[ Page 2439 ]

CONTENTS

Morning sitting

Routine proceedings

An Act to Amend the Municipal Act (Bill No. 177). Mr. D.A.

Anderson. Introduction and first reading — 2439

An Act to Amend the Petroleum and Natural Gas Act, 1965 (Bill No. 31).

Second reading.

Mr. Smith — 2439

Mr. Phillips — 2445

Mr. Richter — 2450

Mr. McGeer — 2451

Mr. Wallace — 2453

Hon. Mr. Nimsick — 2453

Division on second reading — 2454

An Act to Amend the Mineral Act (Bill No. 44). Second reading.

Hon. Mr. Nimsick — 2455

Mr. Phillips — 2456

TUESDAY, APRIL 10, 1973

The House met at 10:00 a.m.

Prayers.

Introduction of bills.

MR. SPEAKER: The Hon. Second Member for Victoria.

AN ACT TO AMEND THE
MUNICIPAL ACT

Mr. D.A. Anderson moves introduction and first reading of Bill No. 177 intituled An Act to Amend the Municipal Act.

Motion approved.

Bill No. 177 read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.

Orders of the day.

HON. D. BARRETT (Premier): Mr. Speaker, I move we proceed to public bills and orders.

Motion approved.

HON. MR. BARRETT: Adjourned debate on Bill No. 31, Mr. Speaker.

AN ACT TO AMEND THE
PETROLEUM AND NATURAL
GAS ACT, 1965

(continued)

MR. SPEAKER: The Hon. Member for North Peace River adjourned the debate.

MR. D.E. SMITH (North Peace River): Thank you, Mr. Speaker. Last evening at the hour of adjournment I was speaking about the petroleum business in the Province of British Columbia. I brought before the House a few facts which have a bearing on the eventual position of the exploration business in the province. I'd like to continue relating to the House some of the facts and figures that have been brought to my attention.

I think that these facts and figures are such that had the Minister been interested not only in the state of the industry in the province but also in what they see as their future in British Columbia, he would have paid more attention to them than he has in bringing before the House this increase in royalty that is being debated this morning.

Mr. Speaker, I'd like to quote from a report prepared by the Canadian Petroleum Association for a few moments, concerning the state of the oil industry in the Province of British Columbia. It's a very recent publication. I think it pretty well summarizes in a few pages the position of the industry in the Province of British Columbia and the way they feel about the increase in royalties.

As I mentioned last night, the petroleum industry would have been prepared to accept a reasonable increase. Certainly they see no reason, and neither do I, for an increase which more than doubles the average rate of royalty being levied against the production of petroleum products in the province. Quoting from the report:

"The industry spent $155 million in British Columbia in 1972 and a record 219 wells were drilled. Natural gas production topped the 1 billion cubic feet per day mark for the first time, up from 920 million in 1971. Oil production declined 5 per cent to 65,500 barrels per day.

"Until recently, there was considerable confidence in the industry, stemming from increases in oil prices and anticipated gas price increases. These would have rectified the serious shortage of capital for new exploration programmes under which the industry in the province has been labouring."

I think we should re-emphasize that point, Mr. Speaker. It says that these things "would have rectified the serious shortage of capital for new exploration programmes under which the industry in the province has been labouring."

"But a shadow has come across the industry with the introduction of punitive oil royalties by the British Columbia Government, compounded by apprehension about what is planned for the gas industry. Petroleum companies now must completely re-examine their exploration programmes in the light of the following legislative proposals.

"First, increasing the oil royalty to a range of 10 to 40 per cent where it previously had a range of 5 to 16 2/3 per cent; cancellation of all special oil unit royalty agreements with no indication of what new rules will govern unit conservation programmes; introduction of an incentive scheme which rewards only those who are successful in their exploration or follow-up activities but does not reward the wildcat drilling efforts necessary to achieve success; increased corporate tax from 10 to 12 per cent of taxable profits effective January 1, 1973; taxing capital utilized by companies at the rate of one-tenth of 1 per cent.

"The industry spent $95 million last year in British Columbia directly in areas of exploration and development. If the negative effect of the royalties is such that industry activities drop by one-half, this will mean that $46 million less will be spent in the province. Even if there is a drop of

[ Page 2440 ]

one-quarter in activity, the effect on the economy will be severe.

"People should not be deceived by a continuation of exploration in the immediate future. Many of the companies' exploration commitments are locked in and the economic impact of the royalty decision may not be visible until later this year or next year. The real damage may only come to light five years from now.

"Those who suffer most will, of course, be the people directly employed by the industry. These include drilling-rig workers, earth-moving contractors, truckers, seismic crews, the dozens of companies that supply drilling rigs with equipment and services, freight companies, water haulers and many more. The secondary effects will be felt by retailers in the towns of north-eastern British Columbia, communications workers, airlines, railways and utilities.

"If north-eastern British Columbia becomes a drag on the economy, this depressing effect will spread and make itself felt, to a greater or lesser degree, among the people of the southern part of the province. People who work for financial organizations, food suppliers, appliance distributors, professional people — nearly everyone could feel the pinch eventually.

"Here are some basic facts about the petroleum industry in British Columbia. Every year the industry spends more in British Columbia than it receives in revenue. In just 20 years it has spent $1.5 billion and has recovered barely half of this to date.

"Man don't realize that the British Columbia government has always received the lion's share of oil industry revenues. For every dollar generated by the industry since 1955, the government received 57 cents, according to our 1972 year-end analysis. The government does not have to take risks."

I repeat that, Mr. Speaker: For every dollar generated by the industry since 1955, the government has received 57 cents, or 57 per cent, of every dollar. And the government has taken no risks, none whatsoever. They've not become involved in the drilling of dry holes, unsuccessful operations. They've not become involved in exploration procedures that they learned by a trial and error method of operating in the muskeg areas of northern British Columbia.

I think we would be well advised to ask ourselves just what other useful purpose we can make of the hundreds of thousands of acres of muskeg country that are basically inhabited by a few beaver, some muskrats, and very little else. Even the large game animals do not occupy the muskeg areas. They avoid them.

And there's hundreds of thousands of square acres of land in north-eastern British Columbia, that would have no utilization if it was not for the petroleum industry in that area.

Again from the report:

"The huge risks taken by oil companies are often overlooked. Of 1,591 exploratory wells drilled in British Columbia, 1,060 were dry holes. They cost the oil companies that drilled them about $250,000 per well.

"The additional burden imposed recently by the government will, on the average, make the oil royalties of British Columbia almost 50 per cent greater than those of Alberta and Saskatchewan. This will certainly be one of the factors that influences oil company decisions about where to put their exploration dollars.

"British Columbia has oil reserves of 292 million barrels — enough to last 12 years at current production rates. The discovery rate is declining. Gas reserves are 10 trillion cubic feet — enough for 27 years under present commitments. The recovery rate has been accelerating.

"I would like to draw to your attention two areas of concern that are becoming evident. 1: the proposed legislation enabling the massive oil royalty increase raises severe doubt as to whether past or future investors have any prospect of return, or in fact, the opportunity to recover their investment. 2: moreover, the manner in which the government proposes to carry out these changes raises questions as to the sanctity of any agreement now or hereafter made with the government of the province.

"In conclusion, it is clear that companies must make allowances in their long-range planning for the new economic environment in which they now find themselves."

Attached to the report is an operational review of the year 1972 and a number of graphs indicating production of gas and oil — the amount of reserves that we know to be proven reserves in the Province of British Columbia — the production rates.

And one very interesting graph, Mr. Speaker, a graph that projects the royalty increases calculated under this new formula — the amendments to the Petroleum and Natural Gas Act — and the rates that will be in effect when this bill passes in comparison with the provinces of Alberta and Saskatchewan. The rate in Alberta goes from a low of 10 per cent to a high of 26 per cent. In Saskatchewan it goes from a low of 7 per cent to a high of about 28 per cent. In British Columbia the new rate will be from a low of 10 per cent to a high of 40 per cent.

If that was on a line that gradually projected upwards from the low quota or low production units right through to the high production units, it might not be so bad, Mr. Speaker. But, in British Columbia the proposed rate of 40 per cent will be reached on production of 200 barrels per day, and anything over

[ Page 2441 ]

and above that will obviously be charged a 40 per cent royalty.

Interjection by an Hon. Member.

MR. SMITH: Pardon me? Oh no. But there's a graph; and it's in the bill. It's in the bill, Mr. Minister. Yes it is.

The average production of oil in British Columbia, depending on the field and on the wells involved and how long they've been in production, will mean that the average royalty being paid from this point on will be better than double what it was before because the projection and the schedule is so set that the majority of our production will fall into a rate of from 30 to 40 per cent as far as royalty is concerned.

There is no requirement on the part of any exploration company to drill for oil in the province of British Columbia. As a matter of fact, this last sale, I think, indicates very clearly the position that the petroleum industry is taking in this province. Only 25 per cent of the drilling reserves actually advertised received acceptable bids. The rest were rejected and while the dollar volume was approximately the same as it has been in previous years, that does not really give you the picture of what's going on in the petroleum business because any time we put up 12 drilling reserves for bid and public tender and only receive acceptable bids on three of them, it gives an indication that the companies bid only the choice areas. Of the other land put up for bid, less than 50 per cent received acceptable bids — mainly in the areas where gas exploration has the greatest potential.

So it must be obvious that the exploration business has reached a peak in the province of British Columbia, and unless something is done to attract the industry to this province, it will gradually decline in British Columbia. There is no chance of discovering major wells or major fields unless exploration continues. There is a tremendous area that so far has only been scratched in terms of exploration activity. There is every possibility that major fields have yet to be discovered, or will be discovered. But that is dependent upon the position taken by the oil companies in relation to the imposts that are placed against them. If they follow the trend that I see developing, they'll find and we will find in a few years the exploration activity in the province — the lifeblood of the petroleum production business, the initial stages of it — will have dropped off to zero.

Now what could be more foolish from an economic standpoint than to increase the royalties at a time like this and pick up 10 million to $12 million per year increase in revenue and by so doing, discourage the exploration business so that the $20 million to $40 million a year that we get in revenue from that source disappears. The net result in terms of dollars to the treasury will be a deficit — a decreasing quantity.

Surely to goodness, Mr. Speaker, the Minister of Mines and Petroleum Resources (Hon. Mr. Nimsick) and the Minister of Finance (Hon. Mr. Barrett) must realize that there is a very distinct possibility that instead of increasing returns that they like to talk about to the beneficiaries — that is, the people that live in British Columbia — they will have committed an error that will see the returns gradually go downhill and finally disappear.

The life of the presently productive oil fields that we have in the province is anywhere from 10 to 20 years — some of them less than that, some of them more. One thing is sure in my mind: unless the exploration end of the business continues, the net results will be decreased revenue to the Crown and, finally, the phasing out of the industry.

Now that's bad enough, but in the process we will have wiped out the jobs and the job opportunities for hundreds and hundreds of people in north-eastern British Columbia, because our economy in that part of the country is very dependent upon the exploration business. Most of the people who presently live there in one way or another are intimately involved in some part of the petroleum industry.

Even the farming community, which has had a tough time the past few years, find that the oil patch, as it's referred to up there, has been a source of revenue and jobs on which they could capitalize during the winter months when they're not farming. As a matter of fact a large percentage of the work force in the industry, at the peak of their season, which happens to be the months of January, February, March and on into April, comes from the farming community in that area. It has been a very comfortable arrangement for both the petroleum industry and the farming community, each dependent upon the other, with very satisfactory economic results for both the industry and the farmers. I don't know of anybody in the farming profession today, for instance, who doesn't have to depend upon some outside job to continue his chosen vocation.

So the jobs that have been created through exploration provided the province with an increasing source of revenue and provided a large segment of the population with good jobs during the winter months when ordinarily they would not have been employed. The results have been beneficial to the whole province. Certainly, those companies that went in originally to look for oil and hit natural gas have provided tremendous financial advantages to both the province and the people who live in the Peace River country.

The point that I wish to make is this, Mr. Speaker: the real impact of what is really taking place in the petroleum industry will not be felt immediately. It's a gradual process as much as the building up of the industry was a gradual process, with first a few rigs coming in and doing some wildcatting, having some

[ Page 2442 ]

success and then gradually expanding from there to the point where last year was probably a banner year in terms of locations drilled in the province.

It's not only being talked about in British Columbia. The petroleum fraternity generally, which because of the activity that's taking place in Alberta concentrate in the cities of either Edmonton or Calgary, talk about what is going to go on and about their projections for British Columbia. I'd like to quote from a Canadian Press report:

"Petroleum industry spokesmen say that the New Democratic Party governments in British Columbia and Saskatchewan will improve Alberta's competitive ability to attract dollars if they increase royalty on oil and natural gas.

" 'These governments have become too greedy at the wrong time,' a spokesman said. 'The disincentive to exploration comes at a time when energy demand is making it economically attractive to develop the marginal potential of the two regions. The British Columbia government royalty has to be a great help to Alberta,' the spokesman said."

If that is the objective of this government, they couldn't have approached it in a better manner, Mr. Speaker, because the impost that is suggested by this bill will have a deterrent effect on the industry and can't help but have the same deterrent effect on the whole economy of north-eastern British Columbia.

I have a stack of letters here, and I don't intend to read them, indicating the position of the small service companies that cater to the oil patch. I'm sure that the Minister has received similar letters. These people basically employ anywhere from one or two to 15 people in their operations. I recently had a communication from a company that does a lot of surveying in north-eastern British Columbia for the petroleum industry. Their average staff was 18 to 20 people. As of today, Mr. Speaker, their staff is down to four. They've laid off everyone else. Those that have remained have had to take voluntary cuts in salary in order to retain their jobs.

Is this what the government has in mind? Is this how you create employment? Is this the manner you create more jobs? Nonsense! You save a few jobs in one spot and you cancel out an equal number in another. False economy, stupid economics as far as I'm concerned.

These people cannot help but be affected by the decisions of this Government. It would be different, Mr. Speaker, if there was a requirement for increased revenue to finance government programmes — if we were budgeting for a deficit. But there is no requirement for the Government to increase royalties to the extent that they have. There's no requirement for that additional revenue and, as a matter of fact, from a strictly economic point of view, the revenue that you generate in one place you are going to lose in another because of the decrease in exploration activity.

The hang-up that this government has regarding all resource industries is incredible. It's something to behold, really. The Government would apparently set out to purposely destroy an industry when that industry has paid its way and has cost the Government nothing in terms of finance or actual contribution. We have to this point taken 57 cents of every dollar generated directly into the coffers of the province.

What greater share could you ask for than that? Take none of the risks; do none of the financing; sit back and participate to the tune of 57 per cent of every dollar generated. To me that is sound economics. I cannot see that the Government could request any greater break than that.

If you decided that you did need a modest increase in royalties, why didn't you make it a modest increase? Why didn't you look at the pattern developed in other provinces and other jurisdictions in Canada before you pulled a figure out of the hat? Just as sure as I stand here, Mr. Speaker, there was no requirement to increase the royalties to the level that is suggested in this bill. It was a figure that was pulled right out of the air. There is no reason for it except that it generates more revenue, supposedly, for the time being.

Let me quote to you from a report prepared by the administration in the Town of Fort St. John.

Interjection by an Hon. Member.

MR. SMITH: I think that you probably have, Mr. Minister. The brief was certainly presented to you. But it's very obvious that what you've read and the briefs that have been before you have had absolutely no effect on your thinking. I'll quote from the report:

"A rig moves in to drill in this area. What is required first is a road built by local contractors who hire local help as Cat operators and foremen. The rig is moved on the lease by local trucking companies who employ drivers and swampers. All these people are dependent directly on the local service industry contractors. At this point, and dependent on distance, the lease preparation, site work and the moving in of the rig has brought in from $15,000 to $25,000 to the contractors.

"The drilling rig now begins work and stays on the lease for two weeks. The service industry here must provide labour for welding, testing, camp facilities, groceries, et cetera, daily. Without exaggerating, 50 service industries from Fort St. John become directly involved. It is estimated that upon completion, a further $60,000 is spent by the drilling contractor. With the present pollution control laws, employment is created for tank truck

[ Page 2443 ]

services and expenditures now are being made by the oil companies for this purpose at a much accelerated rate.

"The above is very indicative that if the drilling rig is not working, the economy has lost $85,000 on just one such hole. This directly affects the local service industry and local farmers who in turn employ local people. These people total 75 per cent of the population of Fort St. John or Fort Nelson. They in turn buy homes, pay taxes, pay 5 per cent provincial tax and contribute to the economy of this province and community.

"The province in turn receives income from land sales and royalties on oil production. The service industries who locally employ our people purchase equipment, buildings and vehicle plates and contribute towards the economy. This is a chain economic situation which would place a great majority of our people out of work if it were upset by the withdrawal of the oil industry.

"We urge the provincial government to negotiate and consider its policy and if any increase in royalty is required, that this increase be at a level somewhat parallel to the Province of Alberta. We are only 35 miles from the Alberta border."

Here again, there are a number of pages of statistical information available to anyone who is interested in looking at the actual returns of the petroleum business in British Columbia.

The industry will remain viable provided it has an opportunity afforded it equal to that afforded it in Alberta, Saskatchewan and the Northwest Territories. The bill that's before us provides not only for increased royalty but also that there will be a credit allowed in areas of new discoveries. In other words, you give them a three-year write-off against royalty in discoveries in a new pool discovery well, whatever that means. I don't think we've even had a definition yet of what the Government considers a new field or a new find.

Regardless of that, let's assume that we do find a new field. The company involved is given a credit for three years or the royalty is deferred actually. They pay no royalty on the first three years of production. That in no way is going to help them to any great extent. Their financing is arranged upon the future potential of that field. The money that they need to generate must be borrowed and paid off at some period down the line.

If anyone who is in the financial world looks at the economics of the proposition and says that regardless of the three-year original deferment, the overall impact of royalty on production will not allow you a return of your capital on the average length of life of a well, the funds are simply going to dry up, Mr. Speaker. They'll not be available.

The other thing is that what you're doing with this type of incentive, if that's what you wish to call it, is providing a write-off of royalty for only those people who are successful. I've already pointed out this morning, in the report that I read from the Canadian Petroleum Association, that the success rate is less than 50 per cent.

If you happen to be unfortunate enough to be one of the companies that has drilled a succession of dry holes, you've spent the same amount of money as the ones who were successful. But there's no write-off there. There's no provision to help offset the expense that they've had in drilling those holes. Then when they do hit a good well and are successful you give them a three-year deferment — but bang; hit them with a rate of royalty higher than in any other part of Canada.

It's not going to be an attraction to the petroleum industry. As a matter of fact, it's probably a disincentive to the industry.

When you were considering this proposition, why did you not look at what is being done in other jurisdictions? The Province of Alberta has a much fairer system. We'll forget about the rate of royalty for a few moments and not even argue that point. The Province of Alberta has a much fairer system in what they are prepared to do for companies exploring in wildcat areas.

What happens there is that under the regulations, when a company goes into a new area and a step-out, before the well is drilled, it is agreed with the Province of Alberta that it will be an incentive wildcat well. In other words, they agree that this is in an area where it will be considered a wildcat well and entitled to an incentive bonus, if you like to call it that, if the well is successful.

So, under the agreement, you may have several drilling companies involved. Quite often they co-operate among themselves and they'll own a percentage of the leases on a pro rata basis. So you might have one driller going in but the actual results will be pro-rated among three, four or up to half a dozen different companies who are involved in the actual exploration business.

Let's assume that they complete the well. Then, when an incentive wildcat well has been completed or abandoned to the satisfaction of the board, a credit in accordance with schedule A shall be established in the records of the department in the name of the licensee. The department in writing as to the matter of allocation of the credit among the participants — that the credit shall be allocated and established accordingly.

So they not only credit the licensee but they credit the participating companies on a pro rata basis established according to formula. They also give them a pro rata decrease or write-off in royalty according to the depth of the well and the actual cost of drilling it.

Now that credit, Mr. Speaker, is available regard-

[ Page 2444 ]

less of whether they have a successful completion or not. So the people who drill the dry holes are not penalized. They are able to write off part of the costs of that against royalties that they would ordinarily be paying the Crown from other discovery wells.

It would seem to me that in our haste, or in the haste of this Government to increase the revenue received from the petroleum production of this province they have completely ignored not only the established practices, but the pattern that is set up in other jurisdictions.

For anyone to think that in British Columbia we are an island unto ourselves, particularly as it refers to the petroleum exploration business is to be very mistaken. Canada is a large country. The potential for development of petroleum resources is better or as good in many other parts of the country as it is right here.

The manner in which we participate with the petroleum industry is certainly one that no one can fault. We take none of the risk and we receive the lion's share of the dollars generated. Certainly a better proposition than buying defunct lumber companies, even when you get one given to you so that you have to pick up $70 million of bonded indebtedness along with it. That's not much of a gift.

For the government to proceed along the lines that they are doing at the present time will do nothing but add a deterrent factor to the petroleum industry. In the long run, Mr. Speaker, it will result in decreased revenue to the Crown, not increased revenue. It will result in fewer jobs…

HON. L.T. NIMSICK (Minister of Mines and Petroleum Resources): You've said that before.

MR. SMITH: I know. But, I'm telling you again, Mr. Minister.

MRS. P.J. JORDAN (North Okanagan): Can't you get the message?

MR. J.R. CHABOT (Columbia River): You learn hard.

MR. SMITH: Sometimes it takes a long time to get through to this Government. The thing that should be done to this bill is have it withdrawn, or at least amended.

HON. MR. NIMSICK: You've said that about every bill on the order paper.

MRS. JORDAN: That's right — they're all bad.

Interjections by some Hon. Members.

MR. SMITH: Mr. Speaker, the collective effect of this bill and a number of others on the order paper will result in decreased job opportunities in British Columbia. Of that we're sure. And that's why we are on our feet suggesting in the most kind terms, Mr. Minister, that you've made a mistake…

Interjection by an Hon. Member.

MR. SMITH: Leo the lion is now Leo the lamb? We're trying to impress upon you, in a kindly manner — just a little bit of friendly advice — that a reasonable increase would have been accepted, but an increase of this nature will have long-term results which will be certainly a disincentive to the industry. It will result in fewer jobs, and will have a direct effect on the economy of north-eastern British Columbia.

Now we've already felt the effects of several bad years in the farming industry up there. If we have added on top of that a slackening of the pace of exploration for petroleum and all the attendant companies that work in that field, the economy will collapse. It will go downhill very quickly. And all I'm saying to you this morning, Mr. Speaker, is that it's stupid economics — that for the short-term gains there will be long-term disadvantages and those long-term disadvantages, while they'll hit north-eastern British Columbia directly in a very disastrous manner, will affect the whole province of British Columbia.

I suggest to the Minister that he take a second look; consult with the petroleum industry; look at the position taken by other jurisdictions in Canada. Back off. Reduce the increase or projected increase to one that both industry and government can live with. In that way we'll continue to enjoy the benefits of a vigorous economy and the fruits of the exploration business in a very tangible way.

Take a look at this bill in relation to what is going on in other jurisdictions. If you want an increase, make it one that you can justify, Mr. Minister, through you Mr. Speaker. Don't get too greedy because in so doing, the disincentive that is apparent will result in a decrease in the activity in the province and we'll all be sorrier people for it. Take a look at what you are doing. Withdraw the bill or amend it and come up with a reasonable scale of royalty increase. Not what we have before us this morning.

The Minister quite often likes to suggest he's a reasonable man, and I believe he is. In this case I say, in all sincerity, through you Mr. Speaker, that the bite you are about to take is just too big. The Minister says it's just a nibble. I guess there are some people who just do not understand the economics of any type of a business proposition outside of the business of running a popcorn stand.

This is not a popcorn stand, Mr. Minister. It's a viable industry which has been build up over a period

[ Page 2445 ]

of 20 years. It can continue to be a viable industry and the Province of British Columbia can continue to generate revenue without investing a dollar in it if you'll take a reasonable attitude on the increases proposed.

Every person who works in the industry or caters to it knows that their costs went up substantially over the last few years — even an increase in the price is not going to result in any great increase in net profit to themselves. It will only help them recover what they've already invested. Hopefully, somewhere down the line they'll be able to recapture their original investment.

They are a long way from that at the present time in the Province of British Columbia. That is just original investment; that doesn't even take into consideration any interest on the money they've borrowed. Just about 50 cents on the dollar has been recaptured. For every dollar the petroleum industry has been involved in, the province already has 57 cents of it. For goodness' sake, look at the economics of what you are about to do.

A reasonable increase, yes. But this is far from reasonable — it better than doubles the royalty on petroleum production. For every company that is involved in petroleum production in British Columbia, their rate has just doubled. Does that make economic sense? Is that going to provide an incentive for companies to come in and look for new areas of discovery? No.

What will happen is that the exploration business will concentrate in the few areas where they have a fair chance of success. They'll concentrate in the areas known to be rich in natural gas and they'll forget about the oil end of it. They know that not only is the risk high but the return is not there.

Even contracts that were negotiated in good faith under this bill will be renegotiated. Those contracts, through agreement, should not have been terminated until 1975. But this bill indicates that you are going to go in and renegotiate those on the basis of higher royalties immediately.

There is no such thing as good faith when these types of capers are pulled at the expense of a major industry. A fair increase, yes; but not this. It's too high. It will not produce the results that you hope for, and in the long run it will wipe the industry out in the Province of British Columbia.

Reconsider your position, Mr. Minister, through you Mr. Speaker. Consult with these companies Everyone in the Government likes to talk about input and to say that they are an open Government, that they want to listen. Well, you have to listen with open ears, not with a closed mind.

Just as sure as I'm on my feet this morning, there was no consultation. You did not go to the petroleum industry and tell them what you had in mind. You used the steam-roller process and said, "Like it or lump it. This is what it's going to be." In order to justify that position, you said, "We're doing this for the people of British Columbia."

Well, the people in north-eastern British Columbia say, "Nonsense." What you are doing is destroying their livelihood. Don't ever think that they are going to look benevolently or kindly on a government that sets out to destroy the basis of our whole economy.

Mr. Minister, if you had purposely set out to scuttle an industry, you couldn't have done it in a better way than that. Reconsider your position; come in with an amendment that will reduce that royalty to a reasonable level; listen to the advice of the oil companies that the fraternity would be prepared to give you; take a look at the reports and the results, and then hopefully we'll still have an industry that we can be proud of in the Province of British Columbia two, three, five and 20 years down the line.

MR. SPEAKER: The Hon. Member for South Peace River.

MR. D.M. PHILLIPS (South Peace River): Thank you, Mr. Speaker, on this lovely Tuesday morning with eight Government Members in the House. Why, they can't be too interested. It's going to get cold, come winter, and we're going to need oil and gas to keep the wheels of progress turning and to heat the homes, Mr. Speaker. They should be here paying attention to what is going on.

Oh, one came in. Well, this is the way we are running the House these days: legislation by exhaustion, starvation. But that's the way it goes, Mr. Speaker. I suppose you have to put up with it too.

MR. SPEAKER: Are you complaining about the dining room?

MR. PHILLIPS: No, I'm not complaining about the dining room; I'm complaining about the hours that we have to spend in this House. That's what I'm complaining about, Mr. Speaker.

Now the Minister has even gone out. Where did he go? See, even he can't stand the hours: 10 o'clock in the morning until 11 o'clock at night, sometimes without lunch, Mr. Speaker.

Well, shall I wait for the Minister to come back or shall I carry on, Mr. Speaker?

MR. SPEAKER: Well, it is entirely up to the Hon. Member whether he wants to be seated or standing.

MR. PHILLIPS: There are a few things I want to read into the record, so I'll carry on. The Minister has a closed mind on the subject anyway but maybe some of the backbench will pick up a few pointers.

Last year in British Columbia oil production declined by 5 per cent to approximately 65,000

[ Page 2446 ]

barrels per day. That was before Bill No. 31, An Act to Amend the Petroleum and Natural Gas Act, came in. That was also in an area where the need for petroleum resources and more oil is increasing every day.

The oil pipeline from the Peace River area to this area is running at capacity at the present time. We're going to have to get our supplies from the Alberta sources through the trans-mountain pipeline. I don't think anyone in the petroleum or pipeline business will invest in additional facilities in British Columbia as long as the present administration is in power. So we're going to be at the mercy of our neighbouring province, Alberta, for the majority of our oil supplies in the very near future. Of course, the situation will get worse.

This increase in royalties, Mr. Speaker, at a time when we need to be looking for more reserves is uncalled for. The increase in oil royalties to a range of 10 to 40 per cent from a range of 5 to 16 2/3 per cent is more than a 100 per cent increase.

When the bill was introduced in this House, the Member for North Peace River (Mr. Smith) and myself said it would drive the industry out of British Columbia. The Minister of Mines, and Petroleum Resources laughed; the Premier laughed. But the last sale completed on April 5 proves that what the Member for North Peace and myself said was true.

Interjection by an Hon. Member.

MR. PHILLIPS: It's true because your sale was only $3 million and it should have been $14 million.

At a time in the world when resources are a top priority and everybody is interested in energy, you have one of the smallest sales this province has ever had. You tell me why, Mr. Minister!

I suppose the Minister is proud of that sale. I don't know what we have to do to draw your attention. We tell you a fact. What do we have to do to convince the Minister that what we are telling him is right? I've listened too much to you, Mr. Minister.

AN HON. MEMBER: We've listened too much to you.

[Mr. Dent in the chair.]

MR. PHILLIPS: Well, you're going to hear a little bit more. Maybe eventually some little glimmer of hope, some little crack of light will break through.

Interjection by an Hon. Member.

MR. PHILLIPS: Maybe something.

AN HON. MEMBER: There has to be a source of light if you…

MR. PHILLIPS: There was no show of interest in this last sale. No show of interest at all. The majority of that $3 million came from the Monkman Pass area, where there is a discovery of gas and it's a proving-up field. How much money out of that sale was actually from interest in the oil? Very little. A very, very small percentage, Mr. Speaker, a very small percentage. And as I say, action talks. In the history of the world when resources and energy is on the tip of everybody's tongue…

Interjection by an Hon. Member.

MR. PHILLIPS: I don't know, Mr. Speaker, what we can do to convince the Minister. There's the Minister of Highways (Hon. Mr. Strachan) smiling over there like a Cheshire cat; maybe he doesn't want anybody to drive on the roads any more. I guess he's going to stop the wheels of progress in British Columbia and stop everybody's wheels. Mr. Speaker, we'll return to the horse and buggy days.

Interjections by some Hon. Members.

MR. PHILLIPS: Unfortunately, Mr. Speaker, it grieves me to have to stand in this Legislature and say to the Minister of Mines and Petroleum Resources, "I told you so. Two months ago, I told you so."

Interjections by some Hon. Members.

MR. PHILLIPS: Well, maybe he's not out to change the Act. Maybe he's going to bring in an amendment. Maybe he's finally seen the light, Mr. Speaker.

Interjections by some Hon. Members.

MR. PHILLIPS: You know, Mr. Speaker, I remember in this Legislature not more than two months ago when the Member for North Peace (Mr. Smith) raised this question, and our Premier stood up and he ranted and he raved and he threw statistics around to try to prove the Member and myself wrong. I don't see him in his chair today. I didn't hear him when this sale came off and he got $3 million.

I didn't hear him come in this Legislature, Mr. Speaker, and say, "See, I told you so. See, the petroleum industries are not afraid of this Government; they're not afraid of what's happening." I didn't see him bragging about that. No, as a matter of fact, his silence was almost deafening, Mr. Speaker.

He said he had met with more people in his office than you could shake a stick at; more people in the last six months, he said, than have been in this office in the last 20 years. "Oh," he said, "We met with the petroleum industry. Oh, we had a big meeting, and we worked this all out. Oh, we're co-operating with

[ Page 2447 ]

them. We're co-operating with the industry. A new era has come in."

Oh, when he ranted and he raved it was fantastic. There weren't many facts in what he said but there was a lot of fiction.

Mr. Speaker, if the Premier had a great meeting with the oil industry and discussed the problems and discussed where they're going, I wonder why one of the largest oil industries in western Canada would write this letter; and I'd like to read you this letter. I'm not going to read a bunch of letters, but I want to read one because this is one of the largest in western Canada and this letter came after this great new era of co-operation, he said. I remember the day he got up there, his hands were going and the statistics were flying. You remember that, Mr. Speaker, I'll never forget it.

AN HON. MEMBER: Hear, hear.

MR. PHILLIPS: I'll never forget it. The letter is addressed to many people.

Interjection by an Hon. Member.

MR. PHILLIPS: That's the Premier, it goes to the Premier — you know, the chap that had the meeting in his new $250,000 suite down there.

Interjection by an Hon, Member.

MR. PHILLIPS: A carbon copy of the letter was sent to me and a carbon copy of the letter was sent to the Hon. Member…do you want me to tell you all the people that got carbon copies?

AN HON. MEMBER: Read them all.

MR. PHILLIPS: A copy was sent to Hon. Leo T. Nimsick and a copy was sent to Dr. James T. Fyles and a copy was sent to Mr. F.X. Richter. But this letter was after this new era, this new era of co-operation. Who did he meet with? A roughneck from an oil rig?

DEPUTY SPEAKER: Order, please. Would the Hon. Member please address the Chair — and relate his…

MR. PHILLIPS: The Premier must have met with some roughneck from an oil rig. Because he certainly didn't meet with the executives of the oil companies.

HON. R.M. STRACHAN (Minister of Highways): Are you condemning the roughnecks now?

MR. PHILLIPS: Certainly we have roughnecks. If you knew anything about the oil industry, you'd know there were roughnecks out there, working in the mud, working in the slush, to try and find oil for you. If you knew anything about the industry at all…

DEPUTY SPEAKER: Order, please. Could we have the Hon. Member please address the Chair?

AN HON. MEMBER: Condemning the roughnecks.

MR. PHILLIPS: I'm not condemning the roughnecks, but you are condemning the roughnecks. You are putting them out of work.

DEPUTY SPEAKER: Order, order please. Would the Hon. Member please continue with his comments on the bill.

MR. PHILLIPS: You know as much about the oil industry as I know about flying people to the moon.

DEPUTY SPEAKER: I would ask the Hon. Members to observe standing order 17; to not interrupt the Member please while he's making his speech.

HON. MR. STRACHAN: If you'd make a speech, I wouldn't interrupt. But you can't interrupt a non-speech.

MRS. JORDAN: You wouldn't know a speech if you fell into one.

Interjections by some Hon. Members.

MR. PHILLIPS: No, Mr. Speaker, it always amazes me when I stand on the floor of this Legislature and get to those guys over there — get to them, make them eat their own words — they can't stand it, Mr. Speaker. They can't stand it, so they say that I'm not making a speech. I don't condemn the way they perform in this House, Mr. Speaker.

DEPUTY SPEAKER: Order, please. I'll just say to the Hon. Member that if he proceeds and ignores them, I'm sure they'll ignore him after awhile. (Laughter).

MR. PHILLIPS: I don't want them to ignore me, I want them to pay attention. I want to read this letter, Mr. Speaker.

DEPUTY SPEAKER: Please read it.

MR. PHILLIPS: It's from one of the top oil executives — after this big meeting that the Premier had. He says:

"I am writing on behalf of BPOG Operations

[ Page 2448 ]

Limited to express our deep concern and disappointment over the action and statements of your Government in proposals recently made with respect to oil and gas operations in the Province of British Columbia."

Now this is after this new era of co-operation and, Mr. Speaker, after the meeting that the premier had with all the top executives. You know, the one that he was — you know.

"B.P. is an explorer and producer which has been active in British Columbia since 1955. In the past two years our exploration activity has been increasing considerably. In the present season we employ approximately 8 per cent of the drilling rigs and about 8 per cent of the geophysical crews active in the province. In 1971 and 1972, our company has spent nearly $2 million in land acquisition…"

I wonder how much they purchased on the last sale. I didn't see their name there at all.

"…our company has spent nearly $2 million in land acquisition, drilling and seismic surveys in programmes where we have acted mainly as operators of joint ventures involving total expenditures to the order of $6 million. These efforts and expenditures were made in good faith and in our belief that our high-risk undertakings would have a reasonable prospect of profit in the future.

"For your information, our company's expenditure on exploration and development in British Columbia since 1955 is in the order of $19 million."

This is just one company.

"To the end of 1972 we had recovered $8.6 million of this investment, and even under the existing conditions of royalty payments our remaining reserves are not sufficient to complete the recovery of the remaining $10.4 million. We cannot agree that the province is not receiving a fair share of revenue from these resources.

"We are particularly concerned with your Government's proposed legislation."

I'm not going to read the rest of the letter. But the point that I want to make very, very clear is that when the Premier tries to make the people of this Province think that he is co-operating with industry, it is not so. It is not so. I am disappointed that the Premier would go out of his way with the performance that he put on in this House to try and, I guess I'd have to say, mislead us. It's not, in my opinion…

DEPUTY SPEAKER: Order, please. I'm sure that the Hon. Member did not intend in the last comment that any Member of this House would deliberately…

MR. PHILLIPS: No, in my opinion, I said — in my opinion.

DEPUTY SPEAKER: Nevertheless, I don't think you should impute any motive to any other Member of the House other than the highest possible motives.

MR. PHILLIPS: Mr. Speaker, I've been standing here trying to think of some other way to say it. I have. The wheels have been turning and I've been trying to think of some other way. If he had just gotten up gently and said it, Mr. Speaker — but you remember the performance he put on.

DEPUTY SPEAKER: I would ask the Hon. Member to withdraw the comment.

MR. PHILLIPS: I'll withdraw the comment, Mr. Speaker. It's all right for the Premier to go ahead and do these things but no one must ever say anything about what he does. But the people will know some day. The people will know, Mr. Speaker. The people will read through all of this fanfare of the Premier's. The light will shine through.

Mr. Speaker, I think the only people the Premier has met with in his office to discuss the oil industry are the people from the Waffle group in southern Ontario who came out here to draw up this legislation. Those are the only people he's met with. Maybe he thought they were the executives of the oil industry. People from the Waffle group were out here, Mr. Speaker, They're writing the legislation to nationalize every industry in British Columbia.

As the Member for North Peace River (Mr. Smith) says, we in British Columbia are not an island unto ourselves. Nor, Mr. Speaker, are we a financial institution unto ourselves. I realize that the previous administration left this province in very good financial condition with hundreds of millions of dollars in surplus. But someday those are going to be gone.

In this province, Mr. Speaker, we require anywhere from $3 to $4 billion in investment capital every year. I hate to predict that this source of investment capital is going to dry up, Mr. Speaker. But I have predicted that the oil companies are not going to continue to invest in British Columbia. My prediction was right. So I'm going to have to predict that all of the risk capital that we require in British Columbia and all of the capital expenditures that we require to keep the province's economy…not necessarily expanding, Mr. Speaker. I'm not talking about expanding. I'm just saying to keep it going on a level plane, with no expansion at all, it's in the vicinity of $3 to $4 billion a year. That's twice what our complete budget is, Mr. Speaker.

We will lose from Bill No. 31, not gain. You may get a little more money from the oil that's coming out of the ground right now, Mr. Speaker, but in the long term we will be the losers. Instead of working and co-operating with the industry and sitting down and working it out, our government — and I hate to

[ Page 2449 ]

say this, Mr. Speaker has created hostility within the industry.

This last sale we had, Mr. Speaker, should have produced three to four times the amount of revenue that it produced. I hate to make another prediction, Mr. Speaker, but I feel compelled to do so. I want this prediction written in the record. I predict, Mr. Speaker, that if Bill No. 31 is passed by this Legislature — and I want the Minister of Mines (Hon. Mr. Nimsick) to hear this very clearly — that the new sale that's coming up in August will produce a smaller return than the one that was just held. That is my prediction. I'm afraid, Mr. Speaker, that I'm going to have to come back to this Legislature to the fall sitting and stand where I'm standing now and again say to the Ministers of Mines and Petroleum Resources, "I told you so."

Mr. Speaker, the people in our area are concerned. It has mainly been the petroleum industry that has opened up the Peace River area. I hate to predict that the land will go back to being known as it was before to the rest of British Columbia. That was before the previous administration opened up the area by linking it with a road and a railroad and pipelines. I predict that the north-eastern part of British Columbia, which has contributed so much to the economy of British Columbia in previous years, will return to being known as the "land beyond the Peace." That's about all you'll hear about it.

Interjection by an Hon. Member.

MR. PHILLIPS: Well, now. There's the Minister of Mines and Petroleum Resources. He's awake and he says that my predictions haven't been known to be worth very much, when I just proved to him, through you Mr. Speaker, not more than 15 minutes ago, that one of my predictions came true.

It's unbelievable, Mr. Speaker. After all the economic benefits that this province has derived from the land beyond the Peace, it will go back to being known as the land beyond the Peace. During the past 20 years, Mr. Speaker, the exploration in that area has been great, but the exploration in the north-east is still in its infancy. The potential has not yet been scratched. Nor will it be scratched, Mr. Speaker, after Bill No. 31. The potential will lie there.

Mr. Speaker, that area could make this province the greatest petroleum province in Canada, even surpassing Alberta. It could, but it won't. To have exploration and risk money, you've got to have a favourable government. This Government, Mr. Speaker, will do nothing but drive it away. British Columbia will be going to Alberta for more and more and more of its oil. We will be at the mercy of our neighbouring province. That is a bad situation, Mr. Speaker, when we have an area that is rich in petroleum products, where the surface hasn't even been scratched.

Why, Mr. Speaker? Because of a get-rich-now policy of this Government. Get rich now, that's all Bill 31 is. Get rich tonight but don't worry about the years ahead.

As both the Member for North Peace (Mr. Smith) and myself have predicted, exploration in the area has now slowed to a snail's pace. Across the border in Alberta — and I was just up there over the weekend — it's a complete beehive of activity. They raised their royalties in Alberta too, enough to keep up with inflation and the increased costs of doing business. But they didn't raise them to 40 per cent and I'd like to point that out to the Minister.

Why don't you withdraw this bill and take a second look? No, you want to prove yourself right. A socialist never accepted a new idea from anybody, Mr. Speaker. They know it all. Closed mind.

While he's closing the debate on this bill, maybe the Minister will tell me why 27 miles across the border in Alberta there is a beehive of activity in the oil exploration business, while in our province it has ground to a halt. I'd like to know the answer to that question. Maybe the Minister will tell me. He seems to have all the answers, Mr. Speaker. Maybe he'll tell me instead of just sitting there smiling and not really paying any attention. He can't even see the facts. Maybe he'll tell me.

The proof of the pudding, Mr. Speaker, has got to be in the eating. The proof of the cessation of exploration in our oil fields is happening now because of Bill No. 31. The proof is there. Mr. Speaker, I recommend to the Minister — and I don't want to lecture the Minister. In all common sense, Mr. Speaker, I'd like to ask the Minister of Mines and Petroleum Resources to do exactly what the Premier said he had done — sit down and talk with the oil industry.

Surely to goodness if the Premier said he had done that, you should do it. Now is that unreasonable? Is that unreasonable, Mr. Speaker? Is it an unreasonable request just to ask the Ministers to sit down and talk with these people.

Hold the bill, take another look at it. If the Minister can with calm and ordinary logic sit down with the oil industry and prove that Bill 31 is necessary, that these increased royalties are necessary, if he can protect his legislation — which he's not too good at doing, by the way — with the people in the industry, I'm sure they'll go along with it. If he can justify this legislation, I'm sure they'll go along with it.

All I'm asking the Minister to do is hold back the bill, sit down and, in common sense, talk with the industry.

Surely to goodness after what's been happening, Mr. Speaker, he can see what is going on. And I don't think, Mr. Speaker, that is an out-of-the-way request.

[ Page 2450 ]

The economy of our area is going to suffer, and as the economy of north-eastern British Columbia suffers so the whole province suffers.

I want the Minister to talk to the industry and quit taking advice from that Waffle group in Ontario. They're not running the province. I know they're trying to. They're certainly writing all the legislation.

Mr. Speaker, when the known resources dwindle, the source of supply dwindles and a shortage develops. That's the way we are heading as far as petroleum supply in British Columbia is going.

Up go the prices, and who suffers? Who suffers, Mr. Speaker? The ordinary man and woman in British Columbia suffers. Every person that drives an automobile suffers. The result of this legislation in the long-run will be the shortage of petroleum products and higher gasoline prices — a complete reversal, Mr. Speaker, of what this Government thinks they're trying to attain.

I wish, Mr. Speaker, that they would be able to see the error of their ways. The history of exploration in the north-east, Mr. Speaker, parallels that of road building in the area. It was the Alaska Highway that opened up the plains area in north-eastern British Columbia and its course determined the first exploratory efforts and finds. That Alaska Highway, Mr. Speaker, was built by the American government without cost to the Canadian taxpayers. Because of it, the petroleum industry opened up in British Columbia. Once the exploration ball got rolling, Mr. Speaker, the boom itself spawned new roads into other areas and has opened up the entire north-east.

As I have said before, Mr. Speaker, exploration in the north-east is costly. The oil value is considerably below the rule-of-thumb ratio of 40,000 to 45,000 barrels per cubic mile of sediment. I wonder, Mr. Speaker, if the Minister is aware of that fact. Does he know how many barrels of oil a cubic mile of sediment in British Columbia produces? Do you know?

[Mr. Speaker in the chair.]

HON. MR. NIMSICK: Sit down and I'll tell you.

MR. PHILLIPS: When I said that it is more costly to explore in north-eastern British Columbia than in many, many other parts of the world and in Canada, exploration is more costly and the recovery is less.

HON. MR. NIMSICK: You've told me that four times.

MR. PHILLIPS: I haven't told you what the recovery is, and you don't know. So I'm going to tell you. The recovery in north-eastern British Columbia is 21,000 barrels per cubic mile of sediment — less than half of the industry's rule of thumb. And you wonder why, when they're expected to pay 10 to 20 per cent more in royalties and recovery is less than half, why there is no exploration going on at the present time.

All I'm asking you, Mr. Minister, to do is to sit down, call the oil industry into your office, hold up the bill…

HON. MR. NIMSICK: I had them there this morning.

MR. PHILLIPS: You had them there this morning. Did you discuss Bill No. 31?

Interjection by an Hon. Member.

MR. PHILLIPS: No, Mr. Speaker, I don't know how, when somebody calls black white, we can make them see the difference. And they insist on doing it. That's the attitude that the Minister of Mines is taking, Mr. Speaker.

MR. SPEAKER: I'd say it's no use repeating it over and over, because he's obviously not going to accept it.

Would the Hon. Member get on with some new debate other than what is a repetition of what the Hon. Member for North Peace River (Mr. Smith) had already underlined four times.

MR. PHILLIPS: Well, I thought, Mr. Speaker, that I had done very well in bringing up new material that the Member for North Peace hadn't already discussed. Certainly, I have repeated his plea to the Minister.

MR. SPEAKER: Yes. Exhaustively.

MR. PHILLIPS: But I have to, because it's on behalf of the constituency which I represent. That is the area that is affected now; all of the province will be affected.

But I've finished my little talk to the Minister, and I hope, Mr. Speaker, that I have pointed out new areas for consideration. I hope when he realizes that the Premier didn't really have all that great, grand and glorious meeting with the oil industry, and when he sees…

I see that he's back in the House now and I hope he's ashamed of himself, Mr. Speaker, for the way he ranted and raved and passed around statistics and said he had met with the oil industry, and all this garbage. I hope he's ashamed of himself.

MR. SPEAKER: The Hon. Member for Boundary-Similkameen.

MR. F.X. RICHTER (Boundary-Similkameen): Mr. Speaker, a few remarks in relation to the

[ Page 2451 ]

principle of the Bill No. 31.

In British Columbia the petroleum and natural gas industry is in its infancy. We haven't been producers for very many years. There's been a very substantial amount of capital spent in exploration and development. There have been very many disappointments in drilling dry holes and dusters. While the industry and the government of the day worked co-operatively to attempt to develop a very substantial industry — and I still have confidence that this can be done — we have large, large tracts of potential petroleum and natural gas-bearing land. But it is difficult to get access to this type of land. The periods in which they can work are very limited.

Actually, in proportion to the amount of money that has been spent on exploration, the results have not been all that encouraging. It would be my contention that we should encourage the exploration even if it is only to cap a gas well or discover petroleum, because we need the statistical data and an inventory so that we will know the potential.

This is not a flash-in-the-pan sort of an industry where you are in today and out tomorrow. This is something that is going to be a resource revenue producer for years to come. The province needs this sort of an economy; the people need these types of jobs. Certain regulations and certain agreements were made. This legislation destroys the sanctity of the earlier agreements which we were to carry on until 1975 and then, at that period, review the royalties.

I'm not for a minute suggesting that the industry would not have been prepared to acquiesce to a reasonable increase in the royalties, but certainly in proportion to the success they have had. During my term of office — and I think equally so during your short term of office — it hasn't been all that encouraging.

You used the term yourself: a number of "dry holes" have been drilled in British Columbia.

You used the term yourself: a number of "dry holes" have been drilled. This is one of the reasons that probably there wasn't more activity at the time of the last dispersal of oil rights. I'm confident that we are going to discover fields; where you discover fields then of course you do get an accelerated activity and interest through the oil companies, because it's obvious then that they have a better potential of success in drilling.

I'm very, very discouraged with this legislation. I think that with the hearings that were held in Alberta a better understanding, a better liaison and co-operation was engendered within the industry and government. I think that maybe this is the way it should have been looked at in British Columbia.

I don't see any real reason, in light of the statement of the Minister of Finance (Hon. Mr. Barrett), that you need this revenue right at this time. Why not carry out some hearings, get some input from the industry. Certainly you have people in your department — if you listen to them — who have the intelligence and the acumen to fully understand this industry. Certainly their guidance would stand you in excellent stead.

I'm sure that there wouldn't be that much lost. I feel that you're going to lose a great deal more by the discouragement that is coming about by the principles that are laid out in Bill 31. It would be my urging on you to reconsider this, to hold it up a little while. Sure, we're going to have to have increase in royalties as time goes on. There's no question about that. But at least give the companies who are attempting to develop the resource in the interests of the province an opportunity to prove up more production and more data in relation to the resource.

I think it's the intention of the Minister of Finance that the resources and the profitability of the development of the resources in the province should take place. I am sure that in his business experience in the field of social welfare, certainly he has learned this principle. I don't think in any way that you're extending any social welfare to the oil industry — in fact this is distinctly the opposite.

Mr. Speaker, I am very concerned about what is going to happen in the Province of British Columbia. I think in terms of the jobs that we're going to lose; I think in terms of the economy that we're going to deter from the province. I'm not prepared to support this bill nor is the official Opposition.

MR. SPEAKER: The Hon. First Member for Vancouver–Point Grey.

MR. P.L. McGEER (Vancouver–Point Grey): Mr. Speaker, I think the Members of the official Opposition have drawn some very compelling points to the attention of the Minister during this debate; enough so that the Minister should reconsider that this Act, as many other punitive taxation Acts, should be reconsidered by the Government.

What is at stake in British Columbia is the provision of jobs for the people. The most significant aspect of the petroleum industry in British Columbia today is that it has put more money into B.C. by far

[ Page 2452 ]

than it has taken out. The petroleum industry has been a net contributor to wealth and to jobs.

We are a developing province. We do have a labour surplus. It is in our interests to encourage capital and to encourage exploration. If it were that the petroleum industry had made enormous profits in British Columbia at the expense of the people — if they were genuinely exploiting us, then the Minister's bill would be welcome.

But as it is, British Columbia is more of a potential producer of significant amounts of gas than it is a real producer. At this stage in our development the critical thing is to find how much has there really is in the ground thing is to find how much gas there really is in the ground.

Interjection by an Hon. Member.

MR. McGEER: I'm not under-rating, Mr. Speaker, the amount of natural gas that may lie beneath the surface in northeastern British Columbia. But I think the Minister is decidedly over-rating the willingness of people to pay exorbitant royalties when the risks are so high and when the difficulties are so great. Northeastern British Columbia is still pretty tough territory in which to operate.

We've debated in this House before, the consequences of the Government's announcements. The consequences have been to limit and to reduce the amount of exploration activity that's going on.

Earlier I drew to the attention of the Minister the fact that the majority of the jobs in the Fort Nelson area will disappear if exploration in the natural gas industry does not continue at its present level. We brought it up in the House, Mr. Minister, two or three weeks ago. I would have thought, Mr. Speaker, the least the Minister would have done is to be in contact with the people in northeastern British Columbia to confirm that this is indeed the case and to set forward policies that would preserve jobs in that area. Indeed, we should be looking to policies that would increase the number of jobs in northern British Columbia.

When all is said and done, that's the most important aspect of the taxation policies — not to try and squeeze a few more dollars out of the hard work that goes on in northeastern British Columbia to provide greater benefits in the lower mainland area in the way of services to people. Because the established portion of this province, where services are higher and where living is easier, should not be parasitic on the wealth that's being produced and can be produced in northeastern British Columbia.

Yet, the policies that the Minister has announced are parasitic. They're policies which will decrease the risk capital, reduce the exploration and the jobs — all, Mr. Speaker, in the interests of collecting more revenue for the Government so it can provide richer services to the "fat cats" that live in Coquitlam and Vancouver East.

Interjection by an Hon. Member. (Laughter).

MR. McGEER: Well, aren't the people who live in Vancouver East "fat cats" compared with those who live in Fort Nelson? Certainly they are, Mr. Speaker. The idea that there aren't "fat cats" in Vancouver East is utter nonsense. I would say for some of the cabinet Ministers who live in Esquimalt and other areas in the greater Victoria region that the healthiest thing they could do, both for themselves and for the public of British Columbia, is to go up and do a couple of hard days' work on one of those wildcat rigs — in the middle of winter in northeast British Columbia. Then they'd perhaps have some appreciation for the people who are opening up this country.

The cabinet Ministers can talk about the "fat cats" in Point Grey, Mr. Speaker, but none of them have lost any weight since they took office, I can tell you. Life is easy in Vancouver East. It's very easy for some in Vancouver East. But up there in northeast British Columbia, where the exploration is going on, it's tough. The weather's tough, the work is hard and there aren't any slackers up there.

All of this is financed, Mr. Speaker, by high risk capital. We may have no sympathy — or even have contempt — for these great corporations that are doing the work; but nevertheless, they're the ones that are taking the risks and spending the money. To date they're spending a lot more than they're taking out.

Mr. Speaker, the time to tax heavily is after the reserves have been proved and when the productions lines have been established.

It was an old principle of Mackenzie King and C.D. Howe to make it awful easy for them to come in and tough for them once they get here.

We haven't reached that stage in British Columbia. There's a tremendous amount of money that yet has to be spent in exploration in this province before we'll begin. to know how secure our petroleum industry is going to be. It's important to know this. As well as to provide jobs, we should not be undertaking taxation policies that will discourage such exploration.

Mr. Speaker, again it's the old socialist philosophy that everybody who works must be doing something wrong. "Everybody who makes a profit or is willing to risk capital must be greedy. Therefore what we should do is do things to handicap and penalize those

[ Page 2453 ]

people. That's the fair thing to do."

Mr. Speaker, I can tell you that if that kind of philosophy worked, every country in the world would have a socialist government. But the strange thing about it is that those countries of the world that are doing best and are able to provide the greatest benefits and highest standard of living to the people are not the ones that pursue that course of action. Instead they're the ones that encourage people to work hard and to take risks. Then, on behalf of those who aren't pursuing that aggressive way of life, a share of the profits are taken so that benefits can be passed around. This, indeed, is what will be the best for British Columbia in the long run.

I hope that the Minister, whose philosophy to date has been so mistaken, will get on the telephone after this debate today and find out what the facts are in north-east British Columbia. Perhaps he'll do something I wonder if he's ever done before, Mr. Speaker. Have you ever been up to those gas fields in north-eastern British Columbia? When? Several years ago but not since he's taken office. "Haven't had any time." Well, maybe the Member for South Peace River (Mr. Phillips) will give you a little time off, Mr. Minister. Maybe he'll give us all a little time off over the weekend. You could go up to the Peace River country with the Member for South Peace River and the Member for North Peace River (Mr. Smith).

I'm sure that they'd be quite willing to accompany you and let you see the facts of life as they are, instead of making Ministerial decisions in your office in the Douglas Building that will do untold damage to that section of the country, without even taking an on-site inspection.

HON. MR. NIMSICK: They might put me down one of those dry holes. (Laughter).

MR. McGEER: Mr. Speaker, it would be unparliamentary and, to say the least, a difficult job. I won't comment on their wisdom, if that would be their judgment after having talked to the Minister.

Certainly, Mr. Speaker, if he fails to convince us in this House, he'll have much greater difficulty convincing them. But there would be nothing wrong with the Minister making an on-site inspection of what's going on in north-eastern British Columbia, to find out for himself what the potential consequences of this legislation might be. If, having made that trip, he discovers that perhaps this wasn't the wisest thing to do but instead was a nitwit idea thought up by somebody in the Douglas Building or a convention of the Young New Democrats in the lower mainland over a weekend, he might get a little perspective and balance and then withdraw the bill.

For the moment, Mr. Speaker, we think it is extremely injudicious to do something of this kind in 1973 and we intend to vote against the bill.

MR. SPEAKER: The Hon. Member for Oak Bay.

MR. G.S. WALLACE (Oak Bay): Thank you, Mr. Speaker. I'll be very brief because many of the reasons we oppose the bill have been expressed.

I'll just return again to our theme in the budget debate, that we just do not see the need for increased tax revenue, particularly at a time when we should be encouraging development with the inevitable consequence of more jobs, particularly when the Premier has said so often that this is the number one challenge to this Government.

Therefore, for the very basic reason that there is not the need for tax revenue and there is a need for jobs, we oppose this bill.

MR. SPEAKER: The Hon. Minister closes the debate.

HON. MR. NIMSICK: Mr. Speaker, it took us quite a while to get to this point. I'm very pleased. For a minute I thought that I wouldn't get there at all.

They talk about incentives and about development for oil. The previous government carried on a policy that you say is a good policy. You say that we could get more revenue. Yet with those policies, the interest in oil was declining all the time. In November of last year when we had the sale, 80 per cent of them were for gas. They've got the greatest interest in natural gas. I didn't look back but the decline has been going on for quite a while.

MR. PHILLIPS: It's declined ever since you came to power.

MR. SPEAKER: The Hon. Member had his say for a very lengthy period. Would he kindly let the Minister have his say, too?

HON. MR. NIMSICK: I'm surprised that the Hon. Member for Point Grey (Mr. McGeer) would tell us that we should lead them down the garden path and then give it to them. I don't like that kind of a policy. I'd sooner tell them what we're doing.

A lot of you talked about the rates in the bill — from 10 per cent to 40 per cent. There's a maximum in our bill. In Alberta there's no ceiling on it. So who is the worst? It all depends on how you graduate the tax to 40 per cent that tells the tale. But nobody said anything about that.

Very little has been said about the incentives in the bill to try and encourage development for oil in the Province of British Columbia. The Hon. Member for Point Grey said that we should wait until they get stabilized. We've only got six years of proven oil left at the present rate of production.

[ Page 2454 ]

Interjection by an Hon. Member.

HON. MR. NIMSICK: They'll be all out in 12 years. But I'm talking about at the present rate of production. I agree very much with the Hon. Member for Boundary-Similkameen (Mr. Richter) when he said that I've got very fine men in the department considering oil. I want to thank him for that.

The Hon. Member for Point Grey (Mr. McGeer) spoke about the hard work on the drills. I just wonder if he ever did work on any drills. I have and it's quite interesting work. It may be hard work but it's pleasant work, too. People sometimes get a lot of kick out of their jobs and I had a lot of fun drilling.

They say we're at the mercy of Alberta. Well, if we don't find any more oil, before long we might be at the mercy of more than Alberta. The energy situation throughout the whole country is coming to the surface. People are now beginning to realize that at the rate we're using these energies, a time is coming when they'll be depleted. So I don't think we're looking at this from the right angle when we want to get rid of it as quickly as we can.

In regard to those contracts that were negotiated until 1975, if I were a Member of Her Majesty's Loyal Opposition, I'd never mention those contracts. I think they were the most dastardly contracts that were ever written up. In those contracts 46 per cent of our oil production is boxed in at the present rate until the wells go dry. I think that it is terrible that any government should box themselves in on a rate from 5 to 16 2-3 per cent until the wells go absolutely dry. If I were the people on that side, I wouldn't mention those contracts at all. They're not the type of contracts that any government should sign or agree to over the years.

There was a question of what a wildcat well is. In the incentive programme, we say that a wildcat well is the first well on a new pool. That's the one that would get the big incentive.

Nevertheless, we feel the depletion of this non-replenishable resource involves a responsibility to the people. I hear people say that these companies take all the risks. But the people of British Columbia risk the resource itself which makes it possible!

Don't forget some of the larger companies that bid on these areas and got these acreages. They farm out some of these agreements. They own the oil rights on the lands so they farm them out to somebody else. They say to that other party, "You drill and if you find oil you can have 50 per cent of it." Here we're saying "If you drill and you find oil all we're asking is 10 to 40 per cent of it." But the big companies can go to the little oil drilling outfits and say, "We want 50 per cent of it." So this is how they farm out these oil resources.

MR. PHILLIPS: I suggest that you learn mathematics.

HON. MR. NIMSICK: When you talk about the money being spent on exploration, remember that a lot of it is tax-deductible on the federal field. A lot of it is contributions made by the taxpayers of Canada to the exploration of this. So don't cry too much on behalf of the large companies.

I say that there must be responsibility to the people. If we're going to deplete this resource we have to deplete it wisely; we have a social responsibility. These wells that are in operation now were paid back a long time ago. Whether we're going to get more oil or not in British Columbia will depend on the drilling that will go on and how much we have in the way of oil lands in British Columbia.

Mr. Speaker, I move second reading of this bill.

Motion approved on the following division:

YEAS — 31

NAYS — 16

PAIRED

Bill No. 31 read a second time and referred to a committee of the whole House to be considered at the next sitting after today.

HON. MR. BARRETT: Second reading of Bill No. 44, Mr. Speaker.

AN ACT TO AMEND THE
MINERAL ACT

MR. SPEAKER: The Hon. Minister of Mines.

[ Page 2455 ]

HON. MR. NIMSICK: Mr. Speaker, that last bill took longer than I had expected, but this one here shouldn't take near as long. (Laughter).

Mr. Speaker, the mineral resources of our province are a very important resource, and one that has to be managed in the best interests of the people. Since taking over this department one of the things that I have tried to do is to bring about a better management of the resource and bring it back into the department, because I do not believe that a resource that belongs to the people should be left entirely at the behest of the private sector throughout the province.

For years we have realized, in the case of our forests, that we had to manage them if we were going to continue to have a yield from those forests. We have to do the same with land and water. But minerals have been taken for granted, and minerals are one of the resources that are not replenishable — once they're used up, they are gone. You cannot preserve minerals in the ground. The only way you can do it is by leaving them there. So when you use them, you have to use them in a judicial manner, so that the greatest benefit will not only come to the people who are living today — we must be thinking of our future generations when we are talking about depleting a non-replenishable resource. This is what I have tried to do in the department. We have made some changes in these amendment to the Mineral Act. I'll run over the highlights quickly with you.

We have tried to update the rights of Canadians. We say that the free miner certificates that were given to anyone previously, should be reserved for Canadians or those landed immigrants who intend to become Canadians — and we give them a period of eight years to make up their minds. Anyone who has been here longer than eight years would be treated the same as any other outsider.

It is my opinion that we've got to give some worth to being a Canadian. I don't think it is right to say that these mineral resources throughout the Province of British Columbia should be free for the taking to anyone from any place.

In this Act we have done away with some of the lists of figures that were in the schedule and we're putting it down to prescribed fees. This gives you a little more flexibility in operating.

Thirdly, restrict exploration in parks — in all parks in the province. In order to explore or prospect, you would have to have a valid permit from the people who are in charge of the parks. And that's got to go to the Lieutenant-Governor-in-Council.

There are little changes in the surface rights — where if we consider it in the best public interest, you can use the surface for other than mining, as well as the mining.

The work requirements have been changed from $100 to $200 per claim per year. The $100 work requirement at the present time has been that way since 1891 when a top miner got $3 a day for mining. Today, with the difference in the value of the dollar and the wages, $200 seems quite reasonable for work requirements on a lease.

The reverted Crown-granted mineral claims that come back to the Crown now will have to go through the same process as an ordinary claim. Up until now, a Crown-granted mineral claim that reverted to the Crown and somebody else staked it, they could get a 21-year lease on it. From now on it will have to go through the ordinary channels.

One of the very important changes is the production leases. According to section 15, if you're just shipping out small quantities from a mine, this can be allowed by the Minister. But, if you're going into production then you must get a production lease. I find that there has been some objection to a production lease because they feel that we are asking too much.

When a mine goes into production there are certain social responsibilities that they must observe as well as making a profit. The life of the mine should be considered, and if it's a feasible and a viable operation. If they can extend that life and still make it a viable operation, it also extends the life of communities around the mine.

All these things must be taken into consideration — the optimum recovery from a mine. We don't believe that you should go in and take the rich ore out and leave the rest if it can be made viable by taking the whole amount out. We expect if there is lower grade ore in that mine, that it will be left to the future generations, then they too, if they need it, can go in there; not left so that you cannot use it. There have been mines throughout the country that have been mined and left and nobody was able to get anything out of it at a later date.

In order to obtain these production leases, they've got to lay their plans before the government or before the Minister and show the recovery, the life, and the feasibility. One thing that this will do, when they get the stamp of approval from the department to go ahead and produce, it will be a boon to those types of mines.

If we find a mine has not got sufficient ore to make it feasible to operate and to bring a production into force, then we should have the right to say this. Maybe in that case, we might stop some of the bogus promotions that go on in the stock market where money is made and lost and very little of it ever gets into the ground to do the actual work of developing a mine.

We also provide where government may participate. I have had many people ask me already if we were willing to participate with them in operating a mine. This is there so that we can do it if we so wish,

[ Page 2456 ]

or if the party in the negotiations wants us to participate in that mine.

Now those are the highlights, I'll be listening for further debate on this very important bill and then I will be able to… Unless you would like me not to speak on it because it's such a good bill. I move second reading of this bill now.

MR. SPEAKER: The Hon. Member for South Peace River.

MR. PHILLIPS: Well, Mr. Speaker, I can understand the Minister of Mines wanting this bill to slip through without anybody having the opportunity to talk on it. The reasons is, Mr. Speaker, that he's not very proud of the bill himself. He'd just sort of like to have it slip through.

He just stood up and would have given the people of this province the idea that the resources of the province have never been managed up to this point in history and that he's going to bring in a new day. There's going to be light shining on the mineral industry. That's not so at all, Mr. Speaker. He talked about its being in the best interests of the people. I sometimes think that the Minister really thinks it's in the best interests of the people to be unemployed, because that's what's going to happen. The employment in the mining industry is going to decline.

To say that the minerals are there, Mr. Speaker, such as our Minister of Mines just did, to say that they're there for anyone to take, is just not so at the present time — before his condemning bill. It's just not so and he knows it. You would think, Mr. Speaker, that in order to get a mine going all you had to do was to go out there with a pail and pick up the ore and take it and sell it. That's what the Minister would lead you to believe.

However, he picked out all the little, teeny bits of "motherhood" that there were in the bill — and there are very few. It didn't take him very long to pick out what few good points he could find in the bill. It's pretty hard for him to do, Mr. Speaker, because there's very little good to say about the bill. Even the Minister himself has trouble.

He would also lead one to believe, Mr. Speaker, that there had been no changes in the mining laws in this province in 100 years. That also is not so, Mr. Speaker, because there have been major changes in mining legislation. When I was in this Legislature between 1966 and 1969 there were major changes in mining legislation — when we brought in the bill that makes a mining company show a plan of how they're going to put the land back into use. There have been major changes made, Mr. Speaker. I don't like to have the Minister say that there have been no changes made.

Interjection by an Hon. Member.

MR. PHILLIPS: Well, it's a mines regulations Act, but it all ties in. There have been major changes in the Mineral Act, too, if you look in the statutes. Yours is probably all up-to-date and reprinted. But, if you take the time to go back into the books that we have, you'll find out just how many changes there have been to the Mineral Act. All right. You've been here too long. Mr. Speaker, the Minister of Mines has been here too long. But he's got a theory, and that's all the Minister talks about — theory; not much in practice, but lots of theory. I don't think that theory is going to develop our mines, particularly his theory, because it hasn't worked anywhere else in the world. And I see no reason to think that it is going to work here in British Columbia.

HON. MR. NIMSICK: I think you'd have been against it anyway, no matter what I do.

MR. PHILLIPS: No, I wouldn't be against it. Now that's not fair, Mr. Speaker. I think you'll have to agree, Mr. Speaker, that when good legislation comes before this House, we support it. But when bad legislation comes before this House, Mr. Speaker, we have to be against it. We have to be against it, because that's our job.

Now I wonder, Mr. Speaker, if I could get somebody to bring me a podium, because when you work in this Legislature as long as we have to, why, I need something to lean on.

MR. SPEAKER: I hope you are not going to start reading something.

MR. PHILLIPS: What's that?

MR. SPEAKER: You are not going to start reading something, are you?

MR. PHILLIPS: I'm going to read a little bit, and I'm going to use a few notes; but I need something to lean on, Mr. Speaker, because I'm getting a little tired. I have a few notes, Mr. Speaker.

I'd like to start off talking about Bill 44, Mr. Speaker, by saying that it is arrogantly discretionary. The reason I say that, Mr. Speaker, is because it gives too much power, Mr. Speaker, to the Minister of Mines. Yes, it gives too much power to the Minister of Mines, Mr. Speaker.

Anybody that knows anything about business, Mr. Speaker, knows that if you are going to go into a long-range programme of developing something that may last for years and years and years, you have to know the rules before you start.

Even in the short game of poker you have to know the rules before you start; and you know what

[ Page 2457 ]

happens, Mr. Speaker, if you've ever played poker. You know that no one in the middle of the game can change the rules because if you try, why the other players they get kind of angry. They get very angry indeed.

Developing a mine that's maybe going to be in production for 20 or 30 years is a gamble and it usually involves, Mr. Speaker, a lot more money than is on the table in a simple poker game.

Yet by this bill, Mr. Speaker, the Minister wants to take onto himself the right to use his discretionary powers, maybe in the middle of the game — maybe even after there's just been millions spent on exploration and province-out. His discretionary powers.

Anybody, Mr. Speaker, who is going to develop a mine must first find the resource…

HON. MR. NIMSICK: That crystal ball of yours isn't very good.

MR. PHILLIPS: Well, it's been working fairly well this session. I've looked into it and I just a few moments ago reminded the Minister…but I don't believe he understands or believes in cold, hard facts. If it's fiction or theory, the Minister can understand it and the Minister can believe it. But, Mr. Speaker, when it comes to cold, hard facts, the Minister drops away.

Businessmen, Mr. Speaker, have to plan against known rules. It is very difficult to plan when you don't know the rules. They must find the resource or develop a product, and then they must get customers for it, Mr. Speaker. They must produce or manufacture the product so that they can make a profit. That's a kind of a nasty word, I realize, Mr. Speaker — a very nasty word in this House. I guess, instead of saying profit, we'll say a return on investment. I don't know if the Minister would even understand that.

Above all they must know that once they have got such an enterprise in motion, Mr. Speaker, they must know that no one is going to come along and capriciously bankrupt them by banning their operations without warning or without reason.

That's a pretty stable statement; but unfortunately they're not going to know that, Mr. Speaker, under the terms of Bill 44.

Businesses will be deterred from investing. Why, Mr. Speaker? Because of the uncertainty of Bill 44.

The Act, Mr. Speaker, leaves the granting of a production lease at the discretion and at the sole discretion of the Minister of Mines. He is a super know-all, Mr. Speaker. This means, Mr. Speaker, that a prospecting and mining company could spend years of effort to find one economically viable mine, one economically viable deposit, take all the steps to develop a mine and then have, Mr. Speaker, the Minister of Mines veto the whole project. That is what can happen.

HON. MR. NIMSICK: You know I wouldn't do that.

MR. PHILLIPS: Well, some more "trust us" legislation, Mr. Speaker — some more "trust us" legislation.

You know, Mr. Speaker, if you're going to have people trust you, you must first of all prove that you can be trusted. But I'm not necessarily saying that to this present Minister, grand old man that he is. What bothers me, Mr. Speaker, is that he's not going to be here after four years, and we don't know who the new Minister of Mines is going to be. This is the problem.

I am a firm believer, Mr. Speaker, that the government should be of laws rather than of men, because the men change; the laws remain as guidelines for business and industry to develop under.

I know that our Minister of Mines has had a lot of experience in the mining business. He's dished out supplies to mines. He knows what's involved. But I don't know how many mines, Mr. Speaker, how many mining enterprises, how many viable, economically-feasible mining enterprises the Minister has ever developed on his own.

Therefore, Mr. Speaker, I have to sometimes — as much as I hate to — I have to question his ability to make these discretionary decisions. Low-grade, large-tonnage deposits, Mr. Speaker, like Lornex, which require large capital outlays, will in the future, under Bill 44, have a great deal of difficulty in financing because, Mr. Speaker, the right to mine the deposit is not assured.

Surely the Minister of Mines can understand that nobody is going to invest large sums of money if the end result is not guaranteed. At the present time, Mr. Speaker, long-term contracts like those with Japan reduce to a certain extent the risk involved in large-scale mining. But now, Mr. Speaker, with Bill 44 staring them in the face, the risk becomes greater. I don't think, Mr. Speaker, that you will see any long-range planning any more.

With the new smelter provision in this bill these long-range contracts would not be available and thus, Mr. Speaker, will reduce the chance of the development of marginal deposits. And, Mr. Speaker, there are many, many marginal deposits in British Columbia. But the development of those marginal deposits, Mr. Speaker, will provide employment, much-needed employment, in this province. The unemployment grows every day, Mr. Speaker.

[Ms. Young in the chair]

MR. PHILLIPS: These new rules under Bill 44, Madam Speaker, would encourage a company to scrap a project as soon as it appeared to be marginal rather than continue some development on the

[ Page 2458 ]

chance that conditions may possibly improve. So this means, Madam Speaker, that our mines that are maybe a little lower in grade — in no way will they be developed.

This bill, Madam Speaker, will disseminate the volume of activity of many companies in the mining business. Rarely is the economic feasibility of a project easily separated from the economic feasibility with respect to the entire company. That is to say that the total company tax planning and total company cash flow planning would also be involved. That is why we have large companies taking a look at some of these marginal developments. Conceivably because of a temporary cash flow problem the company could be forced to either sell the property or accept government financing. Maybe that is what this whole bill is about — government financing so that the government will control and nationalize the mining industry in British Columbia.

These changes, Madam Speaker, would discourage a company from taking on many projects at the same time. The net effect will be to shrink exploration in the province because if, perchance, there should be two properties come on stream at the same time, the company could not afford to hold one in abeyance until it had developed the other…

HON. MR. NIMSICK: You can sure blow a lot of bubbles.

MR. PHILLIPS: …unless they go to the government for financing.

Madam Speaker, the Minister of Mines says that I blow a lot of bubbles. Well, I'm sorry that he considers good, intelligent debate in this Legislature as "so many bubbles." It seems that if they say anything over there it's law, it's right and it's good; if we say anything over here, well, it's not.

The bill puts all the vital management decisions in the hands of the government and removes any reason for a real entrepreneur to continue to put his imagination and energy into the industry. This in a nutshell is maybe what the Government wants to do — they want the people to get out of the mining industry, to not put any imagination into the mining industry, to not put any energy into the mining industry so that they can step in and take the industry over.

Madam Speaker, this bill invites spectres of expropriation and pressure tactics. The possible reasonableness of the government is not made clear. The Minister certainly didn't make it very clear when he stood to introduce the bill this morning.

As the Act is written, with no further legislation — I am not referring to any other bills, but just as this Act is written — the government could ban any property from going into production regardless of its stage of development or the economics involved. That is some of the discretionary power that this bill gives to the Minister of Mines.

Another thing that could happen, as the Act is written, Madam Speaker, is that the government could assume a controlling interest in any property for no investment whatsoever. After a company has brought a mine to any stage of development along the line, whether it's from the original exploration or from partial drilling or in the midst of setting up the actual mining operation itself, our Minister of Mines and Petroleum Resources can step in and assume controlling interest with no investment. Now I ask you, Madam Speaker, is that fair or is it right or is it going to promote good business relations or is it going to help to develop our mining industry in this province?

Some of the vague wording in the bill, Madam Speaker, makes almost anything possible. The bill says that any person may apply for a free miner's certificate. They can apply, but who says whether they shall get that certificate? The Minister of Mines.

Anyone can apply for anything, anywhere, any time, Madam Speaker. The Act gives no indication as to under what circumstances a person will have a right to receive such a licence.

"Further discretionary powers." The Act gives the Government powers to acquire an interest or equity in a property. They then clearly have enormous and arbitrary power to indicate the terms of their interest in return for the permission to produce all in the hands of the Minister of Mines.

Madam Speaker, Bill 44 will substantially increase costs. It will add to exploration costs. Entrepreneurs now will have to face up to increased government restrictions on production and so will have to spread their exploration dollars over a wider front than previous to Bill 44. It adds to pre-production and production costs as well.

The submission of plans, maps and reports to the government is going to be a significantly costly business. Then when they are submitted the Minister of Mines has the right to deny them or send them back and ask them to be redone. It tends to restrict profits without recognizing exploration and development risk, thereby encouraging major companies to take their skills and capital elsewhere. I think that that is the biggest detriment, the biggest thing against Bill 44. It tends to restrict profits without recognizing exploration costs, and it will encourage the major mining companies to take their skills and capital elsewhere.

Madam Speaker, the financial feasibility report will give the Government all the information they require to slap on heavy royalties. The discretion of what these royalties will be is in the hands of the Minister of Mines. So if a person wants to develop a mine, he does all the research, prepares his feasibility study, takes it in to the Minister of Mines, and the

[ Page 2459 ]

Minister goes over it. If it looks like a good deal — after they've maybe invested millions in it — the Minister, at his discretion, can say, "Well, it looks like a good deal. We want in on it."

I think this perhaps will lead many mining companies to not put all of the facts and figures in their feasibility studies, Madam Speaker. This automatically denies anybody, be he prospector or mining company, the right to that pot of gold at the end of the rainbow.

I realize that the Minister wants to take that pot of gold away. He doesn't believe that there should be any pot of gold at the end of the rainbow. There shouldn't be any reward, so he's going to make sure that there is no reward because if the reports, the feasibility studies, Madam Speaker, prove up — there's going to be something good there — then the Minister's going to step in and take over.

The bill, Madam Speaker, does not appreciate the fact that not only a financial decision is involved in a go-no go production decision. It doesn't appreciate that at all, this bill doesn't.

Planning up to three to five years ahead, most companies will be gearing up their staffing and resources to handle the anticipated new venture. But now, when they don't know whether they're going to be able to go ahead or not, all of that planning will have to cease, Madam Speaker. If the project is cancelled, the company ends up having an organization which has to face a sudden and drastic pruning, and no one is going to know until our Minister of Mines makes his decision.

One of the worst things about the bill, Madam Speaker, is that it hurts individual prospectors, and there are some 1,000 individual prospectors in British Columbia, all hard-working individual entrepreneurs in their own right. The exploration and development work required to hold one claim for one year will double from $100 to $200 per claim. The Minister very rightly set out that if it hasn't been changed for 80 years, that's not much of an increase from $100 to $200. However, I will try and explain why this increased cost is more than doubled.

This increase penalizes the small entrepreneur, Madam Speaker, because in settlements for property development with large mining companies, the total package includes an amount for individual work and an amount paid to the entrepreneur. This is the way it has been and this is the way it will still be. The costs are doubled. Either the market value will increase and force the mining companies to be more selective about their prospects, or the small entrepreneur, the prospector, will get a smaller chunk of the pie. If he gets a smaller chunk of the pie, Madam Speaker, he's going to have far less incentive to search for minerals.

Madam Speaker, I have to be against this bill. There have been major changes, and there could have been changes made in the Mineral Act which would not have caused the problems that Bill 44 has caused. There weren't too many changes required to our Mineral Act, and I'll tell you why.

Our mining Act as it now stands is one of the finest pieces of mining legislation anywhere in Canada. Talk to the other jurisdictions, talk to other provinces, talk to other governments. They are coming here, and have been coming for years, modelling their mining legislation after our Mineral Act. So I don't think that too many changes are required, Madam Speaker. This Mineral Act became such a unique and wonderful piece of legislation by the Mines department and the government working in co-operation with the industry. Big difference, Madam Speaker, from working in co-operation with an industry and bringing in a bill such as Bill 44 without consultation with the mining industry.

HON. MR. NIMSICK: Just how little you know.

MR. PHILLIPS: Just how do I know?

HON. MR. NIMSICK: How little you know.

MR. PHILLIPS: So the Minister of Mines says. Well I know, Madam Speaker, that if there were any co-operation with the mining industry, and if the bill had been drawn up in co-operation with the mining industry, certainly the mining industry would not be as angry as they are now with this piece of legislation. That's how I know, Madam Speaker.

The present bill, as I say, is one of the finest pieces of mining legislation anywhere. It became so because it was worked out in co-operation with the mining industry. This Minister, Madam Speaker, should be called the "Minister of Unemployment" instead of the Minister of Mines.

I would like to ask the Minister what is his reasoning? How could he possibly justify this legislation, because this is a freedom-robbing bill. I think that the Waffle movement in the NDP must have prepared these resolutions.

The Waffle movement, Madam Speaker, that is for an independent socialist Canada. The reason I say that is because the following programme regarding resource industries is laid out in the Waffle manifesto. That's where this legislation came from, Madam Speaker. It says, "The NDP will work for the nationalization of Canadian resource industries including the petroleum industry" — oil and natural gas wells included in that — "pipelines, refineries, and petro-chemical industries, coal, uranium, and the forest products industry" — and last, but not least, Madam Speaker — "the hard mineral industries and related smelting."

This policy of nationalizing the hard mineral industry and the related smelting is subscribed to and

[ Page 2460 ]

signed by our Premier, our Minister of Education, our Speaker, our Minister of Municipalities and our Minister of Rehabilitation and Social Improvement. Madam Speaker, our Minister of Mines maybe wasn't around to sign this, because I'm sure he subscribes to it. If he doesn't subscribe to it, with all that power in the Cabinet subscribing to it, his hand would be forced.

Another reason I think that this Bill 44 is for the ultimate goal of nationalizing the entire mining industry is because of the resolution that was submitted to the NDP 1972 convention. That resolution, Madam Speaker, is that the B.C. Government commit itself to the principle of nationalization of all primary resource industries. And I think, Madam Speaker, that…

Interjections by some Hon. Members.

MR. PHILLIPS: Madam Speaker, it seems to bother some of the Members of the cabinet that I would discuss this. However, it would not be necessary to discuss the theories and principles of the NDP government if they didn't show up so clearly in these bills. And when we're assessing a piece of legislation, Madam Speaker, we have to assess what is going to be the ultimate end when the legislation is brought in. If we really analyse the legislation, Madam Speaker, we try and determine what the thought behind the legislation was. Why was the legislation necessary? So the whole thing comes into the ballpark of analyzing a piece of legislation.

All I'm trying to do here, Madam Speaker, is determine why this legislation is necessary. What is it going to do for the Government?

It's going to do nothing for the mining industry. As a matter of fact, it's going to take private free enterprise right out of the mining industry. But it's going to do something for the Government in that it's going to allow the Government to step in and take over the entire mining industry.

The principle involved in the bill is very clear, Madam Speaker — it will allow the socialist Government that we have now to go into the mining industry, from the hiring of prospectors to the smelting of the ore. The Government will be in every phase of the mineral industry in British Columbia, from start to finish.

The bill, Madam Speaker, removes all references to forms and fees that are prescribed in the Act. Again there is more discretionary power where it allows the Minister to prescribe any forms that he desires — more power to the Minister. These forms naturally Are going to be designed to meet the Minister's ends, his own needs, wants and likes. The forms can be changed at any time the Minister decides that he wants to change them.

The bill also allows the cabinet to prescribe fees. I am actually surprised that the bill gives the Minister So many other powers. I can't understand why it doesn't also even allow him to prescribe the fees, but i guess the cabinet want to have a little say. So they come in and prescribe the fees.

The fees, Madam Speaker, will be as the cabinet sees fit at the time, suitable to the occasion with no ground rules laid down at all. There will be no pre-set rules — they make them up as they go along.

The bill amends the requirements and the rights of free miners. In so doing, Madam Speaker, it takes away their incentives and gives them no security whatsoever — like there was in the previous bill.

Interjection by an Hon. Member.

MR. PHILLIPS: Yes, as a matter of fact I have studied the previous bill, Mr. Minister of Mines. When you brought in your legislation I got a copy of the bill and I sat down and I have done a fair amount of studying on it.

Now I have to ask the Minister if he knows what's in the bill. I sometimes think an assistant makes all the decisions. Where did that executive assistant of his come from — Saskatchewan, Manitoba? I think that's the guy that makes the decisions in the Minister's office, Madam Speaker.

The bill allows the Crown to make loans and acquire interest in any mining operation. That is what is allowed under Bill 44, Madam Speaker. Why would that be in there if it wasn't the intent of this Government to completely nationalize the mining industry?

Every word, every comma, every period, everything in the Act is directed to the possible nationalization of the mining industry.

In 1972, Madam Speaker, the annual gross value of mineral production increased in Canada as a whole. I wonder if we will be able to look back next year or in 1975 and ask the same question and get the same answer. Will there be an increase in production? After all, Madam Speaker, that's what we have to do when we're looking at Bill 44. We have to ask: is it going to increase production?

Mineral production in Canada last year rose from $5.9 billion to $6.2 billion — an increase of approximately 5 per cent. Preliminary figures from the British Columbia Department of Mines and Petroleum Resources show that in British Columbia the gross value of mineral production rose for the eleventh consecutive year to a record high in British Columbia of $631 million — a 20 per cent increase and the largest single advance that has ever been recorded in the mining history of British Columbia. All of this has been made possible, Madam Speaker, by one of the finest mineral Acts anywhere in Canada. Yet we have to change it.

I predict, Madam Speaker, that if this Government

[ Page 2461 ]

is crazy enough to pass Bill 44, within a few years we will look back and say that "the mineral production decreased last year to such a percentage point that it will be the largest decrease in mineral production in any single year."

The mineral industry in the Yukon exceeded $120 million — up $26 million or 28 per cent over 1971. The reason that I am bringing this statistic in is that mining companies are going farther north into farther remote areas where the cost of exploration is greater and where the cost of getting the ore out is greater.

We're going to have to move in British Columbia into an area behind the Alaska Panhandle that is not very readily accessible at the present time. But with the railway going up there it will become more accessible.

One of the purposes of building the railroad up of course was to tap the natural resources in that area — lumber and mining. But after Bill 44, Madam Speaker, there won't be many minerals coming out of that area behind the Alaska Panhandle.

These record figures and the record achievement of the mining industry that I have been talking about was under one of the finest mineral Acts anywhere in the entire world. The market and legislation and the attitude of the government over the past 10 years have attracted the risk capital that is necessary to sustain 13 existing mines, and to search for and develop and bring into production a total of 23 new mines.

[Mr. Speaker in the chair.]

Welcome back, Mr. Speaker. I hope you enjoyed your lunch. It's nice that you were able to get away for lunch. Those of us who are legislators here, the common, ordinary people, have to work through our lunch hour.

MR. SPEAKER: I was thinking of you all the time, Hon. Member.

MR. PHILLIPS: We have to work through our lunch hour. We don't get the opportunity to go out and eat. That's why I say it's "legislation by starvation." We broke at 12:30, we passed the bill. We could have recessed until 2 o'clock, but I'll carry on, Mr. Speaker, hungry as I am. Thirsty as I may be, I'll carry on.

Annual exploration expenditures during that same period have risen from $10 million to a high of $40 million in 1970. 1 haven't got the figures for 1971 and 1972 but I know it was higher. But in 1973, with the threat of Bill 44 hanging over the heads of those who would…

Interjection by an Hon. Member.

Surely to goodness, Mr. Speaker, the Minister of Mines will recognize that if we're going to have a viable, profitable mineral industry, we must take into consideration the entire world market. We must not let the Minister mislead us into thinking that British Columbia has the say over what the price of minerals is going to be, that British Columbia has the say over the quantity of minerals that are produced everywhere else in the world, or that British Columbia has the say over whether there'll be a shortage or overage of a particular mineral.

Mr. Speaker, the question I'd like to ask is if the Government had equity share capital, would the Government have kept these two mines, Davis Keys and Churchill Copper — north of Fort Nelson; they're closed down — would the Minister of Mines have kept the mines going even though they were not profitable, viable operations? Mr. Minister, I think that this is what we have to explore under Bill 44.

There were people thrown out of work when those mines closed. People north of my area were thrown out of work.

MR. D.T. KELLY (Omineca): Under Social Credit.

MR. PHILLIPS: Yes, under Social Credit. But if you had been listening to what I said, you'd have known why the mines were closed down. But you don't propose to listen. I told you just a few moments ago that the mines closed down because of the world price of copper. You try and twist it around and say that it was because of Social Credit.

Interjection by an Hon. Member.

MR. PHILLIPS: I don't care whether it was under Social Credit. If you would just listen and open your mind, you might possibly learn something. But you don't want to learn. I just went to some length to explain the world situation as it refers to mines, the price of minerals and the supply and demand of minerals. But they over there on the Government backbench, Mr. Speaker, would like to think — as they must have been led to think — that British Columbia can control the price of minerals; British Columbia can control the world production of minerals; British Columbia can create…

I explained last night in this Legislature that British Columbia cannot create a market for its own minerals. We can't absorb 20 per cent of the minerals that we produce. But the Government backbench would like to say, "Oh, here's great big British Columbia." They've got half a million dollars in the kitty and, my heavens, they think they rule the world — half a million dollars, I might add, that was left by the previous administration.

The question I'm asking the Minister is would he

[ Page 2462 ]

have kept these mines operating even though they were not profitable? Would he have sold the minerals on the world market at a loss? Would he have kept the mines operating and stockpiled the concentrate? What would the Minister have done?

I think the Minister would have realized that economics play a heavy part in the decisions that have to be made by mining companies. Maybe, Mr. Speaker, he would have come to grips with the cold, hard, bare facts. If he did, it would be for the first time in his life. Mr. Speaker, our Minister of Mines lives in a theory world, in a dream world, as is witnessed by the way he drew up the mining Acts and the legislation that is before us.

Another thing, Mr. Speaker, that the mining industry has no control over whatsoever…and was just recently aggravated by the high exchange value of the Canadian dollar. Does the Minister of Mines think that this does not have to be taken into consideration when you're producing minerals for a world market? But, Mr. Speaker, the Minister of Mines would stand in his place in the Legislature and lead us to believe that British Columbia controls the market.

No, whether we refine the ore or whether we put it into the finished product, Mr. Speaker, we still have to sell it somewhere. There are only a little over 20 million people in Canada. No way can the population of Canada absorb all of the mineral production.

If you're going to do what the Minister proposes to do under Bill 44, Mr. Speaker; if you're going to nationalize the industry and produce all the minerals, either you're going to have to go out and sell them on the world market and be influenced by the hard economics of the world financial world or…

HON. MR. NIMSICK: You're an either-or man.

MR. PHILLIPS: Well, I'm probably more of an ore man than you are.

Or, Mr. Speaker, he's going to have to close down the mining industry. Those are the only two alternatives that are open. I don't care. You can bring in all the unrealistic legislation you want. You're either going to have to come to grips with the economic situation, Mr. Speaker, or…

SOME HON. MEMBERS: Or, or.

MR. PHILLIPS: …close down the mining industry. If you close down the mining industry, you're going to throw a lot of people out of work. All those people that you purport to be the government of, which you're really not, are not going to be very happy. You won't need a Minister of Labour because there won't be that big a labour force around.

Another factor, Mr. Speaker, is increase in general costs, which are going up. I visualize in a few years, Mr. Speaker, our Minister of Mines sitting in a great big office pushing computer buttons, economists coming and going all the time, and him tearing his hair out…

HON. MR. NIMSICK: That's one thing I don't have to do.

MR. PHILLIPS: …because something over on the other side of the world has a bearing on his mining industry, which he wants to control in theory and have everything just lovey-dovey. That's what will happen. Eventually, Mr. Speaker, he will come to reality.

I'd like to quote just a few words, Mr. Speaker, from the 61st annual report of the B.C. and Yukon Chamber of Mines. It's the president's report. There are a few comments on it. I'm not going to read the whole thing. There are a few comments in this report that are very appropriate in relation to Bill 44. The date on this report, Mr. Speaker, is January 9, 1973. So the report is after the advent of socialism in British Columbia but before the advent of Bill 44. So we have it in perspective. We know the date. It's after socialism but before Bill 44.

It was back in the days, Mr. Speaker, when the Government was still saying — and we haven't heard it in this Legislature for a long time — that they were going to work with and listen to the industry. Now, I haven't heard a Minister or even the Premier — he's dropped it because he knows it's just so much airy-fairy verbiage. He doesn't say it any more. He could say it before the truth came out. He could say it before the truth came out. He could say it about the petroleum industry, the mining industry, the labour people, every phase of British Columbia life, but he doesn't say it anymore. But anyway, they were saying it when this report came out.

Mr. Speaker, at that point in history, early in January, there was general optimism for 1973. It was based on the Premier's request…

HON. MR. NIMSICK: The price of copper went up after we got in.

MR. PHILLIPS: I want to tell you, Mr. Speaker, that this Minister of Mines would make a far better comedian than he does a Minister of Mines. For him to say that the price of copper went up because of socialism in British Columbia has got to be one of the biggest jokes…

Interjection by an Hon. Member.

MR. PHILLIPS: I think the weather can be explained very simply. It's from all the hot air that's coming from the Government's cabinet.

HON. MR. BARRETT: It's hot today. (Laughter).

[ Page 2463 ]

MR. PHILLIPS: Well, maybe it's a hangover from yesterday's good weather. (Laughter). It doesn't take much to set the Government benches in action, does it? You can talk about good cold, hard facts and economics all day and they sit there with blank looks on their faces, Mr. Speaker, and it just goes right over the top of their heads. But you say something funny and man, oh man.

Maybe I should make this speech in the form of a joke somehow. Then they may be able to grasp it. Instead of the cold, hard facts that I am laying before them, Mr. Speaker, I should maybe make a few laughs and be funny and they'd understand it.

But anyway, this is back in the days, Mr. Speaker, when the Premier was saying, "Don't panic, I'm not going to kill the goose that lays the golden egg." He doesn't say that anymore. No, he doesn't say that anymore. He used to say, Mr. Speaker, that he was going to work with business and industry, but not any more. That was back in the days when the sun was still shining. That was back in the days, Mr. Speaker, when the sun was shining on business and industry in this province.

That was the day, Mr. Speaker, before the clouds of Waffles in Ontario came west. That was the date of this report — before the paint wore off to show the true metal of the socialists. That, Mr. Speaker, was the date of this report, before day 42.

What a revelation opened up in British Columbia when we finally saw the colour of the metal. That was the day, Mr. Speaker, when the definite, fixed purposes of this Government came to light. It was the days, Mr. Speaker, before the Opposition parties in this House looked down and saw what the Government had been seeing all along: the true colour of the legislation. We began, Mr. Speaker, to see the target as they see it. We began to take a look at their true aims and finally realized what was going on in British Columbia.

I am going to quote from this report that I referred to, Mr. Speaker. "They, " — "They," meaning the business leaders — "anticipated a future increase in the gross provincial product with no let-up in price inflation." In the mining sector it was anticipated that "the 1973 production figure will again increase due to the effort of a full year's production from six large mines which started operation in 1972. There are no new metal mines scheduled for production in 1973."

And I'll look into the future a year, Mr. Speaker, and say that Bill 44 is passed. There will be no new metal mines scheduled for production in 1974, 1975, 1976. But after that, Mr. Speaker, the people will put back a good government again and the mining industry will come to life.

What else does this report say, Mr. Speaker? It says, "a reduction in capital investment in mine construction will be felt by industries substantially dependent on major construction." Put that down into simple, everyday terms and I'll tell you about it a little later, Mr. Speaker.

If the Government will accept a motion to adjourn, I would like to move adjournment at this time.

AN HON. MEMBER: Does the Member lose his place by asking that question?

MR. SPEAKER: No.

Mr. Phillips moves adjournment of debate.

Motion approved.

Hon. Mr. Barrett moves adjournment of the House.

Motion approved.

The House adjourned at 1:50 p.m.