[ Page 5833 ]

CONTENTS

Routine Proceedings

Tabling Documents

Ministry of Industry and Small Business Development annual report, 1980-81.

Hon. Mr. Phillips –– 5833

Committee of Supply: Ministry of Industry and Small Business Development estimates.

(Hon. Mr. Phillips)

On vote 126: minister's office –– 5833

Mr. Leggatt

Mr. Davis

Mr. Barrett

The House met at 10 a.m.

HON. MR. PHILLIPS: Mr. Speaker, I ask leave to table documents and a report covering northeast coal development background and subsidiary agreements.

MR. SPEAKER: Are these statutory reports, Mr. Minister?

HON. MR. PHILLIPS: No, they are not. I'm asking leave.

Leave granted.

Hon. Mr. Phillips tabled the annual report of the Ministry of Industry and Small Business Development for 1980-1981.

Orders of the Day

The House in Committee of Supply; Mr. Davidson in the chair.

ESTIMATES: MINISTRY OF INDUSTRY
AND SMALL BUSINESS DEVELOPMENT
(continued)

On vote 126: minister's office, $204,312.

HON. MR. PHILLIPS: This morning we have laid before the House and the people of British Columbia the reports concerning the development of northeast coal. In these reports are the studies we have done in conjunction with the federal government over the last five years. Let anybody who says this decision was made in a hurry, that there wasn't sufficient planning or that we didn't properly engineer the railway read through these documents. They will soon find out that this is probably the best planned and most studied economic development to take place anywhere in North America.

It has been maliciously or otherwise implied by certain persons in our community that we haven't done proper studies on the environmental impact of northeast coal. We have spent millions and millions of dollars studying the impact of northeast coal on the environment. For that member for Coquitlam–Moody (Mr. Leggatt) to stand in this House and say that the townsite is in the wrong place after all the studies and analysis we've done is negative, harping, carping criticism. For that member to stand in this Legislature and say they were going to run the coal down to Squamish, and at the same time and in the same breath say that we haven't taken the environment into consideration.... Can you imagine the impact on the environment of off-loading 30 million or 40 million tonnes of coal in Squamish?

With regard to the economic impact, maybe the member doesn't realize...or maybe he hasn't done his homework. You talk about people doing homework; I think the opposition should do a little homework before they come in with these negative thoughts — negative, harping, carping criticism intended to mislead the people of this great province. The cost of moving that coal from the coal-mines north to Chetwynd, down to Prince George and down to Squamish would add an impost of at least $3 a tonne more than the route we have chosen.

The other point is that on Canada's west coast we need another port, because we're funnelling all the goods we wish to ship to our overseas customers through a funnel, and the bottom end of that funnel is Vancouver. If the opposition had done their homework, they would realize that transportation and port facilities in this decade must more than double if we're going to accommodate the growth that is going to take place in western Canada in this and the next decade. We need another port on the west coast. Northeast coal will be the catalyst to ensure that we have that new port on the west coast and that our transportation system is upgraded. That's what's going to happen. The original contract that we have for the sale of northeast coal is the catalyst that will upgrade the transportation system in the north, not only to accommodate coal but also accommodate grain, sulphur, potash, lumber and all those commodities that we supply to our overseas customers.

I was amazed to hear the NDP member for Alberni (Mr. Skelly) when he stood in the Legislature the other day. He said that we no longer need any more hydro projects in British Columbia. Mr. Chairman, today the projects that are in the planning stages are being held up, because we haven't got the power to supply them. Yet that same opposition will go around the province and say: "Oh, we need a steel mill. Why don't we further process our natural resources?" Maybe they don't realize that a steel mill requires electricity, that a non-ferrous metal processing plant requires electricity. If we're going to further process our copper, which is a natural resource, and not just ship out the ore, that plant requires vast amounts of electricity. They're running around the province and saying in one breath: "Oh, we need to further process our natural resources." And in the next breath they're running around saying: "Don't give them any power to build it." They can't have it both ways.

If we had listened to the harping, carping, negative opposition back in 1963, British Columbia would be in a brownout situation today. You talk about employment. We'd all be on social welfare because we need energy to feed our industry. We need our industry to supply jobs. We need our industry and we need those jobs. We need the taxes from those industries to supply the services that the people of this province are entitled to, and the services they enjoy today.

That group over there want to turn out the lights. In socialist countries where this has happened there is no money to supply the social services. That's what the economy is all about and we, as government, have a responsibility to ensure that the young people who are growing up today have the same opportunities in this great province that we've had in the past.

With regard to the environment, what government brought in a Ministry of Environment and put environment head and shoulders over other departments so we could protect it? It was this government. In this government we believe that we can have economic development and at the same time protect our environment. We want to leave this province in the beautiful state it is in. We want fresh air and clean water. The two can go hand in hand, and that is the policy of this government: to protect the environment but at the same time to keep the economy going, so those opportunities will be here.

I'm going to sit down for a moment and let some other people have their say.

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MR. LEGGATT: Mr. Chairman, I'd like to continue with some questions to the minister. My first question is this: in view of the documents the minister tabled in the House this morning, I'd like to know if one of those documents is a cost-benefit analysis — a list of documents that were tabled in the federal House of Commons which were embargoed by the provincial government from release. I'm wondering now if the minister is prepared to release that particular document. Is that particular document contained within the many documents that the minister has tabled?

The next question I want to ask the minister deals with this premium price that he alluded to several times yesterday. He said he hasn't got just a market price; he's got a premium price for northeast coal. That's certainly the position that the minister has been taking. He may want to correct my information if it's wrong. Teck and Denison have secured a price of $75.50 and $75 a tonne in 1980 dollars. That's compared with the $64 to $67 per tonne price range of Kaiser and Fording Coal. What the minister has not dealt with is the escalation clause in the northeast coal contracts. Those escalation clauses provide for escalation in line with inflation — but, as I understand it, with respect to 46 percent of the total price. Southeast contracts have a price review every two years. Any analysis of this will show that the price of southeast coal will equal that of northeast coal about the mid-1980s or shortly after your deliveries commence. The result, of course, is what we predicted all along: we're going to be giving away northeast coal and depressing the markets in the southeast. I find it hard to come to any other conclusion, if the information we have on the escalator is right. If it's wrong, we'll be happy to reanalyze it. The difficulty throughout, of course, has been that all this information is not public information; it's held behind closed doors. We have to try to analyze snippets and pieces, old reports and press releases and so on.

The next question I want to ask the minister deals with a statement he made on February 4 of this year. It's quoted in the Vancouver Sun. This is Dave Todd's article: "In an unexpected disclosure, Industry minister Don Phillips admitted Tuesday that the multi-billion northeast coal pact with Japan is economically impractical by itself. He said it can't be justified unless further contracts for perhaps 11 million more tonnes of coal are signed with foreign buyers." That makes some sense. The minister slipped out a piece of truth when he answered Mr. Todd's questions on that particular day. The minister knows that there's a massive shortfall in tonnage to recover the public investment on northeast coal. What we've got is a pie-in the-sky deal, hoping that somehow out there we're going to have these contracts, there'll be enough tonnages and it will all work out in the end, my friends. Remember "Nothing is freer than free, my friend," when we were told about the Columbia River Treaty? I hope the minister will deal with the escalator and tell us where we're wrong on our analysis. After all, he does have all this information. We're still trying to struggle with the bits and pieces, the past studies and the press releases that Teck and Denison are continually issuing.

Why do they have to sell this thing so hard, by the way? If the deal is so good, I can't understand why Teck and Denison are spending thousands of dollars in the newspapers. Who are they competing with? Who are they selling? I mean, we're not buying coal. They're not selling the people of British Columbia any coal out of the northeast. Who are they selling and why are they selling? Why do they have to do all that advertising? They haven't corrected any mistakes, I notice. All they're talking about is flowers and motherhood. I haven't seen anything specific.

The next thing I want to ask deals specifically with the surcharge escalator. He has the information and we're relying on what bits and pieces we've been able to pick up. Our understanding is that this surcharge of $2.50 and $3 does provide for an escalator. After the fifth year there's an escalator of 25 percent if the coal reaches $85 per tonne in 1980 dollars. That means that when the escalator comes into force, coal will have to be sold out of the northeast at $182.80 a tonne in order for that escalator to have any impact in increasing the surcharge that's put on to recover the public investment in the Anzac line. So I hope the minister will tell me that there's something wrong with our figures. He has them all there. We can't come to any other conclusion. They've got to sell coal for $182.80 to see an increase in the escalator.

The next question I would like the minister to direct his attention to is whether there are any penalties to be incurred if they fail to hold to the critical path — the delivery date, which is the last quarter of 1983. What will happen to the contracts if it doesn't come on stream? The minister is about the only one who thinks it can be delivered in the last quarter of 1983. I always admire his optimism. I think it's wonderful the way he's able to overcome all the engineering advice and the official advice that he receives. He tells us that he can get the stuff on stream. I sort of admire that sort of imagination and persistence. He has a wonderful drive. But sometimes that kind of imagination leaves the taxpayers of the province in one hell of a hole.

The next thing I want to ask the minister is whether industry has been threatened with an increase in royalties if any section of the industry opposes the northeast coal deal. It's a fair enough question. I want to know whether the minister, in discussions with any officials from any coal companies, has said that they'd have to reconsider the royalty picture if the northeast coal deal got criticized, particularly by producers in the southeast. That, of course, is unfair. I don't know whether the minister and his officials have read the world coal study. They have their own studies on markets. They're not that far off from the world coal study figures. There does seem to be a general agreement that the Japanese market is not going to sustain a significant amount of additional purchases of coal. They have already overpurchased around the world.

Let's read one of the coal bibles in Japan. This is from the Japan Echo, January 28, 1981: "Sources said there would be no more new long-term contracts concluded with new supply sources within the coming two or three years. Japanese blast furnace steelmakers are through with a series of their contract negotiations for import of exploitable coals since last spring." The trade papers all take that position. If there are going to be additional markets, they're going to be in the smaller steel-manufacturing industries of Korea and Taiwan. There may be some chance for additional tonnages there, and we certainly don't wish the minister any bad luck in his attempts to try to market coal from British Columbia into those new markets. The reality is that the markets are thin. The markets aren't there, and the reality is that the minister has gone into this deal prematurely, when he should have had the tonnages lined up in order to pay for the massive investment that he's now putting the public of British Columbia to. He didn't do that.

[ Page 5835 ]

The next question I want to ask the minister deals with Mr. Andras, who continues to threaten to blow this deal sky-high. Teck Corp. has taken the position that if they can't sweeten it up with the federal government there may be no deal at all. I'm not going to quote the newspapers, because people seem to be offended with quotations from newspapers. That's just general knowledge if anyone's talked to Mr. Andras lately. The strategy is very clear. Teck has decided to put pressure on the provincial government. I think they're aware the federal government isn't going to buckle, and they know where the soft bargaining has taken place throughout the deal. In every case where someone had to give to put this deal together, it wasn't Teck, Denison, Perrault or the federal government; it was the minister and this government who buckled in order to put the deal together.

The question I asked yesterday — which I don't think the minister has tackled — was: what was the amount of the charges indicated in the memorandum before the deal came about? How much did we reduce those surcharges? The numbers as to what was viable and feasible were pretty clear. It was pretty clear that it had to come in at about $85 a tonne. But the deal has come in at $75 a tonne. No matter how many ways you continue to put this thing into the computer and analyze it, you're still $10 a tonne short. That $10 a tonne still works out to more than $1 billion of public subsidy to that industry, no matter how many ways he slices it.

The only thing I want the minister to tell us is how much each job is going to cost. What's the investment per job that's being created in the northeast? It's about $200,000 a job. How many jobs would you create with $1 billion using another opportunity, like doing something meaningful for small business in this province?

I'd like the minister to tell us what the defects were in Denison's stage-two environmental impact report. Have any permits yet been issued to either Teck or Denison? There was an indication by the Minister of Environment (Hon. Mr. Rogers) that there would be some preliminary permits issued, even though there hadn't been final approval. I see the minister shaking his head. No permits have been issued as yet, and I agree that's good. We'd better make sure that environmental impact statement is acceptable. But I would like to know what the defects were.

Perhaps the minister will tell us why he's got $2.50 as a surcharge on the Teck coal and $3 on the Denison coal. I know he tells us that it's costing Teck more because they're further away from the spur. Given that kind of logic, the surcharge for the guys even further away is going to be $1. Why do you give a benefit to Teck? Why a subsidy to Teck because they've got farther to go to the line?

We're continually accused of not doing our homework and of being against every kind of development in the province. That's not true. The minister and this government know it. The government knows that a viable northeast development proposal would be one that is acceptable to this opposition. But, as a principle, we don't see why you need to subsidize this to the tune of a billion dollars. You could even take a principle that the Reaganites, or the monetarists, or the right-wing economists would — that the public should get the same return on their investment as Teck and Denison are getting on their investment. Maybe even that kind of principle might appeal to the free enterprise parts over there in terms of getting a return on invested money.

But all we're doing is analyzing and asking whether they have even got a chance of getting their money back without interest. No, they haven't got a chance, not on this deal. The chances are so slim, they're in the airy sky. They're in the minister's imagination.

HON. MR. PHILLIPS: I'll read that back to you in ten years, my friend.

MR. LEGGATT: We may not be here in ten years.

Now there are alternatives. The member for North Vancouver–Seymour (Mr. Davis) had a proposal which was interesting — to move the coal out by conveyor. The heart of the problem continues to be the Anzac spur. The cost of the Anzac spur has taken what would be a sensible economic deal and made it an uneconomic deal. Again, in his anxiety to make the big announcement, to make the political coup, the minister was on the edge of a viable and feasible economic development in the northeast. But in rushing and being premature, he's taken the taxpayers of British Columbia into a fantastic financial bath.

We'll see whether history proves the minister is correct or not. We don't know. But we do know the holes that are in this deal now. We see a price that doesn't escalate as fast as the southeast price. We see an escalator on the surcharge, and Australia will practically have to fall into the Pacific Ocean before there's an increase in the surcharge the way this thing is built. If our figures are correct, and you've got $182.50 a tonne for coal after the five years are up, you're not going to get any increase in the surcharge. You'll be stuck with the $3 and the $2.50, and that $3 and that $2.50 comes to $22.25 million a year. It doesn't take a genius to see the shortage in trying to service the debt on the Anzac line. You can't service that debt with $22.25 million a year. Again, you're $60 million to $70 million a year short.

If you examine the record in terms of the Japanese contracts with Kaiser and Fording, where there is no take-or-pay clause — and I understand there isn't one.... I also understand that it's not common to have a take-or-pay clause. Even though it's not common, there is a very large risk. The Japanese have failed to take delivery in the past of Kaiser and Fording coal. They've had to readjust. In fact they had to make an investment in that market in order for the coal industry to survive. I think it was Mitsubishi who came in because of that disastrous market.

This is a good deal for the Japanese. It means they don't have to over-rely on Australia. They have a much more effective whip-saw technique in negotiating prices around the world. They can diversify, and it gives them security of supply. They have far less chance of interruption in their supply. So we had a lot going for us in negotiating with the Japanese. They wanted the northeast coal for very good reasons.

I certainly reject the idea that they're paying a premium price. They're paying one now, but it's not going to be a premium price down the road. It's going to be a bargain basement, rock-bottom price down the road. Because 46 percent of that price is the only portion allowed to escalate, according to our information. Part of the proposal is about $90 million worth of rolling stock. I'd like the minister to tell us where he's going to get the rolling stock. There is an idea for getting rolling stock. Why doesn't he build a railcar manufacturing plant in the province of British Columbia to supply the rolling stock? That sounds like a good idea. If they'd left that one in place, we'd now be delivering rolling stock up to northeast coal, instead of having the silly political decision to end Railwest.

[ Page 5836 ]

Interjection.

MR. LEGGATT: "Liable to build another one now." You see, you're just four or five years behind the times, Mr. Minister. You should have left Railwest in place.

Interjection.

MR. LEGGATT: We'd have been supplying cars all across the Prairies.

HON. MR. PHILLIPS: What, at 50 percent more cost than they can be bought elsewhere?

MR. LEGGATT: Talk to the Premier of Saskatchewan about that.

MR. CHAIRMAN: Order, please.

MR. LEGGATT: But if you take the $90 million of rolling stock, where is it going to come from? Who's shipping this coal to Japan? How many Canadian seamen are going to be employed? How many Canadian ships are going to be built in order to ship that coal? You couldn't even build that into the deal, could you?

Dome's proposal on natural gas is to use Canadian ships. Surely we don't have to see Dome.... I don't think the minister tried to negotiate for a Canadian bottom. I don't think he even put it on the table.

Did the minister try to get a steel mill for the province of British Columbia? What efforts did he make? Has he done anything with that? Why not try tying that contract in the northeast to a steel mill so that this province starts to process some of its raw materials, and not be, as the minister said, just hewers of wood and drawers of water? Process that coal; bring in some iron ore and make some steel for the province of British Columbia.

HON. MR. PHILLIPS: You fellows say you don't want any more electricity.

MR. CHAIRMAN: Order, please. Hon. members, it's very difficult, particularly for Hansard, when members speak who are not recognized by the Chair. I ask all members to wait until they have gained the floor to make their address.

MR. LEGGATT: I just have a few more questions to ask, and I'll let the minister respond.

Would the minister tell us how the government is going to finance the British Columbia Rail reduction in freight rate? When is the BCR going to get back that freight rate reduction? They're dropping their rate by a dollar, and CN is dropping its rate by a dollar; that's about a 20 percent reduction in the CN rate and 10 percent in the BCR rate. Why does the BCR have to continue to carry the freight on this thing? Poor old BCR, with its massive debt — the minister comes in here and tells us what a successful operation this is. Well, then, I take it that the vote in the estimate is part of my imagination — that $70 million that we're going to have to approve in his estimates to keep the poor old BCR from going under. The BCR is a debt-ridden, colossal failure at this point.

I take it that the cost of the power lines into that site is going to be paid by the rest of the province in its Hydro bills.

[Mr. Strachan in the chair.]

I want to ask about the concerns which were expressed over and over again in Prince George about access to the Prince George market. There's a very strong feeling in Prince George that the routes developed for northeast coal are going to be of more economic benefit to Alberta than to their province. We're looking at the very real possibility that the major suppliers will come from Alberta, because of the natural flow and direction of the road system to Dawson Creek, Chetwynd and so on. Can the minister give the people in Prince George any assurance that they're going to get any spinoff from this particular project?

Interjection.

MR. LEGGATT: Since we're subsidizing this deal by a billion dollars, I want those people to get at least some of that benefit. If you're going to reach into the taxpayers' pockets all across this province, we want to make sure Prince George gets some benefit.

HON. MR. PHILLIPS: Tell a lie often enough....

MR. CHAIRMAN: Order, please. I ask the minister to withdraw the word "lie."

HON. MR. PHILLIPS: If I said "lie," I'll certainly withdraw.

AN HON. MEMBER: It's not an if.

HON. MR. PHILLIPS: I don't remember saying it. If I did, I said yes, I'll withdraw.

MR. LEGGATT: I think the minister was starting off in a pretty calm fashion today; he was pretty cool. But now he's starting to make these wild, crazy accusations about lying and so on. He's gone back to the bathroom to get the potion, and it's no longer Dr. Jekyll; it's Mr. Hyde suddenly again. Now calm down, Mr. Minister, and be rational with your estimates. It's very important.

Yes, we want to see the people of the north get the benefits of the subsidized northeast coal deal. We'll fight for the people of the north to get those benefits — for the people of Prince George and for those people all along that line.

Foreign workers is a question that has to be dealt with. What kind of manpower training have we got in place for the workers that are going to be needed in respect to the northeast coal proposition? My understanding is that there's nothing in place right now to train unemployed British Columbians to work in those fields. I think when we have the kind of unemployment in this country that we do, we should now be putting training programs in place to use the slack labour in this country. The department of manpower tell me they have almost nothing going. You need a task force now to develop the training of British Columbians for the skills that are going to be needed in those fields. The minister should talk to the Minister of Labour (Hon. Mr. Heinrich), who is deeply concerned about our capacity at the present time to provide the skill training for the needs of those coalfields.

With those few remarks, I'd like the minister to address some of the questions.

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MR. DAVIS: Instead of making a speech this morning, I'd like to ask the minister several questions. They're questions which many people in this province are asking, especially insofar as northeast coal and the expansion of secondary industry in this province are concerned. We have a buoyant economy here. Economically it's a happy island in a sea of uncertainty. Unemployment is at the lowest percentage that it's been for years. People are flooding into B.C. at the rate of 1,000 a week, and they're finding jobs. House construction is leading the nation by a factor of two or three. Retail sales are up and continuing to rise in real terms. Even the consumption of oil is up. Things are certainly moving in this province, and they're moving as never before.

You'd think that British Columbians would be happy with all this going on. They are and they aren't. As the results of the by-election in Kamloops showed, they didn't want to rock the boat too much. However, there is an underlying sense of unease. Perhaps it's a result of the problems elsewhere in Canada and on the continent. No doubt also it's due to double-digit inflation, which looks as if it's here to stay. Due to too much red tape, developed land is becoming scarce even in this province. Taxes at all levels seem to be going up. They've gone up even at the provincial level recently. Many people, especially those on fixed incomes, are asking when this upward spiral in costs will be brought under control, let alone brought to an end. In other words, there are lots of unanswered questions. If I were speaking in the House of Commons in Ottawa, I'd be asking about the growing federal deficit and the continuing exceptional growth in the Canadian money supply. But I'm not. I'm here in this Legislature in Victoria.

Mr. Chairman, as you will be quick to point out, I'm on the estimates of the Minister of Industry and Small Business Development. I'll ask him the first questions which come to my mind. As I said before, they're many of the same questions that people ask me around the province.

First, relative to northeast coal. Directly and indirectly northeast coal will cost the taxpayers of British Columbia many hundreds of millions of dollars in the early 1980s. The Anzac spur line alone may cost as much as 500 million as-spent dollars. Most of these dollars will be needed in year two and year three of its construction. This rail line through the Rocky Mountains will still be under construction as late as the end of 1983. There can't be any income in the meantime to offset this mounting expenditure. So my question is: how will the government be raising this $500 million in the interval? There are several choices, of course: (1) by paying for this new line out of an excess of current income over current outgo, as has been the habit in the past in this province with respect to many large projects; (2) by raising taxes; or (3) by borrowing on the open market. I know this government doesn't believe in borrowing for its own purposes. If it's going to finance the Anzac spur — incidentally, in much the same way as a homeowner finances his or her home by signing a mortgage — then it's B.C. Rail selling bonds or another Crown corporation selling bonds. In the latter case, a Crown corporation would be specially set up for the purpose. I understand that the government has said no to a separate Crown corporation. Or has it? Has it made up its mind to sell bonds in the name of B.C. Rail? As I understand it, some soundings were made along these lines by the Minister of Finance (Hon. Mr. Curtis) earlier this year. We really don't know whether this is the way northeast coal is going to be financed in 1982 and 1983, so perhaps we should examine the other alternatives.

The second alternative, and perhaps the least desirable, is an increase in taxes. A 1 percent increase in our sales tax can raise upwards of $200 million in a single year. Are we going to see our sales tax go up to 7 percent and stay at that level until coal begins to be shipped in large quantities out of Prince Rupert across the Pacific to Japan?

Or there's the third possibility. Are we going to have a sufficient budgetary surplus, given our present tax rate schedule and a buoyant economy, to finance the Anzac spur on a pay-as-you-go basis? Certainly this is the most desirable alternative. It's not a certainty. Our provincial revenue, especially on the natural gas side, is continuing to decline. We're putting off a gas price increase at home. Most of our other tax rates, including our corporate profits tax on medium- and large-sized industries, are the highest in the nation. So we really can't count on northeast coal being financed out of current income. Or can we? That's really part of my question to the minister.

Perhaps we're back to the question of borrowing. Can the minister tell us now, or can he even give us an inkling, of how northeast coal is going to be financed between now and 1984, what the borrowing entity might be — if, indeed, there is to be one — and what interest rates he or the government is expecting to have to pay for this money? Will it be 18 percent? B.C. Hydro's current borrowing rate is 17.5 percent. Could it possibly be 15 percent? Or is the government gambling on something like 12 percent? It would be interesting to know, because anyone who is analyzing this big project from a long-term revenue point of view should be using an interest rate for discounting purposes which is of the same order of magnitude as the expected borrowing rate throughout the 1980s and 1990s. My basic question, if I can put it in a one-liner, is: how is the government going to finance the construction of the Anzac spur in the interval between now and the next provincial election?

My second question relates to the northeast corner of British Columbia as a whole. It has to do with the labour supply there. Since construction labour in particular is likely to be short throughout western Canada, it goes along these lines. Prospectively, if we have a hot spot anywhere in the province in the 1980s, it's the northeast. Just think of it. We've got: (1) northeast coal; (2) construction of the Site C dam on the Peace River; (3) quite likely, a new gas pipeline to an LNG port at Prince Rupert; (4) likely again, construction of the Alaska Highway gas pipeline from the Yukon down into Alberta; and (5) possibly one or more non-ferrous metal mines opening up in the Rocky Mountain Trench. This is nearly all construction, at least in the 1980s. It calls for literally thousands of hardhat types, particularly men who can manage heavy equipment or who are skilled in the mechanical and electrical trades.

What happens if Ottawa and Alberta resolve their differences over the price of oil? These projects in northeastern B.C. will be competing with tar-sands plants, heavy oil plants, petrochemical plants and gas-scrubbing plants in Alberta. They'll possibly be competing with developments off the mouth of the Mackenzie and the Beaufort Sea oil developments, so there will be plenty of construction activity in areas bordering on the northeast as well. Although we would like to think that much of the construction labour needed in northeastern B.C. will come from our British Columbia manpower pool, we know better; we'll have to import much of this labour force not only from the Edmonton area but from eastern Canada as well. Wage rates are bound to

[ Page 5838 ]

go up; a lot of overtime will have to be paid; cost estimates will have to be revised upward — perhaps again and again. This is the principal hazard we face not only with respect to northeast coal but in the case of these other publicly and privately financed projects, at least several of which are likely to go ahead in the northeast, beginning in the early 1980s.

So in summing up my concern in this respect, can I ask the minister what arrangements are being made to meet the skilled manpower requirements of our coal, power, gas and transportation industries in the northeast sector in the early 1980s? We need answers in that respect. I know they can't be found in one single ministry, but certainly a substantial effort will have to be mounted, particularly through the Ministry of Labour and the Ministry of Education, in order to help meet this growing need.

Thirdly, Mr. Chairman, I have been talking essentially about primary industry; I have been talking mainly about the extraction and transportation for export of raw materials produced in northeastern B.C. However, what about the prospects for further processing, for first-stage manufacturing on a large scale? What about value added by upgrading these raw materials in the province? What about continuing employment of the kind we have in our pulp mills, smelters and refineries in B.C.? We mustn't continue, as members often say, to be hewers of wood and drawers of water; we must increase the B.C. content of our exports by converting more of these raw materials into semi-finished and, if possible, fully manufactured products.

Coal is a good example. We export it raw today, and we will continue to be exporting large quantities of coal raw tomorrow. But we can sell some of it — an increasing part of it — in the manufactured form of electricity. We could take the waste-coal piles in the East Kootenays, for example, and, by burning them in our own thermal-stations, convert them to electricity. This electricity could be sold at a relatively high price to neighbouring utilities in the United States; sold on a spot basis and brought back again whenever we have a need for electricity, but sold in the meantime — coal in its most highly manufactured form, electricity. Not only would we be increasing the Canadian content of this exported energy by a factor of three or four — in other words providing many more jobs for British Columbians — but we would be eliminating an eyesore in southeastern B.C. as well, and by that I mean the waste-coal piles which are accumulating there now.

Another raw material is natural gas. Alberta is doing a first-class job in converting much of its gas into petrochemical products for sale in eastern Canada and the eastern United States. It's doing this by making its gas available to private industry on a competitive basis. It allows fertilizer companies, for example, to buy gas in the field at going field prices. This way Alberta chemical firms are able to overcome their problem of distance to markets. Because they get the raw material — in this case, natural gas — at a relatively low price, and because they can sign long-term contracts with the producers on terms which are satisfactory to both parties — producers and the chemical firms — they have a big advantage over their competitors who are located in such far-away places as southern Ontario and New York state.

British Columbia, so far, doesn't do this. We aren't taking advantage of our coastal locations either, at least not fully. We insert the government-owned B.C. Petroleum Corporation between the producer in the field and the prospective petrochemical firm on the cost. We as a government are therefore insisting on getting our top dollar, stripping off the difference between costs and the world-over price equivalent for gas. There is little or nothing left for our would-be producers of plastics, fertilizers, adhesives, solvents and the like, and this while Alberta is building ten chemical plants based on natural gas to our one. I would therefore, in this context, like to ask the minister this: has this ministry seriously considered asking the government to revert to a royalty system for oil and natural gas in B.C., one which would also permit chemical companies to buy their gas supplies in the field and make their own arrangements about transportation and pricing in the marketplace?

Fourthly, Mr. Chairman, the most serious problem which Canadians have had to face in recent years has been a lack of growth in industrial productivity. Our output per person employed is little more now than it was in the early 1970s. We're not alone in this predicament, of course. The United States continues to have a productivity problem, the United Kingdom certainly has had one, and in comparison with Japan even West Germany has had a productivity or output per employee problem. Generally speaking there's been a slowdown in the western world, and it's particularly acute in secondary manufacturing in North America. Incidentally, this is why I would like to see us continue to emphasize the processing of our raw materials at home. In those industries, typically, we have very high productivity, and we can increase our productivity, and indirectly that of Canada, by concentrating on those resource-processing industries here in B.C.

Looking across the rest of the continent we still have our Chrysler and Massey-Harris-type of industries — many of them on a smaller scale — also being bailed out. The government has been stepping in more and more to keep the weak from failing. In this country we have the massive federal Department of Regional Economic Expansion. In effect it taxes — certainly the federal government taxes — the successful concerns in order to prop up their competitors. It taxes the go-ahead provinces in order to keep people in the so-called disadvantaged provinces. In other words, we reward failure and penalize success. We interfere unduly in the marketplace, and then we wonder why our performance on the productivity front is so dismal these days. The federal Department of Regional Economic Expansion, DREE, doesn't do much for British Columbia. Perhaps our industries are too competitive or perhaps we're too prosperous. Last year it spent $6.11 per capita in this province as compared to $27.48 in Quebec, $48.24 in Saskatchewan and $118.16 per capita in Newfoundland. It props up textile mills and old fish plants in the east and avoids doing anything whatsoever for really viable resource-processing projects in this province. It prevents people from moving to better jobs, in other words — moving to more promising places where their income can not only be higher but has a greater chance of long-term continuity.

DREE subsidizes firms which export capital equipment to foreign countries. For example, they do this in respect to coal-mining equipment which will be used to produce raw coal, and sold in the same markets — Japan and others — which we will be serving in the 1980s. The same sort of thing is happening with respect to power- generating plants and machinery and equipment for the manufacture of pulp and paper. Why we tolerate this kind of thing really is beyond me, and why our own industrial development people occasionally tend to copy some of these federal initiatives in British

[ Page 5839 ]

Columbia bothers me. I'd like the minister to tell us something about his problems, therefore, in working with the Minister of Regional Economic Expansion in Ottawa. I'd like him to tell us about their zoning, and as a result of their grants his zoning of preferred areas for industrial development here in B.C. I don't like these selective approaches to industrial development. I'd rather we had a thoroughly rational policy of industrial development which supported success and didn't penalize the successful.

In conclusion I'd like to repeat the questions I've asked in even more summary form, and essentially they are: How is the government going to finance the construction of the Anzac spur line into the northeast? What is being done to train young people and others so they can participate in the half-dozen major resource development projects which will be underway in the northeast in the 1980s? What is being done to process more of our resources prior to their export from this province, particularly coal exported as electricity? Finally, what is DREE doing in B.C., and how can we get Ottawa to support our growth industries instead? I'm looking forward to the minister's answers.

HON. MR. PHILLIPS: I'll deal with the last speaker first. I believe the question was, how will the government raise money for the new line, how will it be paid for; and the member offered alternatives. In answer to the member's question, the infrastructure for northeast coal plus the cost of the spur line will be paid for on a pay-as-you-go basis. After each calendar year, we will take the money the railway has spent and we will purchase shares for that amount. So the branch line will be paid for, and as was in our budget forecast, we will be able to do that.

With regard to the hot spot in the northeast that you mentioned, we realize that if all the projects.... It's not only going to be in the northeast; as a matter of fact it's going to be in all western Canada. If all the projects on the drawing board go ahead, we're going to have some difficulty. I think the House should recognize that development of our coalfields is not like building a pipeline. When the pipeline is built, the workers have nothing to do. It's not like building a dam, where you have two or three years of high employment and then the people move out and go somewhere else.

During the construction of the railway, yes, it will take a number of people, particularly the tunnelling. It will be a different type of employment. By and large it will be in highway construction and housing construction. But as far as the actual construction of the mines themselves and the cleaning plants and the processing plants.... We do process our coal. One of the biggest costs of coking coal is the processing of it. It isn't like thermal coal, where you take a shovelful of coal out of the ground, put it on a boxcar and ship it away. Thermal coal has to be processed. One of the high costs of coking coal, over and above thermal coal, is that we have to build those expensive cleaning plants to get the ash out and to get the thermal coal separated. We do process it to some extent. I understand that we don't process it into gasoline, but we do process coking coal at a very high cost, and it adds to the cost of the coal. I think that a lot of the employees involved in constructing and getting ready to mine the coal, particularly with regard to the scrubbing plant and so forth, will be able to continue on. Certainly those who were involved in operating heavy equipment to remove the over-burden will probably stay on, because practically the same equipment is used in mining the coal.

With regard to further prospects for processing our raw materials, as you know, we have a study going on with regard to coal liquefaction and gasification. We in British Columbia are faced with the problem of how far to go in trying to reinvent the wheel. As the member knows, there are literally hundreds of millions of dollars being spent in Great Britain, Europe, the United States and Japan to find the best method to use coal for energy, over and above burning it to create electricity. I don't think, with a population of 2.25 million people, that we can go back and reinvent the wheel. We will be starting immediately, through the existing universities that we have, to study the qualities and the differences of the coal in British Columbia, so that when there is a breakthrough we will know exactly what is in our coal — the different qualities, ash, sulphur, aluminum, etc., and where they exist.

As you know, you're talking about coal to electricity. That's exactly what is happening in the Hat Creek deal. I think that probably in the future it should happen on a smaller scale in other areas because there will be thermal coal available. There's lots of it in British Columbia. If we would come out now and say that our thermal coal is going to be a source of energy, then I think we could do some further planning. I'm not sure there won't be that much thermal coal out of the first two mines, but certainly there is thermal coal in the area. There's a lot of thermal coal in Alberta. Again, one of the things we must ensure is that if we're going to put in thermal coal plants, we must protect our environment.

As you know, we're still negotiating on a direct-reduction steel mill, which will require a lot of electricity. Of course, one of the benefits of your resource development is that every time you have a resource development, you increase your population, not only in the amount of workers directly employed, but some economists use the spinoff of two. We used to use six. I've had arguments with the economists in my ministry when they talk about two or three. I've seen in the north where a project will come in and maybe employ 400 people. I've seen the town around that grow by 5,000 or 6,000 people. I don't necessarily agree with my economists when they use a spinoff of two to three, because in practical terms when you put a pulp mill in a town it can go from 5,000 to 10,000, and yet you only have 400 or 500 employees. I guess we've argued as to where it is and what the benefits are. We've talked about one job created in the north creating maybe one or two in the lower mainland, depending on the fabricating industries, where it's located and so forth.

We all seem to look at a situation where we expect a great manufacturing industry in British Columbia. But if you go back through history, manufacturing industries are built to serve the whole market, and then you start exporting. As I said yesterday, in some instances we're breaking that rule in British Columbia where we are manufacturing high technology items, and we are competing. There's a plant in Kelowna that manufactures copiers. They sell them successfully in the world market — not in the Japanese market but certainly in the United States market. We're manufacturing telephones in North Vancouver. I could go on. There's a list close to your riding. We sell all over the world in competition with the big boys. As your population grows and resource developments grow, more population comes in and it helps all of the food processors and small manufacturers and processors in the fabricating industry.

With regard to adding further value to our natural resources, yes, we're looking at a number of projects. As I said earlier this morning, we are on the brink of having growth of

[ Page 5840 ]

manufacturing in our petrochemicals in British Columbia. When you think of petrochemicals, you don't think of manufacturing, but indeed it is. Before we proceed with the LNG plant, we will be asking those companies that want to proceed what other benefits are going to flow from it. Then we'll be analyzing it. With regard to asking for a special price, we've got to take a look at that. I don't think we have to offer a special price. I think that we can work out the formula that we have for further value added as we have now in the deal we have with Ocelot in Prince Rupert. I think we can use the same formula. Anyway, those decisions will be made in the very near future. I'm very excited about what we can do. Yes, we're looking at one, two, possibly three ferro-alloy processing plants. But as I said earlier this morning, we can't have these metal-processing plants in British Columbia unless we have power. When you get the opposition coming out saying we don't need any more power in British Columbia and there isn't a need for the power that we're going to have from the plants, that's utterly stupid. A lot of the projects that are on the drawing board cannot go ahead unless we have further plants to produce electricity.

MR. HOWARD: It's more stupid to distort the facts.

MR. CHAIRMAN: Order, please. I'll have to ask the member for Skeena to withdraw "distort the facts." Will the hon. member please withdraw?

MR. HOWARD: Withdraw "distorted facts"? That phrase has been used many, many times and been acceptable.

MR. CHAIRMAN: But, hon. member, the Chair heard you impute improper motive to another member.

MR. HOWARD: Oh, well, I certainly will indicate to you that it was not my intention to impute improper motives or any other motives.

HON. MR. PHILLIPS: Well, Mr. Chairman, I've come to expect that from the opposition. They find it very difficult to criticize the government, so they go around making statements which have a tendency to mislead the people of British Columbia.

MR. HOWARD: Just like you.

HON. MR. PHILLIPS: We're not misleading the people of British Columbia when we say that the NDP speak out of both sides of their mouths at once. They talk about further value-adding of natural resources, further processing and further manufacturing. Maybe they think we have a large contract with Eveready. Maybe they think that Eveready batteries are going to supply the electricity to fuel the economy. Well, I don't think that will work.

Interjection.

HON. MR. PHILLIPS: You can talk about hot air. I'll stack the record of this government up against any other jurisdiction, not in producing hot air but in producing jobs and an economy when the rest of the world is either staying stagnant or going backward. That's not hot air. The record will speak for itself. It spoke for itself in Kamloops just recently, my friends.

We're also looking at fertilizer plants and coal gasification. I hope the day will come in the not-too-distant future when we can have another copper smelter in the province. I hope our work that we're doing with tariff and trade people will give us the opportunity to add further value to our copper in British Columbia. I don't think it's going to happen immediately, but I can see — maybe within this decade — a copper smelter in British Columbia. We've had a lot of discussions with other countries and with those who consume our copper at the present time. I suppose that when we start talking about a copper smelter we're going to be faced with some opposition, because copper smelting is an intensive user of electricity.

I suppose we'll be faced with the same situation as with aluminum smelters. Aluminum smelters are a little different, because we don't use a natural resource from British Columbia. We import the natural resource in the form of aluminum and we process it here. You talk about further value added and further processing. I could snap my fingers tomorrow and have three more aluminum smelters in British Columbia. Make no mistake about that.

With regard to further processing, yes, I'm pretty excited about the new zinc find up north. I think it could possibly happen that within this decade we'll have another zinc smelter. Then you start talking about making the end products. That's good motherhood, but we have to have a market. I think eventually, as we increase our population, we can do that.

As I said yesterday, and I want to remind the members of the House again, British Columbia does have a good manufacturing base. We do not cut down our trees and ship them overseas. We process them here. As a matter of fact, our lumber industry is probably the most efficient, well-run lumber industry you'll find anywhere in the world. We do manufacture here. We manufacture pulp, paper and dimensional lumber. We are looking at further value-added as well, so that we won't be shipping.... I can see in the future — maybe not this decade — where we will have to take a second look at even shipping out cants or two-by-fours. The day may come when we add a lot more value to our lumber. The day may come, although the markets are very finicky, where we have a fine-paper mill, not just manufacturing newsprint. We've certainly looked at that. We've talked to the people in the business. It isn't as though we weren't sitting down and analyzing the opportunities; we certainly are.

When you talk about manufacturing, don't forget that we manufacture logging and sawmilling equipment in British Columbia and we ship it all over the world. My ministry has led many missions. We're selling equipment to Chile and to southeast Asian countries. We're selling sawmilling and logging equipment all over the world, very efficiently manufactured in British Columbia. That's the statement I made when we extended the cooperative overseas market development program for our lumber industry. It's not only selling the lumber. It's the logging equipment and continued jobs for all those in the IWA and in our manufacturing industry.

I am of the opinion, as I go about my duties in my ministry, that the people of British Columbia really don't seem to appreciate the manufacturing base that we have in British Columbia. I guess that's my responsibility. I may have to tell the people of British Columbia a lot more about what's going on in their own province, because we do have a good manufacturing base. Our manufacturing base will continue. Our fabrication industries will continue to grow.

[ Page 5841 ]

With regard to northeast coal, this fall we will be putting on seminars throughout the province identifying the opportunities so that the local businessman, the local fabricator and all those spinoff industries will have readily identifiable opportunities for them to expand their business. Before I leave the forest sector I also want to say that the forest industry, the manufacturing industry related to the forest industry and the manufacture of sawmilling equipment and logging equipment have done very well in British Columbia without government subsidy and can compete in the world markets.

With regard to DREE, they haven't spent a lot of money in British Columbia; but I'll tell you they've spent more in the last five years than they did in the previous 20, 30 or 40 years, because we did negotiate agreements with them, albeit not big. I want to tell you that the programs we have in British Columbia have been very effective, and the benefits have been very high-profile in terms of job creation.

I always like to talk about my pet theory that British Columbia should lead the world in the skiing industry. We're not the leaders yet, but I want to tell you that we're well on the way. All we're doing is utilizing a natural resource, because we have the mountains and the snow, and over and above that we have the climate to go with that snow, where you don't freeze your feet when you're out skiing. We're taking advantage of that, and as a result of the moneys we have put in through TIDSA we're getting an average ratio of $5 being spent by the private sector for every dollar we put in as seed money from the TIDSA program. In the case of Whistler, our return can go as high as 25 to 1 for the money we put in there. I look forward to seeing Whistler become the number-one recreation village not only in British Columbia, Canada or North America, but in the world. A lot of people said it would never happen, and a lot of people said it couldn't happen. Those of you who have not been to Whistler and experienced the great thrill of seeing what is happening at Whistler have that ahead of you. It's not only happening at Whistler; it's also happening here on the Island, in the Kootenays, in the interior and, indeed, in the north.

To the member for North Vancouver–Seymour, I don't believe that we should go with the area designated by the federal government. We have had cases in many areas in Canada and the odd case in British Columbia where industries have been located in areas where, economically, they should not have been. We find that the government is faced with a problem later, when they become unviable. I think we've got to let industry decide where they want to locate. Yes, we can give some assistance with regard to provision of infrastructure and maybe some industrial land. I think that industry should not be pushed into an area just because they get a government grant. We've got a plywood mill being built up north now. The federal government gave a grant to the same type of plywood mill in the province of Quebec, but when it came to the province of British Columbia they said: "No, because you built too soon; you made a commitment."

[Mr. Davidson in the chair.]

There are inequities. There always will be inequities in government giveaways. We've got a situation in Canada today where we're really having to bite the bullet in Ontario because that industry has been protected by tariffs. So what are we facing today? The federal government and all of Canada is facing a real problem. It may be tough to knock down the trade barriers, but I have a feeling that in Canada we are an energetic people and we have the resources and we can compete on the world market. We're doing it in British Columbia. We've done it with our lumber industry. We're doing it with our other manufacturing industries. Indeed, we can do it. But once the government comes along — as the NDP socialists would have you do — when you start feeding them money, then they become inefficient. That's where we have a great deal of difficulty in the loans we make through BCDC. We do not want to loan a company into bankruptcy. A lot of people don't seem to understand that a company, particularly a small company, can make money and still go broke.

I have on my desk another example of a high-technology industry in British Columbia. Glenayre Electronics has a location, identification and control system which is being installed and tested on the British Columbia Railway. I think it’s going to be a success. When it is a success, railways around the world.... I believe they're looking at it now. People are coming to look at it now. It's another opportunity for a high technology industry in British Columbia to sell in the world market.

Mr. Member, you know that high-technology industries have received a great deal of attention from this government. I spoke yesterday afternoon of a shining example — our marine industrial park out next to the federal oceanographic institute. We went ahead and built the building, industries are locating and, indeed, it's another example of a success story. I could stand in this Legislature all day and delineate the various successes we've had. Certainly we've made a few mistakes.

Mr. Member, I think I've answered all your questions. If I haven't, please remind me. I've gone over the notes I made, at least.

MR. BARRETT: Mr. Chairman, before I ask the minister a few questions, there appears to be some confusion about documents the minister tabled. Was it the intention of the minister to table the summary of the reports? Would the minister inform the Chair, without me losing my place, that the Clerks and the Sergeant-at-Arms are not releasing the summary since they are under the impression.... I'm only relating what is happening to you, Mr. Chairman. If the minister will indicate that the summary is to be released too, without me losing my place, that would be most helpful.

HON. MR. PHILLIPS: In answer to the member's question, it was my intention to file the summary. I'll see that every member of the House has a copy of the summary, if not immediately, very shortly — probably after lunch.

MR. BARRETT: It is my understanding that the copies of the summary in the Clerk's office were not available to members because they're under the impression that you didn't table them. But you are now telling us that they are tabled. Perhaps, Mr. Member, you could tell the Clerks that they've been tabled.

I'm sorry that the member for North Vancouver–Seymour (Mr. Davis) has gone, because I think he has contributed something very important to this debate. I'm also pleased that the minister decided to answer a few questions about northeast coal and then launched into a lengthy filibuster by raising shibboleths and hyperbole about the federal government. It's a very rare occasion in this chamber when we have

[ Page 5842 ]

an opportunity to debate what is essentially a real difference of opinion based on philosophy, the approach to financing and the husbanding of a resource. The member for North Vancouver–Seymour raised some important questions which the minister failed to address. The member for North Vancouver–Seymour laid out the cautions, and questions regarding those cautions, of a lot of people who are not intimately involved in the day-to-day slugfest that means so much to us in this chamber but which is of little relevance to the average British Columbian over the long haul. Aside from name calling, point-scoring and manoeuvring on both sides of the House, today is one of the very few times when the opposition and certain government backbenchers have an opportunity to ask specific questions about a major project that will have a spin-off effect economically, socially and philosophically for tens of years in the future.

After weeks of asking, we finally got an answer on one key part of this project: where is the money going to come from? The minister said, very quietly and very quickly — and then he skipped on to another subject — that the financing of B.C. Rail's cost of the northeast coal deal would come out of general revenue — pay-as-you-go. You will absorb shares in return for cash in the already heavily debt-ridden B.C. Rail. Mr. Minister, need I remind you that it was this Social Credit administration who set up a royal commission on B.C. Rail? Need I remind you that among the recommendations from the royal commission was one that asked the government to absorb the over $700 million of deadweight debt that exists on that railway? Need I remind you that $70 million a year comes out of the taxpayers' pockets to subsidize the debt of B.C. Rail, piling up higher and higher? Who was it that appointed that royal commission? This government. Who was the first to ignore it? It was this government.

Earlier in the year, we had a story that B.C. Rail was going to go to European markets to borrow $100 million for northeast coal. Questions were raised by my colleague the member for Skeena (Mr. Howard), and the Minister of Finance (Hon. Mr. Curtis) denied it. Also, the Minister of Finance has denied that general revenue funds will be used to subsidize the northeast coal project. I find it interesting that the Minister of Finance isn't even in his seat today when the Minister of Industry and Small Business Development contradicts the commitment of the Minister of Finance that general revenue funds will not be used for northeast coal.

What the people of British Columbia have been told this morning — and make no mistake about it — in response to questions raised by the member for North Vancouver–Seymour and the member for Coquitlam–Moody is that the first digging that takes place on these mines will dig money out of the taxpayers' pockets to subsidize the project. That's the first digging. Anybody who says that this year's budget increases in general revenue taxes were not meant for northeast coal expenditures is either a fool or a liar — take your pick. You've made a decision, and you've announced here today that it means that sales tax, general purpose tax and all those taxes will be collected to go into northeast coal. I ask the minister: with that admission today, does that include — and I want the minister to write the question down, even if he doesn't answer it — the financing of the infrastructure of the town as well, beyond the highways and housing commitments that will all be buried in the general revenue expenditures? Beyond B.C. Rail tapping general revenues by purchasing additional shares, will there be general revenue funds directed through those other budgets? What percentage of those other budgets — if they are — will be directed to northeast coal?

The government had originally planned to bring in a separate bill on northeast coal so there would be a direct accountability to this House of every single penny spent by this government. Since the government consciously abandoned that responsibility to this chamber and to the taxpayers, I ask the minister to table with this House a forecast of how much money from general revenue in the budgets of Highways, Municipal Affairs, Housing and every government department that's related to northeast coal is expected to be expended this year from those budgets, and next year and the year after, during the life of the project. Do you have those figures, Mr. Minister? Can you tell this House why, after thousands of dollars were spent hiring outside lawyers to set up a separate piece of legislation for this project, the government consciously abandoned the direct responsibility to the taxpayers and decided to bury all the costs in the other departments?

We are embarking today into massive debt that will be serviced by handouts and payouts to Crown corporations with the flimflam that somehow it's all being paid as you go. Who will be financing this, Mr. Chairman? The taxpayer of British Columbia, who has been given in one instance a 50 percent increase in sales tax, contrary to the Premier's solemn promise of just two years ago that the sales tax would never be increased again. Anybody who read the Premier's statement and believed it has been lied to — not by the Premier, but by reading the statement. The money is now going into northeast coal, as was admitted today by this minister. In a very excellent presentation the member for North Vancouver–Seymour asked these questions clearly. He got one answer alone. We began to get somewhere. You're going to shovel money out of the taxpayers' pockets into this project. You'll be subsidizing it from everybody. From the executive who lives in West Vancouver right down to the little person on welfare, they're all going to pay their share to subsidize this project. Let's make no mistake about it, none whatsoever.

Why did it take so long to get that admission from you, Mr. Minister? Why did it take the minister all these months to finally fess up to the fact that that money will come out of general revenue?

MR. LAUK: He felt guilty about it.

MR. BARRETT: No, it's not a question of feeling guilty; the count-down time is coming close, and they're going to start having to cough up a lot of money in a hurry. This year it is estimated $22 million will be spent on northeast coal. Give us an accounting, Mr. Minister. There is an item of $22 million; what has been spent so far? Give us an accounting today, item by item. Give us an accounting, too, if you expect to go to cabinet for a warrant and ask for more than that $22 million this year. I ask the minister specifically on this day and at this hour: is it your intention to go to the government — to Treasury Board — before the end of this fiscal year and ask for a warrant to increase that amount of $22 million? Yes or no. Mr. Chairman, I believe before this fiscal year is out that minister will be back here knocking on the door of Treasury Board asking for advances to shovel into B.C. Rail.

The minister, I understand, said that the contracts for the Anzac tunnels had been let. The member for North Vancouver–Seymour says $500 million for the cost; the minister says

[ Page 5843 ]

it's going to be pay-as-you-go. The minister just said that feeding money into corporations leads to inefficiency. Feeding $500 million into two tunnels — does that lead to inefficiency? It's $500 million on today's market, Mr. Chairman; what other directions could it take? It's going to be $175 million a year for three years, just for B.C. Rail's costs alone. That is a minimum of a loss of $35 million in terms of other moneys we're going to have to borrow to keep other Crown corporations going that are falling further and further into debt.

I know that this is not the most exiting debate in the world, but the fact is that this government has made a conscious decision to shift debt onto the B.C. Buildings Corporation, the B.C. Systems Corporation, money that normally would come out of general revenue to pay for those costs, and now we'll have to go out and borrow that money and we'll have to pay charges on that money. Who ends up paying again? It's the taxpayer.

I ask the minister if this government considered any internal financing of B.C. Rail's costs by using Canada Pension Plan funds and superannuation funds? May I have the minister's attention for these questions? Has the government considered financing any of B.C. Rail's costs in this project out of Canada Pension Plan funds or superannuation funds in the hands of the government? Can the minister indicate to me whether or not he's written that question down?

Mr. Chairman, perhaps my hopes were too high today that perhaps after I heard the member for North Vancouver–Seymour give an intelligent series of questions to the minister we would have a minister who would respond to those questions. I don't know, Mr. Chairman, but the government has made a decision to pour tens of millions of dollars into this single project, money directly out of the taxpayers' pockets, with no direct accountability to this House and no direct legislation dealing with it. The Minister of Finance is being asked to comply and acquiesce in the demands of this project without any specific accountability being presented to this House or the people of British Columbia. I'll venture to bet that the people of British Columbia never get an accounting of the pulled-out costs from every one of the government departments whose budgets have been increased because of their share of northeast coal. The minister has yet to explain publicly why that bill was killed before it was born.

I will leave the financing for a moment, Mr. Chairman. The Minister of Finance is on record as saying that no funds from general revenue will go to subsidize northeast coal. Am I correct in that? The Minister of Finance has said no funds will go from general revenue, and today we have the Minister of Industry and Small Business Development admitting that funds will indeed come from general revenue, which means that every time you buy something in the store you're paying for northeast coal.

The member for North Vancouver–Seymour, who should be in the cabinet — who should perhaps be in that ministry, because of the questions he asked today — raised a very important philosophical point beyond any kind of political games-playing in here, and that is the realistic appraisal....

Interjection.

MR. BARRETT: You're a very funny fellow, and I enjoy you normally. But these kinds of citations don't come up very often. The political decision this government is making is going to steer final policy, in terms of priority of funds, away from the important needs of this province for political purposes. Housing will suffer. Hospital construction and school construction will suffer, not only in financing but in labour needs as well. The member for North Vancouver–Seymour has illustrated that even more clearly and eloquently than some other members of this House. I would recommend the minister go back and read the questions raised by the member for North Vancouver–Seymour. He talks about a hot spot in the economy and he's right. When you pour in that vast sum of public funds, out of general revenue with no accountability, you increase a regional hot spot and overall inflation in this province at the expense of every other social and economic need throughout the rest of the province.

I ask the minister a point-blank question. What is the final cost of the Anzac line? How much in overruns are you willing to accept on this project? What is the final figure that you have in your head today as the final cost of the Anzac line? If that final figure is incorrect, what percentage of overrun are you willing to accept on this project?

I also ask the minister to inform the House if he can guarantee that the timetable of August 1983 can be met without penalty. I ask the minister to let the House know whether or not the timetable of August 1983 can be met. If the deadline isn't met, who is directly and ultimately responsible for paying the penalties under the existing contracts with the Japanese? Is it the taxpayer of British Columbia again? Do you have those two questions? Do you have a final figure on Anzac and what percentage would you consider to be fair in terms of overrun costs? Can you guarantee us that by August 1983 the project will be complete? If you can't, can you tell us who's responsible for overrun costs if the project isn't complete?

I want to ask the minister again if he is prepared now to tell this chamber that he will bring in a separate bill covering northeast coal so that every single penny spent on that project can be accounted for here in the House, rather than buried in other departments. If he's not prepared to do that, is he prepared, through the Minister of Finance, to bring to this House a breakout cost of highways, hydro costs, and any other servicing to that community? I find it interesting that the member for North Vancouver–Seymour raised a philosophical question that the minister didn't address. The question could be summed up in saying that people understand that industry should go to where the energy source is, and not vice versa. If I'm incorrectly paraphrasing the member for North Vancouver–Seymour, I apologize. It has been the policy of more and more jurisdictions to understand that industry must go to where the major energy source is, rather than vice versa.

Who is going to build the railcars to carry the coal? I ask the minister to give me an answer to that question. I ask the minister to guarantee to us that we will not be buying railcars to carry that coal from the United States. Can the minister give us an assurance that no railcars carrying Canadian coal will be built in the United States by U.S. workers, using U.S. steel, out of U.S. plants? Where are you going to buy the railcars? Well, if you can't give us those guarantees, then why did you close RailWest when we had an opportunity of building our own railcars here in British Columbia? It's the same as when the government closed down the Princess Marguerite, and two years later they had to bring it back; the same as when you used taxpayers' money in British Colum-

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bia to subsidize American crews on American ships on a jetfoil into this port last year.

You've got no commitment to British Columbia. You've got a commitment to Social Credit resurgence. You don't have the guts to bring in legislation and give accountability to the taxpayers who are paying the bill. Hundreds of millions of dollars taken out of the pockets of the ordinary working people of this province, and you can't even guarantee at this point, a job-training program — as both the member for Coquitlam–Moody and the member for North Vancouver–Seymour pointed out. You know, Mr. Chairman, we're going to get the standard little quips and banter across the floor. Those of us in the chamber understand the humour of the normal little games that go on. But this particular project proceeding as it is now without any accountability to the taxpayers of British Columbia is going to have an impact on our economy for the next ten years in terms of drying up surplus revenues out of general funds. It's going to have the impact of the taxpayers being asked to directly subsidize a massive industrial project without any specific accountability here in this House. It means that other Crown corporations are going to have to go deeper and deeper into foreign debt, because the normal source of funding for those corporations will dry up.

I ask the minister to tell me whether or not he's aware that the internal borrowing pattern by B.C. Hydro — sometimes up to 30 percent of its annual borrowings comes out of superannuation funds and Canada Pension Plan funds — will be interrupted. I ask the minister to tell us and tell everyone else why it is that almost the $900 million worth of B.C. Hydro borrowing this year will come from outside sources, perhaps mostly European and some American. I predict that the internal financing share of B.C. Hydro for the fiscal year 1981-82 will drop dramatically. It is my belief at this point that B.C. Hydro is now in Europe asking for close to 90 percent of that $900 million they need this year. Did the Minister of Finance say I'm wrong? If I'm wrong, I ask the Minister of Finance to table with this House the prospectus that B.C. Hydro is now using in Europe this very month in terms of describing where their borrowings are coming from. I tell you this, Mr. Chairman: B.C. Hydro's prospectus clearly indicates that the normal pattern of inside borrowing for superannuation funds and Canada Pension funds is down dramatically this year and next year because they are forced to go into the international marketplace to get those funds. If I'm wrong, you produce the figures. I'm telling the Minister of Finance, who is now also the fiscal agent for B.C. Rail, that he has a direct responsibility to bring legislation into this House that shows accountability for every single penny spent by the taxpayer.

I've asked a number of specific questions of the minister. I'd like specific answers. Are you prepared to table in this House an item-by-item breakdown of the costs that will be incurred in every other ministry that's directly related to the northeast coal project? Are you prepared to tell us the maximum figure you expect those Anzac tunnels to cost and what percentage would be acceptable to you in terms of overruns? Are you able to determine at this point that you will have to go to Treasury Board this year and ask for warrants for increased funds not allocated in this year's budget for northeast coal? Will you advocate direct accountability to the people of British Columbia by bringing a bill into this House dealing specifically with northeast coal, so everybody can have a clear-cut picture of exactly what you're embarking on?

You haven't answered half the questions from the member for North Vancouver–Seymour. You didn't address yourself to the philosophical problem raised about moving industry right to the energy source, and you completely ignored the questions raised by my colleague, the member for Coquitlam–Moody. You can be jovial and get a slap on the back from the Minister of Finance, but I tell you that this is one of those rare days, beyond the normal chippiness of political bargaining and debate in this House. This government has a responsibility, as any government would, to have direct accounting to the people of British Columbia for the hundreds of millions of dollars that are going to subsidize a foreign customer of a non-renewable resource from British Columbia.

The minister's own admission is that the market doesn't come close to even paying the interest on the money that we're pushing into this project. We've signed for 7.7 million tonnes, and the minister admitted that we need another 11 million tonnes just to break even. It's not just a question of the current contracts, but it's the dream contracts. So I ask the minister to answer those questions directly. How much? Come on, Mr. Minister, how much?

MR. CHAIRMAN: Time, hon. member.

HON. MR. PHILLIPS: Mr. Chairman, the last speaker has raised a number of questions which I'll be happy to deal with after lunch. I move the committee rise, report progress and ask leave to sit again.

Motion approved.

The House resumed; Mr. Speaker in the chair.

The committee, having reported progress, was granted leave to sit again.

Hon Mr. Curtis moved adjournment of the House.

Motion approved.

The House adjourned at 12:08.