[ Page 4215 ]

CONTENTS

Routine proceedings

Mineral Royalties Act (Bill 31). Committee stage.

On section 1.

Mr. Gibson — 4215

Hon. Mr. Nimsick — 4215

Mr. Gibson — 4215

Mr. Wallace — 4217

Hon. Mr. Nimsick — 4219

Mr. McGeer — 4219

Mr. Chabot — 4221

Hon. Mr. Nimsick — 4222

Mr. Gibson — 4223

Mr. Chabot — 4223

On section 2.

Mr. Gibson — 4224

Hon. Mr. Nimsick — 4225

Mr. Wallace — 4225

Mr. Gibson — 4226

Hon. Mr. Nimsick — 4227

Division on section 2 — 4227

On section 3.

Mr. Richter — 4228

Mr. Wallace — 4229

Mr. Fraser — 4232

Hon. Mr. Hartley — 4233

On amendment to section 3.

Mr. Richter — 4235

Hon. Mr. Nimsick — 4235

Division on amendment — 4235

Hon. Mr. Nimsick — 4235

Mr. Smith — 4236

Mr. Phillips — 4237

Mr. Gibson — 4238

Mr.Chabot — 4239

Mr. Gibson — 4240

Hon. Mr. Nimsick — 4241

The House met at 8 p.m.

Orders of the day.

HON. D. BARRETT (Premier): Mr. Speaker, I move we proceed to committee stage on bills.

Motion approved.

HON. MR. BARRETT: Committee on Bill 31, Mr. Speaker.

MINERAL ROYALTIES ACT

The House in committee on Bill 31; Mr. Dent in the chair.

On section 1.

HON. L.T. NIMSICK (Minister of Mines and Petroleum Resources): Mr. Chairman, I move the amendment standing in my name on the order paper (See appendix.)

Amendment approved.

On section 1 as amended.

MR. G.F. GIBSON (North Vancouver-Capilano): Mr. Chairman, we have had second reading of this disastrous bill; nevertheless I think we have to consider in committee how it can be made more workable, and the impact lessened in some areas and explained in others. Accordingly, I have a number of questions for the Minister.

Starting off in section 1 and working through the definition section, and this being a brand new Act there is much to do in the definition section, I would ask the Minister, first of all, if he might explain to the House what the term "designated minerals" means in his understanding. In other words, which minerals is he going to designate? I would refer to his most recent report for the year ended December 31, 1972, in which there are some 20 metals described, and another 20 or so industrial minerals and some structural materials and then fuels.

Now, I assume that fuels, with the exception of coal, are excluded from his idea of designated minerals. But I wonder if he could tell the committee, with some particularity, just which minerals he proposes to designate.

HON. MR. NIMSICK: Mr. Chairman, the minerals that we are proposing at the moment for designation are copper, gold, molybdenum and silver. The proposal that we are making by order-in-council will be: copper at a basic rate of 58 cents; gold the basic value of gold now…. First I had better remark that in regard to copper it is expected to be 58 cents. This figure represents the true five-year average to January 1974 of a net smelter return to the producers in the province, plus an adjustment of 10 per cent to account for cost of increases in 1974.

Gold is expected to be set at $82.50 per ounce. This figure represents the five-year average to January 1974 of returns to producers in the province, plus an adjustment of 50 per cent to account for the previous price restrictions and cost increases in 1974.

Molybdenum: they have experienced no significant price fluctuations in the last five years. Hence basic values are expected to be the same as the corresponding five-year averages. Molybdenum concentrates at $1.60 per pound and molybdic oxide $1.85 per pound, and feral molybdenum at $2.21 per pound.

The basic value of silver is expected to be set at $3 per ounce. This figure represents the five-year average to January 1974 of returns to producers in the province, plus an adjustment of 50 per cent to account for previous price restrictions and cost increases.

Zinc will not be designated immediately because zinc comes mostly under Crown-granted mineral claims under the Mineral Land Tax Act. Lead the same way. They are restricted to Crown granters, so I haven't any proposals for them at the present time.

MR. GIBSON: Mr. Chairman, I thank the Minister very much for his forthcoming remarks on that. Perhaps he might confirm that he has no plans at the moment to designate any of the industrial minerals. I would ask him in particular about asbestos, which has a value of some $21 million production in the most recent reported year. Also the structural materials. At the same time, perhaps, he could be good enough to say, though it is not quite on target, whether or not assessment notices have been sent out under the Mineral Land Tax Act on the lead and zinc. Is it your intention to cover that?

HON. MR. NIMSICK: The assessment notices on lead and zinc have been sent out, I understand. The asbestos comes under the same requisite as lead and zinc, Crown-granted claims.

MR. GIBSON: My next question of the Minister — and I do appreciate his responsiveness this evening — is on the question of gross value. As I read the definition of gross value, and the Minister may have something else in mind — I would hope he would clarify it if that is the case — the gross value would seem to be a value that doesn't vary from mine to mine, but rather is fixed by the international price.

Now, there is some doubt here, because gross value

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as defined means the international price, but it also means the international price paid or credited to the producer. Therefore I would ask the Minister if his understanding and the interpretation that will be given by his department and the administrators is that gross value relates to what I would call net mine receipts — the actual money received.

Let me give some of the problems that might arise. If a producer is selling on an international contract, which might be LME less some particular percentage, say it is 90 per cent of LME, then the royalty would be calculated on the 90 per cent of LME rather than on 100 per cent of LME.

I go on to a couple more complex problems. There may in many ores as shipped be contaminants which to some extent may tend to raise the price of the ore as paid for by the smelter. There might, for example, be a percentage of gold therein. Or it might tend to depress the price of the ore, if, for example, it was copper concentrate with a significant lead contamination.

Let us take that second case. Would the producer be charged royalty on the gross value of, not simply the copper, but of the lead? That seems to me somewhat unfair if that were the case, because the lead actually lowers the value of the concentrate. That is a bundle of questions to throw at you, but perhaps I might ask about that at the same time.

HON. MR. NIMSICK: Well, it depends. If it is a copper concentrate, the gross value means the international price or a combination of international prices paid or credited to a producer on the sale, disposition or use by him of a unit of a designated mineral produced by him, less such reasonable costs of and incidental to smelting or otherwise refining, as are paid or payable to the producer, and are approved by the administrator in accordance with the regulations.

Of course, if they were getting quite a return on other items in the ore besides the predominant ore that is in there, they would then come under the other definition. But in the case of copper, the price that the actual producer receives is all international. It is all shipped out of the country. The gross value is the international price less the smelting and refining costs.

MR. GIBSON: Just to follow that along a little bit, Mr. Chairman, the international price at the moment, if I understand rightly, again talking of copper, is something like $1.15 a pound. The U.S. domestic price, I think, is something like 85 cents, and the Canadian consumer price is something like 80 to 85 cents. We sell substantially all our copper at international price right now, but if the day comes, hopefully, when we do have a copper smelter in British Columbia, that copper smelter in British Columbia will presumably be required to supply at least British Columbian and perhaps western Canadian requirements for copper. At that point it would seem to me that any reference to the international price might cause a certain difficulty, so in a spirit of helpfulness I would ask the Minister if he would consider gross value being defined as net mill and mine receipts per unit of mineral, plus the transportation costs. This seems to be the kind of thing he is getting at, but doesn't have this reference to international price which seems to me unnecessary. The reference should be to amount received, without any particular reference to the level of international price.

HON. MR. NIMSICK: It is the net receipts that they receive for the mineral. At the present time I don't see any reason why the international price shouldn't be in there. If it were smelted in our own province then it would be the net receipts that they would receive in our own province. Of course if it were smelted in our own province they get 1 per cent off on the royalties.

MR. GIBSON: At the moment though, with respect, Mr. Minister, they would still have to reflect the international price rather than the domestic price, even if it were smelted and consumed here — at least as I read the particular definitions.

HON. MR. NIMSICK: I think you are exercising in words more than anything else really, at the present time. At the present time it means the international price or a combination of prices that may be received by the producer. I see no reason why we should change that international price when we handle that within our own province, if we smelted in our own province at any time in the future.

I don't see where the international price there would have any effect on what we do within our own province.

MR. GIBSON: Perhaps moving on to a later portion in the definition section, Mr. Chairman, the Minister, I think, has given us pretty clear indication that what he means by gross value is actual receipts.

Interjections.

MR. GIBSON: Welcome back to the Hon. Leader of the Opposition (Mr. Bennett) after an absence of some two weeks.

Interjections.

MR. GIBSON: Moving on to the definition of mineral, Mr. Chairman, it seems to me that it would be more useful to have some kind of homogeneity of

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definition between one statute and another. The Minister in another amendment Act, the Mineral Amendment Act, 1974, which, of course, we aren't discussing, redefines the word mineral, which has been the standard definition of mineral over the years. It is, both the original definition in the Mineral Act and the new definition which is being moved….

MR. D.E. LEWIS (Shuswap): Point of privilege, Mr. Chairman.

MR. CHAIRMAN: Order! Would the Hon. Member for Shuswap state his point of privilege?

MR. LEWIS: I see we have a stranger in the House. (Laughter.)

MR. CHAIRMAN: That is not a matter of privilege. The Hon. Member for Columbia River on a point of order.

MR. J.R. CHABOT (Columbia River): On a point of order, I want to assure you that the Member for Shuswap will be a great stranger after the next election to this House.

MR. GIBSON: Mr. Chairman, as I was suggesting, the different definition of mineral in all of these Acts is bound, it seems to me, to cause a good deal of confusion. Therefore, I would move, and hope that the Hon. Minister might accept this amendment, that "mineral" means mineral as defined in the Mineral Act.

I would go on to say that that, of course, would not include coal, but the Minister can catch coal through the separate Coal Act. Therefore, it seems to me that this amendment would not only be in order but a helpful one for standardization of our statutes.

Interjection.

MR. CHAIRMAN: Order, please. We'll just have a look at the amendment first before we recognize any other speaker.

Is it the intention of the Hon. Member to strike out the existing definition for mineral and substitute?

MR, GIBSON: Yes, Mr. Chairman. Thank you.

On the amendment.

HON. MR. NIMSICK: Mr. Chairman, the definition of mineral here covers a greater scope than the definition in the Mineral Act for the simple reason that we do hope to take over all underground working. Some of the minerals that might not be called mineral but are constructional minerals will come under this Act. Also coal. The Coal Act at the present time has a minimum of $1 per ton. But if the price of coal climbs, then the royalty Act would take over. That's why we have the definition in this Act different to what it is in the Mineral Act.

Amendment negatived.

MR. GIBSON: Just two more questions under section 1. First of all, why does the Minister have millsite in the definition? I haven't been able to find the word used anywhere in the Act. Much more importantly, what is his interpretation of transport? Transporting, according to the definition section, includes handling, stockpiling, loading and other costs incidental to transporting.

But I would ask the Minister: transporting from where to where? Is it his intention, for example, to include transportation costs from the mine site to the mill? Or is it from the mill to the smelter or wherever it might be, including the ocean freight if the smelter is abroad and so on? Could he confirm from where to where the transportation costs include?

HON. MR. NIMSICK: Transport costs from the millsite to where it's being smelted.

MR. G.S. WALLACE (Oak Bay): Mr. Chairman, my comments will be brief. I just want to say that it's really distressing to me, in something as basic as the definition of the terms under which such far-reaching legislation is written, that this bill should have caused such enormous confusion, misinterpretation, public argument and debate by the people in the mining industry. I don't say this necessarily in criticism of the Minister himself.

I just would like to make a comment on this very contentious bill. I don't know who on earth advised you, Mr. Minister, but as a layman who knows not very much about the mining industry, to have gone through the contortions and the changes and the public confusion and the very severe anxiety as a mining industry because of this bill and in turn to find out that, as far as I can see, the new definition presents a rather less serious light to the mining industry in this bill…. In other words, it is now quite clear that the royalty will not be applied against the cost of transportation. The original definitions in Bill 31 did not at all make that plain.

The royalty was to be applied on the difference between the gross value and the basic value. I hope that if I'm misunderstanding this, the Minister will correct me, but it's now my understanding that the royalty will actually be applied after the cost of transportation and costs incidental to smelting or otherwise refining.

This, of course, Mr. Chairman, makes a substantial difference to the actual method in which the royalty

[ Page 4218 ]

is applied and the actual cost to mining companies of the royalty.

I just think that it's hardly fair that this House and the public and the mining industry and everybody concerned have gone through a period of several weeks of discussion and debate, both publicly and privately, in trying to determine what on earth this bill really means in terms of royalties to the mining industry.

We may argue all we will — and we will (Laughter) — on section 3 regarding royalties. But seriously, Mr. Chairman, regardless of whether we agree or disagree with the principle of a royalty, the very misleading way and confusing way in which this bill up until a few days ago had been presented to the mining industry, really is very distressing and in no way leads to any sense of confidence in your department, Mr. Minister.

I don't know who wrote the bill in the first instance. Maybe the Minister of Labour (Hon. Mr. King) has raised his hand. Frankly, I think it's been written by somebody who knows as much about mining as he does, and that's not very much.

But the fact is, Mr. Chairman, that the reaction of the mining industry, regardless of the principle of royalties, has been based on their great difficulty in trying to interpret what in effect the bill actually says and does. That confusion in turn is based on a very inadequate section 1 giving definitions of the various terms being used in the bill.

I certainly would give the Minister at least credit that the amendments which he's brought in to section 1 make it quite plain that the royalty will be applied after certain costs have been allowed, such as the cost of transportation and other costs often incidental to smelting or otherwise refining.

I just feel that a great deal of the tremendous concern which has been expressed by the mining industry has been based on the fact — and it's a pretty serious fact, Mr. Chairman — that they would be paying royalties on costs which they were incurring in the actual production and refining or otherwise or transporting of the mineral.

It seems to me that it is not reasonable to apply any form of taxation — and it certainly isn't done in other areas of industry — where you are even taxed on your overhead costs which, in effect, is what transportation and degrees of refining are in the mining industry. Certainly there's no income tax applied to the private individual in business or to the corporations until they at least have deducted their overhead costs.

AN HON. MEMBER: But they are individuals.

MR. WALLACE: Not in business, my friend. An individual in business, my friend, deducts his overhead costs and then he pays the tax. Don't tax him on the cost of running his vehicle or washing his business windows or buying supplies or paying his secretary. For goodness' sake, let's be reasonable.

HON. G.R. LEA (Minister of Highways): But they do charge him for the supplies, don't they?

MR. WALLACE: If the supplies are used….

MR. CHAIRMAN: Order, please! The Hon. Member for Oak Bay has the floor.

MR. WALLACE: I don't want to get into a lot of detail and harangue on this, Mr. Chairman. I've said that I welcome the amendments, but I think that part of the problem with this bill has been the very sloppy and inadequate and inefficient way in which the bill was written in section 1, whereby even men and others who have spent a lifetime in the mining industry couldn't figure out what the bill was exactly going to do to the mining industry.

You can smile, Mr. Minister, but it's caused a tremendous amount of heartburn in the mining industry and real anxiety that they were going to be penalized to a degree which I think is less now than appeared to be the case when this bill was first presented.

I'm sorry, but I have to say that I think the Minister was very derelict in his duty in not correcting that very clear misunderstanding right off the bat. When it became clear in public exchanges and exchanges of public opinion that the mining industry were not clearly aware of what the royalty was to be applied to, the Minister said in public: "Yes, I'll be bringing in amendments." But I submit that the time to clarify any misunderstanding was right there and then. Probably we wouldn't have all the bitterness and rancour and all the misunderstanding which we are now faced with.

But I certainly feel that it's better late than never. The amendments which have been brought in describing the definitions certainly make it much clearer just exactly to what amount the royalty will be applied — namely, the difference between what really is net value after the deduction of transportation and refining costs and the basic value.

There are many other things about the bill I would like to comment on later, but I think it would not be right to let that very central issue pass — namely, that the very inefficient and sloppy way in which section 1 was written has caused a great deal of the problems for the Minister and for the mining industry. I'd be interested to have the Minister tell us whether since the new definitions have been brought in he has had any response from the mining industry to the conclusion that the financial penalty of this bill is less than the industry had calculated, let us say, two or three weeks ago. We've all got clippings coming out of

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our ears which show the many millions of dollars of revenue which the mining industry feels will be lost as a result of their calculations based on the former definitions in Bill 31.

Now with the new definitions can the Minister tell us if the mining industry has reviewed the actual specific amount of financial penalty which will be exacted, against the copper industry in particular, by the new definitions in Bill 31?

HON. MR. NIMSICK: Well, Mr. Chairman, the mining industry knew quite a while ago. The definitions that were in the bill originally were interpreted by some correctly and by some incorrectly. The law society interpreted it correctly and the first writing went through our legal men and all the rest of it. If you get three lawyers you'll get three different interpretations of almost anything that you want to place in a bill.

MR. WALLACE: Well, are you sure that this one is the right one?

HON. MR. NIMSICK: The industry was opposed to royalties in principle, and I don't think that the clarification — and I did make a clarification in moving second reading of the bill…. I explained that it would be on the net amount of returns. Now don't forget that the basic royalty is on the net smelter returns less transportation costs. The incremental royalty is on the net smelter returns. Whether I should have brought in the amendment right away…. But you don't bring in amendments right away. You've got to put the bill out. You've got to have it debated, and then you bring in your amendments.

I did state that there would be clarifications of the definitions, but some of them would still insist that it was on the London metal market or on the gross — that the gross meant the whole thing. I'm sure that the mining industry, those who interpreted it the other way, now will feel a lot better. Those who interpreted it correctly probably will still be opposed to the bill, but the idea of bringing in these clarifications was to make it quite clear to them in the bill exactly what the definitions were.

MR. P.L. McGEER (Vancouver–Point Grey): I think that the Minister has given us some valuable information this evening. But I read the definition here of international price, for example, listed in section 1 and I think, by analogy, if I could ask the Minister this question: how would he establish what the international price of a ton of pulp would be? There's a price that….

HON. MR. NIMSICK: A ton of pulp?

MR. McGEER: Yes, to take a natural resource commodity that's sold on international markets.

Interjection.

MR. McGEER: Yes, I understand that, but international price is whatever price is paid internationally; and B.C. pulp from Ocean Falls — we don't know what it's being sold at. We guess that it might be $450 a ton; it might be $600. The Minister won't tell us. We know that some mills are selling for $200-plus; other mills are selling for $180, according to what their long-term contracts are. It's pretty clear to me that the international price is something which is determined by a buyer and it will vary from mill to mill. If you buy from Gottesman International the price is $450 a ton if it's pulp, but if you're buying in California, it may be a third of that.

MR. CHAIRMAN: Order, please! I would ask the Hon. Member to confine his remarks to the section as amended, and there is a definition in the amended section.

MR. McGEER: Yes, but the definition says "the price of a unit of a designated mineral established." In the case of the Minister he's thinking of copper, but I'm doing it by analogy so that people can see the problem. We haven't yet got to applying taxes to copper. But if that commodity were pulp, Mr. Chairman, and if you were Gottesman International, you'd be selling that for three times….

MR. CHAIRMAN: Order, please. Order!

MR. McGEER: Mr. Chairman, what I am getting at, if you'll listen for a moment….

MR. CHAIRMAN: Would the Hon. Member be seated? I would ask the Hon. Member again to relate his remarks strictly to the amendment before us. Would the Hon. Member continue?

MR. McGEER: Well, Mr. Chairman, I don't know how to get across the point better that the international price is not something which is fixed by the World Bank or Canada or Chile or the Minister. The international price is what a buyer will pay; if you are selling pulp on the grey market, you will get three times the price or double the price what you get if you have a long-term contract.

We may be selling copper concentrates to Japan on a long-term basis, which is considerably below the spot copper price on the London Stock Exchange, but this definition makes no attempt to resolve that sort of difficulty. What I am saying, Mr. Chairman, is that this definition of international price is absolute and utter nonsense. There is no such thing as an

[ Page 4220 ]

international price of any commodity because there is no world body that establishes prices for everyone in the world.

It may be that the price of copper will only vary from maybe 80 cents a pound to $1.20. In the case of pulp on the international market, as the Minister of Lands, Forests and Water Resources (Hon. R.A. Williams) well knows, the price variation is far more than 50 per cent.

If you put your pulp up for sale through an international manipulator, as the Government of British Columbia has done, then the price can be triple what it is if you put it up through legitimate channels on the basis of long-term contracts. The price of copper has gone up and down in spectacular fashion based on world supply. When Allende, the Chilean dictator….

AN HON. MEMBER: Dictator? He was elected.

MR. McGEER: Well, he confiscated legitimate business interests in the country of Chile, including their copper mines. In so doing he created an international shortage which resulted in a spectacular increase in world copper prices. I submit, Mr. Chairman, that this is the basis of this particular bill which is being introduced.

If you really want to trace the origins of it, it is in the dictatorship of Allende. Chile was the major world copper supplier, and when that government confiscated the copper interests in their country it resulted in a world shortage of copper and increases in the copper price which varied tremendously according to whether or not you had a long-term contract. If there was a long-term contract for copper then, of course, you continued to supply the buyer at whatever the agreed selling price was through the term of your contract. If you didn't have a long-term contract then you sold at whatever the market would bear.

We are doing the same kind of thing with pulp here in British Columbia. In the case of those….

MR. CHAIRMAN: Order, please. I would just ask the Hon. Members to be a little quieter while the Hon. Member is speaking. Would the Hon. Member continue?

MR. McGEER: Thank you, Mr. Chairman. I'm very pleased, Mr. Chairman, that the Minister is listening intently. I wish I could say the same for the Minister of Lands, Forests and Water Resources (Hon. R.A. Williams), and some of this chatter or static in the back. It just happens to be a fact of life that when there is a short supply of any commodity, in this particular case we are discussing copper….

Interjections.

MR. CHAIRMAN: Order, please. The Hon. Member for Vancouver–Point Grey has the floor.

MR. McGEER: Thank you, Mr. Chairman. When a commodity is in short supply, as copper is in short supply, there is one price for people who are on long-term contracts, and there is another price for those who have to scramble to get what is left over.

Internationally, whether the British Columbia government likes it or not, the laws of supply and demand hold sway. Because the laws of supply and demand hold sway, the price that any given mine may get for the mineral it offers for sale depends on whether it has a long-term contract or whether it happens to be taking advantage of the world situation in times of short supply, or whether it suffers from the world situation in times of oversupply. So we've got international price set forth as a definition in this Act when international price is nothing but balderdash and nonsense.

What I would like to have from the Minister is how, in practice, he intends to resolve this fairly obvious market situation. It becomes critical, not just for the producing mines in British Columbia, but as to whether anybody might wish to develop a mine, no matter how long term a contract they may be able to win, because of the uncertainty in the economics of their operation.

We have no command on the world supply of copper. That is fairly obvious. Our copper basically is low grade; it is leftover copper. It is the kind of copper that is mined only when the richer sources of supply in the world are for one reason or another, usually political reasons, prevented from reaching the market.

Mr. Chairman, we need to have far more sensible answers from the Minister than he has given to date before the industry will have any confidence at all of the wisdom of the government in applying this particular Act they are introducing.

HON. MR. NIMSICK: The first thing I would like to say in regard to Allende of Chile is that he was democratically elected as President of Chile.

MR. McGEER: Hitler was the democratically elected Chancellor of Germany, and you know what happened when he took over.

HON. MR. NIMSICK: He wasn't a democratically elected Chancellor of Germany.

MR. McGEER: He certainly was.

HON. MR. NIMSICK: No. He was appointed as Chancellor by the President of Germany.

AN HON. MEMBER: He got more votes than

[ Page 4221 ]

anyone else in the 1933 election.

HON. MR. NIMSICK: In Chile they were trying to get back for the Chilean people some of the moneys that were going out of the country on the copper trade. Following Allende's taking over the copper industry the copper price went down to around 45 cents if you remember. It wasn't until after that copper went sky high, not due to what Allende did in Chile.

It definitely states here that this gross value and the price is paid or credited to a producer. That's what you are talking about.

The Hon. Member was not in the House at the start of the sitting tonight when I explained to the Hon. Member for North Vancouver-Capilano (Mr. Gibson) exactly what gross value meant and what international price meant. It is the price that the producer receives, less the smelting costs. In the case of the basic royalty it will be the smelting costs plus transportation.

AN HON. MEMBER: It doesn't say that, Leo.

HON. MR. NIMSICK: It certainly does.

MR. McGEER: Mr. Chairman, may I read "international price" as I read what is in this bill? If international price on page 1 said what the Minister said, we wouldn't be asking the question — if international price said "the price that the producer receives." International price, it says, means "the price of a unit of a designated mineral established for the purposes of international trade by one or more persons or commodity exchange institutions approved by the Lieutenant-Governor-in-Council."

We are going to check Hansard Mr. Chairman, after the evening session, but that statement which appears in the bill is quite different from what the Minister just stood up and said international price meant. We are not going by Hansard definitions. After the Lieutenant-Governor appears and somebody nods and the thing becomes a law, we must go by what is said on the piece of paper — not what appears in Hansard.

HON. MR. NIMSICK: Read it over again.

MR. McGEER: Mr. Chairman, if the Minister wishes to say that this definition is wrong and he is going to bring in an amendment, then I am sure that section 1 would pass without difficulty. But he is saying one thing and something else is said on this piece of paper.

HON. MR. NIMSICK: Mr. Chairman, it says "for the purpose of international trade." If you look up the definition of "gross value," it means the international price or a combination of international prices paid or credited to a producer on the sale. Then we went to the extent of defining international price. It means the price of a unit or of a designated mineral established for the purpose of international trade. This is the price that the producer gets. Now, some of them don't get the same as others. Some of them are under contract, and they get a different type than another company. This is the price that we are following. That is the reason that it is in there.

MR. McGEER: Mr. Chairman, I hope that when the time comes for interpretation of this Act we will be able to hold the Minister to the remarks he made and be able to quote Hansard as the definitive authority as to what the provincial government will be obliged to follow in the application of this particular section.

MR. CHABOT: Mr. Chairman, just a brief question. The Minister clarified for me on what basis the royalties will be charge — that it will be based on the smelter value.

HON. MR. NIMSICK: Net smelter returns.

MR. CHABOT: Net smelter returns, certainly.

I wonder if the Minister could tell me what kind of a bureaucracy this is going to generate within the Department of Mines and Petroleum Resources. Each and every carload of concentrate shipped out of the province to a smelter has a different value. Each and every carload has a different value. It varies, sometimes only two or three cents a ton, but it all varies. I'm wondering just how many hundreds of public servants are going to be involved. What kind of expenditures are going to be involved in recording the kind of assays that are generated through the various smelters in the United States and in Canada as well?

The next question that comes to mind is: is there a royalty on high-grade ore that comes into British Columbia for concentrating purposes? We've seen it happen in the past — ore coming from the Northwest Territories, from Pine Point, into Kimberley primarily. They shipped ore in abundance there at the initial outset during the three-year period. I'm wondering whether there is a royalty application to ore coming from either Pine Point or Pyramid or be it from the Northwest Territories or from the Yukon — when it comes into British Columbia for concentration purposes or for smelting purposes as well. Is there a tax on that?

HON. MR. NIMSICK: This royalty bill only applies to the Crown-owned mineral resources of the Province of British Columbia.

MR. CHABOT: Mr. Chairman, isn't there a fear that organizations such as Cominco, for instance,

[ Page 4222 ]

which has an abundance of ore in the North West Territories, owning Pine Point Mines and owning formerly Pyramid Mines, could possibly or conceivably ship ore to Kimberley to be concentrated there? They could close down their existing Sullivan Mine, in turn jeopardizing many jobs in the community of Kimberley. It's a very serious concern. There's the strong possibility that ore could come from the North West Territories as it has come in the past at the original outset.

HON. MR. NIMSICK: You're creating a supposition now.

MR. CHABOT: No, I'm not. It has happened. I have seen thousands of carloads come from Pine Point.

HON. MR. NIMSICK: I worked in Kimberley and I know the carloads that come in and all that. But this does not apply to that ore that is shipped in from Pine Point or from outside the province. This royalty only applies to ore produced in the Province of British Columbia.

When you say there is a different value, this is the reason we take the net smelter return. If they ship 50 tons of ore to a smelter and they get back so much money, that's the net smelter return…

MR. CHABOT: I know that.

HON. MR. NIMSICK: …they receive back after the ore has been smelted.

MR. CHABOT: Yes, Mr. Chairman, on that very point. Certainly they high-grade at Pine Point. Pine Point is a rich ore body. It's quite conceivable that they will continue to operate the concentrator in Kimberley. The Cominco concentrator there could continue to operate with ore generated from the North West Territories. In other words, mining could come to a standstill, conceivably at the Sullivan Mine in Kimberley.

I asked the question regarding the kind of bureaucracy you will be establishing within your department to keep track of all this ore and all these assay returns you're getting from the various smelters all over the United States primarily and from some in Canada. I would think the bulk of it is shipped down into the States. I'm wondering how many people are involved and what costs are involved in keeping and recording the various assays, and not only the assays but the billing of the various mines in British Columbia on the royalty charge here in your legislation. How much of it will you lose by the application of the royalty charge?

HON. MR. NIMSICK: Mr. Chairman, the companies themselves will make their reports on the amount of ore they ship and the amount of returns they receive. It will have nothing to do with the bureaucracy in the department.

MR. CHABOT: How big will that be?

HON. MR. NIMSICK: There will be no need of a bureaucracy in the department because we will accept the reports from the companies. Undoubtedly, if we find they're not living up to the Act, then we may make a check on them. But otherwise, they will be doing the reporting as to how much they received. They've got to issue their bills to us.

MR. CHABOT: Mr. Chairman, no doubt that will involve quite a bureaucracy in your department. The Minister fails to understand that freight rates are based on smelter weight and value. It takes some considerable time for smelters to give their assays back to the railway company who, in turn, interchanges it back to the original carrier. It takes months.

The Minister shakes his head. Listen, I'm very familiar with this particular subject, Mr. Minister.

HON. MR. NIMSICK: So am 1.

MR. CHABOT: I know for a fact that we've seen carloads of lead and zinc — primarily concentrate — in which the smelter weight and value affects the freight weight. It's all based on the values per ton of those concentrates.

HON. MR. NIMSICK: Not the value of the concentrates.

MR. CHABOT: Oh, yes.

HON. MR. NIMSICK: On the weight.

MR. CHABOT: Sorry, smelter weight and value per ton and on the weight. Logically, because a lot of it blows off as it goes down to the smelter. But I've seen instances where it has taken two and three years before a final billing is made to the mine on the adjustment of the freight rate based on the assay at the smelter.

Under those circumstances, I want to assure you that there is a strong possibility that that mine could be closed down before that billing ever reaches or the assay or the final result — that is, the application. You've talked about the fact that consideration is given to the transportation costs of concentrates from the mill site to the smelter. If it's going to take two or three years, I want to assure you, there's much revenue that you're going to be losing. How are you going to overcome this two- and three-year delay in

[ Page 4223 ]

which instances many of the smaller mines could be closed down? How will you possibly ever collect the money which you are attempting to collect under this legislation?

HON. MR. NIMSICK: I don't know what railroad the Hon. Member worked for, Mr. Chairman, but when I worked in Kimberley and they were shipping ore in from Pine Point, we received the weight bills with the carloads of ore. The cost of transportation was right on those weight bills.

MR. CHABOT: Different proposition.

AN HON. MEMBER: How long since you worked there?

HON. MR. NIMSICK: Not a bit different than that.

The railroad issues their weight bills with the carloads of ore. So don't try and cloud the issue by something that has nothing to do with it at all. At the time that the shipment is made, the railroad has the weight bills there and the price and everything is right on the weight bill. I've issued hundreds of them through the plant in Kimberley.

MR. CHABOT: Mr. Chairman, just another short question. The Minister apparently doesn't realize there's a difference in the freight-rate structure. Railways have thousands of different freight rates and different freight-rate structures — thousands of them. You can't start comparing the freight rate, which is a firm thing in most instances on ore, and comparing it with concentrates because concentrates in most instances are based on assays, smelter weight and value, then, in turn, the destination carrier.

I'm thinking back on many instances I've seen. The Great Northern, for instance, has been extremely lax in billing back to Canadian Pacific the results of the assay and the weight as well. I've seen delays of upwards of two years in returning those figures back to the railway — to the Canadian Pacific, the original carrier. Canadian Pacific sometimes has been a little slow in billing the mine. I've seen minds close down.

I assure you that when you're dealing with the whole mining industry in British Columbia and you're dealing with a lot of little mines, you're going to lose a lot of revenue because you're not going to be able to collect it. Before you get that return from the destination carrier back to the original carrier, you're going to find the mine has closed down.

MR. GIBSON: After listening carefully to the Minister on this critical question of gross value, I think I understand what he's saying. But what bothers me is that when the time comes for interpretation, possibly by a court, of the legislation we're passing now, the court has to deal with what is written in the bill rather than what is said in Hansard.

As I read this definition, there seems to me a good chance that a court could find that what is to be the subject of a royalty is the deemed income according to international price of a producer as opposed to the realized income.

Subsequently, I would, in a helpful spirit, move the following amendment: that in section 1, line 9, delete the existing definition and replace it with, "gross value means net mine and mill receipts per unit of mineral plus transportation cost."

That would, it seems to me, make it perfectly clear that it's receipts we're talking about and nothing in particular to do with the international price levels.

HON. MR. NIMSICK: Mr. Chairman, I can't accept the amendment because the definition is quite clear. I made quite clear what it means. We have to have that international price there. It states definitely, "paid or credited to a producer on a sale." I can't make it any plainer than that. That's what it means.

Amendment negatived.

MR. CHABOT: I've asked a question. I realize I can't insist on an answer. But will the Minister give me some idea as to how many additional civil servants will be necessary to keep track of the royalties in and out and the reports that are submitted to the department? How many?

Interjection.

MR. CHABOT: I wish that Minister for pulp and newsprint from Ocean Falls and Gottesman fame would stop giving the Minister the answer because I'm sure the Minister can answer himself. You think that Minister is that incompetent that you have to give him the answers.

MR. CHAIRMAN: Order, please.

MR. CHABOT: I'm just asking a reasonable question of the Minister. I don't think the Minister of Lands, Forests and Water Resources (Hon. R.A. Williams) can sit in the background and say, "Oh, a modest amount." The Minister must have some projections if he's administering his department. He must have some projections as to how many additional staff will be required to administer the provisions of this legislation. If he'll give me the number of the people involved, I'm sure without difficulty I can project the cost involved.

HON. MR. NIMSICK: The present staff we have in the revenue division at the present time will handle

[ Page 4224 ]

the whole situation. They're very competent and I feel quite confident that they'll look after the interests of the Province of British Columbia in this regard.

MR. A.V. FRASER (Cariboo): Well, I'd like to ask the Minister a question. He mentioned personnel in the revenue section — how many personnel have they got there since he became Minister?

HON. MR. NIMSICK: I had that through the estimates. I couldn't relate exactly the number right now unless I went back to the estimate book. You've got the estimate book there, you could look it up yourself.

MR. CHAIRMAN: Order, please. I believe the question is out of order in that it's not relevant, strictly speaking, to this section.

Section 1 as amended approved.

On section 2.

HON. MR. NIMSICK: Mr. Chairman, I move the amendment standing under my name on the order paper. (See appendix.)

Amendment approved.

On section 2 as amended.

MR. GIBSON: Section 2 is one of the five or six sections in this bill that I have to very strongly oppose if it is not satisfactorily amended. And I will say why. Section 2 is one of the very important discretionary sections in this legislation. It's one of the two or three that led the taxation section of the Canadian Bar Association to say as follows:

"The most important provisions of the bill involve discretionary powers. And most, if not all the discretionary decisions are not subject to any appeal to the ordinary court. Liability for a tax or an equivalent charge should be explicit and ascertainable, and based upon a judicial interpretation of the will of the Legislature rather than an administrative discretion not subject to appeal."

And that, Mr. Chairman, is exactly what we have in section 2. The bar later on said:

"The bill as drawn in embodies an unprecedented abdication of responsibility by the Legislature in favour of the administration."

That, Mr. Chairman, is exactly what this section 2 does because it gives the Minister and Lieutenant-Governor-in-Council, through his power to determine basic value, complete power to decide what tax any given company and any given mineral will pay in any given year. That, I believe, is: (1) a power that should not be delegated by this Legislature; (2) a taxation power that should not be subject to Ministerial discretion.

Even the brief submitted to the Minister and the government by the United Steel Workers was quite explicit on this point that it should be possible in advance to have a predetermined idea of the tax liability. The idea that that should be subject to the whim of the Minister of the day, is, to me, completely unacceptable.

The particularly offensive section here, I would say, is section 2(3), and I would therefore move that that be amended by deleting subsection (3) and replacing with the following:

"The basic value shall be the average of the gross values of mineral in the province in the two years immediately preceding the royalty year, plus any change necessary to reflect a change in the international value of the Canadian dollar and its effect on net mine receipts, and any change necessary to reflect inflation or deflation in mining costs."

The concept of that amendment, Mr. Chairman, is that it takes the discretion away from the Minister. It sets forward a firm and definite formula for the establishment of tax liability. It relates that tax liability more precisely to the economic circumstances of the day rather than using the five-year average jumping-off point proposed by the Minister which is not too closely related to the economic circumstances of the day, given the rate of inflation we've had and the tremendous swings in commodity markets. It seems to me it is more proper to relate that to the two-year segment, and it seems to me that changes in mining costs should be explicitly recognized. Accordingly, I move that amendment.

I HON. MR. NIMSICK: Mr. Chairman, while I think the amendment is really out of order….

MR. CHAIRMAN: On the point of order, we'll consider that point.

AN HON. MEMBER: It's up to the Chairman to decide that, not you.

HON. MR. NIMSICK: I didn't say it was out of order, I said I think….

MR. CHAIRMAN: In regard to the point of order raised by the Hon. Minister in regard to the proposed amendment from the Member for North Vancouver-Capilano (Mr. Gibson), I would rule the amendment out of order on the grounds that it interferes with the Crown prerogatives as contained in

[ Page 4225 ]

this section of the Act. It alters this, and this is not something that can be done by the amendment in the hands of a private Member. It must be with the consent of the Crown, or introduced by a cabinet Minister. Therefore I rule it out of order.

HON. MR. NIMSICK: Mr. Chairman, I'd like to answer the Hon. Member though, just to quiet his fears a little bit. I'm rather surprised that he would question the Minister's discretionary powers. When you passed the bill a few days ago in regard to forestry, they gave all the discretionary powers, and it had no figures in it at all…

MR. GIBSON: We opposed that.

HON. MR. NIMSICK: …to the Minister in forestry, and its been always that way.

MR. GIBSON: We were against that.

HON. MR. NIMSICK: In this bill I've been very careful to tell you that the first-designated price would be on the five-year average. There's a flexibility there for the first-designated price, and from then on you take into consideration the changing conditions, the costs of operation and the value of the Canadian dollar. And when you take it five years, I think it gives them a better chance. But in your amendment it would take it every two years and this wouldn't work at all. So, just to quiet your fears, I think you will agree that the five-year average is the fairest and the best way to handle this situation.

MR. WALLACE: Mr. Chairman, the Minister is obviously concerned and trying to quieten fears, as he says. I can tell him there are lots of fears in the mining industry, and these amendments are not enough to quieten the fears. We have numerous communications from people in the mining industry. I simply quote one; this man says:

"The discretionary clause contained in Bill 31 is much too vague for any precise financial planning and should be eliminated in favour of legislation which specifies the limits of the government's authority to tax."

HON. MR. NIMSICK: This is not a tax.

MR. WALLACE: Oh, come on now, let's not get into semantics. It's a form of taxation against the mining industry. You can waffle around and decide what you think of taxes and what I think of taxes, but a tax is a payment of money by an individual or a corporation to the state. Now whether you do it in the form of royalty or a tax on profits or any other way, it is a tax. So let's not drag the debate down to that level and contest the fact that this is not a tax.

MR. CHAIRMAN: Order, please. I would point out to the Hon. Member that I think the more appropriate place to discuss that particular point would be under section 3.

MR. WALLACE: Well that may be, Mr. Chairman. I didn't raise the point as to determining what a tax means. The Minister did. So call him to order.

HON. MR. NIMSICK: I'm not saying anything. I'm just….

MR. WALLACE: You just opened your mouth and said this wasn't a tax.

HON. MR. NIMSICK: I'm just answering you, and I'm ruled out of order.

MR. CHAIRMAN: Order, please. The Hon. Member for Oak Bay has the floor.

MR. WALLACE: Let's have some fair play in here — the same for both sides of the House, Mr. Chairman.

Interjection.

MR. WALLACE: Yes, my ears are red and there's more than my ears red. My temper's getting a little red in this House. We want some fair play for both sides.

MR. CHAIRMAN: Order, please. I was merely pointing out to the Hon. Member who has the floor that we will be discussing this under section 3.

MR. WALLACE: Mr. Chairman, section 2 gives the kind of discretion to the cabinet which makes it impossible for the mining industry to know where they're at. And if an industry so dependent on risk capital doesn't know where it's at financially then its planning has to be somewhat chaotic or they turn their back on British Columbia and put their money elsewhere. Now, does that not make sense? Simply because under the terms of section 2 and the wide discretion given to the Minister to designate what these different terms are, or his scope to designate a mineral, to designate gross value, to designate basic value, indeed his discretion to decide the whole formula…. You needn't shake your head, if that's not the case what have you got it in here for?

All I'm trying to say is that the mining industry in no uncertain terms has made it clear to the people of British Columbia, and they're tried to make it clear to this government, that there is real danger in this degree of discretion to the cabinet in section 2 on the

[ Page 4226 ]

basis that it does not give any very clear, precise way in which the mining industry can calculate the kind of royalties it might be liable to pay.

Mr. Chairman, the Manitoba bill, which had many similarities to this bill, had a great deal more flexibility than this bill has. They had mechanisms of appeal, for example, which this bill doesn't have. Even in the socialist province of Manitoba they withheld or withdrew that bill and did not proceed with it.

Now why can't this Minister realize that wasn't done without a great deal of consideration and reconsideration? We had the great expert, Eric Kierans, who wrote pages and pages — volumes. I have a copy here and I can read it all to the Minister if he'd like to hear it. It would only take a few hours.

Eric Kierans wrote volumes on this question of royalties and the fair return to the province from value of mineral resources. The bill in Manitoba was based on Eric Kierans' considerations, and contained many similar provisions to the Bill 31 we have in British Columbia. And what happened to the Manitoba bill?

When it was finally considered and reconsidered, the government decided to withdraw it. Now I think that there is a message there for any person who is willing to look at some of the defects in Bill 31. One of the defects is the very great degree of discretion given to cabinet in section 2 and in other sections — but certainly as much in section 2 as any other.

I wonder if the Minister wouldn't reconsider and agree that this could be amended. Or perhaps he could tell the House on what basis he feels that this creates no difficulty to the mining industry to budget for the years ahead. We have got all kinds of clippings which I would like to refer to in section 3. But really 2 and 3 have a close relationship, because 3 establishes the principle of royalties, and 2 establishes the formula based on certain terms.

So, while on a strict definition of the rules of debate we can't debate section 3 at the moment, I wonder if the Minister would not reconsider the real dangers which exist from this rather extensive and yet poorly defined degree of discretion which is given to the cabinet.

HON. MR. NIMSICK: Mr. Chairman, after listening to the Hon. Member for Oak Bay telling me that there is no flexibility in this section here, and that we don't tell the industry where they are at, I don't quite….

MR. WALLACE: I didn't talk about the flexibility in your bill; I was talking about the Manitoba bill.

HON. MR. NIMSICK: I don't quite understand that at all. You said that the Manitoba bill was more flexible.

MR. WALLACE: That's right.

HON. MR. NIMSICK: We tell them the net smelter returns. We tell them the net value. We can't change that by order-in-council or anything else. Now the only thing is the basic value, which is….

MR. WALLACE: That is the whole point; that is what I was talking about. You decide that.

HON. MR. NIMSICK: Yes, but by five-year average plus an extra cost as the inflation goes on. Next year we will take into consideration the other increasing costs.

MR. WALLACE: And you decide on these costs.

HON. MR. NIMSICK: Now if you want to box that in and put the exact figures down here, then the industry is boxed in completely — so is the cabinet and so is the government — and they cannot manoeuvre at all. I would like to be able to manoeuvre it enough so that we can make sure that the industry can carry on in a good way. That is all that is in this section here. I think that this section is one of the sections where the Minister has the least discretion of all.

[Mr. Liden in the chair.]

Interjection.

HON. MR. NIMSICK: This is setting the basic value.

MR. WALLACE: That is right, and you decide what it is. You are the referee, you are the rules maker and you are the whole works.

HON. MR. NIMSICK: We have defined exactly here how we arrive at the basic value. Well, what better person could you have than me to do it? (Laughter.)

MR. GIBSON: The Minister has just made it clear that this is just more "trust us" legislation. "We are going to do a good job. Trust us; give us that blank cheque. " I just can't agree with it.

There is the Minister over there saying "aye." He has no idea of the impact of this bill on this province. He is trying to hurry the thing up. We'll just take time for proper examination, Mr. Minister. You stand up and make your own speech when you are ready.

MR. CHAIRMAN: Order! Address the Chair.

MR. GIBSON: Thank you, Mr. Chairman; and could you ask that Minister just to keep quiet?

[ Page 4227 ]

Interjections.

MR. CHAIRMAN: Order! The Member for North Vancouver-Capilano has the floor.

MR. GIBSON: That Minister who is supposed to be in charge of Industrial Development (Hon. Mr. Lauk) just has no respect.

Mr. Chairman, before going on with this section, and some improvements that might be made, I would like to ask the Minister about his interpretation of the phrase "the value of the Canadian dollar." You could interpret it two ways. You could interpret it as the value of the Canadian dollar on the international currency market, or the value of the Canadian dollar in terms of purchasing power. I wonder if the Minister would clarify for us which is his intent.

HON. MR. NIMSICK: It would be definitely in terms of internal purchasing power.

MR. GIBSON: In that case, then, it seems to me that there is some ambiguity in that meaning. Since there are other things later on in this section that need to be patched up. I am going to move an amendment.

I will just say what the other things that need patching up are. There is a provision in section 3(b) to take into account province-wide changes in the cost of labour. It seems to me that this should be related to labour in the mining industry, because if it is not it will penalize labour in the mining industry from being able to fight as hard as it should be able to for a larger share of the mineral revenue, if the royalty cannot be adjusted to take into account their greater gains from the provincial average. It seems to me that that should be taken account of.

Furthermore, since well over half of the costs of mining companies relate to the purchasing of supplies and equipment, it seems to me that that should be specifically noted as one of the cost factors that should be taken into account in this discretionary determination — which I shall, in any event, continue to oppose. Therefore, I would move that section 2 be amended in line 12 by deleting "value" and replacing that with "purchasing power," in line 17 by inserting after the word "labour" the words "in the mining industry," and in line 21 by inserting a new section (c): "and province-wide change in the price of mining supplies and equipment."

HON. MR. NIMSICK: Well, Mr. Chairman, to hurry up matters here — I know that everybody is in a rush and they are getting a little bit edgy, since we're coming near the end of the session….

Interjections.

HON. MR. NIMSICK: I'll take my time. The changing value of the dollar takes care of the purchasing of supplies. When you just use the mining industry — the word "labour" in the mining industry — don't forget that the mining industry is not the highest paid industry in the province.

MR. GIBSON: We want it to advance.

HON. MR. NIMSICK: I think that they are underpaid to a great extent.

MR. GIBSON: But we want it to advance.

HON. MR. NIMSICK: But in the mining industry you have got electricians, you have got machinists, you have got the whole scope of labour. If you are just going to restrict us to the mining industry, maybe the industry would have a shortfall in this regard. So I think that we are more generous by leaving it open this way.

MR. GIBSON: How about purchasing power?

MR. D.M. PHILLIPS (South Peace River): I wonder, before we pass over this section, if the Minister would mind advising me what….

MR. CHAIRMAN: I would like to remind the Member that we have some amendments here that we should be dealing with.

MR. PHILLIPS: Oh, I'm sorry.

Amendments negatived.

MR. CHAIRMAN: We are now back to section 2 as amended earlier.

MR. PHILLIPS: I wonder if the Minister would advise me what minerals he plans to designate, say within the next two or three months.

HON. MR. NIMSICK: I already went over that subject when you were not in here. You weren't here at the start, and I went over the four designations that we were proposing to the cabinet after this bill gets through.

Section 2 as amended approved on the following division:

YEAS — 31

[ Page 4228 ]

NAYS — 16

MR. GIBSON: Mr. Chairman, I ask that the vote be recorded.

On section 3.

HON. MR. NIMSICK: I move the amendment standing in my name on the order paper. (See appendix.)

Amendment approved.

On section 3 as amended.

MR. F.X. RICHTER (Boundary-Similkameen): Mr. Chairman, this particular section is the real main core of the whole bill. All the mechanics that are built around it really wouldn't mean anything without section 3, the royalty section. The amended bill is as provocative and objectionable a type of legislation as I have ever seen come into this House, and certainly amendments haven't made it any more palatable. The spirit and concept of the original bill is still with this much amended bill.

Certainly it is a most unacceptable formula which the government has brought in to attempt to get a greater extraction of return from the minerals. There are other ways and methods which I have discussed earlier in this session, during the course of debate, which would have virtually given more revenue to the government by way of the Mining Tax Act and its revision, which would have been a very simple method of accomplishing their objectives.

Interjection.

MR. RICHTER: Well, it's a peculiar thing, Mr. Attorney-General. Already there's 15 per cent there and certainly if you could have had the first 15 per cent which was obtained through the provincial government, by negotiation, you could have done the balance with the federal government. You're going to have to do it anyway eventually after our new government is elected.

AN HON. MEMBER: Would we have to go cap in hand?

MR. RICHTER: Now, wouldn't that be too bad? We have to come cap in hand and so do all the miners to this government, and that's just as objectionable or more objectionable than going to Ottawa. However, let's get back to the section on royalties.

The passing of this bill will not bring about the end of resistance to the measures contained in the legislation. For the foreseeable future, we can see a great decline through this royalty section and its imposition on the industry. We'll see a great decline in further development and exploration for minerals in this province. Certainly the world needs minerals today and we need them ourselves. The mining industry was developing in such a fashion that it's argumentative today as to whether, if you calculate all the income tax and that that is generated through mining wages and it is credited to the mining industry, it could virtually outstrip the forest industry.

We have a great potential in this particular field of resource. Certainly what we have here before us in this royalties bill is not going to engender any great enthusiasm for discovery. We know this for a fact. Certainly there will be a great amount of resistance to this and there's going to be a great administration problem when it comes to running down all those factors such as the Minister has mentioned. Transportation means from the origin to the destination. I would like to know how the Minister intends to calculate other than taking the law of averages or the mill run of it when delivered at the ship. Is he going to follow this on when it gets to Oita, Japan or the various other Japanese ports where the smelting takes place?

I assume — and I hope that I am not wrong — that he's going to take the figures of the mining industry. I'm quite sure the mining industry will certainly give the authentic figures. But I can't help but see that the other provisions — for scrutiny and the main thrust of inspection by way of his particular force in applying and administering this Act through his administrator, there they can go in and pick up the books and things of this nature — could be very detrimental. It could be a very sad situation as far as relationship between the Mines department and the industry if you become over exuberant in employing these tactics.

I'm sure that the mining industry certainly intends to stay in this province. I would hope they would stay in this province. I hate to see the capital that is going out at this particular time because of this piece of legislation. In light of these viewpoints I'm certainly not in a position to support this legislation

[ Page 4229 ]

but I will oppose it.

MR. WALLACE: Section 3 as amended we oppose for some very fundamental reasons. One is that we can't buy this false argument that a royalty is not a tax. That's number one. Maybe we can agree to have a difference of opinion but I want the reasons for our opposition to be unmistakably clear in this debate. We believe that it is a tax and that the basic principle of taxation is the ability to pay.

Interjection.

MR. WALLACE: Now we have this chirp, chirp, chirp from Shuswap saying that it's a payment on a commodity.

I hope you won't rule me out of order because I'm only responding to the comments of well-intentioned critics, who I notice haven't got up and got into the debate themselves. They always just chirp when the opposition Members are debating the bill. But that kind of comment just shows a complete lack of appreciation of the kind of constructive criticism that we are trying to bring to this bill — that it's a payment on a commodity.

Another argument that we hear is: "Of course, it has been done before," or: "It is in existence now." There are a lot of mistakes that civilization goes on making all the time. We fight wars that have been fought before. But does that make today's war any more sensible than the wars in the last 15, 16, 19 centuries? No, of course not. This argument that a royalty such as we are imposing in section 3 is all right because we've had royalties in the past, I think, is a very weak argument. If that's the best argument the Minister can put up, then I think that this government really is in trouble.

MR. LEWIS: That's wishful thinking.

MR. WALLACE: Oh, it's not wishful thinking, my friend. The Minister has more troubles than he realizes. The only thing is, of course, Mr. Chairman, that in the mining industry it is a cyclical industry and risk capital just doesn't vanish overnight. It will perhaps be two or three or four years before the real impact of Bill 31 comes home to this province. That's really the tragedy of this debate we're having right now.

We of the opposition try to point out what this section will do to the mining industry, but we cannot prove it. We can't really come close in time to proving it because the kind of effect of section 3 on the mining industry will probably not be reflected for some time — two years or three years.

We have mines in production that for sheer economic reasons will continue producing almost regardless of what the royalty is. But that again is part of our argument against the bill, that perhaps in the short run — and I do emphasize short run — the Minister perhaps next year or the year after will be able to demonstrate that the government revenues through section 3 royalties have increased.

MR. CHAIRMAN: Mr. Member, I want to bring to your attention that you are discussing the principle of the bill. You should be discussing the detail of section 3. The principle has already been approved in this House.

MR. WALLACE: The detail, Mr. Chairman, of section 3 is essentially the guts of this bill.

MR. CHAIRMAN: The amount of royalty and things like that.

MR. WALLACE: That's right.

MR. CHAIRMAN: The principle of royalty has been dealt with.

MR. WALLACE: All right, Mr. Chairman. But the heart and soul of section 3 is, as you have so correctly pointed out, Mr. Chairman, the amount of the royalty and the manner in which it is applied. I'm saying that that amount of royalty….

For example, Mr. Chairman, since you raise it, I'd just like to quote from The Vancouver Sun of June 12, where a mining executive says that one of his company's mines in British Columbia may have to pay more in taxes than it makes if the price of copper continues to rise.

"George Albino, vice-president and chief operating officer of Rio Algom Mines, told the Canadian Nuclear Association annual meeting: 'The ridiculous situation is the result of a tax squeeze play by the federal and provincial governments on the mining industry, and if the price of copper goes above $1.50 a pound from its present level of $1.30, the company's open-pit copper mine at Lornex, B.C. may have to pay more in taxes than its net income.'"

That, Mr. Chairman, is because of the application of the amount of royalties in section 3.

The fact is that with this kind of taxation….

Again, I recognize that the Minister doesn't agree that it is a tax, but we believe it is; and if you read any newspaper in the country, everybody who writes in the newspapers seems to think it's a tax too.

AN HON. MEMBER: It's a penalty.

MR. WALLACE: The fact is that section 3, as applied in the amounts which are described, will have a very serious effect on the degree to which investors are willing to invest capital because of these

[ Page 4230 ]

predetermined kinds of royalties under section 3.

I think that in the debate on second reading, Mr. Chairman, it was pointed out that it is an industry intimately dependent on risk capital. Here we have royalties in section 3 which make it even more of a risk for the investor to invest his capital.

There was a very interesting seminar held here in Victoria the other day. One of the key speakers was John Whitehead of New York, who is chairman of the governing council of the Securities Industry Association in the United States. He says that the North American continent, Mr. Chairman, is in the early stages of a severe capital shortage. The nations' needs have simply outstripped our people's ability and willingness to invest. In addition, our capital markets have been called upon to supply funds for investments in a vast array of new types of projects and facilities.

He goes on to talk about a drop in the rate of savings. We find that such savings as there are flow into safe havens like guaranteed savings accounts, life insurance, corporate pension funds — but not into risk securities.

MR. P.C. ROLSTON (Dewdney): People are buying gold and coins.

MR. WALLACE: The Member for Dewdney (Mr. Rolston) interjects that people are buying gold. That just confirms totally the point I'm making: that you buy tangible, valuable things you can see, feel and capitalize on, Mr. Chairman.

Here we are talking about people putting money into exploration in possible ore bodies, which might have a possible value, where the risk is that they might lose their shirt. We've already had debate in this House on second reading which shows that on the average one in 1,000 of these various enterprises for exploration and development of ore bodies is successful. We've had examples, and I won't go over the debate again, of the kind of very minimal return which often the investor realizes.

So as for this interjection that people are buying gold, I know why they are buying gold. There's very little risk in buying gold. It has been valuable for 10,000 years. But there's very questionable value in the money that I or any other investor might put into a potential ore body in the ground.

The impact of section 3 with this kind of royalty, we believe most sincerely, holds such tremendously serious potential for the industry as a whole. We are all agreed that it is the second most important industry in British Columbia, that there are many thousands of people involved directly or indirectly, and that the well-intentioned motive of the government to obtain some return from the resource through the royalties in section 3 is reasonable….

We accept that some formula should be found. We don't agree that it should be a royalty. We oppose this section very strongly because we believe in a graded tax on profits. This government and this Minister have given no valid reason why that isn't an eminently sensible alternative.

MR. CHAIRMAN: Once again, Mr. Member, the principle has been adopted.

MR. WALLACE: Yes, Mr. Chairman. But we are talking about….

MR. CHAIRMAN: You should be talking about the amount and the manner — section 3.

MR. WALLACE: Certainly, Mr. Chairman. Well, the amount of the royalty has caused the mining industry in British Columbia to express extreme alarm. I've already quoted regarding Lornex Mines where the vice-president and the manager of operations has said that the company may finish up paying more in forms of taxation than its profit.

We have another quotation here from Mr. Whist, a mining executive who was speaking in Kamloops. He said….

Interjection.

MR. WALLACE: Don't confuse the issue, Mr. Minister. It's a free country. You can be affiliated with any organization you like. You're always preaching discrimination. Don't discriminate against a professional because he happens to be associated with some group. Now don't give us that kind of discrimination.

Interjections.

MR. CHAIRMAN: Order! The Member for Oak Bay has the floor. You know the rules.

MR. WALLACE: The gentleman I am about to quote is a mining executive; and I see that it has little effect what particular political interest he has. He's the president of TCL Exploration Group Limited. He said: "It is almost certain that a project such as Valley Copper Mines could not be contemplated under the proposed legislation. Section 3 opposing this amount of royalty in this manner…." — and we could go on. I've got all kinds of clippings here. "Bill 31 Pushes Firm out of B.C. Activity."

"A mining corporation of Canada announced it would not undertake any further mineral exploration in B.C. If the provincial government goes ahead and implements its mining royalties under section 3. In a prepared statement the company said that royalties in Bill 31, in addition to the many forms Of

[ Page 4231 ]

taxation already imposed on the mining industry, eliminate any incentive to find or develop mineral deposits."

All I am saying, Mr. Chairman — and I'm trying to move along quickly — is that we could quote until the cows come home tonight that kind of reaction by the mining industry in direct relation to the essential content of section 3, which is the heart and soul of this bill.

It creates a penalty against the mining industry which, when you take into consideration many of the factors which were debated under the principle of the bill, means that this is a very negative effect on capital in the first place. Without capital the industry goes nowhere, and there are all the other consequences — exploration, development, employment, development of communities, you-name-it.

What we have against section 3, furthermore, Mr. Chairman, is that this government wants to share in the good times — yes, let's cream off the top when the industry is doing well — but under this bill mining companies can pay taxes when they are losing money. How can you call that justice in the marketplace?

MR. R.T. CUMMINGS (Vancouver–Little Mountain): They do it to everyone that way.

MR. WALLACE: There again, you know, we get this kind of ridiculous justification. Because you do it to some people it is okay to do it to someone else. What ridiculous logic we hear in this House at times. Just because mistakes are made in the past do we go on making them again and again in new legislation? That just doesn't make sense. If your ice-cream cones didn't work out by one formula surely you wouldn't go on using the same formula, Little Mountain.

Interjections.

MR. CHAIRMAN: Order! The Member for Oak Bay (Mr. Wallace) has the floor. Please address the Chair.

MR. WALLACE: I keep being interrupted, Mr. Chairman. It is most distressing.

MR. CHAIRMAN: I'll do my best to help you out.

MR. WALLACE: Thank you, Mr. Chairman.

That is another element, Mr. Chairman, of the basic reason why we oppose section 3. Not only do we believe that its effects on the mining industry will be very severe, but we just feel that in the first place it applies regardless of the financial success or otherwise of the company. We don't feel that this is the kind of fair approach to taxation which would serve both purposes — namely to obtain for the province a fair return on the revenue from its resources and secondly, the very vital goal of maintaining incentives in the industry. If you get hammered by this kind of tax, regardless of how well or how badly the company is flourishing, we think that this is just a most depressing effect on the industry.

We have been over the other reasons in second reading of this bill. The royalty rate in itself is excessive in terms of a super royalty. I certainly recognize that under the new definition the degree to which the super royalty applies is a little better than some of the figures that first crossed my desk when the bill was first introduced. But we certainly have to re-emphasize the fact that because of these royalties, the way they are applied, the effect on the companies and these other consequences that I have mentioned of diminished exploration and development, we must inevitably look to the loss of jobs in the mining industry in British Columbia. It has got to be a clear-cut consequence of section 3.

Again, we are past the debate in principle, but in terms of practical consequences from the application of section 3 we have already got quotations, letters and clippings from the newsprint where people are stating that geologists and skilled professional people are already leaving British Columbia to seek employment elsewhere. This just didn't happen because of the weather, Mr. Minister. This happened because of the clear consequences which are already developing from the central thrust of section 3 in the from of royalties.

One of the tragic things to me seems to be that the mining industry is not an industry with a long history in this province. It has been built up over 12 or 15 years or something of this nature. Because it has been not penalized by this kind of royalty, it has attracted all the ingredients for a successful industry. These ingredients, as I say again, are risk capital, skilled personnel and the climate which encourages people to feel that their endeavours in the mining field will be rewarded and not unfairly or excessively penalized.

I've done a little bit of research on the question of geologists, prospectors and fieldmen. There already seems to be a return to the conditions of 1958, before the mining industry really got going in the province. It has taken 10 to 15 years to build up the exploration industry. It is apparent now that from this body of perhaps 1,000 geologists and skilled people we are going to be down to 300 or 400. These people, of course, obviously depend on continuing exploration. That, in turn, depends on the investment of risk capital.

So we keep coming back to point 1, step 1, which is section 3 of this bill. The mining companies cannot see their future being anything but difficult under the kind of penalty — namely a royalty, the amount of penalty and the manner in which it is applied.

[ Page 4232 ]

I'm sure we don't want to go on repeating ad nauseam these points but I have repeated them on this section, Mr. Chairman, because it is quite obvious that up until now the government is quite unrealistic and unheeding of what is, I think, a legitimate concern of the people in the second most important industry in this province.

You can argue all you like that it is purely self-interest but it isn't just self-interest. These people are employed in an industry which, in their view, can be severely damaged by the application of royalties described under section 3.

First of all we in this opposition and the public concerned failed to have the bill hoisted. Now we are saying that surely there should be some delay or some mechanism whereby the very many people who are coming to the Legislative buildings later this week in good faith to try and express their concern — surely there must be some way in which the Minister can heed that anxiety, even if only to the point of giving them their day in court. That is all they are asking, I think. We haven't hoisted the bill for six months but surely there could be some mechanism — if the House is only to adjourn for example this week and not to prorogue. There must be some way in which further consideration of this bill could be given to the standing committee on mining.

MR. CHAIRMAN: I would like to remind the Member that he is repeating the arguments of second reading and the arguments on the principle. You're not dealing with the detail of section 3 as you should be.

MR. WALLACE: The need for some further consideration is based on the very dramatic and serious ramifications of section 3.

MR. CHAIRMAN: Those are the arguments of second reading. They shouldn't be in the arguments of committee.

MR. WALLACE: I'm trying to point out, Mr. Chairman, that the fundamental reasons why I am opposed to section 3 are because of the very serious consequences which I believe will follow from section 3. I think the time is still available to the Minister to give it that 12th hour reappraisal or reconsideration. I'm almost finished, I promise you, Mr. Chairman.

I really believe that all these thousands of people in the industry are not necessarily anti-NDP per se but they are concerned about their livelihood and the serious damage that section 3 will bring about to the mining industry, their jobs, their communities and their futures in this province. I beg the Minister to reconsider.

MR. FRASER: I can't help but think that this is all caused by a ball-point pen. I refer to the 1969 election when the now-Minister was in a squeaker in the election and, because of the validity of a ball-point pen declared by a judge, he was elected and then, of course, re-elected and now is the Minister of Mines and Petroleum Resources. He is now bringing so much consternation to the Province of British Columbia with Bill 31.

Specifically we are dealing with section 3 — the royalties section. Mr. Chairman, it certainly is having an impact all over this province. I'm not sure and I don't think even the Minister knows the concern throughout the province and the worry that is engendered. He keeps on playing down the fact that the mining industry doesn't employ too many people. That might be right in a way but I don't think that 50,000 people are a small amount of people. He never says how many are indirectly employed in the mining industry….

MR. CHAIRMAN: I would like to remind the Member that he is dealing with the principle of the bill which has been adopted. You should be dealing with section 3 and the detail of it.

MR. FRASER: I realize that, Mr. Chairman.

MR. CHAIRMAN: You're dealing with the arguments on principle and they have been dealt with.

MR. FRASER: I'm dealing with royalty and the effect the royalty is having, Mr. Chairman.

MR. CHAIRMAN: That's not part of the argument on section 3. That is part of the argument on principle and that has been dealt with. Deal with the amounts or the manner in which section 3 is written and you will be in order. If you start dealing with principle you will be out of order.

MR. FRASER: We don't agree with royalty as such at all.

MR. CHAIRMAN: You know that it is out of order to discuss that on this section. That is discussed under the principle of the bill in second reading.

Interjection.

MR. CHAIRMAN: Order! The Member for Cariboo has the floor.

MR. FRASER: The royalty section is the whole guts of the bill, Mr. Chairman.

MR. CHAIRMAN: I would remind you once again that you deal with section 3 in detail. The principle

[ Page 4233 ]

has been dealt with.

MR. FRASER: You are going to get rough here, and keep me in order and all that, but the royalties are the thing that is concerning the whole province. I would like to say to you, Mr. Chairman, that what the people of this province will gain from royalties and super royalties that are mentioned here will never make up for the loss of income, the loss of jobs and stagnation of communities and secondary industries.

MR. CHAIRMAN: You are out of order when you are dealing with the principle of the bill. You will deal with section 3 in detail, and not the principle of the bill.

MR. FRASER: That's fine. I'll try again, Mr. Chairman, but you are being extremely rough, 1 would think.

You are dealing here with a 2.5 per cent royalty this year, going to 5 per cent and then a super royalty after. That is what is concerning not only the mining industry but the people working in the mines. I say that this is all wrong. It should be in the form of tax, and there are too many things left in doubt.

I would just say to you, Mr. Chairman, that the other thing that is left in doubt is the mining industry. I think they will stay where they are, at the production level, with this royalty. I really think they can live with it. But the point is that we will have no expansion of the industry and that is my concern. Certainly in two or three years' time they might take a look at how the royalty is working, and the world price and so on, how the royalty applies, but in no way are we going to see any expansion, and this concerns me.

A lot of exploration has stopped now, but I'm thinking of the producing mines that have future ore bodies that were planning on expansion, and they are not going to….

MR. CHAIRMAN: I would remind you again, Mr. Member, that you are dealing with the principle of the bill.

MR. FRASER: Well, rightfully so, but also I thought I was dealing with the effects of royalties.

MR. CHAIRMAN: You are supposed to be dealing with section 3 in detail in committee, not the principle of the bill. You know that.

MR. FRASER: I've already mentioned that 2.5 and 5 per cent in the super royalty, and now I'm trying to relate the effect it's having. I'm telling you it's having a great effect. We would have had a copper smelter going in this province right now if it hadn't been for Bill 31, and I certainly don't like that. That's again jobs created.

I would just say that in conclusion, Mr. Chairman, you've been so rough that I can't say what I would like to say, but I would like to see the Minister consider delaying bringing in Bill 31 and the royalty section of it until it can be further analyzed and replace it with some form of taxation which everybody can understand. This way the concern of the mining companies is such that they are just going to freeze up. I don't think this is good for our province or our people in the province.

HON. W.L. HARTLEY (Minister of Public Works): Section 3 has to deal with possibly the difference in political philosophies over there and here. We are arguing that a royalty is fair; you are arguing that it should be income tax. I think it boils down to that. We've had the Liberals, Conservatives….

MR. CHAIRMAN: I would remind the Member that you are not dealing with the principle of the bill. You are supposed to be dealing with the detail of section 3.

HON. MR. HARTLEY: I'm discussing and advocating a royalty as compared to the income tax that the Member for Oak Bay (Mr. Wallace) pleaded for.

MR. CHAIRMAN: I would remind you that that's the kind of debate that took place under second reading.

HON. MR. HARTLEY: Very good.

MR. CHAIRMAN: And those arguments have been made, for and against royalties. The question now is to discuss the detail of it.

HON. MR. HARTLEY: Just as we collect a royalty when a young man or a young woman or a person goes out into the hills and cuts a Christmas tree, there's a charge for that resource. My friend from the Cariboo (Mr. Fraser) should discuss with his rancher friends the basis that the ranchers go into business, and that is that they have a range lease that allows the cattle to go into the hills and graze. Those ranchers pay royalty for each blade of grass that their cattle eat.

MR. CHAIRMAN: I want to remind the Member that you're dealing with the principle of the bill, and that has been dealt with in second reading. You are supposed to be dealing with the detail of section 3.

HON. MR. HARTLEY: Mr. Chairman, I'm discussing royalties.

[ Page 4234 ]

MR. CHAIRMAN: Well, you are not going to be allowed to discuss royalties in principle in committee stage here. You're supposed to be discussing section 3, and not the principle of the bill.

HON. MR. HARTLEY: Mr. Chairman, section 3 relates to royalties.

MR. CHAIRMAN: Yes, and that's what you should be discussing — the amounts, not the principle of it.

MR. CHABOT: Challenge him if you don't agree with him. (Laughter.)

HON. MR. HARTLEY: As far as challenges, you're doing that across the way. But the challenge of this, Mr. Chairman, will come at the next election.

Interjections.

HON. MR. HARTLEY: Yes, Mr. Member for Cariboo (Mr. Fraser), if you would like to come and run in Yale-Lillooet next election, this will be the issue. I have discussed royalties….

MR. CHAIRMAN: Order!

MR. CHAIRMAN: Order! I don't think that we'll benefit the discussion on section 3 by having a debate across the floor of the House between two Members.

Interjection.

MR. CHAIRMAN: Order! Member for Yale-Lillooet has the floor.

HON. MR. HARTLEY: I'm answering it right now.

MR. CHAIRMAN: Deal with section 3 of Bill 31 right now, please.

HON. MR. HARTLEY: Very good. Mr. Chairman, the group across there places no objection to one mining company charging a royalty to another, but when this government attempts to collect a royalty, and there are many cases of that….

MR. CHAIRMAN: Order! Those are the arguments of second reading that have been made, well made in this House on both sides.

HON. MR. HARTLEY: I haven't made them.

MR. CHAIRMAN: You can't be repetitious or tedious even on another Member's argument.

HON. MR. HARTLEY: Where we have the Similkameen Copper Mine in Princeton, that will be paying these royalties as outlined in section 3, before they could go into business in any fashion they paid Newmont Mines $11 million to buy out the old worked-over claims. Kaiser paid Crowsnest Coal $51 million. That was one corporation to the other. You are objecting to this graduating scale here that we should be collecting this for the people of the province. We feel this is eminently fair and that the basic way to go into business is to sell out basic raw materials as outlined in section 3 instead of giving it away. It has been given away for over 100 years; we say sell it.

As far as my friend from Oak Bay (Mr. Wallace) quoting Lornex, I would like to read here what Lornex says with regard to Bill 31 and royalties.

MR. CHAIRMAN: I hope it has something to do with section 3.

HON. MR. HARTLEY: It was before section 3 was…. No, it relates to section 3, Mr. Chairman.

"Profits Triple Despite Royalty. Lornex Mines Take a Leap.

"Despite setting aside nearly eight times as much money for tax purposes, including the new and as yet unapproved B.C. mining and royalties levies, Lornex Mining Corporation has nearly tripled its net earnings in the first quarter of 1974."

Good for Lornex, yet our Member for Oak Bay was quoting someone in Lornex saying that they were going to have to go out of business. They are not going to have to go out of business.

MR. FRASER: You know full well that the Member for Oak Bay doesn't even know where Lornex is.

HON. MR. HARTLEY: Right, but you and I know where it is.

MR. FRASER: My brother works there. He votes for you — unfortunately. (Laughter.)

HON. MR. HARTLEY: He's a pretty smart fellow.

Basically, Mr. Chairman, I believe that if anything the royalties, as set out in section 3 of this bill, are all too little and all too late. I believe the mining industry and their friends across the way would have been listened to with far more respect and taken much more seriously if they had come in with amendments like this instead of crying: "Withdraw Bill 31."

[ Page 4235 ]

MR. RICHTER: Mr. Chairman, when one compares section 3 with the original bill you find that this whole section of the bill has been amended. While this is spelled out in subsection (1) right down to (9) it has laid out the definitive implications of the bill.

Mr. Chairman, in light of this fact and in studying the various subsections, I believe that there is one subsection missing. That is subsection (10). I have a proposed amendment which I wish to move at this time. That will be section 3(10).

"Notwithstanding the provisions of section 5, no producer is liable to pay any royalty under subsection 5 in respect to a designated mineral produced from a mineral location before the time when there has been recovered out of the net operating revenue from production of such designated minerals from such mineral location, calculated after allowing for the payment of royalty under subsection 4, an amount at least equal to the aggregate of the amounts expended on the exploration and development of such mineral location, including an amount representing a reasonable return on the invested capital, an amount representing a reasonable provision for administrative expenses, the determination of any amount in this subsection to be approved by the Administrator in accordance with the regulation."

I so move.

HON. MR. NIMSICK: Mr. Chairman, while this copy is out of order, I would like to make the comment that the cost of putting a mine into production is already allowed for deduction from income tax under the income tax regulations. You're trying to give them a double deduction in this regard.

Interjection.

Amendment negatived on the following division:

YEAS — 16

NAYS — 31

On section 3 as amended.

HON. MR. NIMSICK: Maybe I should just give you a slight explanation on this section here — a little lesson. I think maybe, after listening to some of the speeches, the Premier was right when he said that I should be reprimanded for not being tougher. Maybe it's very lucky, in the close election 1 had in 1969, that I made it in order that I am the Minister of Mines today.

[Mr. Dent in the chair.]

When we look at this section 3 and see the amount of royalties that are charged, it's very small compared to what the private sector does among themselves. I'm sure, when anybody states that a mining company is going to close down because of this small royalty, that they're talking with their tongue in their cheek. When you take a $1 copper and you subtract…. Presume the smelting cost is 20 cents and the transportation cost is 3 cents, we'll say; that makes 77 cents. So 2.5 per cent of that is 2 cents for the first year and 5 per cent is 4 cents a pound for the second year. That is on the basic royalty. On the incremental royalty, if you take 58 cents — as I announced tonight that we were proposing for the basic price….

Interjection.

HON. MR. NIMSICK: That's the actual figure that I gave you tonight; 58 cents will be proposed to the…

Interjections.

MR. CHAIRMAN: Order, please.

HON. MR. NIMSICK: …cabinet for this year. No, it's solid for this year. Then the 20 per cent above that is 70 cents. You subtract 70 from 80 and it makes 10 cents, and you take 50 cents of that. So the first year we would get 7 cents a pound on copper from the producers.

When you look at the total price and what they pay for other commodities they use in the production of the mineral, they pay for every commodity they use and this is just a charge on the main commodity in the production. I don't think anybody should

[ Page 4236 ]

object to that charge. I'm sure that no mine would close down if the price of copper came down two cents or four cents. I'm sure that that would not stop them, because the price varies that much all the time.

MR. CHAIRMAN: Order, please! I would point out to the Hon. Minister that in discussing this particular section we should not stray into the debate on the principle of the bill, but should confine our remarks to the….

HON. MR. NIMSICK: Mr. Chairman, I'm just explaining the section as to how it applies to a mine. So I'm sure that I'm fully in order in explaining the section this way. I want to make it crystal clear to the Members of this House how it is going to be applied and how it will affect the mining industry in the Province of British Columbia. When you think of that, I am sure that you couldn't make it much less. If you smelt it in your own province, there is 1 per cent less. If the price goes 10 per cent below the basic price, you get .5 per cent less, and if it goes over that, you get 1 per cent off the royalty.

Interjection.

HON. MR. NIMSICK: If they didn't have to spend that kind of money in getting the mine, the royalty would be a lot higher. But seeing that they have to spend money to develop a mine, that is the reason I made the royalty so low. I'm surprised that there is any objection here at all. I thought it would just whip right through.

MR. D.E. SMITH (North Peace River): Mr. Chairman, after listening to a dissertation like that from the Minister, I can't help but rise to my feet in this debate, because it is obvious that the Minister is talking with his tongue in his check.

You know, either he does not understand the economics of resource industries such as mining in the Province of British Columbia, or he's decided to completely disregard what the people who are involved in the industry are telling him concerning the impact of the royalty schedule that he suggested — on the strict basis that the best and the surest way to take over the mining industry in the Province of British Columbia in the name of the Crown is to proceed down these lines.

Now if that is your intention, Mr. Minister, declare it. Declare it not only to the mining companies but to all the shareholders who hold shares in mining companies.

MR. CHAIRMAN: Order, please. I believe that the Hon. Member….

MR. SMITH: I'm not going to canvass that any further, but I want to make that as a very definitive statement, because the type of royalty that is proposed under this section isn't a matter of disagreement between yourself and the large mining companies. It's a matter of disagreement between yourself and everybody from the large mining companies down to the individual prospector, who couldn't care less about the problems of production of a large mining company. All he's out there to do is find a mineral discovery.

But it affects all of them, Mr. Minister. When you talk about a base price of copper of 58 cents, and beyond that you allow 120 per cent before you get into the super royalty, you knew before you set that price that it was discounted at least four cents a pound, that the five-year average is more like 62 cents, not 58 cents, and then at your sole discretion — probably on a yearly basis or more often if you so desire — you are going to change that, not only for copper but for every other metal that is produced in the Province of British Columbia…. At your sole discretion you could decide to change that every month or six weeks. But I wouldn't say that you're going to do that. You're going to look at it on a yearly basis and go back five years.

Well, in the mining industry that's equivalent to changing your mind almost as often as you change your shirt, because there is no stability for any company. There's no assurance that the money they invest in exploration and discovery and bringing a new mine into production will ever be returned.

Now who are the people you are penalizing when you use this approach on royalties? You are not penalizing the president, the vice-president, the people in a large mining corporation. You are really penalizing the little investors in the Province of British Columbia and the average everyday citizen who, by choice, works in the industry in the province and hopes to make a living doing it.

It is inconceivable to me that you do not understand the economics that are involved, that you refused to accept the arguments put before you by the people who are most informed about mining in the Province of British Columbia before you came up with the type of setup you have on royalties.

It has been said time and again by the industry that they do not mind paying a fair tax. They feel that they should do that on behalf of the people of the province as a result of the fact that they are reaping a non-renewable resource.

MR. CHAIRMAN: Order, please. I would point out to the Hon. Member that the concept of the bill, which is the concept of a royalty in principle, has already been accepted by the House. We are now considering the details of section 3.

MR. SMITH: We are considering the details of

[ Page 4237 ]

section 3.

MR. CHAIRMAN: I would say to the Hon. Member that when he compares taxes and royalties, he is turning again to the discussion of the principle of the bill. I would ask him to confine his remarks to the section.

MR. SMITH: Well, I'm trying very much to do so, Mr. Chairman. But if the concept and the impact of royalty as it is proposed in section 3 is of no consequence to the Minister, it certainly is to many people in the Province of British Columbia.

The Minister has indicated the values that he is prepared to set at the present time — 58 cents, I believe it is, for copper. I've already indicated to the Minister that 62 cents is closer to a realistic price, and that if the price you set — I don't care what mineral you are dealing with, Mr. Minister — is substantially or even to a very lesser degree under the five-year average, then you penalize and double-jeopardize the mining industry in the Province of British Columbia. If it is at least equal to what your figures in there show, then at least you are at a saw-off with the mining industry. If it is above that, there would be a bit of a credit in their ledgers over and above what they had anticipated.

But I'm convinced that the Minister, whether it's from poor advice or whatever, is determined to set that base under what should realistically be considered as the average so that the super royalty comes into effect quicker than it would, and as a result dissipates all the money into the provincial coffers that would be used for exploration in the Province of British Columbia.

If you can't understand that, Mr. Minister, obviously you do not understand the responsibilities of your department. That is what the mining industry has tried to tell you ever since this bill was introduced — that there is no future for potential mines in the Province of British Columbia or no future for new exploration in this province if you continue along these lines.

Surely that must relate to a government who believes in benefits for people, because the resource industry is something that we all depend on in the Province of British Columbia. Be thankful we have them here. It's just inconceivable to me that the Minister cannot understand the logic of that argument.

If it was a facetious argument, I wouldn't even be on my feet this evening. I believe that they made some very logical statements and points in respect to their particular position — not only from all segments of the mining industry, but including the associations that represent them. Surely to goodness, Mr. Minister, you can analyse what will happen and, as a result of that, withdraw the bill, or at least reduce the impact of section 3 on the industry in this province.

I predict that if you continue along the path you have chosen to travel, it will be catastrophic for the mining industry and, as a result of that, the people who are employed in the industry and, as a result of that, the taxpayers of the Province of British Columbia.

MR. PHILLIPS: Mr. Chairman, I just want to ask the Minister a question on a particular mine. I have before me the Consolidated Churchill Copper Corporation report to the shareholders. As you know, when Churchill Copper started up some years ago it was a very marginal mine. As a matter of fact, because it's in the area I live I bought some shares in it, just to sort of give it a little boost. I didn't buy that many, but everybody in that area was buying some shares…

AN HON. MEMBER: To help it out.

MR. PHILLIPS: …to help it out. I didn't make any money on them. I sold. I didn't lose any but I didn't make any.

That mine was closed down two years ago due to the depressed price of copper. As the Minister well knows, it started up in January 1, 1974. There is an investment by the small shareholders in this mine of approximately $14,500,000. And in the first three months of this year they would have made a profit of a $1,074,720; which, after having this S14 million invested for the amount of time they got, would hardly be what you would call even a fair return.

Now, they estimate, and they are the experts that the mineral royalties under your Act would be $890,593, leaving an operating profit after estimated B.C. mineral royalties of $184,127. Now, when you take off depreciation, amortization of preproduction costs, and interests, et cetera, they show a net loss of $169,091.

Now, are the people who put out this report to the shareholders wrong? What does the Minister intend to do? How would you keep a marginal mind like that open?

MR. CHAIRMAN: Order, please! I've waited a moment for the Hon. Member to make his point. Would he relate it to the details of section 3? The royalty concept generally outlined in this section has already been approved by this House. I would ask the Hon. Member to relate his remarks to the details.

MR. PHILLIPS: Are we still not on section 3?

MR. CHAIRMAN: section 3.

[ Page 4238 ]

MR. PHILLIPS: Well, it's section 3; the royalties, the details.

MR. CHAIRMAN: Order, please! I would point out again that the royalty concept as generally outlined in section 3 has already been approved by the House.

MR. PHILLIPS: I'm not talking about the concept, Mr. Chairman; I'm talking about the details of the royalty. Was it applied wrongly to this particular financial statement? That's all I'm asking the Minister. I know we've agreed to the concept; I haven't agreed to it but the House has agreed to the concept of royalty. I'm asking him: did they work out the details wrongly in this report to the shareholders?

Under this section 3, how would that mine ever open up? And there's another mine just across the mountain, Davis-Keays Mines, which was going to be opened up in April of this year, which, because of the details of this bill and the royalty section, is now not going to be opened up, and not going to provide employment. Maybe the copper will stay in the ground forever, I don't know. I'm asking you: how are you going to deal with a marginal mine like this?

HON. MR. NIMSICK: In answer to the Member, Mr. Chairman. Churchill Copper went back into operation. They knew full well then that there was going to be a royalty. I don't know what statements you have; I haven't got it here so I can't comment on it. It would be impossible for me to comment without seeing it and applying it to the whole deal.

But, nevertheless, there is a section in here, if a mine is having financial trouble, that they can make application for deferment of taxes from year to year, if necessary, if we feel they have a just cause for deferment of taxes.

MR. PHILLIPS: …taxes are going to have to be paid. You are just deferring them for the time being. Both of these mines, as I say, are very marginal mines. If you wait another seven years, as I said during the estimates and on the amendment to the main motion, when they start producing copper from the ocean floor these mines will never be operated.

Here's the Minister of Industrial Development, Trade and Commerce (Hon. Mr. Lauk), running around, trying to seek an economic base for the northeastern portion of British Columbia.

MR. CHAIRMAN: Order!

MR. PHILLIPS: Trying to bring up something. All he has to do is say to the Minister of Mines "Forgo a section in this royalty or change the Act and you've got employment for several hundred people right there, plus all of the people who would be employed in the service industry."

MR. CHAIRMAN: Order, please! The Hon. Member is asking the Hon. Minister to examine the statement of the mine to see whether the figures were correct in terms of the details of this section. I think that's an appropriate question under this section. I think it would therefore be appropriate to let the Minister examine them before he comments.

However, he may discuss other matters in this section. But to speculate about what may happen in the industry I think would be out of order until he has had an opportunity to examine the details.

MR. GIBSON: Just one or two questions for the Minister. This section describes how the royalty is determinable but not when. I wonder if the Minister could tell us how far in advance of the beginning of each calendar year he will be in a position to set all the parameters relevant to the payment of the royalty, particularly the basic value, and whether within any given calendar year he might change that basic value.

HON. MR. NIMSICK: Once the basic value is set, it will be set for the year.

MR. GIBSON: Could the Minister say how far in advance of the beginning of the year he will attempt to fix that?

HON. MR. NIMSICK: We hope to have that in the first two months of the year.

MR. GIBSON: But not before the beginning of the year.

HON. MR. NIMSICK: Well, we might right at the beginning of the year. We can do it once we find out the increasing costs of production and that. We can set the royalties….

MR. CHABOT: I want to ask a question to the Minister. At the outset, when the bill was introduced, the Minister suggested that the new royalty measures under section 3 would generate approximately $20 million in revenue to the provincial government. This figure was certainly not supported by the mining industry. They suggested it would be somewhere in the neighbourhood of seven times your projection of revenue under section 3. I am wondering if your projection of $20 million dollars is still relevant today. Are they lower or are they higher? What is your anticipation as far as revenue is concerned regarding section 3?

[ Page 4239 ]

One other point, Mr. Chairman, dealing with the royalties. I think the royalty has certainly made many mines reassess their position in the province. I think the Granduc Mines has suggested because of the royalty that they are going to look at the possibility of recovering as quickly as possible the $140 million of investment they have made in the Stewart area. Not only have they invested in the construction of a tunnel and development of their copper ore but they've also subsidized housing for the workers as well.

I wonder if the Minister will tell us just how he can relate this kind of a royalty structure against the mines, such as Granduc Mines, which have a unique cost factor built in. What I mean by unique is that it's an underground mine and it's in a tunnel. The men have to be transported through the tunnel to get to the mining face. The extraction costs are substantially higher than open-pit mines. In fact, I understand the extraction costs and the costs of production by Granduc is somewhere in the neighbourhood of five times as much as any other mine.

How can you possibly have a uniform royalty structure against copper when some mines costs of production are substantially and, in this particular case five times higher? I'm not going to mention the fact that Granduc and its subsidiary companies are going to pull out and we're going to lose tens of millions of dollars of exploration up in that Stikine area and the Stewart area where the government is attempting to build the railroad and where they talk about the development of the northwest. The development of the northwest appears to be one of the priorities of the government. How can you get development in the northwest, which is primarily a resource-oriented type of area, especially when you introduce these kind of royalties?

MR. CHAIRMAN: Order, please! The Hon. Member is straying away from the details of section 3. I would ask him to return to the details of section 3.

MR. CHABOT: It's going to discourage development up in the Pacific northwest.

Now, it hasn't been established yet that it is economic to mine under water on the sea bed. But this royalty structure under section 3 will certainly destroy the copper industry in British Columbia if it ever does become economic to mine the sea. There is a thousand years of copper under the sea it has been established. It's just a matter of the economics.

The economics of mining, once they've overcome the cost factors of mining under the sea, will kill the mining on land. Has the Minister taken into consideration on the environment the applications these royalties will have? Where you high-grade an ore body, you leave a lot of gutted land and so forth. This royalty structure you are establishing is going to be environmentally damaging to British Columbia. It's not in the best interests of this province.

MR. CHAIRMAN: Order, please. I would point out to the Hon. Member that the arguments he's been putting forward have already been canvassed at some length, and especially in the debate on the principle of the bill. I would ask him to confine his remarks more to the details of section 3.

MR. CHABOT: I know it's a difficult question to ask the Minister but if the Department of Mines and the Minister of Mines — the government in fact — is concerned about the viability of the mining industry, they must have looked at the various ore bodies that exist, the various mines that exist in British Columbia and come to some conclusion as to where it's profitable and not profitable to mine, based on the kind of royalties you are establishing here under section 3.

There must be some cut-off areas as far as, for instance, copper percentage. It would vary from mine to mine because of the fact that costs are higher in some mines than others. The Minister must have some projection as to how much of the projected copper ore reserves we have established in British Columbia at this time will become waste rock.

It is suggested that in many instances, because of these royalties, 50 per cent of the copper ore will become waste rock.

MR. CHAIRMAN: Order, please. I would again point out to the Hon. Member that the arguments he's marshalling at length have already been dealt with or mentioned several times in the principle of the bill. I would ask him to keep his remarks more relevant to the details of section 3.

MR. CHABOT: Mr. Chairman, I'm keeping my remarks relevant to section 3, dealing with the royalty and the establishing of the royalty of the various mines in British Columbia, and the destruction of future mines in British Columbia.

Mr. Chairman, I listened to the latitude that was allowed to the Minister of Public Works (Hon. Mr. Hartley) where he talked about political philosophy. He talked about ranches; he talked specifically about Newmont Mines. He talked about Crowsnest Coal Company being purchased by Kaiser Resources. He was allowed a lot of latitude. Is it because he's a Minister and I just happen to be a Member of the opposition?

The Minister of Health (Hon. Mr. Cocke) suggests that there's a phone call for me at this time, Mr. Chairman. If the Minister is not concerned about the well-being and the future of the mining industry in

[ Page 4240 ]

this province, he can leave — and leave right now, if you're not interested.

What we are discussing is the future viability of a mining industry. We feel that section 3, with its royalties being imposed on mining industry, will destroy the mining industry in this province.

MR. CHAIRMAN: Order, please.

MR. CHABOT: Mr. Chairman, you don't like those words.

MR. CHAIRMAN: Order, please! I would point out again to the Hon. Member for Columbia River that the royalty concept as contained and generally outlined in section 3 has already been adopted in principle by the House. Therefore, the discussion is to confine itself to the details of section 3. I would ask the Hon. Member to try hard to follow that rule.

MR. CHABOT: I'm trying hard, Mr. Chairman, and you realize that. I've attempted to be rational, calm, cool and collected tonight when I'm discussing such a serious matter as this — and it's a very serious matter we are discussing. We've seen other governments attempt to impose royalties and back off because they've also felt that they would ruin the mining industry. I would hope that the Minister would answer a few questions I've proposed to him regarding section 3.

HON. MR. NIMSICK: To keep the record straight…. I spoke about this the other night, but I would like to say, in regard to Granduc Mines, that he picked a poor example. When I first brought in the royalty bill, everybody worried about Granduc, and I was rather worried about it too. But you know that Granduc Mines made an arrangement with Newmont Mining. There is Granduc Mines and Granduc Operating. The Granduc Operating — that is the producing in the mine — from the next smelter returns have to pay 22.5 per cent royalty. Then, when it gets up to certain millions of pounds, it goes to 25 per cent royalty. They're not worried about how much it costs the operating company to operate. This is a preproduction cost. I can read it right out of the book here.

"To receive royalty of 22.5 per cent of net proceeds before deducting preproduction costs of lessees on the first 32.5 million tons of ore milled and 25 per cent thereafter."

Now if I were to suggest a 25 per cent royalty I'd guess I had better run. But all we're suggesting is 2.5 per cent this year and 5 per cent next year. Even Granduc is not going to shut down because of this royalty. They told me that themselves.

MR. CHABOT: I have a question as to his calculations — his original calculation of $20 million — whether his projection was still accurate or whether it was higher or lower, or whether the mining industry is wrong.

I am not going to go into the whole story of Granduc, having been a shareholder of Granduc, and having lost a few dollars on Granduc — quite a few dollars for me, really. I recall the refinancing arrangement they had to make. I'm not going to start quoting the facts and figures because I don't recall them; it was some years ago. Shortly after the disastrous slide they had up there they had to refinance it. I forget how many tens of millions of dollars they had to borrow.

You are suggesting at the moment — you read it out there — that 22.5 per cent of the net proceeds goes to the operating company.

HON. MR. NIMSICK: Royalty. On the net smelter returns at preproduction.

MR. CHABOT: On net proceeds? Well, unfortunately I don't have the financial arrangement before me. If you have it you can send it over to me and I'd love to debate it with you, Mr. Minister, because that wasn't my understanding. Mind you, it's some years ago that I did look at the kind of financial arrangements that were made to get to finish the tunnel and to eventually get that very costly ore body into production way up in the northern part of British Columbia.

I'd hoped that the Member for Atlin (Mr. Calder) would be speaking on behalf of the workers here tonight when we are discussing section 3.

But, Mr. Chairman, I was wondering if the Minister would tell me if his figures are still accurate: the $20 million projection he has on revenue from the implementation of section 3.

HON. MR. NIMSICK: Mr. Chairman, at the time I made that statement I took an average price of 70-cent copper for the year of 1974. I figured that it would be in the neighbourhood of $20 million the first year that we would take in excess. In the second year, when we found out the exact amount, it would amount to about $23 million in 1974 — and $30 million in 1975. That was taking a basic price of 55-cent and 70-cent copper.

MR. GIBSON: Mr. Chairman, I have a short question and a proposed amendment for the Minister on what seems to me to be a drafting error. That occurs where the words "per cent" are used in lines 29, 32 and 44 of this section. The intent, I'm sure, is that the royalty payable should be reduced by a percentage point rather than a per cent of the rate.

In other words, if the royalty payable should be reduced by 1 per cent of 5 per cent, it would be

[ Page 4241 ]

reduced to 4.95 per cent. I think the Minister's intent is that it be reduced to 4 per cent, if I understand his intent rightly. Therefore, I would move and hope the Minister would accede to an amendment which would replace the words "per cent" in those lines I quoted, with the words "percentage point."

HON. MR. NIMSICK: According to my legal beagle this means that it would be I per cent less. This is what it reads here. What line did you say that was in?

MR. CHAIRMAN: Lines 29, 32 and 44.

HON. MR. NIMSICK: "…reduced to one half of 1 per cent if exceeded by more than 10 per cent but less than 20 per cent the weighted average gross values of the units, the rate of royalty under subsection 4 is reduced by one half of 1 per cent; or exceeded by the 20 or more per cent of the weighted average gross value of the units, the rate of royalty under subsection 4 is reduced by 1 per cent."

It is quite definite, according to the lawyers I have, that the intention is that it is reduced by 1 per cent. It can be argued, I suppose, that one percentage point…. I think it is really nit-picking in words that you are trying to do in this regard. It is fully understood by the industry and in all their reports that they accept it as 1 per cent less. By 1 per cent, I mean that instead of 5 per cent it would, be 4 per cent.

MR. GIBSON: It is not fully understood. Everyone I have talked to says the literal interpretation of it is that it would reduce it from say 5 per cent to 4.95 per cent.

As I've said before, the judges have to interpret the law the way it is written. I think it is written wrongly here.

Amendment negatived.

MR. GIBSON: I just want to say six short sentences before this amendment comes to a vote, if it is coming to a vote now. This is the royalty section and Members should bear that in mind. It is the one that has ruined exploration. It will shorten the life of mines, it will stifle northern development. It will cut the future jobs in this province by thousands. It will, in the end, bring in less revenue to the province than without it.

The whole thing could simply have been replaced by a profits tax and I think it is absolutely wrong.

MR. PHILLIPS: Mr. Minister, I sent a very reasonable request over to the Minister. It was a very reasonable question that I asked him and I would like the Minister to reply.

These involve two marginal copper mines. As has been stated in this House before, Mr. Chairman, most of the copper mines in this province are marginal but these might be more marginal than others. There is another marginal copper mine similar to this just south of Whitehorse which is…. Are you going to give me an answer to this tomorrow? Do you want me to move adjournment of this debate.

MR. CHAIRMAN: Order, please! The proper motion is to move that the committee rise, report progress and ask leave to sit again.

MR. PHILLIPS: I move that the committee rise, report progress and ask leave to sit again.

Motion approved.

The House resumed; Mr. Speaker in the chair.

MR. CHAIRMAN: Mr. Speaker, the committee reports progress and asks leave to sit again. Further, it reports that a division took place in the committee on Bill 31 on section 2 on an amendment and it requests that the division be recorded in the Journals of the House.

Leave granted.

Hon. Mr. Barrett moves adjournment of the House.

Motion approved.

The House adjourned at 10: 56 p.m.

[ Page 4242 ]

APPENDIX

The following amendments are referred to on page 4215 et seq.:

31 The Hon. L. T. Nimsick to move, in Committee of the Whole on Bill (No. 31) intituled Mineral Royalties Act, to amend as follows:

Section 1, lines 9 to 17: By deleting all the words in lines 9 to 17, and substituting the following words:

" 'gross value' means the international price, or a combination of international prices, paid or credited to a producer on the sale, disposition, or use by him of a unit of a designated mineral produced by him, less such reasonable costs of and incidental to smelting or otherwise refining, other than by milling, the unit of the designated mineral as are paid or payable by the producer and are approved by the administrator in accordance with the regulations;

" 'international price' means the price of a unit of a designated mineral established, for the purposes of international trade, by one or more persons, or commodity exchange institutions approved by the Lieutenant Governor in Council."

Section 1, lines 34 to 49: By deleting all the words in lines 34 to 49, and substituting the following words: "the designated mineral such reasonable costs of and incidental to transporting the unit of the designated mineral as are paid or payable by the producer and are approved by the administrator in accordance with the regulations;".

Section 1, line 63: By deleting all the words in line 63 and substituting the following words: "Governor in Council in respect of a designated mineral; and

" 'weighted average' means the average, weighted by volume or weight, of the gross value or net value, as the case may be, of the units of a designated mineral sold, disposed of, or used by a producer during the part of a year preceding the date the weighted average is calculated."

Section 2, lines 9 and 10: By deleting the words ", and, for the purposes of a determination other than the first determination," and substituting the word "and".

Section 3: By deleting all the words in section 3, and substituting the following words:

"Royalty.

"3. (1) Every producer shall pay, in accordance with this Act and the regulations, royalty on the quantity of a designated mineral produced by him in the Province.

"(2) Every sale, disposition, or use of a unit of a designated mineral by a producer shall, unless the Lieutenant-Governor in Council otherwise orders, be deemed to include the royalty portion of the unit.

"(3) Subject to an order under subsection (2), the amount of royalty payable by a producer shall be determined by multiplying the number of units of a designated mineral sold, disposed of, or used by him during the year of the determination by the rate of royalty determined under subsection (4) or (5), or both, and by multiplying that product by the weighted average net value to the producer of the units.

"(4) Subject to subsections (5), (6), and (9), the rate of royalty shall be

(a) two and one-half per cent of the units of a designated mineral sold, disposed of, or used by a producer during the year 1974; and

(b) five per cent of the units of a designated mineral sold, disposed of, or used by a producer in every year after the year 1974.

"(5) Where the weighted average gross value of the units of a designated mineral in respect of which royalty is determined under subsection (3) exceeds, by twenty per cent or more, the basic value of the units of the designated mineral,

[ Page 4243 ]

APPENDIX

the producer of the designated mineral shall pay royalty, in addition to the rate of royalty under subsection (4), at a rate established by dividing one-half of the difference between the weighted average gross value of the units and one and two tenths of the basic value of the units by the weighted average net value of the units.

"(6) Where the basic value of the units of a designated mineral in respect of which royalty is determined under subsection (3)

(a) exceeds by more than ten per cent, but less than twenty per cent, the weighted average gross value of the units, the rate of royalty under subsection (4) is reduced by one-half of one per cent; or

(b) exceeds by twenty or more per cent the weighted average gross value of the units, the rate of royalty under subsection (4) is reduced by one per cent.

"(7) Where more than one producer is liable to pay royalty in respect of the production of the same units of a designated mineral, the producers are jointly and severally liable to pay royalty under this Act in respect of such production.

"(8) Where a producer is affiliated to a person from whom he receives a gross value, the Lieutenant-Governor in Council may, where he is of the opinion that the gross value so received is not a bona fide gross value, specify the gross value that the producer is deemed to receive.

"(9) Where a producer is liable for the payment of and pays, the costs of or incidental to smelting or otherwise refining, other than by milling, the designated mineral in respect of which royalty is payable under this Act, and the smelting or refining is carried out in the Province in a manner approved by the minister, the rate of royalty under subsection (4) is reduced by one per cents