-1974. I think that last year it cost $3.8 million. Now last year the reason for the f:l.gure of $3.8 mill:! on is extensive dmvn-time caused by technical problems and a management-labour d1spute. The estimate for next year fs $5.6 million.

Now, those amounts represent the difference between the incentive rate that ErC0 pays and the est:ll'lated cost rate of providing the po'lorer. '!'he system costs are determined on the basis of fixed cost for instellecl capacity and variable costs for enerry. The costs are allocated aMonr. Hydro's customers on a pooled cost basis. E<>.ch customer shares the entire syste111 costs in direct proporti.on to his demands on the system for peak capacity and energy. No"'• ~'r.

Speaker, it is estimated that over the balance of this contract,which is twenty-five years and which does not enc1. unt:!J 19'l3,the Province will have to spend in subsi.dizing the power for EPr.O $200 million from 1976 to 1993. HR. MUP.PHY: Tl•at is the net cost to the Government of Ne,•foundland. t~. r.RnSBIE: Every year lJe lVill have to pay out amounts ranging from - well as the cost of energy and the system goes higher and higher, the cost 1719

necemher 16, 1975 }IR. r.ROSB TF: : TRpe 669 (afternoon) of the subs]<ly heccl1!1es h]f'hcr ;md hi~her. So that the coRt of F.P('() for the rower in st•bsj riv a1 0ne over the ttventv-fjve years j s $19. 'i miJJhm: .pJus ahont ~22 I'lilli0n. Tt tvi.U he ~222 miJUon, another $200 million in the next year-;. 1720 IR-3

December 16, 1975 Tape 670 PK - 1 Mr. Crosbie : That is just an estimate, lt . may be much 1110re than that, It depends on how energy costs go in the future. MR. NEARY: Borrow it to pay it. MR. CROSBIE : We have to - of course we have to collect taxes and so on - this is one of the costs that the government has to meet every year as a result of this contract entered into by the last administration. And before any hon. gentlemen opposite get up when they are rebutting and say, well you were in that administration.

You know, let me say that I joined that administration at the end of July 1966, and that I did not know about the ERCO contract, and that I was never consulted about ~he ERCO contract, the Cabinet was not consulted as far as I know, so I have, you know, no responsibility for, and if I had been consulted I might not have known enough to say anything, you know. MR. SIMMONS: But you stayed there. MR. UURPHY: I could have - MR. CROSBIE: It was negotiated between 1964 and 1966, and the date when it was signed was September of 1966. MR. SIMMONS : l.Jhy did ''Ou not resign then? MR.

CROSBIE: But little aatters like that was a bit too quick,